21 ms·

This is just the start. Landlords would be smart to work with tenants to share some of the loss and renegotiate temporary adjustments to keep at least some reve

by bshipp 6y ago

This is just the start. Landlords would be smart to work with tenants to share some of the loss and renegotiate temporary adjustments to keep at least some revenue coming in because the heady days of high demand for rental units is likely behind us for a while. It'll be worse in downtown areas. I've heard from multiple firms that are looking at downsizing their expensive office space and continuing to allow employees to work from home. if a person doesn't have to work downtown they will often choose not to live there either. COVID is going to change the face of urban real estate. So if you have a tenant, they're gold and do what you can to keep them.

cft 6y ago
In California for example, due to state-wide rent control, it's very dangerous for a landlord to lower rents. I would rather offer 6 months free rent than lock into permanent nonadjustable lower rent situation.
- leereeves 6y ago
  If a lot of landlords start exploiting that loophole, I wouldn't be surprised if the law were revised to be based on the average rent over a year, or something similar.
  - wtvanhest 6y ago
    That really would be the best legislation. A simple calc of the rent of the first 12 months of the lease becomes the base rent.
  - GhostVII 6y ago
    I think the only effect of that would be to prevent landlords from giving free months of rent - better to lose a tenant than permanently have lower rents which may not be sustainable.
  - favorited 6y ago
    They wouldn't have to change it, because that is factored in. The law states: "In determining the lowest gross rental amount pursuant to this section, any rent discounts, incentives, concessions, or credits offered by the owner of such unit of residential real property and accepted by the tenant shall be excluded." So if your rent is $3k/month, and the landlord gives you 3 months rent-free, your rent according to AB 1482 is still $3k.
    - throwaway2048 6y ago
      That doesn't mean the law cant change.
      - JshWright 6y ago
        No, but it means the law was expressly with to account for this circumstance, so it isn't a "loophole".
  - londons_explore 6y ago
    There are a million ways around that - for example, the landlord could employ the tenant to clean and tidy the property.
    - OJFord 6y ago
      The obvious fix would be to make it like tax evasion (illegal) vs. avoidance (rational behaviour with a morally questionable extreme) - viz. to a large degree the line is up for interpretation, coming down to the spirit of the law and the motivation behind what was done.
  - fiter 6y ago
    This is already the case in Berkeley.
- sonthonax 6y ago
  So a rent reduction by another name?
  - whalesalad 6y ago
    Yep. My landlord did this with me. My rent is still the same amount but we created an additional 'discount' agreement on top of the original lease to lower it by a substantial amount.
- dheera 6y ago
  At the same time maybe it's time for landlords who have been sitting in armchairs swimming in cash to start giving back to the people who haven't been able to afford to live here?
  - eagsalazar2 6y ago
    Not sure why this was downvoted. The reality in SF and many other locations is that supply has been artificially limited and landlords who bought years ago have been making enormous profits. I don't know that I'd describe it as "giving back" but there is a market recalibration that is justifiable and I won't lose too much sleep worrying about landlords in SF who make 30% less than they do now.
    - AmericanChopper 6y ago
      Landlord aren’t the ones imposing the artificial limitations though. It’s the same group who created the rules that would punish a landlord for temporarily lowering rent.
      - thephyber 6y ago
        > Landlord aren’t the ones imposing the artificial limitations though It's certainly not the people moving in from outside the area who want to rent for affordable rates. Landlords are part of the NIMBY problem, but not the only part.
        AmericanChopper 6y ago
        But they aren’t the part of the problem that is accountable for it. In a democracy you should expect that everybody will be appealing to the government to protect their own interests. The NIMBYs quite obviously do this. But it’s the local governments that implement the NIMBY-protecting policies. The local governments are the ones accountable to the people, not the NIMBYs. I imagine the delinquent politicians are quite happy when people point the finger at landlords instead of them.
  - 6y ago
- twblalock 6y ago
  This is yet another reason in the long list of reasons why rent control is a bad policy.
  - thephyber 6y ago
    I don't disagree, but it's important to remember that when rent control is proposed, it's because some people are very desperate. It would behoove us to suggest viable alternatives every time it's proposed and we shoot it down.
    - quickthrower2 6y ago
      The government could build affordable housing and rent it out at a reasonable price. "Council houses" as they are called in the UK are built very well. They are often ugly, but I'm sure that these days they can be built well, cheaply and made to look OK.
      - stass 6y ago
        The government could start by removing hurdles to build. The amount of hassle one has to go through in California in order to build housing is staggering.
      - dogma1138 6y ago
        The vast majority of council houses in the U.K. are owned by private landlords who rent to the council. No one wants to live in Social housing projects in the U.K. and for a good reason they are all rubbish, the U.K. has had some of the worst designed and built social blocks in the world many of them were demolished within 1-2 decades. Stuffing poor people into high density housing is a horrible idea every study shows that spreading them out is not only cheaper but also much more beneficial to them.
        quickthrower2 6y ago
        Counterpoints: 1. Not all social housing is high rise or high density. Look outside of the cities for example - new towns. Lessons can be learned this time. 2. Much of the social housing was sold off in the 80's I think, the trick is to keep government ownership of it, not sell it for a pittance and let private landlords profit from price increases.
- bluntfang 6y ago
  excuse me, but dangerous for who exactly? You mean your future returns on investments will be lower on your rental property? How exactly is that dangerous? Is someone's life in danger? If anything, lower rents allow more people to afford housing, making it less dangerous. Let me guess, you have huge problem with the homeless situation, but are unwilling to consider lowering rents? Is that right?
nly 6y ago
Why do you say this? By all accounts, in the UK at least, rental demand has boomed compared to last since lockdown restrictions eased https://www.bbc.co.uk/news/uk-england-52847319 https://www.bbc.co.uk/news/uk-england-52847319
- atemerev 6y ago
  The second wave and new restrictions are inevitable.
- londons_explore 6y ago
  Leases are typically for a fixed period, so it's really the integral of these charts that matters - how many people are currently in a rental. I suspect that number is still a long way below normal, because lots of people are moving in with friends or family (students, young professionals, etc.). My experience in London is the ratio of people looking for a house to houses advertised is the lowest I've ever seen in 10 years.
lacker 6y ago
In some places, like Oakland and Tahoe, rent seems to be going up. But in San Francisco it is going down. Probably all as a result of people fleeing San Francisco to nearby places with a cheaper rent per square foot.
- notJim 6y ago
  Are that many people really moving away? I understand the logic, but it's a major life decision, so I'm surprised if it's happening so rapidly in response to covid. I've heard of people leaving the city temporarily, but assumed many of them were maintaining their apartments. I would have guessed the lower rents were more about money drying up, and landlords being desperate to hang onto any tenant who can pay.
  - bshipp 6y ago
    You're right; the immediate response is driven by cash flow. The situation im talking about is likely a year or more away as many commercial firms are in longterm leases. I'm just saying that its definitely on the horizon given the conversations I'm having, even if evidence at the moment is scant.
  - peruvian 6y ago
    It’s June. I don’t know about SF but in NYC most leases expire in June or July. A lot of companies aren’t ending WFH till 2021 or fall. Plenty of young people are not renewing their lease and staying with their family outside the city or state. My building had has four tenants move out in the past week - one a family. They’ll probably be back and rent again but by then rents will have dropped.
  - qchris 6y ago
    Anecdotally, I know two professionals in their late twenties who used to live in New York City, but moved home to be with their family during quarantine. Their leases are up in September, and neither one seem likely to renew, since their jobs can be done remotely and their offices are planning on maintaining the status quo for the forseeable future, past the point when many people usually sign leases. I don't have data that this is a larger trend, but I don't see anything particularly unique about those two individual' s situations that would make a similar approach untenable or unappealing to many other people.
dv_dt 6y ago
Unfortunately, as part of the unfolding of the post 2008 recession, a lot of rentals shifted from individual or smaller landlords to larger corporate landlords whom take a much more impersonal approach to making it through the depression. To some degree, to the extent they can take out holdover loans and let rentals sit empty, they will do just that - irregardless of the social utility of compromise. https://www.theatlantic.com/technology/archive/2019/02/single-family-landlords-wall-street/582394/ https://www.theatlantic.com/technology/archive/2019/02/singl...
- joe_the_user 6y ago
  This is the pernicious dynamic. For Large landlords, certainly but also generally, you have a situation where property appreciation becomes more important than rental income, so evicting people and getting nothing becomes a better outcome than lowering rent. Edit: Also note this appreciation driven dynamic is something of a product of QE - printing money. As the treasury dumps money into markets, anything of apparently reliable value, "money-like", becomes more valuable - commodities and land being examples but the "best" companies also. This appreciation process becomes more important than the ordinary use of the object in the case of land (empty mansions in London being the prime example but we may wind-up with many more if the approach continues).
  - michaelmrose 6y ago
    If you raise taxes on non owner occupied housing you can achieve any reasonable target for real estate "investing" you desire. If you just want to target holding but not renting property because it decreases housing supply you can do that even more aggressively. I'll take 100% of appreciation for the months it sat unoccupied if it sat unoccupied for 3 or more months for 1000 Alex.
- jeffbee 6y ago
  Corporate landlords are rational and reasonable negotiators who will readily respond to market signals. Small landlords are a crapshoot; you might get one who just prefers an empty unit over lower rents. You can easily see this from craigslist data right now. Large buildings are lowering rent faster than small buildings and single-family houses.
fbonetti 6y ago
You’ve got it backwards when it comes to residential real estate. More people become renters during a recession. Vacancies reduced dramatically after 2008. https://fred.stlouisfed.org/series/RRVRUSQ156N https://fred.stlouisfed.org/series/RRVRUSQ156N
- amiga_500 6y ago
  2008 didn't have airbnb imploding at the same time.
  - aSplash0fDerp 6y ago
    This appeared to be a valid point (why the downvote). An underlying pandemic throws most of the historical data out the window. Just ask Hertz, AMC and Las Vegas.
    - amiga_500 6y ago
      Why the downvote? Because there are a few people who downvote anything negative for landlords on this board, and as we can see from the replies to this story, there are many landlords on hacker news.
      - aSplash0fDerp 6y ago
        Well. 1st one to the door (selling artificially inflated assets) does not guarantee success. I'm sure many/most landlords are still rooted in reality and are still using the infamous investing formula of "where there are losers, there are winners" (aka buy low, sell high).
01100011 6y ago
Google 'white flight' for historical precedent. It remains to be seen if it will happen again, but it is certainly possible. I know I'm ready to leave the Bay Area for someplace boring.
jackcosgrove 6y ago
If there is deflation in the housing market, then marginal mortgage holders will walk away and become renters. That will swell the ranks of renters and drive up rents. In many metro areas owner occupied real estate is overpriced relative to rents. When this imbalance corrects rents will rise, as before the correction owner occupants were subsidizing renters by overpaying for property even though renting made more sense.

by bshipp 6y ago

cft 6y ago

In California for example, due to state-wide rent control, it's very dangerous for a landlord to lower rents. I would rather offer 6 months free rent than lock into permanent nonadjustable lower rent situation.

leereeves 6y ago
If a lot of landlords start exploiting that loophole, I wouldn't be surprised if the law were revised to be based on the average rent over a year, or something similar.
- wtvanhest 6y ago
  That really would be the best legislation. A simple calc of the rent of the first 12 months of the lease becomes the base rent.
- GhostVII 6y ago
  I think the only effect of that would be to prevent landlords from giving free months of rent - better to lose a tenant than permanently have lower rents which may not be sustainable.
- favorited 6y ago
  They wouldn't have to change it, because that is factored in. The law states: "In determining the lowest gross rental amount pursuant to this section, any rent discounts, incentives, concessions, or credits offered by the owner of such unit of residential real property and accepted by the tenant shall be excluded." So if your rent is $3k/month, and the landlord gives you 3 months rent-free, your rent according to AB 1482 is still $3k.
  - throwaway2048 6y ago
    That doesn't mean the law cant change.
    - JshWright 6y ago
      No, but it means the law was expressly with to account for this circumstance, so it isn't a "loophole".
- londons_explore 6y ago
  There are a million ways around that - for example, the landlord could employ the tenant to clean and tidy the property.
  - OJFord 6y ago
    The obvious fix would be to make it like tax evasion (illegal) vs. avoidance (rational behaviour with a morally questionable extreme) - viz. to a large degree the line is up for interpretation, coming down to the spirit of the law and the motivation behind what was done.
- fiter 6y ago
  This is already the case in Berkeley.
sonthonax 6y ago
So a rent reduction by another name?
- whalesalad 6y ago
  Yep. My landlord did this with me. My rent is still the same amount but we created an additional 'discount' agreement on top of the original lease to lower it by a substantial amount.
dheera 6y ago
At the same time maybe it's time for landlords who have been sitting in armchairs swimming in cash to start giving back to the people who haven't been able to afford to live here?
- eagsalazar2 6y ago
  Not sure why this was downvoted. The reality in SF and many other locations is that supply has been artificially limited and landlords who bought years ago have been making enormous profits. I don't know that I'd describe it as "giving back" but there is a market recalibration that is justifiable and I won't lose too much sleep worrying about landlords in SF who make 30% less than they do now.
  - AmericanChopper 6y ago
    Landlord aren’t the ones imposing the artificial limitations though. It’s the same group who created the rules that would punish a landlord for temporarily lowering rent.
    - thephyber 6y ago
      > Landlord aren’t the ones imposing the artificial limitations though It's certainly not the people moving in from outside the area who want to rent for affordable rates. Landlords are part of the NIMBY problem, but not the only part.
      - AmericanChopper 6y ago
        But they aren’t the part of the problem that is accountable for it. In a democracy you should expect that everybody will be appealing to the government to protect their own interests. The NIMBYs quite obviously do this. But it’s the local governments that implement the NIMBY-protecting policies. The local governments are the ones accountable to the people, not the NIMBYs. I imagine the delinquent politicians are quite happy when people point the finger at landlords instead of them.
- 6y ago
twblalock 6y ago
This is yet another reason in the long list of reasons why rent control is a bad policy.
- thephyber 6y ago
  I don't disagree, but it's important to remember that when rent control is proposed, it's because some people are very desperate. It would behoove us to suggest viable alternatives every time it's proposed and we shoot it down.
  - quickthrower2 6y ago
    The government could build affordable housing and rent it out at a reasonable price. "Council houses" as they are called in the UK are built very well. They are often ugly, but I'm sure that these days they can be built well, cheaply and made to look OK.
    - stass 6y ago
      The government could start by removing hurdles to build. The amount of hassle one has to go through in California in order to build housing is staggering.
    - dogma1138 6y ago
      The vast majority of council houses in the U.K. are owned by private landlords who rent to the council. No one wants to live in Social housing projects in the U.K. and for a good reason they are all rubbish, the U.K. has had some of the worst designed and built social blocks in the world many of them were demolished within 1-2 decades. Stuffing poor people into high density housing is a horrible idea every study shows that spreading them out is not only cheaper but also much more beneficial to them.
      - quickthrower2 6y ago
        Counterpoints: 1. Not all social housing is high rise or high density. Look outside of the cities for example - new towns. Lessons can be learned this time. 2. Much of the social housing was sold off in the 80's I think, the trick is to keep government ownership of it, not sell it for a pittance and let private landlords profit from price increases.
bluntfang 6y ago
excuse me, but dangerous for who exactly? You mean your future returns on investments will be lower on your rental property? How exactly is that dangerous? Is someone's life in danger? If anything, lower rents allow more people to afford housing, making it less dangerous. Let me guess, you have huge problem with the homeless situation, but are unwilling to consider lowering rents? Is that right?

nly 6y ago

Why do you say this? By all accounts, in the UK at least, rental demand has boomed compared to last since lockdown restrictions eased https://www.bbc.co.uk/news/uk-england-52847319 https://www.bbc.co.uk/news/uk-england-52847319

atemerev 6y ago
The second wave and new restrictions are inevitable.
londons_explore 6y ago
Leases are typically for a fixed period, so it's really the integral of these charts that matters - how many people are currently in a rental. I suspect that number is still a long way below normal, because lots of people are moving in with friends or family (students, young professionals, etc.). My experience in London is the ratio of people looking for a house to houses advertised is the lowest I've ever seen in 10 years.

lacker 6y ago

In some places, like Oakland and Tahoe, rent seems to be going up. But in San Francisco it is going down. Probably all as a result of people fleeing San Francisco to nearby places with a cheaper rent per square foot.

notJim 6y ago
Are that many people really moving away? I understand the logic, but it's a major life decision, so I'm surprised if it's happening so rapidly in response to covid. I've heard of people leaving the city temporarily, but assumed many of them were maintaining their apartments. I would have guessed the lower rents were more about money drying up, and landlords being desperate to hang onto any tenant who can pay.
- bshipp 6y ago
  You're right; the immediate response is driven by cash flow. The situation im talking about is likely a year or more away as many commercial firms are in longterm leases. I'm just saying that its definitely on the horizon given the conversations I'm having, even if evidence at the moment is scant.
- peruvian 6y ago
  It’s June. I don’t know about SF but in NYC most leases expire in June or July. A lot of companies aren’t ending WFH till 2021 or fall. Plenty of young people are not renewing their lease and staying with their family outside the city or state. My building had has four tenants move out in the past week - one a family. They’ll probably be back and rent again but by then rents will have dropped.
- qchris 6y ago
  Anecdotally, I know two professionals in their late twenties who used to live in New York City, but moved home to be with their family during quarantine. Their leases are up in September, and neither one seem likely to renew, since their jobs can be done remotely and their offices are planning on maintaining the status quo for the forseeable future, past the point when many people usually sign leases. I don't have data that this is a larger trend, but I don't see anything particularly unique about those two individual' s situations that would make a similar approach untenable or unappealing to many other people.

dv_dt 6y ago

Unfortunately, as part of the unfolding of the post 2008 recession, a lot of rentals shifted from individual or smaller landlords to larger corporate landlords whom take a much more impersonal approach to making it through the depression. To some degree, to the extent they can take out holdover loans and let rentals sit empty, they will do just that - irregardless of the social utility of compromise. https://www.theatlantic.com/technology/archive/2019/02/single-family-landlords-wall-street/582394/ https://www.theatlantic.com/technology/archive/2019/02/singl...

joe_the_user 6y ago
This is the pernicious dynamic. For Large landlords, certainly but also generally, you have a situation where property appreciation becomes more important than rental income, so evicting people and getting nothing becomes a better outcome than lowering rent. Edit: Also note this appreciation driven dynamic is something of a product of QE - printing money. As the treasury dumps money into markets, anything of apparently reliable value, "money-like", becomes more valuable - commodities and land being examples but the "best" companies also. This appreciation process becomes more important than the ordinary use of the object in the case of land (empty mansions in London being the prime example but we may wind-up with many more if the approach continues).
- michaelmrose 6y ago
  If you raise taxes on non owner occupied housing you can achieve any reasonable target for real estate "investing" you desire. If you just want to target holding but not renting property because it decreases housing supply you can do that even more aggressively. I'll take 100% of appreciation for the months it sat unoccupied if it sat unoccupied for 3 or more months for 1000 Alex.
jeffbee 6y ago
Corporate landlords are rational and reasonable negotiators who will readily respond to market signals. Small landlords are a crapshoot; you might get one who just prefers an empty unit over lower rents. You can easily see this from craigslist data right now. Large buildings are lowering rent faster than small buildings and single-family houses.

fbonetti 6y ago

You’ve got it backwards when it comes to residential real estate. More people become renters during a recession. Vacancies reduced dramatically after 2008. https://fred.stlouisfed.org/series/RRVRUSQ156N https://fred.stlouisfed.org/series/RRVRUSQ156N

amiga_500 6y ago
2008 didn't have airbnb imploding at the same time.
- aSplash0fDerp 6y ago
  This appeared to be a valid point (why the downvote). An underlying pandemic throws most of the historical data out the window. Just ask Hertz, AMC and Las Vegas.
  - amiga_500 6y ago
    Why the downvote? Because there are a few people who downvote anything negative for landlords on this board, and as we can see from the replies to this story, there are many landlords on hacker news.
    - aSplash0fDerp 6y ago
      Well. 1st one to the door (selling artificially inflated assets) does not guarantee success. I'm sure many/most landlords are still rooted in reality and are still using the infamous investing formula of "where there are losers, there are winners" (aka buy low, sell high).

01100011 6y ago

Google 'white flight' for historical precedent. It remains to be seen if it will happen again, but it is certainly possible. I know I'm ready to leave the Bay Area for someplace boring.

jackcosgrove 6y ago

If there is deflation in the housing market, then marginal mortgage holders will walk away and become renters. That will swell the ranks of renters and drive up rents. In many metro areas owner occupied real estate is overpriced relative to rents. When this imbalance corrects rents will rise, as before the correction owner occupants were subsidizing renters by overpaying for property even though renting made more sense.