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Direct cash still has this effect. $1500 to subsidize rent that is $1500 to property owners.
by ericmcer 5y ago
Direct cash still has this effect. $1500 to subsidize rent that is $1500 to property owners.
- asdff 5y agoOnly if you have no rent control and allow property owners to take as much as they are able to off the table short of starving their tenants.
- lotsofpulp 5y agoOr only if you prevent supply from meeting demand.
- nsxwolf 5y agoWhen I was a landlord I found it very difficult to even cover the mortgage, let alone cover association dues and maintenance. I would try to raise the rent a little in between tenants, and it would greatly reduce interest in the listing.
- rvense 5y agoWhy should the rent cover your mortgage?
- germandiago 5y agoBecause people who buy a place would like to reasonably be able to pay something that takes 30 years or similar to pay with the rent itself. That is a reason why you invest in the first place.
- munk-a 5y agoThat's a pretty arbitrary measure though - you're making "free" money either way to pay towards that mortgage while retaining the whole value of the asset while it is gradually purchased. Whether you've got enough to cover mortgage or not doesn't necessarily flip a binary switch making it a good investment or not. Property ownership is a market barred from entry by a high buy in cost to account for some risk - but the risk is rather minimal and most properties are going to be value accruing over time. We can observe this by looking at how cheap general property insurance tends to be (unless you're in a really risky area - i.e. building a house in a flood plain).
- germandiago 5y ago> That's a pretty arbitrary measure though It is, but I think I would find reasonable getting a mortgage if it does not impose a load on my finance by having it rented.
- deleted 5y ago[deleted]
- ethangarofolo 5y agoWhy wouldn't it? We're talking about a mortgage on the rental property itself not on the landlord's personal residence.
- greenshackle2 5y ago> We're talking about a mortgage on the rental property itself not on the landlord's personal residence. Yes. Everyone in this conversation understands that. There's no relation between the amount and terms on your mortgage for your rental property and the market price to rent a given unit. If I take a 20 year mortgage does that mean I should charge more rent than if I took 30 years because my payment is higher? Should I drop rent by half when I'm done paying my mortgage since I no longer have a payment? It's nonsensical. There's especially no reason to expect that rent should cover 100% of the principal fraction of your mortgage payment. Taxes, maintenance, interest, etc. are pure costs which are understandably passed on to tenants. The principal fraction of a mortgage payment is not a cost, it is building your equity. If rent is covering all costs and "only" 50% of the principal fraction of your mortgage payment you're still making a profit. Because you're paying, let's say, $1000 of the mortgage payment with your own money, but you're getting a $2000 increase in equity.
- ClumsyPilot 5y agoIndeed - it is increadible that so many people just assume rent should basically buy another person a house by default.
- nsxwolf 5y agoIf the increase in equity should be satisfactory, that's an argument for just letting everyone live in the place for free. I mean, you're coming out ahead. I know other landlords with multiple units. If they don't think something will be an income producing property, they won't buy.
- greenshackle2 5y agoMy point is that you charge market price. Because that's how markets work. Price to rent ratio varies very widely between different markets. If you don't want to buy in a market with a high price to rent ratio that's fine. There's simply no rule that guarantees a price to rent ratio such that rent covers all costs plus the full payment on a 30 year mortgage in all markets at all times.
- dylan604 5y agoLikely NOT the landlord's personal domicile's mortgage, but the mortgage on the rental property itself. Landlords with mortgages on their rental property can go upside down on their notes too.
- greenshackle2 5y agoIf you can't bear any risk of losing money perhaps you should buy money market funds instead of real estate at 20x leverage.
- nsxwolf 5y agoI bought a house just before the financial crisis and a decade later needed to move but I was underwater. I didn’t have enough money to sell it so I rented it out.
- dylan604 5y agohow did this not break your mortgage agreement? most private mortgages have a clause that states the mortgaged property will be your primary residence. specifically. it is to prevent private mortgages being obtained for rental properties.
- nsxwolf 5y agoShrug. It never came up. I was all squared away with a good legal document for the lease, verified renters insurance, all that. Never even occurred to me the bank might take issue with it. Oh well, no harm done.
- zip1234 5y agoObviously there is no rule that it should. I know plenty of people that kept their old house (and mortgage) when moving and tried to rent it out to build some equity and make money.
- wizzwizz4 5y agoIt sounds like the bank was doing to you what people are complaining about landlords doing to tenants.
- nsxwolf 5y agoI think it was simply a function of renters in my area having other options at the price point.
- kingkawn 5y agoThe amount of rent people are paying is exorbitant if it covers the mortgage for owning the property.
- giaour 5y agoNormally, rent on a property is significantly less than the monthly payment on a 30-year mortgage on the same property. Where were you renting out spaces where people were willing to tolerate rent that high?
- MisterBastahrd 5y agoWhere does this "normally" occur? A house in my neighborhood would rent for over $3000 a month and cost about $1600 a month in mortgage / insurance / taxes, and that's been my experience when looking at any property anywhere in my entire city.
- giaour 5y agoManhattan, Seattle, the Bay Area. I haven't rented anywhere other than that, so I don't know how it works outside of those markets (which are admittedly unique as far as market fundamentals go). I paid $1400/month for rent on a place in Alameda, CA. The last recorded sale of the property was for ~$400,000 a couple years before I moved in. That mortgage would be ~$2400/month given average interest rates at the time.
- MisterBastahrd 5y agoThat's crazy comparative to most places I've lived. $1400 will get you a 2 bedroom apartment in a run down complex in the DFW area. Right now, $2350 gets you into a doublewide in Alameda.
- deleted 5y ago[deleted]
- pharmakom 5y agoUBI would likely cool the housing market since people would have the resources to try cheaper places.
- anonporridge 5y agoThis is an important point too. Traditionally, humans have to live where they can find a flow of capital via the jobs available. If every human has a baseline flow of capital attached to them specifically, regardless of where they live, it potentially opens up a ton of possibility in where people can live, because they can do less well paying jobs but still live a good life.
- qqqwerty 5y agoIt is also worth comparing this to the current status quo. About ~17% of working age adults in West Virginia are receiving disability benefits[1] vs about 8% for California and New York. The reasons for this are complex, but in short it is likely due to a mixture of cost of living (disability benefits go farther in LOC areas), economic opportunity (disability is "more attractive" when job opportunities are scare), and demographics (older, more blue collar, etc...). But regardless of how or why these discrepancies exist, we have essentially created a system which incentives our population to self-sort geographically based on their ability to contribute economically. That is of course problematic in and of itself, but this also means we have a real life pseudo "UBI experiment" that we can evaluate. And if you look at the data, nearly all of the states with high disability percentages are low cost of living states, particularly when it comes to housing prices. So anyone who complains about how UBI would increase housing costs needs to first account for the fact that large swaths of the working age population are already receiving benefits similar in level to a UBI (disability is about $1600/mo). And despite the higher concentration of beneficiaries in areas like WV, we haven't seen much of any impact in real estate or local inflation. If anything we have seen the opposite. [1] https://www.mathematica.org/dataviz/state-disability-maps https://www.mathematica.org/dataviz/state-disability-maps
- julienb_sea 5y agoAlternatively, UBI would provide a new income stream to literally everyone, increasing everyone's purchasing power. In a pure supply/demand scenario, the equilibrium price of essentially anything will increase accordingly, i.e. inflation. It's a fair point that UBI would result in some shift in market dynamic. But ultimately, most people will still want to get a job to supplement the UBI income, and high demand areas will remain high demand.
- anonporridge 5y agoLand lords still exist in a competitive market and can't arbitrarily raise rents without collusion. One way to alleviate this problem is to have a harsher tax on vacant properties to punish using housing as a store of value and creating artificial scarcity in the market, e.g. like how the DeBeers corporation made diamonds artificially scarce and scammed the world for the past century selling a shiny rock.
- davidw 5y ago> Land lords still exist in a competitive market and can't arbitrarily raise rents without collusion. Well...kind of. It's pretty bad in a lot of places. There aren't enough homes in the places people want to live.
- anonporridge 5y agoThere's a delicate balance of property owners using their power to prevent new construction and densification in an attempt to keep their property values high by preventing competition and going too far where you destroy your local economy because the people who actually do the work can't afford to live there.
- shinryuu 5y agoThat's the trickle-up economics in action! I'd prefer that.
- munk-a 5y agoI've always been a fan of picturing it as "rising tide economics".
- indymike 5y agoPay the landlord, and landlord gets the money and tenant gets evicted. Pay the tenant and the rent gets paid and no one gets evicted. We saw this with the 2009 mortgate crisis - banks got bailed out and evicted homeowners. Had we paid the homeowners, I suspect most would have just brought their mortage current.
- j_walter 5y agoNot if the tenant isn't being required to pay rent. 2 years of government money in the name of COVID assistance and rent help...but nothing that actually meant it went to paying rent. Some tenants simply bought more stuff or saved it while the landlords are still going without rent payments.
- Guest42 5y agoIs there a data source for this claim?
- geoduck14 5y agoEvery newspaper for the past 2 years. The government was THROWING money at people.
- BoiledCabbage 5y agoAnd most of those stories were business owners who used the money on themselves, let the business fold, and walked away. Not what's being argued here.
- Guest42 5y agoThe population received a significant sum of money but I haven’t seen a data set or statistic indicating people buying discretionary goods rather than paying rent.
- koolba 5y agoThere’s many examples of exactly this happening. Here’s one: https://www.npr.org/2021/10/22/1046154251/they-refused-to-pay-rent-and-stole-the-fridge-landlords-deal-with-pandemic-squat https://www.npr.org/2021/10/22/1046154251/they-refused-to-pa... The tenants no doubt received direct stimulus payments and never paid a dime of it in rent. There’s a reason why section 8 et al are paid directly to the landlords.
- SantalBlush 5y agoThis ignores competition between landlords though. If I get a UBI to supplement my income, maybe I can take that job in the smaller town instead of working in the big city. That spreads real estate demand over a much larger area. I'm still not sure whether or not UBI will be a success, but there are some reasonable arguments in its favor.
- gnat 5y agoThat's exactly what happened with student housing subsidies in NZ. Labour were elected and fulfilled a campaign promise by raising the housing allowance by $150 pw. Rents in Wellington rose $150 pw at the same time.
- tragictrash 5y agoDo you have a link to a more in depth article?
- gnat 5y agoHm, government commissioned research says this isn't happening. I may be forced to eat my words. https://www.motu.nz/assets/Documents/our-work/population-and-labour/individual-and-group-outcomes/Accommodation-Supplement-Exec-Summary.pdf https://www.motu.nz/assets/Documents/our-work/population-and... That said: "Larger rent increases were observed among those who received larger increases in accommodation payments."
- qqqwerty 5y agoThis is a bad example. Students are tied geographically to their respective campuses. With a UBI, individuals would be incentivized to relocate to lower cost of living areas to stretch their UBI farther. The fact that housing is in such tight demand in certain areas is not an argument against UBI. To solve that problem we need to build more houses.
- kingkawn 5y agoThose people get a house for the month. That’s what it subsidizes. Landlord gets theirs one way or another.