Political efforts will put the idea of rent control in front of some Chicago voters in the coming months:
Real and tangible, indeed, for the Lift the Ban coalition, a bloc of community groups that has been leading a two-year campaign against Illinois’ ban on rent control. The group is pushing for a repeal of the state’s 1997 Rent Control Preemption Act, a law that prohibits municipalities from enacting any form of regulation on residential or commercial rent prices.
“Because of the preemption act, it’s essentially illegal for any municipality to explore the idea of regulation,” said Jawanza Malone, Lift the Ban leader and executive director of the Kenwood Oakland Community Organization. “It just doesn’t make sense. The food we eat is regulated; there are environmental protections. Why is it that rent isn’t regulated? We’re just advocating for economic well-being for all of our communities.”…
The coalition’s efforts have already resulted in a question about rent regulation slated for the March primary ballot in nine wards and about 100 precincts around Chicago, Malone said. Couple that with state Rep. Will Guzzardi, D-Chicago, introducing a bill to the state House last year repealing the rent control ban and Democratic gubernatorial candidates J.B. Pritzker and Daniel Biss expressing support of a repeal and you have a number of people optimistic about the repeal coming to fruition…
But rent regulation is not a tool that economists and realty professionals want to pull out of the tool kit. In fact, Brian Bernardoni, senior director of government affairs and public policy for the Chicago Association of Realtors, likens it to “throwing a hand grenade on your lawn to get rid of dandelions.”
The issue of affordable housing needs to be addressed in some way in the Chicago region. If there are plenty of people opposed to rent control – and I assume at least a few business leaders will fight against the idea – what alternatives will they propose? At the least, perhaps a public discussion of rent control will push other parties to put some other ideas on the table.
I know the various problems in Illinois are vast but it would be great to hear a business leader or a government official step up soon and say that they had plans to build thousands of affordable housing units. I do not know how this could be done but could this not lead to a significant improvement for residents as well as positive public perception to whoever makes this happen?
Here is a new business model: buy a lot of foreclosed homes after a housing bubble bursts, plan to rent out many of the properties, and watch the money flow in.
Though Blackstone is unlikely to sell much or even any of its stake in an IPO, the stock market debut will test investors’ interest in the idea that the rental-home business can be institutionalized as apartments, shopping centers and office towers were before.
Blackstone and others investors believed that the housing collapse presented a rare opportunity to acquire homes for less than it cost to build them. Millions of foreclosures created a market large enough to justify investing in large systems to manage and maintain sprawling portfolios of rental homes…
To generate the revenue growth that shareholders will demand, they must pace rent hikes to avoid spooking tenants into becoming home buyers themselves. And now that foreclosure rates have returned to normal levels and prices have rebounded, they could find it difficult to add new houses at attractive prices.
They also must convince investors that huge home-rental companies are viable long-term businesses, not just massive portfolios of properties that need to be sold off.
I imagine there will be some particular parties (not just investors) interested in how this works out:
- Nearby residents. What happens if this leads to significantly more renters of homes in certain places? Americans tend to view renters more negatively than homeowners – though this might change in the future if the country shifts to fewer homeowners. How well will Blackstone do with having quality renters and following up with issues?
- Communities. Having renters is probably preferable to having vacant homes. But, they might have similar concerns as nearby residents as well as other interests in how Blackstone uses the properties.
- Advocates for affordable housing. There was some concern a few years ago that having large firms like this purchase cheap homes could limit lower priced housing. The lower end of the housing market could use more stock but investors may need to pursue higher rents in order to generate profits.
- Renters and homebuyers. What kind of rents will Blackstone charge? Will they eventually sell these properties and at what price? What kind of landlords will they be.
Additionally, I wonder what would happen if this does not prove to be a viable business plan. Are there others who would be interested in purchasing these properties? What if foreclosure proceedings begin with an institutional investor?
The State of the Nation’s Housing 2016 was released last week and there are a number of unfortunate historic points highlighted in the executive summary:
But at 1.1. million units, new home construction was still running near historic lows last year. A key factor holding back housing starts is the sustained falloff in household growth…
The US homeownership rate has tumbled to its lowest level in nearly a half-century. The decade-long declines are especially large among the age groups in the prime first-time homebuying years…
Just as exits from homeownership have been high, transitions to owning have been low. Tight mortgage credit is one explanation…And given that the homeownership rate tends to move in tandem with incomes, the 18 percent drop in real incomes among 25-34 year olds and the 9 percent decline among 35-44 year olds between 2000 and 2014 no doubt played a part as well…
On the renter side, the number of cost-burdened households rose by 3.6 million from 2008 to 2014, to 21.3 million. Even more troubling, the number with severe burdens (paying more than 50 percent of income for housing) jumped by 2.1 million to a record 11.4 million…While nearly universal among lowest-income households, cost burdens are rapidly spreading among moderate-income households as well, especially in higher cost coastal markets.
The conclusion suggests stability – homeownership should stabilize with increased household formation – as the effects of the housing bubble continue to fade. However, the glory years of housing seem to be far off as housing costs plague many Americans and the housing industry concentrates on higher end units.
As the economic crisis slowly fades into history, the question remains: is American housing transformed for decades (lower rates of homeownership, more high-cost renting, fewer housing starts)?
One writer suggests Americans have bought into the lie that houses are good investments:
Would it surprise you to know that if there are two equally expensive houses—one for rent, one to buy—the person who buys will pay 40 percent to 50 percent more each month? That’s what happens when you factor in property taxes, insurance, maintenance fees and assorted fees like repairs—which almost nobody does…
The truth is, most of what we’ve been raised to believe about owning a house simply isn’t true…
Run the numbers. Yale economist Robert Shiller found that from 1890 to 1990, the return on residential real estate was just about zero after inflation.
This trend toward seeing homes as a good return on investment is a recent development. Perhaps it hints at the commodification – and a need to see a potential return on investment – of everything.
But, if owning a home is not a great investment, why do Americans still privilege homeownership? Here are some historic reasons:
- Land is valuable. In the past, people needed land to some degree to survive. Think of all those tenant farmers in the Middle Ages who always had to pay someone else. Or think of sharecroppers in the United States. Land equaled food or the ability to run a business on your property. Additionally, having your own piece of property meant that you could get away from others as well as the government. It is that the home is your castle thing.
- Owning a home is a sign of material prosperity. When you are a homeowner, you have made it enough to be able to own and maintain your own property. In other words, you have the resources to waste it. This is the realization of the American Dream as George W. Bush once put it.
- Additionally, homeownership is a sign of dedication to your local community. Renters are assumed to be lower-income, transient, and not committed to civic organizations. Homeowners have a stake in their community because they (1) will be there for an extended time and (2) want to protect their property values (though this is also a more recent development).
- Combining #2 and #3, homeownership was assumed to keep people invested in capitalism as opposed to socialism. Again, if you own your own property, you want to see it do well rather than hand it over to an outside manager (the state or a landlord).
A new study of the 11 biggest American cities finds that an increasing number of suburbanites rent:
About 29 percent of suburbanites living outside the nation’s 11 most populous cities were renters in 2014, up from 23 percent in 2006, according to a report released Tuesday by New York University’s Furman Center real estate think tank and the bank Capital One.
The finances of home ownership since the mortgage meltdown might be a lead reason for the change, but the cost of renting also is rising in most of the biggest metropolitan areas, the study found…
Traditionally, suburbs have not been very open to renters, particularly when it comes to apartments. The stereotypes of renters are that they care less about the community, they are more transient, and that their dwellings drive down housing values. But, two major things changed that could contribute to the effects of the economic crisis:
- What if more new renters are renting single-family homes rather than apartments? The same stereotypes regarding renters might still apply but these renters are not as easy to spot and look like they are living the suburban dream of homeownership. Plus, isn’t having renters in single-family home preferable to all the vacant homes due to foreclosures?
- There are more suburbs than people often think that don’t look like wealthy bedroom communities. In other words, these renters might be clustered in particular communities where housing is cheaper and apartments are more plentiful but renting in wealthier suburbs may not have changed much.
It will be interesting to see how suburban communities respond to the uptick in renters. New regulations? Reconsideration of how renters should be viewed?
That city that may have been the exemplar of the early 2000s housing boom may now provide good evidence of a shift from owning to renting in the United States:
The shift to rental in single-family homes is visible on streets like Recktenwall. Between 2005 and 2009, about 80% of such houses in greater Las Vegas were owner-occupied; by 2013, that had dropped to 71%, a 12,000-unit shift…
But the homeownership decline is not entirely tragic. For the footloose, the empty-nested, the risk-averse and assorted others (contract workers, military servicemembers) renting makes sense…
The housing crash’s ground zero was Las Vegas. People who thought you couldn’t lose money on a house lost everything. At one point, an astonishing three quarters of Las Vegas mortgage holders owed more on their homes than they were worth, a percentage that still hovers around 25%.
That’s one of many factors suppressing home sales. Another is the fact that millions of houses have been flipped to rentals by investors who snapped them up at rock-bottom prices years ago.
This long article that covers presidential support of homeownership in recent decades to the perks of some newer apartment complexes presents an interesting conundrum: Americans – including young adults – tend to say that they would prefer or aspire to own a home but for a variety of reasons – from bad credit to tight credit in the mortgage industry to uncertain jobs to college loans to better perks in rental complexes to more options like single family homes available for rent – see renting as desirable at the moment. Some of this might only be determined over time; will the housing market conditions continue to push people toward renting? And, if this happens, does the aspirations of owning a home also slowly decline?
What would be helpful to see with this article that uses Las Vegas: where has the population increased or declined in the metropolitan region over the last ten years or so? While the single-family home market was hit hard, does that mean the suburbs lost people and residents moved closer to the region’s center?
The housing market is such that either renting or buying a housing unit is difficult for those under 35:
If you’re an American man or woman under the age of 35, there’s a historically large chance that you’re living with your parents. And if not, you’re very likely to be renting, and paying too much for the privilege. Only 34.8 percent of young adult households actually own their home, the smallest fraction since at least 1994, and among those who are forking over cash to a landlord, nearly half are considered “rent burdened”—meaning housing eats up around a third or more of their income.
And what about those who’d at least like to buy? Well, there’s a pretty good probability they’re getting boxed out of the market. On top of the challenges posed by tough post-crash mortgage standards, Bloomberg reports Thursday that prices for typical starter homes have been on a tear due to a lack of supply, and are now actually above their past bubbly heights.
As others have pointed out, high housing costs for those trying to start their adult lives or in their careers can have some large consequences. How to pay off college debt? How to easily move to the next new job opportunity? How to build wealth? How to start family life? This has been a problem for a few years now and doesn’t look like it will get much better soon.