OT: Rent inflation - what's the cause?

[verticaldoug]

Originally Posted by mhespenheide

I own a house in Seattle (technically Burien) with almost an acre of land. I'm looking to split the lot and build a rental property or two. As a teacher with a modest income, it's my only real shot at a reasonable retirement income.

If I can get the lot split for two additional units, I'd love to have my parents stay for a month or more at a time to see their grandchild grow up and then AirBnB it the rest of the time. I'll look to rent the second unit to tenants.

Am I automatically a jerk under this scenario? Should this be "heavily taxed and restricted"? I'm asking honestly, not rhetorically, here. I think of myself as progressive and recognize that I got astronomically lucky to have bought back in 2012. I'd be locked out of the market today.

I really don't think the conversation is about landlords or housing but actually about tax policy. The issue is our loophole riddled tax code where the wealthier you are, the lower you can push your effective tax rate. Once your wealth changes from being driven by your salaried income, but to your capital, the effective tax rate game completely changes. A simple flat tax which would lower rates for basically everyone on this forum, yet raise taxes on the most wealthy is a simple and effective solution.

[Clean39T]

Originally Posted by verticaldoug

I really don't think the conversation is about landlords or housing but actually about tax policy. The issue is our loophole riddled tax code where the wealthier you are, the lower you can push your effective tax rate. Once your wealth changes from being driven by your salaried income, but to your capital, the effective tax rate game completely changes. A simple flat tax which would lower rates for basically everyone on this forum, yet raise taxes on the most wealthy is a simple and effective solution.

Sure, as long as you add in significant credits and investments to keep it from being regressive on lower earners..

Which is essentially what we are saying about rules around investment properties, vacation rentals, etc. Bringing more equity, closing loopholes and give-aways to those who least need it, and the like.

[tuxbailey]

I rent out my old town house since 2014 and I haven't raised my rent at all, I even lowered by $50/month when I had a really responsible tenant who signed a multi-year lease.

Given that property tax increase every year as well as maintenance cost, I think I am a lousy business person.

Nowadays the rent is about $100-$150 more per month in the area and I have a new tenant started at the beginning of the year. I think I will raise the rent by 2.5% - 3% on a year to year basis going forward.

[mhespenheide]

Originally Posted by Clean39T

No, you're not. But I'm guessing politicians would love to set you up as an example for why things have to stay as they are.. and thereby protect the interests that are lining their pockets.

There's no reason not to have progressive tax policy that targets specific outcomes based on wealth accumulation and overall income/means.

That's fair -- I'm a big proponent of designing tax policy and subsidies that drive targeted desired outcomes.

With only 1-2 units, I can't see myself sitting on vacant properties as an "accepted turnover rate". Ideally, I'd want a mid-career teacher (or similar) with a family in there and I'd be happy with rates that are slightly below market for a stable/good tenant.

I'm just looking around right now at general costs and overall inflation/price spikes and wondering what the heck I'm going to do -- or any of us is going to do -- if retirement income is constant while costs go up exponentially. That makes me nervous about long-term financial stability. I'm sure there are many more people on the other side of the coin thinking the exact same thing right now given rental cost increases.

[sjbraun]

Originally Posted by jlwdm

At $29k per house those are going to be cheap rentals. Probably need a lot of work before can rent.

Jeff

Ach! I mistyped. Should have written $14,500,000; so $290,000 per house.

[prototoast]

Originally Posted by echappist

The (obvious) answer is that until there's something to indicate so otherwise, of course you aren't a jerk by the virtue of being a landlord.

I personally have benefited from renting from reasonable landlords: I was a tenant at one place for four straight years, and I will have lived at my current place for three straight years by the time we move out next spring. The rent increases at both were quite reasonable (to the tune of $25/month/year), and I basically ended up paying a few hundred less per months below market rate.

But as you can tell from this thread, not all landlords (even the small-time ones) do this, and some will be glad to squeeze out all they could get, even if that means units go vacant (thereby helping neither themselves nor potential renters).

Frankly, the post to which you responded paints the picture with such a broad brush, such that it is rhetorically defective. In no world should small-time landlords, big time landlords (say at least 50 units), slumlords (e.g. Kushner Jr.), 2nd property owners, and AirBnB operators be all included in the same category. Sure, they all hold equity in a residence that's not their primary residence, but the similarity ends there.

Rentals are good. Second homes are fine. Landlords are a mixed bag. But more than anything else, housing affordability is driven by the quantity of housing units. If a location has nine housing units and 10 people, those 10 people Will bid aggressively to not be The one place to live. If you have 10 people and 11 has a unit, the landlords will price aggressively to not be the one who collects zero rent.

If you are able to turn your lot that is currently one housing unit into two housing units, you are doing a service for affordability for everyone, no matter what price you charge.

Too many housing policies focused on the price, but if you subsidize buyers while simultaneously restricting the quantity, of course those gains are going to go to landlords. Quantity is the name of the game. Landlords aren't jacking up the rent while units sit empty. And if you have more people who want to live in an area then housing units for them, there is no policy that can make housing broadly more affordable.

[B4_Ford]

Greed. The decline of Western Civilization. End Stage Capitalism.

[HenryA]

Originally Posted by mhespenheide

That's fair -- I'm a big proponent of designing tax policy and subsidies that drive targeted desired outcomes.

snipped a bunch

Aye, there’s the rub…

Targeted desired outcomes are met by legislative and regulatory capture. And my desired outcome is the one that must be accomplished because its so good and important. If I contribute enough to campaigns I get what I want.

[smontanaro]

There's also Memo 618 to contend with.