Are renters the real victims?
May Rental Advice: When the mortgage crisis hit, all eyes were on homeowners. But tenants, who didn't take out risky loans, have had to pay the price for the follies of others.
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The link is undeniable: One reason rents are so darn high right now is that homeowners got in over their heads back in the boom days.
Blame the banks, if you like, for aggressively marketing too-good-to-be-true home loans. Or blame buyers for failing to understand the risks. Either way, the result is the same: Once the bubble burst, it's renters who have had to pay the price, and all without a single bailout in their name.
It may seem counterintuitive at first, but the connections are clear.
First, the housing crash caused a serious slowdown in residential construction, including of apartment buildings. Now that tenants are back on the market, thanks to a pickup in jobs, they're finding that supply hasn't kept pace with demand. Net effect: The landlord can raise the rent and somebody will pay it. (Bing: How to negotiate a lower rent)
Second, the great foreclosure crisis still has banks trembling, a condition that seems to interfere with their ability to open the vault and issue new home loans, even to qualified buyers. Add people who have lost their homes to foreclosure and you have thousands of new renters crowding the market.
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Third, the accompanying Great Recession created a boom of accidental landlords, some of whom offered illegal and even dangerous rooms for rent. Given the scantily regulated nature of the housing market, no one's the wiser and plenty of tenants have paid with their health and sanity. One reader wrote us to say that she lost three different rooms after complaining about untenable conditions.
(Renters: What tough choices have you had to make to pay the rent? Please write to us at firstname.lastname@example.org.)
Another reader, a landlord in Texas, wrote to say that tenants now come to her with "horror stories" about these accidental landlords: collapsed ceilings, untreated mold and sky-high heating costs due to insufficient insulation.
- On our blog, 'Listed': Is this a good time to buy your first home?
"The truly unfair aspect of the housing downturn has been, in my opinion, the inexperience, unpreparedness and generally unprofessional behavior on the part of new and accidental landlords," wrote Shannon Victory of Cleburne, Texas.
The accidental advocate
It's these kind of overlooked consequences to renters — the other third of the nation — that got William Deegan, a retired housing-finance wonk, thinking.
Incensed by what he considers the inordinate attention and financial breaks that go to homeowners — federal mortgage relief, tax write-offs, respect — Deegan formed in 2009 what he calls the first national tenants advocacy group, The American Tenants Association. The group, which is now called Renter Nation, aims to mobilize tenants and, ultimately, to generate tenant-protection laws at the federal level.
"Tenants don't have political clout," says Deegan, who owned four homes before choosing to rent later in life. "There's discrimination that weaves its way through our system, our culture, our tax system.
"I personally know people who have not made a mortgage payment in a year and they're still in their home," Deegan says. "It's a basic sense of fairness. I thought, 'This isn't right. Here I am paying my rent every month, and these people are being financially irresponsible.' It's just not right."
To date, Deegan has provided tenants with advice through the organization's Facebook page, by phone and via a radio show. His goal is to amp up Renter Nation and mobilize tenants to vote. As it is, renters, who typically earn less than homeowners, have a lower turnout rate at the polls.
"Residential renters in the United States are the largest demographic group that are not represented by a national group," Deegan says. "Ninety-five million people and we don't have an advocate."
Stay tuned, as they say.
- MSN Money: Is renting the new American dream?
Occupancy rates drop; rents to follow
While rents continue to rise, as they have for the past two years, there are strong indicators that we've hit a peak and prices may drop.
In its first-quarter survey of 47 counties, the apartment-research firm RealFacts found that while rents, on average, were up, to a national average of $1,008 per month, occupancy rates were dropping in more areas than not, indicating that demand for units is finally letting up.
"As long as the demand is there, [landlords] can continue to increase prices," says Nick Grotjahn, a RealFacts sales and client representative.
In 53% of the areas surveyed, occupancy rates fell. Many are places where the occupancy rate, and rental prices, climbed dramatically in 2011. The turnabout indicates that prices may have maxed out.
"Now there comes a point where people are saying, 'Hey, I can't afford this anymore. The rent is too high,' so they'll make other arrangements, decide to stay at home, maybe look at buying, and so the occupancy slows or stalls." Grotjahn says.
Fastest growing first-quarter rents:
- Boulder, Colo., up 4.5% to $1,107 per month
- Seattle, up 4.3%, to $1,121 per month
- San Jose, Calif., up 4% to $1,857 per month
Highest first-quarter growth in occupancy rates:
- Charlotte, N.C., up 1.2% to 94.9%
- Houston, up 1% to 91.5%
- Las Vegas, up 0.7% to 91.7%
Greatest first-quarter drop in occupancy rates:
- Oklahoma City, down 2% to 92.2%
- Baltimore, down 1.9% to 93.1
- Kansas City, Mo., down 1.2% to 93.4%
Help, am I being foreclosed on?
We continue to get questions from tenants who suspect that the landlord isn't paying the mortgage and that they're about to get kicked to the curb.
One reader midway through a two-year condo lease in Scottsdale, Ariz., says notices from the bank started appearing on her door this spring. She called the landlord, who said he was simply negotiating a new rate and not to worry. "He said everything is fine and if I have to move he'll help me," she wrote. Odd thing for the landlord to add if everything is fine, right?
We turned to Ken Volk, founder of Arizona Tenants Advocates, for advice.
First, Volk says, determine from official records who currently owns the property. A title company will have the most up-to-date information. "They're usually only a week behind," he says. "They're going to have quicker information than even if you call the county."
That should at least put your mind at ease, as you'll know whom to send the rent to. Either way, you have the right to stay for the duration of your lease, provided you don't skip out on the rent or otherwise violate the terms of the lease.
The Protecting Tenants at Foreclosure Act of 2009 is a federal law that allows renters to remain in a foreclosed unit for the duration of their lease. The only exception is if the new owner intends to use the property as his primary residence, and even then the tenants have 90 days from the date they receive a written eviction notice.
Arizona law may provide even greater protections to tenants in foreclosure. If the property has been transferred, contact the Arizona Tenants Advocates, a tenant lawyer or a local tenants union for information on how to protect your rent payments and deposit by notifying the new owners in writing.
The rise in the rents is due to the fact that the housing crash. But it is also due to the landlord who wants to pocket all of that loose cash out there. What I mean is you had home buyers that were paying a set amount before they lost out and the landlords think that since they were paying that amount for a home then why can't they do the same for an apartment or house, and along with it I will pocket more in my pocket and live a high life. What I think needs to happen is for one the landlords need to get their heads out of the clouds and back to the ground, two the banks need to start releasing some of their funds and help get these people off the streets. And of course the employers need to start paying wages that will allow someone to live a bit comfortable not a luxury life.
you're fat and ugly, no one will ever love you, and you should probably live in a deep-dark hole for the rest of your natural life - that's what happens when you're not whytt, or american-ican: but mainly whytt...
still waiting on the zombie apokolypse
Believe it or not, Ronald Reagan caused this problem. It is called Governmental Pretty. He moved the Housing Cost out of the Inflation Calculation. Interest follows inflation. Housing skyrocketed, interest did not follow, clear and simple.
The way loans are amortized with the first 10 years going to interest only (unless you pay extra and note with your payment that the extra is to be applied to principle only), you are basically paying high price rent. There should be a way that even from the get-go, a small amount is applied to principle. This is one way the banks are getting rich. I do not understand how they have had all these problems considering the way the loan system works. It would be nice if when they gave the new buyer (who they may have never dealt with) the low loan interest rate, they would conisder contacting the home owners that have been paying high interest rates for a long period of time some type of a break, especially if the homeowner is without a job. The banks are all about MONEY anymore. If they did the decent thing and helped out the homeowner, there would probably be less renters. And with less renters, the rent would go down due to that "supply and demand" thing.
BTW, the way it works now, if you're paying a high mortgage payment, the bank is not going to want to refinance. They like all that INTEREST.
With all the housing laws directed against the landlord and for the tenant, regardless of whether the tenant destroys your property, refuses to pay rent, is involved with drugs, etc, I find this advocate's comment that there is no help for the tenant just ridiculous. Many tenants are incensed that they are required to clean their apartment when they leave, believe they are being picked on if they have to pay for a broken item such as a window that their drunk husband broke. Sorry - it's these 10% of tenants that make the rest look bad and force landlords to have lease agreements thicker than a home finance contract. Same for landlords, it's the 10% slum lords that make the rest who care and do everything possible for their residents look bad.
I think it depends on when your landlord bought the property....if they bought during the boom they have a big nut to cover and have to charge more to meet their obligations, but if they are new buyers they can be more flexible on the rent.
I've been on both sides of this.....a good renter can be hard to find, so if you rent do your best to respect the property and not be too much of a pain in the patoot over the small stuff . I have been a great renter my whole life and it has paid off as I have faced virtually no rent increase in the last 3 places I've rented over the past 18 years.....a good relationship with the landlord can be a great thing.
FYI, rents have gone down here in my area by ALOT, of course I'm in the southwest and the housing market hit us hard. There is also alot of variation in the rent owing I suspect to the boom owners and the new investors who have purchased at 1/3 of the boom prices in some instances.
I dont have a problem with rental costs in my area, just prick landlords. For example, I rented a home out in the country a few years ago. The landlord had 5 horses and a bunch of barn cats that she promised would be gone within a month (Oct.) Come Feb, I was still taking care of her cats and horses (which I know NOTHING about btw) and the property manager did NOTHING! Nada...Zilch. What was I supposed to do? Let them starve?!?
Same place, during the winter, my fireplace was clogged (which was my only source of heat at the rental) and my family and children were out of heat for 2 weeks. We ended up having to go to Wyoming to stay with family because she couldnt afford to fix it.
Anyways, she ends up trying to raise rent $200 dollars on me and so I broke my lease and left. I was hosed on my deposit. She found every little thing to make me pay. It even took her 2 months to pay what little was left because the crazy lady didnt have my deposit. (Probably why she tried to hose me.) I should've taken her to small claims court because I KNOW I would've won that one. Im just not sue happy, I guess.
Oh, it get worse. She gave me a bunkbed for my 5 year old son. I just put it out in the garage because it was ugly. I'm glad I did because I found out later her son had hung himself off that same bed a year before. Thanks landlord.
Anyways, thats my crazy rental story. Yes, we do need advocates.