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Updated 6 months ago on . Most recent reply

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Michael Calvey
  • Head of Sales at BiggerPockets
  • Denver, CO
124
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93
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Unpacking the Rent Crisis: It's Not Just Greedy Landlords..

Michael Calvey
  • Head of Sales at BiggerPockets
  • Denver, CO
Posted

TL;DR: Recent article suggests rent hikes aren't just about landlord greed - rising costs across the board are a major factor.

Just read an eye-opening article about the recent rent crisis.

It challenged my assumptions, so I thought I'd share the key points:

- Rents up 25% since 2020, but wages only 22% - ouch.
- 50% of renters now "rent-burdened" (>30% income on rent).
- Landlord costs skyrocketing: 
     - Insurance: +30% (thanks, climate change)
     - Utilities: +30%
     - Property taxes, materials, maintenance all up
     - Even lawn care and cleaning services cost more

The article argues these costs are being passed to tenants, not just padding profits. Interestingly, it cites data from Baselane, banking built for Landlords, showing a 30% increase in landlords' monthly expenses from 2022 to 2024. This kind of data gives us a more concrete picture of the situation.

Questions for discussion:
Renters: Has your landlord mentioned any of these factors when raising rent?
Landlords: Are these costs hitting you as hard as the article suggests?
Everyone: What solutions do you see to make housing more affordable?

  • Michael Calvey
  • [email protected]
  • Most Popular Reply

    User Stats

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    Dan H.
    #2 General Real Estate Investing Contributor
    • Investor
    • Poway, CA
    6,976
    Votes |
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    Dan H.
    #2 General Real Estate Investing Contributor
    • Investor
    • Poway, CA
    Replied

    I find it interesting that virtually every business in America is expected to maximize profits to the level possible in a free economy but a landlord (LL) that does the same is a “Predatory landlord”.  Every business should strive to maximize profits in a free economy, but for some reason some people think this should not be the case for a LL.

    Just over a year ago my umbrella insurance provider indicated they were no longer covering vehicles.  They were reducing the premium slightly for this loss of coverage.  It is important that my umbrella policy cover vehicles for reasons that are not important.  I spent a significant portion of the next 2 days looking for umbrella insurance.   Most umbrella insurance providers either did not cover vehicles in CA, did not cover structures in CA, or required that I had all vehicles and properties insured with them to provide an umbrella policy.  I had very few choices.  My umbrella insurance almost doubled over night.  

    The article mentions nothing about risk.  

    In the time frame that is covered by the article my market had the most stringent eviction moratorium in the country.  You could only evict for health and safety issues.  A tenant could stop paying and break every lease term not related to health and safety and you could not evict.  I have not seen any statistic on what percentage of the tenants that did not pay during this eviction moratorium ended up paying the back rent but believe it is a very small percentage (unbeliever <5%).  This in effect means LLs paid for the housing of these tenants by law without getting compensated.  this newly identified risk mandates increased revenue (rent increases) to compensate for the increased risk of the government allowing tenant to not pay rent and damage unit with no legal means to get rid of the tenant.

    Just prior to the period in the article, CA passed statewide rent control on MF (starting at 2 unit) properties.  This took away the LL capability to not renew lease or, my preferred method, provide large rent increase above market to get rid of less than ideal tenants.  Now LL are stuck with these less than ideal tenants.  This raises risk and increases effort required which is to be reflected in rent increases.   In addition, our rent increase is capped such that a crazy inflation period could exceed max allowed rent increase which again is a risk.  This increased risk is the primary reason after rent control is started, the rent increases are maximum allowed for a few (minimum) years after rent control goes into affect.  The rent control advocates, having zero understanding of economics, blames greedy landlords without realizing the rent control has increased risks.

    My properties are in a very desirable area that is very constrained.  In a free market the rents would reflect the scarcity of a great product but the government tries to meddle in the free market which at least in the short term increases the scarcity. 

    Best wishes

  • Dan H.
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