9 ms·

Renting out houses is not a risk-free business. Risk materialized and hit people who took way more than they could chew. But I doubt most of them are really "c

Renting out houses is not a risk-free business. Risk materialized and hit people who took way more than they could chew. But I doubt most of them are really "crippled" in light of crazy price appreciation on the other hand. They might be forced to sell due to cash flow problems (immediate cause of most business failures anyway, no?), but should still be in the plus after the sale goes through.

WalterBright 5y ago
Having the government declare that renters can live rent-free and cannot be evicted is not a normal business risk. It's very close to outright confiscation of property. Governments that do such things tend to have very poor economies as a result, as very few businesses are willing to undertake such risks.
- quantumofalpha 5y ago
  It's longtail-ish but there could be a number of other reasons why you might not be able to rent out a property for many many months.
  - awillen 5y ago
    Sure, but when the government is the one that expressly puts these rules in place, the government needs to take responsibility for the impact of them.
    - quantumofalpha 5y ago
      And they did! At least in California, that's the news here. Overleveraged people got a lesson but will be made whole it seems. And every houseowner massively profited from house prices appreciation. What more can you ask for? Have your cake and eat it too.
      - deleted 5y ago
        [deleted]
      - gameman144 5y ago
        Overleveraged renters can't ask for more, but renters who paid their bills on time and responsibly forewent other spending are really taking a bath here, and could ask to not be penalized for acting responsibly over the past 18 months. This is a textbook case of a moral hazard.
        ipaddr 5y ago
        They are not being punished. Just because some other group got a benefit doesn't mean the first group are taking a bath. If you see someone steal something you shouldn't think you have to steal too because others will have benefit you don't. It sounds less like moral hazard and more like jealousy. The people who didn't pay took a risk, ruined relationships with management. It will probably follow them around to credit reports and to the next place.
        gameman144 5y ago
        > If you see someone steal something you shouldn't think you have to steal too because others will have benefit you don't. This isn't the situation, though. The situation is more like the government announced that theft of Playstations wouldn't be prosecuted; my friend stole a Playstation, I paid for my Playstation, and at the end of the day the government stepped and paid of my friend's Playstation off for him. You're totally right that the government isn't punishing me for having paid for my Playstation. But economically I am being penalized for having not stolen my Playstation. When the responsible thing to do and the economically advantageous thing to do are at odds, it's not far-fetched to expect fewer people doing the responsible thing.
- beerandt 5y ago
  It is confiscation of property, and an illegal one, since it's not for public use. Not allowing an owner to exercise all of his rights of ownership is a taking, even if it's not permanent. You see this often with construction projects that expropriate not only the title to land needed, but also temporary servitudes (leases) on adjacent land for site access or extra room for construction. Point being, the "temporary" nature of the order, and the fact that the landlord retains title/ ownership, doesn't preclude it from being an (un)constitutional "taking" of private property.
  - bronzeage 5y ago
    It's kind of done for the public good. If it didn't happen, there's a chance the rent/housing market would spiral out of control along with the economy, dragging down the landlords with it.
  - DannyBee 5y ago
    Most courts to consider it so far have not considered the state-level eviction moratorium laws to be a taking that is occurring without compensation. See, e.g., https://www.inversecondemnation.com/files/eviction-moratorium-decision.pdf https://www.inversecondemnation.com/files/eviction-moratoriu... (massachusetts) (A federal court also declined to block it) I am too lazy to look at all of them. The reason they are usually found not to be takings is twofold. First, they only prevent a specific type of relief. In most of them, nothing in them stops the landlord from suing for money damages, or even necessarily for breach of contract with ejection as a remedy. They only usually prevent you from filing eviction petitions. Second, they generally do not state that you are not owed the money, only that you may not temporarily collect it. https://www.law.cornell.edu/wex/takings https://www.law.cornell.edu/wex/takings goes through most of the current tests, and most moratorium rules fail them. For example, taking again the MA one: 1. It does not allow permanent physical occupation (they are temporary) 2. It does not cause loss of all beneficial/productive uses of the land (you are still owed the money, and in fact can sue for money damages) etc
  - philistine 5y ago
    Where I live, a renting agreement is covered by certain government guarantees. For example, you cannot evict someone if they fail to pay, you need to obtain consent from a judge to do that. To my mind, if the government suddenly refuses to evict anyone for public health reasons, the taking of intangible property rights is minimal, non-discriminatory and justified. We’re at war with a virus here, some sacrifices will have to be made. If people can be evicted, more people will die than if they stay put.
- brailsafe 5y ago
  It sounds like normal business risk to me. If you're in any other business, you're counting on the economy doing what it does to facilitate people spending their money on your product, and in the meantime you're spending on overhead to maintain your retail store or whatever infrastructure you need. If there's a real problem there, you're out of pocket for the expenses you've risked having to pay. In this case though, you've invested in one of the most critical aspects of someone's livelihood. That presents a real problem for everyone if people can't afford to be sheltered, and as part of the system, if not someone actively worsening the system, you're kind of agreeing not to fuck it up for everyone. I say "if not someone actively worsening the system" because if you're buying property with the exclusive intention to rent it, there's a decent chance you're just taking available property off the market and contributing to ever-increasing prices, even though the value of the property is kind of just fake number, which increases the need to rent (and be dependent on you) in the first place.
  - bassman9000 5y ago
    you're counting on the economy Arbitrary regulation is not the economy. If CA decides tomorrow to pass a bill that mandates all tech workers to have proper accreditation, including a bar exam, and to fine to oblivion companies that don't comply, is that the economy?
    - disgruntledphd2 5y ago
      In California, under those circumstances, yes it is.
    - brailsafe 5y ago
      A more likely hypothetical scenario would be regulation on the term "engineer" at some point in the future, because there aren't any extenuating circumstances that would demand that happen at this moment, but I don't really see what your driving at anyway.
      - bassman9000 5y ago
        That the whims of a few, or even a single bureaucrat, are not normal business risk. Read Sowell's Basic Economics on how arbitrary regulations distort the market.
- serjester 5y ago
  I’m surprised no ones mentioned this but the government also provided emergency relief funding (payroll protection) to business owners. While not explicitly designed for landlords they technically qualified - even if the only person on payroll is themselves. I know multiple people, albeit in different lines or business, that had 5 to 6 figures of payroll loans forgiven. The real loser here is the future of the US dollar.
  - risk000 5y ago
    >The real loser here is the future of the US dollar. This presumes that the quantity theory of money (and/or the theory of Ricardian equivalence) is correct, which it most likely is not[0]. Money printing does not cause hyper-inflation, as demonstrated in this CATO paper[1]. Governments are not households[2], because they hold monopolies on currency creation[3]. Also, currency creation is not 'debt'.[4] It follows from this that there is a vast and largely unexplored space on the graph of currency creation over time, where the line can rise before it triggers negative systemic effects. A fiscally sovereign nation can never run out of its own currency. This policy space is where the future lies, awaiting us. The worldview-assumptions implicit in your question would discourage us from exploring this space. That, in my view, would be the heart of folly. Many thinking people in the economic and policy professions are realizing this, and not a moment too soon. 0. https://saylordotorg.github.io/text_money-and-banking-v2.0/s23-03-the-policy-failure-of-the-mode.html https://saylordotorg.github.io/text_money-and-banking-v2.0/s... 1. https://www.cato.org/working-paper/world-hyperinflations https://www.cato.org/working-paper/world-hyperinflations 2. https://www.youtube.com/watch?v=ba8XdDqZ-Jg https://www.youtube.com/watch?v=ba8XdDqZ-Jg 3. https://www.youtube.com/watch?v=1AyT9zftNrE https://www.youtube.com/watch?v=1AyT9zftNrE 4. https://www.youtube.com/watch?v=XIe_BiRIlgU https://www.youtube.com/watch?v=XIe_BiRIlgU
- fattire 5y ago
  OR Governments that do such things tend to have excellent economies as a result by preventing a cascade of unneeded financial collapses and the social costs associated with dealing with that along with the increased human suffering of an already significant homeless population.
mizzack 5y ago
Most risk is covered by lease terms. Failing that, there's eviction... until the government intervened and changed the fundamental contract. And, no, no one is going to buy your house if it has non-paying tenants that can't be evicted. They would just be inheriting your problem due to tenant's rights.
- quantumofalpha 5y ago
  Non-paying tenants is just a short-term problem and you can put a dollar amount on it. It's not the worst thing that can happen to a property. People with deeper pockets than you and able to wait it out would still buy with the right discount for the inconvenience and uncertainty. Or even for the mere right to be your buyer - there's extreme housing supply shortage in certain markets if you haven't been following the news. With some comical extremities like people pledging to name their firstborn after the seller etc
pempem 5y ago
I want to address the note about "biting off more than you can chew". This would have required ~1 year of reserves, full on, for every unit. Thats a lot to ask if we want a real estate market that is diverse and not feudalistic in nature.
dehrmann 5y ago
Risk of not being able to evict someone not paying their rent for a year wasn't a risk anyone though was even possible in December, 2019.

WalterBright 5y ago

Having the government declare that renters can live rent-free and cannot be evicted is not a normal business risk. It's very close to outright confiscation of property. Governments that do such things tend to have very poor economies as a result, as very few businesses are willing to undertake such risks.

quantumofalpha 5y ago
It's longtail-ish but there could be a number of other reasons why you might not be able to rent out a property for many many months.
- awillen 5y ago
  Sure, but when the government is the one that expressly puts these rules in place, the government needs to take responsibility for the impact of them.
  - quantumofalpha 5y ago
    And they did! At least in California, that's the news here. Overleveraged people got a lesson but will be made whole it seems. And every houseowner massively profited from house prices appreciation. What more can you ask for? Have your cake and eat it too.
    - deleted 5y ago
      [deleted]
    - gameman144 5y ago
      Overleveraged renters can't ask for more, but renters who paid their bills on time and responsibly forewent other spending are really taking a bath here, and could ask to not be penalized for acting responsibly over the past 18 months. This is a textbook case of a moral hazard.
      - ipaddr 5y ago
        They are not being punished. Just because some other group got a benefit doesn't mean the first group are taking a bath. If you see someone steal something you shouldn't think you have to steal too because others will have benefit you don't. It sounds less like moral hazard and more like jealousy. The people who didn't pay took a risk, ruined relationships with management. It will probably follow them around to credit reports and to the next place.
        gameman144 5y ago
        > If you see someone steal something you shouldn't think you have to steal too because others will have benefit you don't. This isn't the situation, though. The situation is more like the government announced that theft of Playstations wouldn't be prosecuted; my friend stole a Playstation, I paid for my Playstation, and at the end of the day the government stepped and paid of my friend's Playstation off for him. You're totally right that the government isn't punishing me for having paid for my Playstation. But economically I am being penalized for having not stolen my Playstation. When the responsible thing to do and the economically advantageous thing to do are at odds, it's not far-fetched to expect fewer people doing the responsible thing.
beerandt 5y ago
It is confiscation of property, and an illegal one, since it's not for public use. Not allowing an owner to exercise all of his rights of ownership is a taking, even if it's not permanent. You see this often with construction projects that expropriate not only the title to land needed, but also temporary servitudes (leases) on adjacent land for site access or extra room for construction. Point being, the "temporary" nature of the order, and the fact that the landlord retains title/ ownership, doesn't preclude it from being an (un)constitutional "taking" of private property.
- bronzeage 5y ago
  It's kind of done for the public good. If it didn't happen, there's a chance the rent/housing market would spiral out of control along with the economy, dragging down the landlords with it.
- DannyBee 5y ago
  Most courts to consider it so far have not considered the state-level eviction moratorium laws to be a taking that is occurring without compensation. See, e.g., https://www.inversecondemnation.com/files/eviction-moratorium-decision.pdf https://www.inversecondemnation.com/files/eviction-moratoriu... (massachusetts) (A federal court also declined to block it) I am too lazy to look at all of them. The reason they are usually found not to be takings is twofold. First, they only prevent a specific type of relief. In most of them, nothing in them stops the landlord from suing for money damages, or even necessarily for breach of contract with ejection as a remedy. They only usually prevent you from filing eviction petitions. Second, they generally do not state that you are not owed the money, only that you may not temporarily collect it. https://www.law.cornell.edu/wex/takings https://www.law.cornell.edu/wex/takings goes through most of the current tests, and most moratorium rules fail them. For example, taking again the MA one: 1. It does not allow permanent physical occupation (they are temporary) 2. It does not cause loss of all beneficial/productive uses of the land (you are still owed the money, and in fact can sue for money damages) etc
- philistine 5y ago
  Where I live, a renting agreement is covered by certain government guarantees. For example, you cannot evict someone if they fail to pay, you need to obtain consent from a judge to do that. To my mind, if the government suddenly refuses to evict anyone for public health reasons, the taking of intangible property rights is minimal, non-discriminatory and justified. We’re at war with a virus here, some sacrifices will have to be made. If people can be evicted, more people will die than if they stay put.
brailsafe 5y ago
It sounds like normal business risk to me. If you're in any other business, you're counting on the economy doing what it does to facilitate people spending their money on your product, and in the meantime you're spending on overhead to maintain your retail store or whatever infrastructure you need. If there's a real problem there, you're out of pocket for the expenses you've risked having to pay. In this case though, you've invested in one of the most critical aspects of someone's livelihood. That presents a real problem for everyone if people can't afford to be sheltered, and as part of the system, if not someone actively worsening the system, you're kind of agreeing not to fuck it up for everyone. I say "if not someone actively worsening the system" because if you're buying property with the exclusive intention to rent it, there's a decent chance you're just taking available property off the market and contributing to ever-increasing prices, even though the value of the property is kind of just fake number, which increases the need to rent (and be dependent on you) in the first place.
- bassman9000 5y ago
  you're counting on the economy Arbitrary regulation is not the economy. If CA decides tomorrow to pass a bill that mandates all tech workers to have proper accreditation, including a bar exam, and to fine to oblivion companies that don't comply, is that the economy?
  - disgruntledphd2 5y ago
    In California, under those circumstances, yes it is.
  - brailsafe 5y ago
    A more likely hypothetical scenario would be regulation on the term "engineer" at some point in the future, because there aren't any extenuating circumstances that would demand that happen at this moment, but I don't really see what your driving at anyway.
    - bassman9000 5y ago
      That the whims of a few, or even a single bureaucrat, are not normal business risk. Read Sowell's Basic Economics on how arbitrary regulations distort the market.
serjester 5y ago
I’m surprised no ones mentioned this but the government also provided emergency relief funding (payroll protection) to business owners. While not explicitly designed for landlords they technically qualified - even if the only person on payroll is themselves. I know multiple people, albeit in different lines or business, that had 5 to 6 figures of payroll loans forgiven. The real loser here is the future of the US dollar.
- risk000 5y ago
  >The real loser here is the future of the US dollar. This presumes that the quantity theory of money (and/or the theory of Ricardian equivalence) is correct, which it most likely is not[0]. Money printing does not cause hyper-inflation, as demonstrated in this CATO paper[1]. Governments are not households[2], because they hold monopolies on currency creation[3]. Also, currency creation is not 'debt'.[4] It follows from this that there is a vast and largely unexplored space on the graph of currency creation over time, where the line can rise before it triggers negative systemic effects. A fiscally sovereign nation can never run out of its own currency. This policy space is where the future lies, awaiting us. The worldview-assumptions implicit in your question would discourage us from exploring this space. That, in my view, would be the heart of folly. Many thinking people in the economic and policy professions are realizing this, and not a moment too soon. 0. https://saylordotorg.github.io/text_money-and-banking-v2.0/s23-03-the-policy-failure-of-the-mode.html https://saylordotorg.github.io/text_money-and-banking-v2.0/s... 1. https://www.cato.org/working-paper/world-hyperinflations https://www.cato.org/working-paper/world-hyperinflations 2. https://www.youtube.com/watch?v=ba8XdDqZ-Jg https://www.youtube.com/watch?v=ba8XdDqZ-Jg 3. https://www.youtube.com/watch?v=1AyT9zftNrE https://www.youtube.com/watch?v=1AyT9zftNrE 4. https://www.youtube.com/watch?v=XIe_BiRIlgU https://www.youtube.com/watch?v=XIe_BiRIlgU
fattire 5y ago
OR Governments that do such things tend to have excellent economies as a result by preventing a cascade of unneeded financial collapses and the social costs associated with dealing with that along with the increased human suffering of an already significant homeless population.

mizzack 5y ago

Most risk is covered by lease terms. Failing that, there's eviction... until the government intervened and changed the fundamental contract. And, no, no one is going to buy your house if it has non-paying tenants that can't be evicted. They would just be inheriting your problem due to tenant's rights.

quantumofalpha 5y ago
Non-paying tenants is just a short-term problem and you can put a dollar amount on it. It's not the worst thing that can happen to a property. People with deeper pockets than you and able to wait it out would still buy with the right discount for the inconvenience and uncertainty. Or even for the mere right to be your buyer - there's extreme housing supply shortage in certain markets if you haven't been following the news. With some comical extremities like people pledging to name their firstborn after the seller etc

pempem 5y ago

I want to address the note about "biting off more than you can chew". This would have required ~1 year of reserves, full on, for every unit. Thats a lot to ask if we want a real estate market that is diverse and not feudalistic in nature.

dehrmann 5y ago

Risk of not being able to evict someone not paying their rent for a year wasn't a risk anyone though was even possible in December, 2019.