9 ms·

It is a huge risk right now to take on someone that is poor as a renter because of the moratorium. It is completely unsurprising to me that landlords have pric

It is a huge risk right now to take on someone that is poor as a renter because of the moratorium. It is completely unsurprising to me that landlords have priced this risk factor in.

baron816 6y ago
There was an article a saw a few weeks ago about some guys based out of Oakland (maybe someone else can find it) who has accumulated 5 figures worth of rental debt. It talks about how he had just moved into an expensive place at the beginning of the pandemic, got laid off, then couldn’t pay for the whole year. IIRC, he eventually moved, but still couldn’t pay rent and started accumulating even more rent debt there. I can’t imagine who would rent an apartment to that guy.
- stevula 6y ago
  Five figures is $10,000. It only takes 2-3 months of rent to reach that in an expensive Oakland apartment.
- darth_avocado 6y ago
  I know the exact article you mentioned. The real story is actually more nuanced. The guy off course got laid off and could no longer afford the rent. But he racked up rent also because even if he moved earlier, his contract would have made him pay a ton of fines to even get out of it. So he decided to stay.
  - baron816 6y ago
    Yeah it’s not like it was really that much of his fault or anything (though I found it a bit fishy why he couldn’t get another job). Everyone’s mentality up until ~September was “oh just another month or two then everything will be back to normal”. But my point is how could you expect landlords to rent to anyone without a very stable income? They could be out tens of thousands of dollars.
    - unishark 6y ago
      Well in this case, the landlord can simply allow the tenant to break the lease without such a harsh penalty, rather than playing this game which encourages people to use the law against them.
    - 0x003 6y ago
      > though I found it a bit fishy why he couldn’t get another job What line of work was he in? If he lost his job during the pandemic, is it possible there simply were very few jobs available that he was qualified for?
      - baron816 6y ago
        Product Manager
pdimitar 6y ago
That, however, reduces their chance in getting tenants so it becomes a vicious self-feeding closed circuit process?
- foepys 6y ago
  It's probably because of speculation. If there is a chance that the moratorium will end in July it's better to not have any tenants for a few months than bad ones you cannot evict and will trash your place. Also, unoccupied properties are always more valuable.
  - imtringued 6y ago
    Is it really speculation if the government turns tenants into net negative customers?
- an_opabinia 6y ago
  Occupying a home reduces its value. Letting someone live somewhere "for free" (to them) is still worse to the owner of the house than leaving it vacant.
adolph 6y ago
The article does cite eviction moratorium effects, but from a different angle: Landlords stuck with tenants who can’t pay may try to offset these losses by raising rents on everyone else. Rents in lower-end units tend to already be close to operating costs, Schuetz noted, so landlords may have slim profit margins.
- TuringNYC 6y ago
  Not only this, but there will be a eviction-moratorium risk premium that tenants will implicitly pay for years to come, to adjust for the added risk and to help keep a virtual buffer for future moratoriums.
tehjoker 6y ago
It's crazy that we live in an economy where you have to pay just to live somewhere, but when the eviction moratorium ends, there's going to be a huge financial reckoning as there's no way anyone is paying all that back rent. Biden is going to have to either bail out tenants or landlords and banks. I'll be taking bets on which one he does.
- hsitz 6y ago
  ??? In what economy do most people not have to pay just to live somewhere?
  - postalrat 6y ago
    Utopia
  - panic 6y ago
    Our highways are free for everyone to use and maintained using tax money. It's not inconceivable that housing could work the same way.
    - anonuser123456 6y ago
      Gas taxes pay for roadways.
      - woodruffw 6y ago
        And so the reasoning goes: income taxes should pay for the general welfare, rather than the general hardship of various Middle Eastern countries.
    - sershe 6y ago
      I grew up in an economy where it was. When I was born, we were living in a 4-people, 3-generational, ~500sqft 1.5 room flat (the large kitchen was subdivided to make a tiny bedroom); later, the govt decided that we deserve better and I ended up growing up in a 4-people, 2-generational, ~650sqft 2-room flat. I wonder what my parents, two engineers, would have been able to afford in the USA? I think I had a very happy childhood but comparing these things kinda allows you to reflect. Interestingly, the low standards stick; when we bought a small 1100sqft house with my wife (in the USA), some of my friends back in Russia were like "oh, a big house, are you planning for kids?" ;)
gnicholas 6y ago
Interestingly, if landlords were allowed to use larger security deposits, some would choose to do this instead of raising the monthly rent. My friend is looking to rent out an ADU, and the first idea was to have a sizable security deposit in order to filter applicants who fully intended on paying rent from those who would be more likely to use the eviction moratorium. But apparently California tightened the rules around security deposits in 2020, which actually exacerbates this problem. Landlords used to be able to ask for up to two month’s rent as a security deposit, but now they can only ask for one month's rent. This leads to upward pressure on rents, as landlords adjust the only lever they have left. I wonder if applicants can/do offer to prepay several month's rent, to signal that they are serious long-term tenants who have the ability and interest in paying rent (even if they legally could avoid payment).
- TuringNYC 6y ago
  This comment is spot on. Rent premiums are often not greed, but just a risk premium and buffer-collection for a catch all of issues from future non-payment to other BS.
  - imtringued 6y ago
    Prices are negotiated. Two parties must agree on the price. If there is a "greedy" landlord overcharging people there must also be a person "willing" to pay the overpriced rent. Of course there are cases of vacant properties but I don't think this is a problem for most rental markets.
    - TuringNYC 6y ago
      I'm pretty sure vacant properties are a problem in every market, it is just a matter of grayscales -- how many days do you keep units empty waiting for a creditworthy tenant. Perhaps the unit is empty 10 days, perhaps 15. Willingness to keep a unit empty is part of the negotiation -- a landlord is saying "I'd rather keep the unit empty for another couple of days than take a rent that wont adequately-compensate for the 4% chance i get nothing for 10months (i.e., eviction)" Of course, even eviction timelines vary vastly from one jurisdiction to another
Frost1x 6y ago
The more modern trend of businesses passing risk sort of flies in the face of the old rationale of business ownership taking on risk which justified the rewards of doing business. Now you're just doing business wrong if you don't minimize risk or figure out how to shift and transfer risk away from yourself.
- insert_coin 6y ago
  You try to minimize all risks, not only in business but in all aspects of life. That has always been the case. The caricature you presented has never existed.
lamontcg 6y ago
Implicitly though you're assuming that landlords have pricing power in this market. The reason why they have pricing power is likely due to the moratorium. People aren't being evicted so those units aren't going on the market, so supply of rentable units is being artificially suppressed. When the moratorium expires then renters will be evicted and those units will go back on the market which should drive costs down for everyone else.
toiletfuneral 6y ago
Maybe landlords should get real jobs?

It is a huge risk right now to take on someone that is poor as a renter because of the moratorium. It is completely unsurprising to me that landlords have priced this risk factor in.

baron816 6y ago

There was an article a saw a few weeks ago about some guys based out of Oakland (maybe someone else can find it) who has accumulated 5 figures worth of rental debt. It talks about how he had just moved into an expensive place at the beginning of the pandemic, got laid off, then couldn’t pay for the whole year. IIRC, he eventually moved, but still couldn’t pay rent and started accumulating even more rent debt there. I can’t imagine who would rent an apartment to that guy.

stevula 6y ago
Five figures is $10,000. It only takes 2-3 months of rent to reach that in an expensive Oakland apartment.
darth_avocado 6y ago
I know the exact article you mentioned. The real story is actually more nuanced. The guy off course got laid off and could no longer afford the rent. But he racked up rent also because even if he moved earlier, his contract would have made him pay a ton of fines to even get out of it. So he decided to stay.
- baron816 6y ago
  Yeah it’s not like it was really that much of his fault or anything (though I found it a bit fishy why he couldn’t get another job). Everyone’s mentality up until ~September was “oh just another month or two then everything will be back to normal”. But my point is how could you expect landlords to rent to anyone without a very stable income? They could be out tens of thousands of dollars.
  - unishark 6y ago
    Well in this case, the landlord can simply allow the tenant to break the lease without such a harsh penalty, rather than playing this game which encourages people to use the law against them.
  - 0x003 6y ago
    > though I found it a bit fishy why he couldn’t get another job What line of work was he in? If he lost his job during the pandemic, is it possible there simply were very few jobs available that he was qualified for?
    - baron816 6y ago
      Product Manager

pdimitar 6y ago

That, however, reduces their chance in getting tenants so it becomes a vicious self-feeding closed circuit process?

foepys 6y ago
It's probably because of speculation. If there is a chance that the moratorium will end in July it's better to not have any tenants for a few months than bad ones you cannot evict and will trash your place. Also, unoccupied properties are always more valuable.
- imtringued 6y ago
  Is it really speculation if the government turns tenants into net negative customers?
an_opabinia 6y ago
Occupying a home reduces its value. Letting someone live somewhere "for free" (to them) is still worse to the owner of the house than leaving it vacant.

adolph 6y ago

The article does cite eviction moratorium effects, but from a different angle: Landlords stuck with tenants who can’t pay may try to offset these losses by raising rents on everyone else. Rents in lower-end units tend to already be close to operating costs, Schuetz noted, so landlords may have slim profit margins.

TuringNYC 6y ago
Not only this, but there will be a eviction-moratorium risk premium that tenants will implicitly pay for years to come, to adjust for the added risk and to help keep a virtual buffer for future moratoriums.

tehjoker 6y ago

It's crazy that we live in an economy where you have to pay just to live somewhere, but when the eviction moratorium ends, there's going to be a huge financial reckoning as there's no way anyone is paying all that back rent. Biden is going to have to either bail out tenants or landlords and banks. I'll be taking bets on which one he does.

hsitz 6y ago
??? In what economy do most people not have to pay just to live somewhere?
- postalrat 6y ago
  Utopia
- panic 6y ago
  Our highways are free for everyone to use and maintained using tax money. It's not inconceivable that housing could work the same way.
  - anonuser123456 6y ago
    Gas taxes pay for roadways.
    - woodruffw 6y ago
      And so the reasoning goes: income taxes should pay for the general welfare, rather than the general hardship of various Middle Eastern countries.
  - sershe 6y ago
    I grew up in an economy where it was. When I was born, we were living in a 4-people, 3-generational, ~500sqft 1.5 room flat (the large kitchen was subdivided to make a tiny bedroom); later, the govt decided that we deserve better and I ended up growing up in a 4-people, 2-generational, ~650sqft 2-room flat. I wonder what my parents, two engineers, would have been able to afford in the USA? I think I had a very happy childhood but comparing these things kinda allows you to reflect. Interestingly, the low standards stick; when we bought a small 1100sqft house with my wife (in the USA), some of my friends back in Russia were like "oh, a big house, are you planning for kids?" ;)

gnicholas 6y ago

Interestingly, if landlords were allowed to use larger security deposits, some would choose to do this instead of raising the monthly rent. My friend is looking to rent out an ADU, and the first idea was to have a sizable security deposit in order to filter applicants who fully intended on paying rent from those who would be more likely to use the eviction moratorium. But apparently California tightened the rules around security deposits in 2020, which actually exacerbates this problem. Landlords used to be able to ask for up to two month’s rent as a security deposit, but now they can only ask for one month's rent. This leads to upward pressure on rents, as landlords adjust the only lever they have left. I wonder if applicants can/do offer to prepay several month's rent, to signal that they are serious long-term tenants who have the ability and interest in paying rent (even if they legally could avoid payment).

TuringNYC 6y ago
This comment is spot on. Rent premiums are often not greed, but just a risk premium and buffer-collection for a catch all of issues from future non-payment to other BS.
- imtringued 6y ago
  Prices are negotiated. Two parties must agree on the price. If there is a "greedy" landlord overcharging people there must also be a person "willing" to pay the overpriced rent. Of course there are cases of vacant properties but I don't think this is a problem for most rental markets.
  - TuringNYC 6y ago
    I'm pretty sure vacant properties are a problem in every market, it is just a matter of grayscales -- how many days do you keep units empty waiting for a creditworthy tenant. Perhaps the unit is empty 10 days, perhaps 15. Willingness to keep a unit empty is part of the negotiation -- a landlord is saying "I'd rather keep the unit empty for another couple of days than take a rent that wont adequately-compensate for the 4% chance i get nothing for 10months (i.e., eviction)" Of course, even eviction timelines vary vastly from one jurisdiction to another

Frost1x 6y ago

The more modern trend of businesses passing risk sort of flies in the face of the old rationale of business ownership taking on risk which justified the rewards of doing business. Now you're just doing business wrong if you don't minimize risk or figure out how to shift and transfer risk away from yourself.

insert_coin 6y ago
You try to minimize all risks, not only in business but in all aspects of life. That has always been the case. The caricature you presented has never existed.

lamontcg 6y ago

Implicitly though you're assuming that landlords have pricing power in this market. The reason why they have pricing power is likely due to the moratorium. People aren't being evicted so those units aren't going on the market, so supply of rentable units is being artificially suppressed. When the moratorium expires then renters will be evicted and those units will go back on the market which should drive costs down for everyone else.

toiletfuneral 6y ago

Maybe landlords should get real jobs?