Rental Market is Untested in a Recession

[Michael Temple]

I came across this article this morning in the Wall Street Journal. Hopefully, everyone can get to it without hitting the paywall.

https://www.wsj.com/articles/t...

Just in case you do hit the paywall, I will do a quick summary. The gist of the article is that our "asset-light" economy where more people than ever rent homes, lease cars, and use streaming services for entertainment has never been tested in a recession. We have this new model that has emerged after the 2008 great recession where people have decided owning stuff is no longer a priority. Instead, they want to essentially rent (lease, subscribe, etc.) to all the things they use in life. This model has never really been tested in a bad recession, so what happens? Do any of these people that serve as our tenants suddenly leave our rentals to find cheaper digs, dump their car leases, and stop subscribing to Netflix? The article basically says we don't really know.

It is an interesting question. If you bought property based on being able to achieve a certain level rent and in a bad recession people simply leave and find a lower rent place and nobody will rent your place at your pre-recession level that you depended on to make all the numbers work what is your contingency plan?

I am not sure I have one personally, but I am at least thinking about it now. I know one of the main arguments I hear from people when I have suggested this, albeit in a different form, is everyone needs a place to live so we are all safe. That is true, but at what level of rent do they need a place to live? That is the question here. They may need a place to live, but they may not need to live in YOUR place and pay YOUR required rent. They could just move to a cheaper place to weather the storm and then find a nicer place later. They are mobile and largely uncommitted to large fixed monthly expenses. They may leave some people with high debt loads on rentals in bad shape. 

Thoughts?