Foreclosure by AKZO on Flickr

In The Rent is too Damn High, reviewed by Andrew here, Yglesias argues that single-family homes are typically owned, not rented, because the costs of managing the property make it inefficient to do so. And indeed, it’s cheaper to be a landlord for a multi-family building, since much of the infrastructure and common space is shared by multiple tenants.

Nonetheless, the wave of foreclosures in America over the last few years has led to a wave of investment companies scooping up distressed homes and turning them into rental properties:

With home prices down more than a third from their peak and the market swamped with foreclosures, large investors are salivating at the opportunity to buy perhaps thousands of homes at deep discounts and fill them with tenants. Nobody has ever tried this on such a large scale, and critics worry these new investors could face big challenges managing large portfolios of dispersed rental houses. Typically, landlords tend to be individuals or small firms that own just a handful of homes.

It’s possible that single-family housing has gotten so cheap – and other investment opportunities have gotten so scarce – that this new wave of investors will actually make a profit. It’s also possible that advances in technology, like the ability to remotely monitor houses or dispatch plumbers, have fundamentally changed the economics of landlording.

More interesting, though, is the question of how this new industry will make its mark on suburbia. Defenders of the home mortgage tax deduction often claim that homeowners are better stewards of their property and more invested in their community than renters. But surely large-scale landlords managing an investment portfolio have interests as well, and unlike single-family homeowners, they’ll be able to dedicate significant resources to lobbying.

Unlike suburban developers, who close the sale and are gone, suburban landlords will need to make money from their neighborhoods over time. They’ll also need to attract a different clientele than the typical urban renter, probably a family (multi-generational?) that can fill a 2600 sq ft house. Will they advocate for more density in the ‘burbs, so as to lower maintenance costs? Or perhaps less density, so as to keep rents high? More parks? Better schools? More highways?  If this new business model proves successful (and that’s a big if) it could fundamentally change the landscape (both political and actual) of suburban America.

83 Replies to “The Rise of the Suburban Mega-Landlord”

  1. There are also a lot of rental houses in Seattle, like the one I live in.

    Concerns over maintenance are real. My house, like many, are a hand-me-down from parents who bought or built the houses near retirement. The current owner loves the checks but not so much the maintenance. Roof leaks in multiple places? Surely a tube of patch will fix that every time. Well, it’s your decaying asset, not mine….

      1. The free market doesn’t work when there’s a principal-agent problem. And lo and behold, there is one in the rental market.

      2. Yes, Nathaniel, I do realize that the “urbanists” despise freedom of any kind. It’s a popular idea on blogs like this one, but fortunately not so popular in real life. If you don’t like your rental, move. If you don’t like renting, save up and buy your own place. That’s how it works, and how it’s going to keep working, whether you like it or not.

      3. In my experience as a landlord, I think I had good tenants. They paid the rent on time, and while they didn’t have an ownership mentality, I didn’t expect them to. Any landlord who does expect that is a fool. As for the cat lady, well, she asked me if she could bring her cat, and I said yes. Word to the wise: If you ever contemplate being a landlord, the average cat is worse than the average dog.

        As for landlords when I was a tenant, I never had a problem either. I did live in a couple of barely maintain dumps, but the price was right, and I knew it at the time. So I rolled with the punches. These “tenants rights” groups out there never seem to look at both sides of the equation.

      4. Yes, Seattle Citizen, I realize that any discussion about actual economic behavior is derailed by right-wing lunatics going on about “despising freedom”, but it gets boring. Please, if you wish to join the conversation, learn what we’re talking about and discuss it intelligently. If you’d like to suggest good ways of dealing with the principal-agent problems inherent in renting, so as to *make* the market work, *I’m all ears*.

      5. Sorry to be so irritable, but I hate seeing regurgitated right-wing bullshit lines. “Freedom” is not the issue.

        I know about cats (ugh), and I know about maintenance. Renters are renters because they don’t *want* to have to think like owners — which is *fine*.

        …except when it comes to stuff like energy efficiency. If the renter pays the utility bills, NOBODY has a real incentive to make the building more energy efficient; the landlord’s incentive is far too indirect to actually work except in a market with a huge number of vacancies, where landlords are chasing renters — and even then it only works if the landlord is well-capitalized. There are several reasons why that situation is rare.

        There are all kinds of problems with the rental market. They do not affect dealings between really good landlords and really good tenants, which don’t really have much of a “market” character to them — those are more “personal relationship” interactions. And that’s fine too, of course, I know a few people who got their apartments through interviews because the landlords liked ’em.

        It would be nice to turn the rental market into a well-functioning *free market*, but I’m not entirely sure how. It doesn’t have quite as many market failures as transportation, let alone health care, but it’s far worse than agriculture (and agriculture has some serious market failures itself).

      6. It would be nice to turn the rental market into a well-functioning *free market*, but I’m not entirely sure how. It doesn’t have quite as many market failures as transportation, let alone health care, but it’s far worse than agriculture (and agriculture has some serious market failures itself).

        The rental market is a very free and efficient market, especially now that advertising rates have dropped so much. Of course, the so-called “progressives” are doing their very best to make it less free, by forcing universal inspections (and their costs) on tenants who don’t want them, and by trying (and thank god, failing) to require landlords to rent to criminals. It goes on and on.

        Just let the market work. People who want the very best quality will pay for it, and those who’ll accept less, will get less. Legal standards already create an implied warranty of habitability. That’s sufficient. If you don’t like your landlord’s behavior with respect to repairs, move out.

    1. And not just that, either, but other things that affect whoever lives there. Drafty windows and doors (that run up the heating bill)? Leaky faucets and toilets (that run up the water bill)? Inadequate waste pickup (where I’ve lived, a law prohibits tenants from contacting the waste hauler)? Failing major appliances? Light fixtures that won’t take non-incandescent bulbs? Nonworking cable/phone jacks or failing electrical? Many times the answer to these and more is “well can you still live there?” Implying that if the tenant is unhappy for any reason they’re welcome to give notice and roll the dice on finding a new place to live.
      To be fair, there are good rental companies/individuals out there, but they’re far and few between.
      However, something else I see as a component is individual personal responsibility. A single person or a busy family with little if any time outside of professional and personal obligations to perform tenant maintenance duties is much better off in an apartment than renting a house. Imagine how this behavior could be shaped through civic means, such as sales taxes being imposed on value of house rentals but not apartment rentals.

      1. Artificial limits on competition in the rental market (i.e. density restrictions) does not help this situation. In an ideal world, the tenant could move to another location with better insulation, a higher standard of maintenance, etc.

        In modern day Seattle, not so much. You have the option to move, sure, but at what cost? If your lease was negotiated many years ago, odds are you’ll be looking at a price hike just to move into a comparable unit in a different building.

      2. Jason, I agree that a single tenant is better in an apartment. As the former landlord of a single-family house, I can attest that not even the best tenant cared about the place half as much as I did.

        By the way, if anyone had stuck a sales tax on rentals, I’d have passed it through to the tenants, same as any other fees. As for the failures you cite, you forgot to mention the tenant who let a toilet run for a month, sticking me with the water bill, and the other one whose cat pissed all over the carpets.

        She didn’t pay her last month’s rent, so the security deposit didn’t cover the damage. But she did leave her kinky lingerie in the basement, which provided me a few laughs anyway. Oh, and there was the guy who literally couldn’t figure out how to screw in a lightbulb.

        Trust me, the list of Stupid Tenant Tricks is endless. By the way, before I was a landlord I had been a tenant for almost 15 years. I’ve seen it from both sides. There’s plenty of blame to go around. I can predict one thing: Large scale corporate house rentals will drive rents sky high, and quality of housing down.

      3. There are lots of great landlords, and there are lots of great tenants. But by definition, we’re more likely to hear about the bad ones. When you find a good landlord, you’re less likely to move; when you have a good tenant, you’re likely to do what you can to keep them. Therefore, on average, any individual bad tenant or bad landlord will be over-represented in terms of the number of landlords/tenants they’ve dealt with.

        This is just math. Suppose you have landlords Alice, Bob, and Charlie, who respectively rent to tenants Dave, Eve, and Frank. Alice and Dave like each other, so Dave doesn’t move. But Bob is bad, so Eve moves out, and Frank is bad, so Charlie doesn’t renew his lease. Now Eve and Frank need a new place to live, so Eve rents from Charlie, and Frank rents from Bob. The end result is that most landlords think that half of all tenants are bad, and most tenants think that half of all landlords are bad.

      4. (apologies for the double post, but the following was meant for this part of the thread)

        In my experience as a landlord, I think I had good tenants. They paid the rent on time, and while they didn’t have an ownership mentality, I didn’t expect them to. Any landlord who does expect that is a fool. As for the cat lady, well, she asked me if she could bring her cat, and I said yes. Word to the wise: If you ever contemplate being a landlord, the average cat is worse than the average dog.

        As for landlords when I was a tenant, I never had a problem either. I did live in a couple of barely maintain dumps, but the price was right, and I knew it at the time. So I rolled with the punches. These “tenants rights” groups out there never seem to look at both sides of the equation.

      5. “Drafty windows and doors (that run up the heating bill)? Leaky faucets and toilets (that run up the water bill)? Inadequate waste pickup (where I’ve lived, a law prohibits tenants from contacting the waste hauler)? Failing major appliances? Light fixtures that won’t take non-incandescent bulbs? Nonworking cable/phone jacks or failing electrical? Many times the answer to these and more is “well can you still live there?” Implying that if the tenant is unhappy for any reason they’re welcome to give notice and roll the dice on finding a new place to live.”

        Notice how many of these are essentially externality problems. For the simplest example, if the heating bill is charged to the tenant, the landlord has little incentive to do anything about it, unless the housing market is so slack that all tenants will just leave the apartment vacant. The tenant has no incentive to fix it, because any fixes will accrue primarily to the benefit of the landlord (the tenant doesn’t get to take them when he leaves).

        Most of the other problems are the same: the incentives are set up to prevent *either* the tenant *or* the landlord from having an incentive to fix things — unless there are a huge number of vacant rentals, in which case landlords will have to fix things in order to remain competitive.

      6. I’ve sometimes wondered if the correct solution is some form of cost-sharing on matters like utility bills. Every rental I’ve ever seen has either been “landlord pays all utilities” (which is just as bad because then the tenants don’t care about wasting energy or water) or “tenant pays all utilities”.

      7. For the simplest example, if the heating bill is charged to the tenant, the landlord has little incentive to do anything about it, unless the housing market is so slack that all tenants will just leave the apartment vacant.

        So now you want some government energy efficiency requirement for rentals? You’re not being a good urbanist. I thought you people were against local government telling people what they can and cannot do with their own property.

  2. The situation is cyclical. Generally speaking, when home/apartment building prices get down to where a landlord sees positive cash flow they will buy, eventually raising rents driving renters to buy, in turn driving values up, so the original investor can sell at a profit. This is the short term “make money in real estate” scenario repeated over and over locally and nationally. Your city may vary.

    Developers promote amenities in their sprawling realms until they are down to the last lot and then they lose all interest. The large management companies you speak of will only be too happy to depreciate their holdings until values climb, and then sell for the profit. You won’t see Waypoint Real Estate Group (from the link) at a PTA meeting anytime soon, in either the urban or suburban environment.

    The single family home owner who makes a point of adhering to the amortization schedule eventually has a retirement package that is worth something, and probably saved some money otherwise.

    1. Taking a lot of distressed properties, rehabilitating them and putting them back on the market initially should drive up supply and keep prices for homes low.

      The rental option seems like a good deal for communities — it enforces a certain standard of repair and upkeep. Also it might be able to draw younger people into the suburbs who would like to live there out of college but don’t have many apartment options normally and don’t want to buy a house yet.

      1. The reality will be different. The home rental market is very different than the apartment rental market. It tends to be dominated by small-time landlords, for whom repairs are often a matter of sweat equity, as opposed to apartment landlords, who are much more often big operators with maintenance staffs.

        A large-scale house landlord will have a maintenance staff, and because of the separation between units and greater complexity of repairs, those costs will be higher. The result will be that the “certain standard of repair and upkeep” will be surprisingly expensive.

        If this phenomenon actually does develop, no one should be expecting any bargains, that’s for sure.

  3. unlike single-family homeowners, they’ll be able to dedicate significant resources to lobbying.

    Detached from reality here. It’s long term residents, often retired that have the time and take the interest to work with staff at city hall. Glenn is right, you’re not going to see mega-lords joining community clubs, setting up face to face meetings with council members, etc. that it takes to get things done on a neighborhood level. Renting single family homes if you’re financing the majority of the value is a cash neutral proposition at best. The money is in the appreciation of the property. If it gets rezoned (campaign contribution) then they hit the jackpot.

    1. Bernie, totally agree. I guess the distinction I’d make is between “grassroots” lobbying by homeowners and top-down lobbying by large-scale landlords. And the point you raise about hitting the re-zoning “jackpot” is exactly the point I’m interested in. Will there now be a significant political push to up zone the suburbs? That, in and of itself, is fascinating to me, and goes against 60 years of suburban politics.

      1. If they are buying scattered tract homes in residential neighborhoods there’s not going to be much chance of upzoning. That strategy can’t be a money maker with rentals. If they are targeting blocks or homes along an arterial with some commercial development in place then yeah, it’s cover the finance cost with rent and wait for the upzone.

        What I see are smaller homes that are “winterized”. Meaning they’ve turned off the water, drained the pipes and are just keeping them “on ice” until they can be sold. I assume these are currently bank owned.

        BOA is experimenting with renting back homes but that’s to the owners being foreclosed on. They’re not going to get into the business of vetting tenants and property management. I know some people that have been successful at buying several homes over time and renting them out but you really have to know the market and shop for the real bargains which are not that easy to snap up.

      2. I think BOA is going to run into real trouble on the rental front. A tenant who couldn’t afford the mortgage and was foreclosed on is not a reliable risk when it comes to maintenance. If BOA, et. al. weren’t so stupid (“bank” being a synonym for “organized stupidity”), they’d have cut the principal like everyone wanted them to.

      3. BOA’s previous strategy was to kick people out of their houses and then leave them vacant and a target for looters, rather than successfully reselling them. Making the occupants into renters has to be better than that.

        I guess I’m saying that it’s not “real trouble” for BOA if it’s better than their previous practices, which were really self-destructive and tended to drive property values to zero.

      4. Hmm, comment didn’t go through…

        …anyway, 100% agreed about “organized stupidity” and that the banks should have written down the principal on the mortgages long ago.

        I know why they didn’t, though. Because they don’t own the mortgages. This leads us to a rabbit hole of massive frauds, well-documented at various sites, mostly linked from Naked Capitalism.

    2. BOA’s previous strategy was to kick people out of their houses

      Those houses belong to the lender(s), not whoever defaulted on the loan. In most cases, the bank is only the mortgage servicer and not even the holder of the note. In most cases, there isn’t a note holder in the traditionally understood sense. There are people, or financial institutions (usually the latter) who hold a bond whose payments are derived from mortgage payments.

      The bank usually has no power to cut anyone a better deal. That would have to come from the bond holders. The banks are only conduits for payments, and if the payments aren’t made, then they foreclose under the terms of contracts with borrowers and bondholders.

      Banks are stupid, and corrupt, but the critics are utter morons, hence this ridiculous debate that has no relationship to factual or legal reality. Yep, it’s great fun, but you actually know nothing at all, so you can be sure that nothing will be done.

      Have fun this spring at your next “Occupy” rally. Nothing will come out of that, either. Why? Because those people know nothing, and don’t want to know anything. When they can be so easily out-maneuvered by commercial banks, the stupidest major institutions in our society, and ones that are prima facie guilty of a long list of frauds, this tells you that today’s “protesters” really are the useless, meth-addled whackjobs we think of them as being.

      Don’t even call it the United States of America anymore. Call it Argentina. we are a country of sheep, most docile and a few angry, but all sheep: stupid, easily herded, and inclined to believe in magic. Easy pickings for the thieves who call themselves shepherds.

  4. Before I take the bait, I’d like to know what percentage of rental homes in America are owned by “mega-landlords?” I suspect it’s infinitesimal.

  5. For a long time I’ve thought that it’d be neat if a large institution owned many houses in different regions. You could be a member renter with the ability to sign 5 to 10 year leases and have a bit more autonomy over the house. Plant a blue berry bush, paint the living room, etc.

    Then as life changes maybe you have to move to a different part of the country. Maybe this move is just for 3-4 years of a PhD program. You could apply to live in one of these institution owned houses and get to plant another blue berry bush. When you finish you PhD you will most likely have to move again to start your career.

    If you are a bad tenant then your membership is terminated and you no longer have access to these homes that allow for greater autonomy.

    As a 27 year old I think the serial house ownership of starter home, family home, smaller empty nest home is kind ridiculous. The only home I imagine myself purchasing is the ’empty nest home’ in which I’ll retire.

    I don’t see why if you are a renter you have to live like a guest.

    1. Nice fantasy, but the reality is very different. Renters are transients, by and large. They don’t care for a place like an owner does. Even if one tenant plants that blueberry bush, the next tenant will fail to water it. And painting the place on their own? What planet do you live on?

      1. Well, I was basically thinking of a Home Owners Association that wasn’t geographically tethered. Violate the agreement and you’re out.

    2. I don’t see why if you are a renter you have to live like a guest.

      You don’t. There are lots of buildings — especially older ones in areas with a long history of renting — where many/most people are long-term renters. Quite a few people in my building have been there for 10-20 years. (We’re hoping to stay that long as well!) In older buildings, it’s much more common for painting to be allowed (or even encouraged). Personally, since moving in a month ago, we’ve painted a room, replaced the thermostats with digital ones, and hung lots of curtains, among other things. We were also lucky that when we moved in, the bedroom was a lovely spring green color, and there was a blue-grey accent wall, which we were able to convince them not to paint over.

      In general, it’s the rare landlord who will object to painting, so long as you restore it to its original hideous beige color when you leave. ;)

      1. Aleks, the very first thing you learn as a landlord is to paint the insides white. It’s a little bit like food allergies, which have become fashionable. Ya got yer gluten intolerant types who can’t stand yellow. Ya got yer vegans who can’t stand blue. Ya got yer ovo-lacto vegetarians who hate on the green. And on and on and on.

        So it’s white. White, white, white. Unless it’s a dump, in which case, in return for really cheap rent, ya take whatever ya get. In any case, tenants don’t paint. Or fix toilets. Or pick up a screwdriver.

  6. This is only a part of the larger trend of the inversion of living patterns, where density is starting to become positively correlated with wealth instead of the reverse, and more richer people are moving into “luxury condos” in the city while poorer people are starting to move into the houses they left behind in the suburbs.

    1. Not really. There are more people moving into luxury condos in the city but the total number is dwarfed by suburban wealth. Although DT Redmond has a very high concentration of wealth it’s density is still only 2,848/sq mi. Look how far down the list you have to go to find Capitol Hill (98102). WEALTH IN THE UNITED STATES

    2. That’s simply not true. Except in a few cities, the big money lives in big houses. That has not changed, and it will not change.

      1. No, it’s true. It *is* changing. Slowly, mind you.

        Now, the *really* big money has multiple houses: a penthouse in the city and a mansion in the country. And fly between ’em by private jet. I’m not kidding — that is Richistan.

        But the medium-big money — which can’t afford full-time chauffeurs or private jets — is moving to relatively big in-city locations to escape the driving. It’s a slow trend, but it’s real and documented. Of course this only applies to the ones who also work in a city, but that’s an awful lot of them.

      2. Nathaniel, the hipster urbanists like to imagine that America is turning into Manhattan, the city of their dreams. But it’s not. Any honest look at where the population growth has occurred will tell you this.

        A few thousand new condos in Seattle have been dwarfed by single-family house growth in the suburbs. I fully realize how much you hate this reality. It just kills you to realize that people have turned their back on your urbanist dreams, and have done so by the tens of millions.

        But that doesn’t make it any less true. Look at the numbers, and at least tell yourself the truth, even if you won’t dare admit it on the Internet.

      3. Do the words ‘zoning’ or ‘land use’ mean anything to you?

        Nope, never heard of them. But since you are so much smarter than I can ever hope to be, why don’t you explain them? I just love to learn from my betters. As you pass along your wisdom, please make sure to tell us your history of renting (both as a tenant and a landlord) and of owning. I can’t imagine that you’re, say, a 20-something student who owns a backpack, a bicycle, and the clothes on his back and not much else.

      4. Seattle Citizen, don’t count the “number of houses built”, which is at best a hopelessly imperfect measure of preferences — count the actual population movements among people in different income brackets.

        Come back when you’ve done so. You’ll find *I’m right and you’re wrong.

      5. Note that the vast, and increasing, numbers of relatively poor people — a majority of the population — *are* moving to the suburbs, still. Hence, you know, ever-increasing single-family houses in the suburbs….

        I’m talking about the trend at higher levels.

      6. It’s a pretty simple concept, one even you should be able to grasp.

        If you restrict growth in one area, and simultaneously subsidize it an another, the subsidized area will grow faster than the restricted. That in no way gives an accurate picture of actual desires.

      7. Seattle Citizen, don’t count the “number of houses built”, which is at best a hopelessly imperfect measure of preferences — count the actual population movements among people in different income brackets.

        Nathaniel, you are a great “urbanist.” Like so many of your crew, you just make shit up on the fly. You never cite any data, and when you do make a specific assertion about a data point you’re invariably wrong. But hey, with the assertion you just made, how about citing some actual data? If you dare, that is.

      8. @Matthew ‘Anc’ Johnson, you asked me if I knew what “zoning” and “land use” are. I replied, no, I don’t, how about teaching me. And then you went off on a tangent. Focus, Matthew, focus!

      9. I figured it was apparent from my reply, but if you need me to spell it out… Zoning and Land Use Codes are restrictions placed on landowners limiting what they can do with their property.

      10. Zoning and Land Use Codes are restrictions placed on landowners limiting what they can do with their property.

        Same goes for building codes, fire codes, pollution regulations, and the latest progressive feel-good idea, mandatory dwelling unit inspections. Do you want to repeal those restrictions too? I didn’t think so.

    3. The worldwide norm is for the wealthy to live in the middle of the city and the poor on the edges. If they have a country estate, they also have a city townhouse to stay in when they’re there. Suburbios in Spanish physically means suburbs but culturally means poor people and slums.

      The difference in the US is the rich and middle class decided to move to the edges. The rich can afford it, while the middle class depend on infrastructure subsidies and cheap gas. This is unsustainable as a mass arrangement over the long term, so it will probably revert to the worldwide norm eventually and be seen as a temporary aberration. There has been some pullback already, as people have been moving back to Seattle, New York, and Detroit. If the suburbanites can achieve solar power and solar cars, perhaps it can remain in the current state for a long time.

      1. Detroit’s population in 2000 was 951,270. In 2010 it was 713,777. That’s a 25% decline. To get cops to move back into the city they are rehabing abandon houses and selling them for $1000. You’re just making this stuff up. The wealthy in London have been out in the “suburbs” for hundereds of years. Madison park was a suburb before it was annexed into the city. The flat in the city is the second home. The vacation home is in a vacation spot like a ski area, beach, etc.

      2. Mike, the reason people in Spain and places influenced by it have historically lived close to the city center is because any money in a Spanish town was distributed, in the end, through city hall and the courthouse, located in the center of town. In other words, through patronage.

      3. Detroit’s an aberration, and a one-industry town.

        In London, *like everywhere else*, the superrich have both town and country houses. But you can’t seriously call a location with a Tube stop a suburb any more, and the moderately rich live in such places.

      4. Seattle Citizen, the money is STILL distributed through institutions located in the center of town, whether they are government or corporate.

      5. *Detroit’s an aberration, and a one-industry town.*

        Nathaniel, you make Fox News look like amateurs in the making it up game. There is a long list of American cities that have lost population. You can begin with Chicago and move from there.

      6. In the 1970s and 80s. Seattle’s population reached its nadir of 420,000-something in the 1980s. Now it’s up to 550,000 something and climbing. The same is generally true for other American cities, although the amount of change may be different.

        I may have miscalculated about Detroit. My point is that essentially nobody was moving to Detroit in the 80s but now people are. That may have been overwhelmed by the number of people moving out of Detroit during that time. The point is that many American cities were on a one-way trip downward to decay and depopulation, but that has been reversed and they’re moving upward now.

      7. Seattle grew 8% between the last to census. Washington State grew 14%. King County grew 11.2%. Snohomish County grew 17.7% Just because Seattle has reversed decades of decline but other cities, like Chicago are still in a downward spiral even though Illinois as a state grew. People are increasingly becoming “city folk” but that’s because what were the suburbs are now cities and continue to absorb the majority of the growth. Bellevue, once a bedroom community to Seattle now increases in population during the work day because of commuters.

      8. In the 1970s and 80s. Seattle’s population reached its nadir of 420,000-something in the 1980s. Now it’s up to 550,000 something and climbing.

        Jesus H. Christ, doesn’t anyone ever even bother to look it up before posting some stupid, inaccurate factoid on this blog?

  7. My landlord just went through bankruptcy, due to the financial strain of the single-family homes they owned. Several of them were foreclosed upon before the owners started bankruptcy proceedings, and for a period of a few years I was actually quite worried I would wake up one morning and find that my apartment was now owned by a bank with no interest in being a landlord.

    In bankruptcy, the way the landlord got back to solvency was by ditching the detached homes and keeping only the multiplexes. The single rent-check they could get from a detached home, even at a premium rate, was not enough to cover the added costs of maintaining the structure and servicing the debt. A multiplex with 2 or 3 renters did much better, even when there was a vacancy.

    Of course, a detached home purchased NOW would have much lower mortgage payments than one purchased before the bubble burst, and the rent payments would be larger. So it probably pencils out much nicer now.

  8. Apartment or my own home: What I want most of all is to live someplace that the owner looks at as someone’s home, and not one more poker-chip. The sooner that view of housing becomes standard, the sooner our country’s economy will recover from its present wasting sickness.

    Mark Dublin

    1. You don’t know what you’re talking about. One-third of the dwelling units in the U.S. have no mortgage. They are owned free and clear. The other two-thirds turn over, on average, every seven or eight years. If you look into the numbers, the highest turnover is in condos that the “urbanists” think everyone should be forced into. Single-family houses have much lower turnover. Owner pride is the rule in this country, not the exception.

      If you don’t own a place, I’d very strongly suspect it’s because you can’t afford to.

      1. The 1/3 owned free and clear are mostly in essentially poor areas, where (a) housing prices are dirt low, and (b) nobody would lend money against THAT land.

        I know these rural areas. It’s not owner pride, it’s more about being stuck; they can’t afford to leave.

        I wish there were more owned-outright houses in prosperous areas, but there aren’t. The rate of outright ownership in the US is really low compared to in the former Soviet bloc, for a nasty comparison.

        This is really because of our “bankrupt the worker” policies since the 1980s.

      2. Nathaniel, please give us your citations to back up your assertions about where the mortgage-less dwellings are. Or did you just make it up because it sounded good to you? Ideologues of the left and right love to just make it up on the fly. So, anyway, where’s your data?

      3. “The rate of outright ownership in the US is really low compared to in the former Soviet bloc”

        Ownership has two different kinds in Russia. One is permanent public housing, where you have a lifelong “lease”. So they call it owning but we wouldn’t. The other type is privatized apartments, so like western ownership. American ownership is historically 65%, and the subprime mortgage bubble pushed it up only 2 or 3%: so it’s basically steady at 2/3. When I was in Russia in 1996, only a few rich people had privatized apartments. I find it extremely hard to believe that 2/3 of the population has since bought privatized housing, or even has a fraction of the income for that.

      4. Look at the percentage of mortgaged property in the rural parts of the country. They’re low compared to more urban areas.

        Start running the numbers and it starts adding up to a LOT of property.

        It’s not 1/3, but it’s easily 1/6, which would be “most” of 1/3.

      5. Mike, you are correct about Soviet ownership, except that a lot of the countries in the Eastern Bloc (not Russia itself) deliberately handed the apartments to the current occupants during the privatization wave. That one-time transaction is what gave people ownership.

  9. I think the whole industry has to rethink itself. As the society becomes a more mobile workforce, the times where you buy a house and the live there for 10-20 years, especially in the major metro areas/workforce centers, is a thing of the past. But with transaction costs of a sale at close to 10% the growth in the market makes owning a house a loosing proposition for an increasing segment of the workforce, even with the mortgage tax benefits. And with the market dynamics, the investment risk is significantly higher than other things you could do with your money.

    On the rental market, I think that would have been a great opportunity for the banks to do this earlier on in the crisis and it would have helped everyone – the market wouldn’t have been flooded, the banks could have held on to their balance sheets, and people would have had an orderly transition out of this mess. But it would have required a bit of imagination and leadership, something that’s rare in current politics, and the current crop of large banks. There was an interesting interview with the ex-CEO of Citi talking about how the banking culture has changed from service to money making as the #1 priority.

    1. At the aggregate level, the U.S. is becoming less mobile, not more mobile, as it ages. This trend has been noted in recent years. On average, people move around a lot in their 20s, and then less so with every passing decade.

      Banks as big landlords? Folks, regardless of what you read in some real estate section, this is not going to happen in a major way. The most you will see is banks (maybe) having a financial stake in this or that big leasing company, which will have a bunch of otherwise unsaleable houses in some radically distressed market like North Las Vegas.

      Banks are far, far, far too inept to ever actually manage anything. If they try to become big commercial landlords, they’ll take a bath. Which, on second thought, might mean they actually will give it a try …

      1. “Banks are far, far, far too inept to ever actually manage anything. If they try to become big commercial landlords, they’ll take a bath. Which, on second thought, might mean they actually will give it a try …”

        So true.

      2. To put some numbers on it. King County population 65 and older in 2000 was 10.4% rising to 10.9% in 2010. In Seattle it’s 10.8% for 2010. Can’t find the data for 2000. Overall in Washington State the percentage change was 11.2% increasing to 12.3%.

  10. Interesting. The one part of this I question is the trigger that made this happen. I highly doubt it’s finding an efficient way of hiring plumbers. More likely would be finding a way of having control over tentant – less fear they’ll trash the place, or cost you a lot in complaints. Either a good hold on their credit ratings, better way of predicting how good of a tenant they’ll be, higher security deposits, or maybe even some renter’s insurance deal. It could certainly just be the number of dirt cheap houses on the market, but you need to come up with capital to buy those houses, and that implies something has changed that gives your investors a reason to invest.

    1. What changed is motivated sellers. Banks have “zero interest” in owning homes. They make money by renting out money, not houses. A private owner is much more likely to hang on and wait for prices to recover. They may be able to deal with renting out the home or figure they are going to be paying rent anyway so why not hold on. Banks pretty much have to sell at market rate and don’t have the ability to do a lot to make the property more desirable. Individuals or companies that can hire property managers are buying because they know that with a minimal amount of work they will be able to flip the house at a profit. I think most of the houses will go to people or companies that own small numbers of homes. Those with local knowledge and time to thoroughly investigate will snap up the best buys.

  11. We get it “Seattle Citizen” – you’re a right-wing crank who thinks all the power should accrue to the landlord (typical right-winger) and that tenants should be grateful they are only treated as second-class citizens and not third-class citizens. You are likely a slumlord who has blinders to his own slumlording.

    Please let me know the name of your business so as to avoid ever renting from you.

      1. You really, really don’t want to fuck with your landlord. Especially if he’s a good one. You see, the good ones talk to each other, and once you fuck with one of them, you’ll never get a second chance.

        Now who’s spouting crap with no evidence or facts to back it up? I’m a land lord; although nobody calls me Sir unless I’m on JBLM. Never ever heard from or had contact from other landlords regarding tenants. Of course I have essentially zero turn over since rents are below market rate. I remember trying to rent our first place. I don’t play the games foisted on us. There are great rentals out there; they just don’t come on the market very often. So, if you want those long term deals then you’re best option is to consider purchase.

      2. From Nathaniel, upthread:

        Sorry to be so irritable, but I hate seeing regurgitated right-wing bullshit lines. “Freedom” is not the issue.

        I guess it’s just fine to hurt expletives here as long as you’re in the transit clique.

      3. Now who’s spouting crap with no evidence or facts to back it up? I’m a land lord; although nobody calls me Sir unless I’m on JBLM. Never ever heard from or had contact from other landlords regarding tenants. Of course I have essentially zero turn over since rents are below market rate

        You answered your own baseless accusation. If you have zero turnover then of course you wouldn’t hear from other landlords. Otherwise, you’d hear from landlords checking tenant references, and you’d be calling landlords to check references yourself.

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