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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 msnrealestate@microsoft.com.)
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.
Read: As rents rise, what's a renter to do?
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.
Read: 6 tips to finding the best deals on rent
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.
Read: If your landlord is facing foreclosure, stay put
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.
