I’m not a residential property owner, just an armchair economist, but something Ben Brooks said makes me scratch my head:
“It’s easy for Trumbull to say “we need more low-cost rentals”, but what he doesn’t look at is the market forces that are driving rental rates. Get more people to buy homes, and rental rates will come down.”
Here is what Trumball said:
“Meanwhile, the cost of renting has been going steadily up along with the rise in demand for apartment units. So, even as economists talk of now being a great time to buy, low-cost rentals would be even more welcome to many Americans.”
Okay call me crazy, but didn’t Trumball just say the cost of renting has been going steadily up along with the rise in demand for apartment units? So yes, I think Trumball does get it. It’s also the truth. Wouldn’t millions of Americans love low cost rentals?
This is the double edged sword of Economics. It controls the distribution of limited resources, but it can be downright cruel when it prices goods and services that people deem necessary to live right out of their price range. Credit is still tight, you need 20% down on a house and that’s $20,000 on meager condo in the suburbs or a decent sized house in the middle of West Bumblefuck. That’s a lot of money, and people aren’t making enough to save up that much. Therefore, they have to rent. Not everyone has a relative they can move in with, and some people don’t even have relatives.
This makes renting a sellers market. Demand is high and there’s nothing you can do about that unless the zombie apocalypse comes and takes out some of our population. To lower prices, you have to increase supply. That means you have to build more complexes for apartments. This gets into all sorts of problems:
1) The biggest problem is that if you look around, land is finite. There are only so many places to sit on the planet.
2) People in general are not flexible in moving. They want to stay near family, or don’t have the money or resources to move cross country, and this limits their choices.
3) Construction is in the tank thanks to the credit crunch. New Housing was depressed, well apartment complex construction that requires even more money to build was even more depressed. Supply is constrained until someone builds new buildings.
4) The middle class is getting squeezed, as people have less and less money to spend. Those who own these complexes have less incentive to rent to the poor and working class because they want the higher margin renters. But those are getting harder and harder to find so why build a fancy new building if you can’t find a group of people who can put $500 together for an apartment?
5) While I’m all for regulations, regulations do in fact increase costs. There’s a point where an apartment becomes a slum, and if you want to be a law abiding large property owner, you probably have to abide by the law and pay those costs. This increases the price you need to make money.
The solution is always of course low cost housing, we just don’t know as a society yet how to get it. Calling such a statement stupid is like saying that a touch screen phone will never be successful because no one has been able to do it right before. What we have to do is innovate, we just haven’t figured it out yet.