This is the problem with everybody being leveraged to the hilt.
I suspect some small fraction of property owners, however, are unleveraged, absentee, and likely willing to grant rent forbearance for quite awhile. For example, older people holding onto real estate for their children, or who simply really like their tenant and are committed to the community. Restaurants lucky enough to have such landlords, or similarly situated landlord-restaurateurs, are probably counting their blessings right now.
We wouldn't have a very dynamic economy if everybody operated this way, but at least there's some heterogeneity to help us bootstrap things. No comfort for the huge number of people who have effectively lost their life savings, though.
There is no problem if this is just one person or one business. There's no issue with allowing people some time to find the next renter.
The problem is that when everybody leverages to the hilt and the whole area collapses, the rent prices stay high even when there's no one renting--which is bad for renters. And this continues in a gigantic game of chicken until some of the owners finally run out of cash and go bankrupt and everything collapses simultaneously which also isn't good for the end renter.
It's like the 2008 Wall Street crash. Lots of people knew what was going on. However, everybody knew that they were equally screwed whether they were responsible or not. So, they just rode the train and hoped they could cash out to the next sucker before the disaster.
And then we get the joy of everybody wailing that they need a bailout.
You sound like you have the rarer, nice landlords with maybe a handful of properties that are being rented out. These are the landlords that as long as you pay their mortgage and provide little fuss, they are happy and not trying to constantly maximize their returns.
I'd imagine your scenario would not be the case with a typical management company. While your scenario is attainable for a small amount of people, it would be difficult to see happenning for the masses.
I don't know about the US but speaking for the UK, landlords have had a ridiculously easy ride in recent decades. As a result, people with spare money customarily invest it in buy-to-let properties, the cost of housing has rocketed, and vast amounts of cash are continuously siphoned from poorer people to richer people. We don't have to vindictively celebrate these people getting wiped out, but anything that discourages customary amateur landlordism has to be a good thing.
not all landlords are rich and/or have rent as their entire income in normal times. my friend is a "landlord", in the sense that she rents out the spare room in her house to help pay the mortgage. now her entire industry is shut down and her tenant isn't getting paid either. no matter how responsibly they manage their finances, most people can't handle suddenly having multiple sources of cashflow go to zero.
The reason so many are forced to rent is because they cannot buy. At the end of the day, the population is mostly housed, but only a very small percentage benefit enormously from it because they own all the property.
Perhaps its because those who can afford to buy due to their socioeconomic status can vacuum up properties at cheap interest rates, and then profit by renting to those who can't afford to buy?
One part of the solution is to drastically curtail subsidies for landlords (depreciation/mortgage interest deduction)
I’m not disparaging people looking out for themselves.
However, renting out an asset (which generally isn’t depreciating) is only going to increase the inequity between the renter and the landlord. If their relationship is based entirely on who can afford a deposit then I don’t see what excess of demand and supply has to do with it.
If you’re talking about building so many houses that they loose their value as a commodity entirely, the problem there is an entire generation who have staked their pensions on property.
I should know better than to attempt to have an advanced economics discussion with the likes of HN readers ... many of whom for reasons I will never understand always jump to the defense of evil landlords. Landlording is not a job and does not add value or goodness to the economy or to society. Most people involved in the "For Rent" business have gobs of money, no skills, no actual work ethic, and no ethics period (try a Google search "Jared Kushner slumlord" for reference of one key example).
The proliferation of renting "for profit" in the last 10-15 years is the number one factor contributing to the acceleration of the division of the top 1 percent from the bottom 40 percent (used to be the bottom 25 percent, then the bottom 30 percent; now it is the bottom 40 percent), because there are no market forces slowing it down. More progressive income taxes could have slowed down the top tier just enough to give the bottom 40 percent a little bit of a break. But the rate at which the top 1 percent's income is growing is now even too much for that to have any effect. They write tax code for their benefit, own lobbyists, get unfair tax credits, and basically wreak havoc on the working class by stealing their equity. The article's citations of median rents in LA is evidence enough.
Current system: When landlords have more profit to buy more units, they control more supply and are thus incentivized to further inflate rents, ad infinitum. Clearly price-side economics favors those setting prices. Rent controls do not really work, nor does any system that attempts to make renting "affordable" for working class people because it's basically just pouring more money into an already broken system. Lift people up and out of poverty by giving them incentives to escape the broken system rather than forcing them to stay beholden to it.
The reason the tax on rental income would work is it would make renting "for profit" prohibitively expensive for landlords. Sure, they could try to aggressively increase rents, but it would work against them because for every extra dollar of rent they tried to suck out of people, they'd only net 35 cents. Furthermore, a fresh injection of supply would hamper their efforts to buy up all the supply in consolidtions. Rather the small and independent landlords would have to focus on keeping their current renters happy (like by offering real customer service) and improving the quality of the rentals they manage. Imagine that!
The solution is to make collecting rents an unappealing and unprofitable avenue of investment. And it would work.
Most amateur landlords do not factor in voids, repairs or the possibility that housing will not rise and rise.
Luckily most don't have to factor in opportunity cost because most don't "own" but are in fact highly leveraged. Housing is the only mainstream access to leveraged debt - that's why people love it.
Go to your bank and ask to borrow $400K "because you think google's shares will go up". They will say no.
But real estate? They love it, especially as it's all back-stopped by the government now.
Everyone wants to pile in and exploit other people working to capture some of their labour.
What happened to adding value and working hard? Can we all be rentiers? Who will grow the food?
It's tricky. One person takes out a loan to start a small business and it fails due the virus. Another takes out a loan to purchase properties and be a landlord who also gets wiped out. Economic rent is a societal problem. But landlords aren't actually reaping in the profits most of the time, and it might be argued that they're providing useful services to people. On the other hand, most go into it with the hope of just sitting on stuff and making passive income for low amounts of work. If landlords are doing societal good, it's mostly accidental, and at best a local maxima of a well function system.
I'd say in the scheme of suffering going on right now this doesn't feel like the most deserving of sympathy. Taking out huge loans is a risk. As a society, this is not a good way for members to build wealth. But they're not villains by any means.
You're not considering an important subset of renters. Consider the elderly, those who have lived in a given community for many years. They may not be driving anymore, everyone they know is around that neighborhood, their doctors, family, and their whole life. It'd be very heartless if it was possible for landlords to displace the old since they are unable to keep up with the market forces which demand 5% rent increases yearly.
I happen to think landlording is a manipulative use of resources that leverages capital to perpetually inflict usury on people that can least afford it with little hope of raising themselves up. I've had half a dozen landlords in the last 10 years, and every single one provided absolutely zero value outside of their fortune to take a home someone else could live in.
In fact, in my most recent home with 12 zones of sprinklers built with zinc piping 30y ago, I had to personally replace half of the valves and a whole manifold so that I wouldn't have to choose between losing my deposit for the yard dying, or paying $1000/month to run the worn out system. I've had issues with every property I've rented, and every single landlord I had any beef with was more than willing to strongarm me using the lopsided law rather than manage their own properties.
Another story. I was a newlywed and went to sign a 6 month lease. 5 months pass and we want to leave, give them notice, and move out at the end of the month. Well, the teenager running the leasing office counted wrong and wrote it for 7, and when we went to turn the key in they told us we owed $1200. Sure, I didn't catch the error either, but they said nothing at notification and were unwilling to split the difference. They sent it to collections and just had the gov take it right from my bank account.
Or how about my rental before my first story, where they sent a sprinkler guy to "fix" the sprinklers, he checked out the issues I raised and said he was going to get parts. He never returned. Later that week I noticed that the lawn was terribly dry, I check the timer and turns out the landlord just asked the guy to surreptitiously unplug the controller so they didn't have to pay for the water.
And that's not even getting into the economic impact of usury on housing, and how every day its taking away the dream of owning a little something of their own from people that arguably put more labor towards keeping our society healthy than probably any of the data shuffling nerds on this site.
But hey, if you think it's great that people can't afford a home I guess you can consider it something different.
Leasing property should be out of the hands of regular regular folks because regular folks don't know how to handle it ethically. I define regular folks as pretty much anyone not heavily regulated for ethical performance.
The problem with leasing property is that once you've bought the property to lease, you the landlord (good god the feudal nature of the word itself should be setting off alarm bells) are now in possession of a basic need of humans (shelter) that you can dole out as you please. This property is also fairly easy to manage without it going down in flames so the next step is maximizing your own comfort at the top of your middle-class existence at the cost of some poor other unfortunate. This poor other unfortunate must clamber up to the top of the shit-pile racing against time as you bleed them dry so they too can afford a property to squeeze out the next unfortunate.
It's a pyramid scheme of the worst kind. But its practice is widespread and common enough that we don't bat an eye. And you don't have to look far to see abuses everywhere veiled in legal frameworks. My wife, for example, was recently thrown out of a Scandinavian country because we didn't have a strong enough case for residency. Her landlords were a man and a wife both very well-off living downstairs. We thought it was an amicable living arrangement until, on moving out, they politely informed her she'd be paying two months of rent after her departure to "give them enough time to find a replacement". This was in a city swarming with desperate people willing to kill their pet if it meant they could be move in the same day. My own experiences with landlords in the US have been of the same awful caliber.
We, as human beings, have allowed these abuses because there are no sufficient checks and balances to our own greed. It's all Self-first and damn the others. I feel a kind of hollowness eating me out from the inside every day I get a little older wondering where the Hell we all went wrong.
Sure, eventually you get an equilibrium. Because nobody else wants to be a landlord you can charge so much that it's worth the aggravation. I wonder how many of these new units would be needed if people were more willing to rent out unoccupied units.
The problem isn't as acute for big companies. If you have 1000 renters you have a staff to deal with problem tenants. You have lawyers on retainer. You expect some number of tenants won't be paying rent at a given time, so you charge everyone else enough that you still make money.
The people who get screwed are the duplex and fourplex owners who wanted to use rental income to supplement their retirement.
I suspect some small fraction of property owners, however, are unleveraged, absentee, and likely willing to grant rent forbearance for quite awhile. For example, older people holding onto real estate for their children, or who simply really like their tenant and are committed to the community. Restaurants lucky enough to have such landlords, or similarly situated landlord-restaurateurs, are probably counting their blessings right now.
We wouldn't have a very dynamic economy if everybody operated this way, but at least there's some heterogeneity to help us bootstrap things. No comfort for the huge number of people who have effectively lost their life savings, though.
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