Tag Archives: Rent

Coastal Cities Lead In Apartment Rents

Not surprisingly, apartment rents in the US are the highest in land-use restricted coastal cities like San Francisco, New York city, San Jose CA, Boston and Washington DC. Other west coast cities and Miami round out the remaining top ten most expensive apartment rents.

According to Zumper, North Carolina (Raleigh and Charlotte) and Arizona (Glendale and Scottsdale) along with Fort Worth TX saw the biggest increases in apartment rents.

Raleigh, NC saw one bedroom rent climb 5.1%, which was the largest monthly rental growth rate in the nation, to $1,040. This large bump moved the city up 2 positions to become 49th most expensive rental market.

Charlotte, NC took a 5 ranking bump up to 26th with one bedroom rent climbing 5% to $1,260 and two bedrooms increasing 2.2% to $1,370.

Glendale, AZ jumped up 7 spots to rank as the 67th most expensive city. One bedroom rent grew 5% to $840, while two bedrooms were up 1.9% to $1,070.

Scottsdale, AZ saw one bedroom rent climb 4.5%, settling at $1,380, and up 3 positions to become the 21st priciest city.

Fort Worth, TX moved up 3 spots to rank as 40th with one bedroom rent jumping 4.5% to $1,150 and two bedrooms increasing 2.3% to $1,340.

On the downward side, tax- and pension-crazy Chicago has fastest declining rents. And it is Always Sunny In Philadelphia for rents!

Chicago, IL fell 2 spots to rank as the 17th priciest city with one bedroom rent dropping 5.1%, which is tied with Bakersfield’s growth rate as the largest dip in the nation, to $1,490.

Bakersfield, CA saw one bedroom rent drop 5.1%, settling at $740, and down 7 positions to become 86th.

Anchorage, AK moved down 3 spots to 62nd with one bedroom rent falling 4.2% to $910. Two bedrooms, on the other hand, were flat at $1,150.

Atlanta, GA took a 4 ranking dip to 22nd with one bedroom rent decreasing 4.2% to $1,370 and two bedrooms down 3.3% to $1,740.

Philadelphia, PA one bedroom rent dropped 3%, settling at $1,310, and down 2 spots to rank as the 24th priciest city. Two bedrooms stayed stable at $1,700.

Of the top 100 cities, LeBron James’s home town of Akron has the lowest apartment rents in the nation. Followed closely by other non-coastal cities like Wichita, Detroit, Lubbock TX and Tucson AZ. And if you are taken back to Tulsa, you will find relatively inexpensive apartment rents.

Source: Confounded Interest

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Rent Unaffordability Continues To Grow For Americans

The National Low Income Housing Coalition has published its latest “Out of Reach” report which shows that renting is becoming increasingly unaffordable for countless Americans.

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Its central statistic is the Housing Wage which is an estimate of the hourly wage a full-time worker must earn to rent a home without spending more than 30 percent of his or her income on housing costs. As Statista’s Niall McCarthy notes, for 2019, the Housing Wage is $22.96 and $18.65 for a modest two and one-bedroom flat respectively based on the “fair market rent”.

A worker earning the federal wage would have to put in 127 hours every week – equivalent to more than two full-time jobs – to afford a two-bedroom apartment. It isn’t just a regional issue – there isn’t a single state, metro area or county in the U.S. where a full-time worker earning the minimum wage can afford to rent a two-bedroom property.

It isn’t just workers on the minimum wage who are effected.

The report also states that the average renter’s hourly wage is $1.08 less than the Housing Wage for a one-bedroom rental and $5.39 less than a two-bedroom rental. That means that an average renter in the U.S. has to work a 52 hour week, something that becomes increasingly difficult if that renter is a single parent of someone struggling with a disability. When it comes to the situation in different occupations, a median-wage worker in eight of the country’s largest ten occupations does not earn enough to afford a one-bedroom apartment.

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Software developers, general managers and nurses are able to meet both Housing Wages but for many other occupations and accomodations, renting is becoming increasingly difficult. Medical assistants, laborers and janitors are among those falling short while the gap back to minimum wage workers is even greater still. Worryingly, these are the ten jobs that are expected to see the biggest growth over the coming decade and that is likely to result in an even greater disparity between wages and housing costs by 2026.

Source: ZeroHedge

US Rents Climb To Fresh Record Highs Despite Slowest Price Increase In 11 Months

US existing home sales slumped for the 13th straight month in March, but the pressures on the national housing market have yet to translate into cheaper rents: To wit, average national rent climbed 3% YoY in April, and 0.3% from the prior month, according to Yardi Matrix data cited by RentCafe.

The national average rent hit $1,436 in April, climbing about $42 from the prior year to $1,436 – which, though still positive, marked the slowest pace of growth in 11 months.

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Across major US housing markets, rent in Wichita is the most affordable, averaging $646, followed by Tulsa, at $688. On the other end of the spectrum is the average rent in Manhattan, the world’s most expensive rental market, climbed to $4,130 in April. Behind Manhattan is – of course – San Francisco, with an average rent of $3,647, then Boston ($3,357) then Brooklyn ($2,878), then San Jose ($2,720) and Los Angeles ($2,471), in sixth place. Of the largest metropolitan rental hubs, Indianapolis had the lowest average rent ($861), followed by Columbus, Ohio ($924).

While rents tended to be highest in urban enclaves along the coasts, some large rental markets in the Sun Belt boasted surprisingly affordable prices, including Las Vegas ($1,061) or Phoenix ($1,046).

But in another sign of just how skewed rents are across the US, of the 253 cities examined as part of the study, only 64% have average rents below the $1,436 national average, while the other 36% have average rents above.

Source: ZeroHedge

Why Are An Increasing Number Of High-Income Americans Choosing To Rent?

(MishTalk) The percentage of high-income households choosing to rent is on the rise. High-income is defined as $150,000 and up.

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The Rent Cafe reports High-Income Americans Are the Fastest Growing Renter Segment — Up by 1.35 Million in a Decade.

The most recent U.S. Census data tells us that the annual increase in the number of high-income renter-occupied households – defined here as those earning $150,000 or more – has been consistently faster than owner-occupied households. As a matter of fact, from 2007 to 2017, the numbers of those rich enough to own, yet who still prefer to rent grew by 175%. That’s compared to a decade-long increase of 67% in homeowners within the same income bracket.

Top-Earning Renters Are Growing Faster than Any Other Renter Income Bracket

Of the 43.3 million renters nationwide, 2.1 million are top earners. High-income renters represent the demographic that experienced the largest boom across the U.S. given that, back in 2007, there were only 774,000.

Breakdown

  • Over $150K — ↑175%
  • $100K – $150K — ↑111%
  • $75K – $100K — ↑66%
  • $50K – $75K — ↑32%
  • Under $50K —↓0.2%

High-Income Renter-Occupied vs Homeowner-Occupied Households 2007-2017

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Debate Over High-Income Definition

Arguably, $150K may not be enough to qualify as high-income in places like San Francisco or New York City, which is probably why the two cities have the largest numbers of renter-occupied households inside this bracket.

NYC’s upper-bracket renters outpace owners not only in net numbers but also in the rate of increase. Wealthy renter-occupied households in New York doubled in the course of a decade, going from 125,000 in 2007 to the largest number of wealthy renters in the U.S. today — 249,000. As for people earning $150K or more who own a home in the Big Apple, their numbers have increased by a lesser 63% over the course of a decade (189,000 in 2007 to 306,000 ten years later).

Top 10 Cities With High-Income Renters

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American Dream

The Rent Cafe concluded. “The attitude toward renting at any income level is changing. With renters becoming the majority population in many U.S. cities, the spike in the national population of wealthy renter households could mean a change in attitude toward an American Dream that no longer belongs to this generation of renters.”

Marriage Rates Down, Cohabitation Up

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Not Just Student Debt

The Rent Cafe article ties in nicely with my previous report: Marriage Rates Down, Cohabitating Rates Up: It’s Not Just Student Debt to Blame

Attitudes, Attitudes, Attitudes

A Fed study on Consumers and Communities released last month had an interesting comment on homeownership.

“We estimate that roughly 20 percent of the decline in homeownership among young adults can be attributed to their increased student loan debts since 2005. Our estimates suggest that increases in student loan debt are an important factor in explaining their lowered homeownership rates, but not the central cause of the decline.”

The rest is explained by changing attitudes and affordability.

Attitudes about marriage, having kids, mobility, and debt have all changed.

This is not 1960 or 1971.

To top it off, houses simply are not affordable. That’s what the cohabitation rate shows. Wages have not kept up with home prices even without the burden of student debt.

American Dream

Even when high-income households can afford a house, many choose to rent instead. Why?

  1. Changing attitudes about the “American Dream”.
  2. The Marriage Tax Penalty
  3. The Remarriage Penalty

Reader “Cecilia” thoughtfully added “Liquidity and Walk Away Arbitrage”, which also ties into the remarriage issue.

Remarrying can greatly complicate divorce financial arrangements. It’s easier to live with someone. No one wants a second divorce, especially if the first one was messy.

Source: ZeroHedge

 

Oregon Defies Logic With Statewide Rent Control

It is often said by cynical economists and political commentators, usually of the right or libertarian persuasion, that the road to hell is paved with good intentions. There is no more odious and damaging economic policy that comes from the heart than rent control. For years, limiting the cost of living spaces was done at the local level, but one West Coast state aims to be the first to implement statewide rent controls.

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Oregon’s Proposed Rent Controls

Oregon is set to pass SB 608, legislation that prohibits landlords from raising rents in the first year of a resident’s tenancy. The bill would also cap future rent hikes at 7% annually, plus inflation. This will target all rental properties 15 years or older but exempt units that are a part of a government housing project.

It should be noted that SB 608 does not have vacancy controls, which means buildings can jack up the rent by any amount once the tenant gives his or her notice. Because of this, the legislation bans no-cause evictions, so any landlord must offer a government-approved excuse for evicting a tenant.

With Democratic supermajorities in both chambers of the legislature, SB 608 is likely to pass, making Oregon the first state with statewide rent control.

Gov. Kate Brown (D-OR) is proud of the move, saying in her inaugural address:

“We also need to help Oregonians who have homes but are struggling with the high cost of rent. We can help landlords and tenants navigate this tight housing market. Speaker [Tina] Kotek and Sen. [Ginny] Burdick have innovative proposals that will give renters some peace of mind.”

Lawmakers are jubilant over the bill, but economic experts call the Beaver State’s policy proposal risky, including Mike Wilkerson of ECONorthwest, an economics consulting firm, telling Reason: “You’d be hard-pressed to find any economist who comes out in favor of rent control as a means to help improve whatever failure you are experiencing.”

Rent Control Hurts the Poor

First, it is important to examine the justification for rent controls. Advocates contend that it is immoral for someone who has lived in a neighborhood his entire life to be suddenly priced out of it. It is also wrong, they assert, that landlords are just sitting on their rear ends, enjoying higher rents, because there is a greater demand to reside in New York, San Francisco, or Boston than in Jerome, AZ, or Bonanza, CO.

Proponents will ignore the unintended consequences of rent control. New properties are not erected, vacancy rates plunge, existing landlords exit the market, and the small supply of housing diminishes. Landlords will try to evade regulations by transforming their units into condominiums, luxury apartments, furnished suites, or offices.

Advocates also overlook two other important facts: Real estate can be utilized for a diverse array of purposes (commercial, housing, or industrial), and these laws distort pricing signals.

Ultimately, the state plays a game of cat-and-mouse, coming up with intrusive ways to rein in the evaders. Regulation begets regulation.

New York City

When World War II ended and peacetime reigned supreme in America again, things were not what they used to be, at least for the thousands of troops returning home. After being engaged in battles overseas, soldiers had a new front to fight at home: life – and everything it had to offer.

Despite the inflation rate either contracting or rising in single digits between 1947 and 1952, the cost of living ballooned for the returning heroes of the Armed Forces. One area of the country that increasingly priced these men out of the market was New York City, where real estate values were skyrocketing – and still are!

Officials had an idea to help everyone affected by rising housing costs: rent controls. While the goal was to make units more affordable, the city made the situation worse by introducing temporary relief.

Like economist Milton Friedman once quipped, “There is nothing more permanent than a temporary government program.” This relic of 1947 is still around today, exacerbating the housing affordability crisis. It is estimated that approximately 50,000 apartments and one million rent-stabilized units are controlled by a 70-year-old law.

To understand how egregious this policy is, look no further than former Rep. Charles Rangel (D-NY). The Wall Street Journal reported in September 2008 that he occupied “four rent-stabilized apartments in a posh New York City building,” living in three and using another as an office. By holding four properties, he took advantage of valuable resources at below-market prices at the expense of others.

Controls

Is there a difference between bombs and rent control? Economists often pose this question when debating the efficacy of government controls. The Mises Institute’s Joseph Salerno delivered a lecture a few years ago, showing pictures of urban areas and asking his audience if these dilapidated units were the victims of a bombing campaign or rent controls.

When you even pose the question, you know it’s necessary to second-guess the prescription.

Any time officials use “controls,” you know the policy is going to be a failure. Whether it is preceded by “price” or “rent,” this economically defiant measure produces destitution, deterioration, and destruction. It’s too bad politicians and bureaucrats never learn their lesson.

Source: ZeroHedge

The “Rental Affordability Crisis” Explained In Three Charts

Four years ago, the United States Department of Housing and Urban Development (HUD) warned of “the worst rental affordability crisis ever,” citing data that:

“About half of renters spend more than 30% of their income on rent, up from 18% a decade ago, according to newly released research by Harvard’s Joint Center for Housing Studies. Twenty-seven percent of renters are paying more than half of their income on rent.”

This is a significant problem for US consumers, and especially millennials, because as we have noted repeatedly over the past year, and a new report confirms, “rent increases continue to outpace workers’ wage growth, meaning the situation is getting worse.”

In the second quarter of 2017, median asking rents jumped 5% from $864 to $910. In the first half of 2018, they have remained at levels crushing the American worker.

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While the surge in median asking rents has triggered an affordability crisis, new data now shows just how much a person must make per month to afford rent.

According to HowMuch.Net, an American should budget 25% to 30% of monthly income for rent, but as shown by the New Deal Democrat, workers are budgeting about 50% more of their salaries than a decade earlier. The report specifically looked at the nation’s capital, where a person must make approximately $8,500 per month to afford rent.

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In California, the state with the largest housing bubble, the monthly income to afford rent is roughly $8,300, followed by Hawaii at $7,800 and New York at $7,220.

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In contrast, the Rust Belt and the Southeastern region of the United States, one needs to make only $3,500 per month to afford rent.

“Based on the rule of applying no more than one-third of income to housing, people living in the Northeast must earn at least twice as much as those living in the South just to afford rent for what each market considers an average home,” HowMuch.net’s Raul Amoros told MarketWatch.

Which, however, is not to say that owning a house is a viable alternative to renting. In fact, as Goldman notes in its latest Housing and Mortgage Monitor, “buying is looking increasingly less affordable vs. renting with home prices growing faster than rents.”

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In short: the situation is not likely to improve in the short-term.

A sign of relief could be coming in the second half of 2019 or entering into 2020 when the US economy is expected to enter a slowdown, if not outright recession. This would reverse the real estate market, thus providing a turning point in rents that would give renters relief after a near decade of overinflated prices.

Source: ZeroHedge

New York Millennials Paying $1800 Per Month To Cram Into 98-Square-Foot Rooms

Millennials in New York are known for living in a state of perpetual brokeness – between student loans, $20 nightclub drinks and $15 avocado toast, it’s easy to understand why 70% of millennials have less than $1,000 in savings. 

Now we can add expensive, glorified closets to the mix, as the Wall Street Journal reports.

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30-year-old marketing manager Scott Levine lives in an $1,800 per month, 98-square-foot room in a postage-stamp of an apartment – “basically, a kitchen” – with two roomates. Every week, someone from Ollie – his property manager, stops by to drop off towels and toiletries. 

A “community-engagement team” at Ollie helps plan Mr. Levine’s social calendar. A live-in “community manager”—sort of like a residential adviser for a college dorm—gets to know Mr. Levine and everyone else living on the 14 Ollie-managed floors of the Alta LIC building, known as Alta+, and finds creative ways to get them engaged in shared activities, like behind-the-scenes tours of Broadway shows or trips to organic farms. –WSJ

“Life in general can be a bit of a headache,” says Mr. Levine. Thanks to Ollie, he adds, “Everything is done for you, which is convenient.”

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Ollie’s business model is all about convenience and roommates – usually single people in their 20s and 30s who have all amenities provided for them, while sharing a kitchen and common area. 

For city-dwellers accustomed to living cheek-by-jowl with people whose names they’ll never bother to learn, this might seem strange. But for young people still forming their postcollege friend groups—in an era when participation in civic life is down and going to a bar can mean huddling in a corner swiping on Tinder—it makes sense. So much sense that people put up with apartments so small they’re called “micro.” But hey, free shampoo. –WSJ

Meanwhile, startups such as Ollie and Common are competing with big-city real-estate developers. Common manages 20 co-living properties in six cities where roommate situations are more common, such as New York, Los Angeles and Washington DC. They have approximately 650 renters according to CEO Brad Hargreaves. 

“Our audience is people who make $40,000 to $80,000 a year, who we believe are underserved in most markets today,” Mr. Hargreaves says.

Other startups are managing existing homes and apartments, “Airbnb-style” as the WSJ puts it. 

Bungalow, which just announced $64 million in funding, wants property owners to offer space to “early-career professionals” looking for a low-maintenance place to stay. It charges rent that’s “slightly higher” than what it pays those owners, a company spokeswoman says. It currently maintains over 200 properties—housing nearly 800 residents—across seven big cities, says co-founder and CEO Andrew Collins.

As with Common and Ollie, Bungalow advertises that it furnishes the common areas in its homes, installs fast free Wi-Fi, and cleans them regularly. The company also organizes events and outings to help you “build a community with… your new friends.” –WSJ

One of the underlying aspects of the co-living startup models is a technology platform that both advertises to prospective tenants and takes care of their needs once they’re living on-site. Ollie’s “Bedvetter” system, for example, shows apartments to potential tenants – and shows who’s already signed up to live there with links to their personal profiles in order to match roommates. Bedvetter also matches people into “pods” of “potential roommates” before they begin an apartment hunt. 

“It’s like online dating,” says Levine – while his roommate, Joseph Watson, 29, compares it to eHarmony or Match.com vs. Tinder, as it’s designed for long term pairings.

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“Micro Economics” 

While millennials in New York and other urban areas scramble to make ends meet, developers are making hand over fist on the co-living movement – even though the renters themselves are paying less than they would for a private studio. 

The Alta LIC building also has conventional apartments, but the co-living units are filling up faster, says Matthew Baron, one of the Alta LIC building’s developers. What’s more, he adds, he can get more than $80 a square foot for Ollie units compared with around $60 a square foot for the others, even though the Ollie ones are on the lower, less-desirable floors. –WSJ

Another complication with co-living arrangements is tricky community management. L.A.’s PodShare, for example, vets potential tenants beforehand – however issues with problem tenants are unavoidable. “We’ve hosted 25,000 people at this point, so there’s bound to be some problems,” says founder Elvina Beck. 

Common building tenant Teiko Yakobson said that the “community vibe broke down after Common eliminated the paid “house leader,” complaining that “We all just became strangers, and it was no better than living in any other apartment.” Common instead replaced the program with “centralized” community managers at the corporate level – which Hargreaves says is “more coherent” for them. 

It’s not all bad, however…

When it does work, co-living can re-create the kind of communities tenants seek online—ones grounded in common interests and shared socioeconomic status.

Mr. Levine, who not only lives in a co-living building but also works in a co-working space—and in whose social circle most people do either one of those or the other—is aware that, while this isn’t for everyone, he is hardly a standout. “One thing I’ve heard before is that I’m a stereotype of a New York millennial,” he says.

Just make sure you have earplugs in case your roommate is able to get laid in their respectively expensive, tiny room. 

Source: ZeroHedge