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Rent is not high just because of scarcity. It's high in North Virginia even there is plenty of new housing on the market - the problem is that developers are on

Rent is not high just because of scarcity. It's high in North Virginia even there is plenty of new housing on the market - the problem is that developers are only building luxury apartments and trying to rent at above market prices. Most of these places are offering 3-4 months free up front because nobody is paying the obscene sticker prices for a 12 month lease. It's not just a local phenomenon - public REIT's are buying up affordable units nationwide and renting them out at >20% above market... http://www.multifamilyexecutive.com/business-finance/luxury-apartments-galore-at-what-cost_o http://www.multifamilyexecutive.com/business-finance/luxury-...

exelius 11y ago
Rent is high because home-buying credit is scarce. Banks are still gun-shy about lending, so only people with stellar credit or who are borrowing a small percentage of their earning power can get home loans right now. Which has caused REITs and other PE organizations to come in and buy up real estate to fill the gap -- and REITs are not interested in dealing with "affordable" rental units and the social problems that often come along with them. So they market their buildings as "luxury" and attach a high price tag. This has led to a couple of side effects: a shortage of rental units (and the associated high rental prices), a shortage of qualified buyers (people aren't able to roll the equity from their starter house into a new home because they never bought the starter house), and an extreme shortage of new construction at the low end of the market (the only people who can even qualify to buy today are upper-middle class). We're still not out of the subprime quagmire yet. The rental market in the US was sized for a world where subprime mortgages existed -- and now that they largely don't, those people have to live somewhere. Regardless, "affordable" housing will not exist unless it is subsidized by the government. The private sector has no interest in renting to the low-income segment when the "up-market" segment is lower cost, higher margin and has significantly lower legal risk.

exelius 11y ago

Rent is high because home-buying credit is scarce. Banks are still gun-shy about lending, so only people with stellar credit or who are borrowing a small percentage of their earning power can get home loans right now. Which has caused REITs and other PE organizations to come in and buy up real estate to fill the gap -- and REITs are not interested in dealing with "affordable" rental units and the social problems that often come along with them. So they market their buildings as "luxury" and attach a high price tag. This has led to a couple of side effects: a shortage of rental units (and the associated high rental prices), a shortage of qualified buyers (people aren't able to roll the equity from their starter house into a new home because they never bought the starter house), and an extreme shortage of new construction at the low end of the market (the only people who can even qualify to buy today are upper-middle class). We're still not out of the subprime quagmire yet. The rental market in the US was sized for a world where subprime mortgages existed -- and now that they largely don't, those people have to live somewhere. Regardless, "affordable" housing will not exist unless it is subsidized by the government. The private sector has no interest in renting to the low-income segment when the "up-market" segment is lower cost, higher margin and has significantly lower legal risk.