The cover of the Winter 2020/2021 cover of Real Estate Journal published by National Reia. Yours truly. Check it out.
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Real Estate News
The Tightening Against Landlords Continues
Back in July, I wrote that the slew of new regulations and restrictions against landlords would likely never go away. History shows that once the ratchet is tightened, it is never loosened completely. Some of the headlines from Maine to California seem to be proving my predictions correct.
Landlord-tenant laws in Virginia spurred on by covid could be come permanent.
Minneapolis to consider rent control.
Eviction bans state wide in California.
Learning how to screen your tenants and work with them is going to be more important than ever in the coming months and years. It is going to get ugly in some places. Stay tuned and seek out folks with common ground.
Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors. Subscribe to Smarterlandlording here. Contact Kevin here.
Tightening The Ratchet
Headlines around the world are currently predicting another covid related crisis. This time it is an evictions crisis. As courts reopen and landlords are once again allowed to enforce their leases and property rights, evictions, it is said are going to throw hundreds of thousands into the streets. The homeless will be everywhere, from New York and across America, to London and Toronto.
Will hundreds of thousands of evictions be filed? Maybe. Will every single one of them proceed to an actual set out? Doubtful. In our company’s experience, most eviction cases are worked out before they ever get to court. Tenants start paying again work outs are made or tenants move on to somewhere else.
Yes, some folks are having a hard time paying the rent these days, we have seen it in our business. We have had to work with some tenants and let others move on because they simply could not afford their apartment after a job loss. But most tenants are keeping up with their side of the deal. In fact, stats from around the country show that above 85% are paying their rent and that number is only slightly below what was collected a year ago before all of this covid mess began. These states and my own anecdotal evidence make an eviction crisis appear to be far from imminent.
Nevertheless, the press is touting that a crisis of evictions is looming. As a result, my guess is that politicians are going to use this as an opportunity to respond. How? They will respond in two ways. First, where they can they will extend eviction moratoriums. Just keep the courts closed and problem solved.
Landlords, knowing that they do not have the courts to aid them, will in response elevate their screening methods and techniques. Landlords will work harder to keep potential deadbeat tenants out so that the need to go to eviction court declines.
This increased scrutiny by landlords toward potential tenants will lead the politicians to their second response, they will go after screening techniques. They will make the connection between lack of court enforcement and the increased screening done as a result. Politicians will then claim that landlords are denying people adequate housing. They will move to solve a problem which they created in the first place by closing the courts. They will make it harder for you to screen by expanding the scope of protected classes for example. Or they will work to ban screening techniques such as criminal background checks with “Ban the Box” initiatives.
The covid crisis has and will allow politicians to turn the ratchet tighter on landlords. Even when the crisis subsides, do not expect things to be completely loosened and returned to where they were. History shows that once tightened, things are never again loosened completely.
Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors. Subscribe to Smarterlandlording here. Contact Kevin here.
No Fault Evictions Rise Ahead Of Rent Controls
The new law, championed by Democratic Gov. Gavin Newsom as the strongest statewide renter protection in the country, caps annual rent increases at 5% plus inflation, while also forcing landlords to specify a legitimate reason for evicting tenants and to offer relocation assistance for no-fault evictions.
But in the interim months until the law kicks in, tenant rights groups are scrambling to combat what they say is a wave of landlords exploiting a temporary loophole that allows them to get rid of tenants now. That way they can raise rents beyond the rent cap, avoid having to pay any relocation help to displaced tenants, and simply remove tenants they view as problems without going through additional legal hurdles introduced by the new law.
Read the rest here.
The Self Defeating Effects Of Rent Control
When New York State’s legislature passed a bill strengthening rent controls on apartments in June, New York City mayor Bill de Blasio crowed that the legislation “will halt displacement . . . and keep working families in the homes they love.” Yet one of the biggest eras of displacement in Gotham’s history happened decades ago because of rent control. Enacted during World War II, controls squeezed landlords unable to increase rents for maintenance, repairs, and fuel prices until owners began abandoning buildings by the thousands during the late 1960s, driving out middle-class residents, stranding the poor in deteriorating apartments, and creating immense tracts of poverty in formerly stable blue-collar neighborhoods.
Billed as tenant-protection legislation, New York’s latest rent regulations, which make it more difficult for landlords to raise prices on apartments that they upgrade or that become vacant, mark a return to the disastrous policies of the displacement era. But because New York’s progressive legislators can’t repeal the laws of the marketplace, the effects have already begun to show.
Read the rest here.
The Effects of Rent Controls
I wrote about rent controls here a few months ago. I closed that post with a quote from economist Assar Lindbeck. “Next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities.”
Since writing that post, New York has enacted more rent controls and the destroying effects of rent controls are now beginning to appear.
From The Wall Street Journal:
Barely a month has gone since New York passed its new rent-control law, and the predictable problems are fast emerging. Blackstone Group , which owns the Manhattan developments of Stuyvesant Town and Peter Cooper Village, is putting renovations on hold, reports Crain’s New York Business.
“In light of the recent legislation, we are in the process of evaluating capital investments at Stuy Town,” a Blackstone spokeswoman said. Maintenance, such as fixing leaks, must legally continue. But Crain’s, citing an unnamed source, says “renovations to vacant units would stop, as would potentially larger construction projects.”
Together the two properties cover roughly 24 city blocks. They include more than 11,000 apartments, some of which fall under the state’s rent regulations. Because the complex was originally built in the 1940s, sprucing up is necessary.
The old rules at least gave landlords some leeway to recoup costs. When an apartment became vacant, rent could rise 20%. If rent passed $2,774, the regulation ended, and the market rate could be applied. The new law axed those provisions, lowering the incentive to invest and update properties.
Stuy Town and Blackstone are making the news because they’re enormous, but the same logic applies to every building owner. Economists are more or less unanimous in calling rent control destructive. The only short-term winners are people who’ve already locked in.
The Stuy Town tenants association favored the new rent law. No wonder: Its president told another newspaper in 2016 that she moved in 35 years ago and was still paying less than $1,400 for a one-bedroom. You might call that the low price of stagnation, but wait until neighboring apartments deteriorate around her.
In Oregon, which implemented statewide rent controls recently, Karen Sale notes in a comment at this post that the law “dramatically affects Oregon landlords. Many are putting their long term rentals on the market for sale.”
H/T to economicpolicyjournal.com
Foreclosure Rates – Then and Now
This headline recently came across my inbox recently, Top 10 States With The Worst Foreclosure Rate.
That seemed worth a click, so I did.
Here are the ten states with the highest foreclosure rates.
New Jersey 1 in 1,006 Housing Units in Foreclosure
Delaware 1 in 1,008 Housing Units in Foreclosure
Maryland 1 in 1,193 Housing Units in Foreclosure
Florida 1 in 1,365 Housing Units in Foreclosure
Illinois 1 in 1,465 Housing Units in Foreclosure
South Carolina 1 in 1,615 Housing Units in Foreclosure
Connecticut 1 in 1,801 Housing Units in Foreclosure
Ohio 1 in 1,918 Housing Units in Foreclosure
Nevada 1 in 2,041 Housing Units in Foreclosure
Pennsylvania 1 in 2,205 Housing Units in Foreclosure
At first glance, these rates may seem pretty high. Are they? Are they really that bad? To check, I went back and looked at the data for the same states from 10 years ago at the height of the bursting real estate bubble. The picture that emerges shows that words such as “worst” are relative.
New Jersey 1 in 55 Housing Units in Foreclosure
Delaware 1 in 1,512 Housing Units in Foreclosure
Maryland 1 in 343 Housing Units in Foreclosure
Florida 1 in 17 Housing Units in Foreclosure……1 in 17!
Illinois 1 in 401 Housing Units in Foreclosure
South Carolina 1 in 754 Housing Units in Foreclosure
Connecticut 1 in 593 Housing Units in Foreclosure
Ohio 1 in 50 Housing Units in Foreclosure
Nevada 1 in 10 Housing Units in Foreclosure……1 in 10!!!!
Pennsylvania 1 in 1,140 Housing Units in Foreclosure
So yes, these states are the ten worst right now. But it can definitely be much, much worse.
Your State’s Most Expensive Neighborhood
So where do you live? Are you in one of the most expensive neighborhoods across the country?
Click on this report from Realtor.com to find out.
Me? Not even close. When you are bad you get put in the corner.
Rent Report For February 2019
Zumper.com has published a compilation of average rents for one and two bedroom units from across the United States. How is your location doing? Memphis, TN experienced a dip in overall rental amounts for these units, but it is the slow time of the year.
From the report:
“While most of the top markets had another flat month, there was some movement toward the bottom of these 10 cities. Miami fell out of this group, being replaced by Santa Ana, so now 6 of the 10 most expensive rental markets are in California (again).”
Read the rest of the report and check out the data on rent amounts here.
Memphis, TN – A City of Renters
There is a reason why the rental market is so strong here in Memphis, TN and why they keep adding more rental properties to the market.
We are a city of renters.
Here is a snippet from a recent article in the Memphis Business Journal.
“Memphis had the largest increase in renters among the 50 largest metros in the U.S., going from about 45 percent of residents who rented in 2006 to 56 percent in 2016.”
You can read the entire article here.
