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Comment by maxsilver | Hacker News Reader

I also hate maintaining a detached single family home with a yard. I also hate being responsible for the fixes. But that situation is still far better than renting.

When we rented, we were subjected to eviction at any time, for nearly any reason, for basically no notice (60 days, which in the US is effectively zero notice). Your subjected to every whim the crazy wildly-irrational housing market throws at you (we've had 12% yearly rental increases for a decade straight now, despite living in bumblefudge-nowhere Midwest).

Renting in the US today is capital-e Evil, and just wholly broken. Unless we're ready to implement some guaranteed nationwide rent controls and guarantees against unjust eviction and harassment, making housing ownership possible for all citizens has to be the number 1 goal. Because home/condo ownership is the only way to gain any sort of housing security in most of the USA today.

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The thing I've noticed is that in my area all the modest neighborhoods (2 bed, 1 bath, sub $200k) are being bought up by landlords. This leads to a neighborhood of renters, which is a lot different than a neighborhood of owners. The Havers can buy a lot more houses than the Have-Nots and I'm left wondering what the price of single family homes would be if renting them was illegal and they were all placed on the market.

Yes. That's a "private equity" thing.[1] Blackrock can borrow at lower rates than homeowners. So they can buy up houses and rent them out at a profit. Plus they can keep raising the rent. And they outsource maintenance.

[1] https://www.theatlantic.com/technology/archive/2019/02/singl...

The agency cost of any landlord is much larger than the savings in capital cost. For example, for a tenant there is an incentive to complain over the smallest problem instead of fixing himself or just living with the problem. Management agents charge a fortune to deal with these issues.

It's another example of the high cost of being poor. The rent on my town home is several thousand more per year than what a mortgage (5% down), taxes, HOA fee, PMI, and home insurance would be.

Think of it instead as a player closer to the money printing machine that is the fractional reserve banking system. This is the inflation the Fed created directly, and these institutions probably are thinking: 'housing prices only go up, so the duration of my borrowing doesn't matter, borrow short term buy long term, it's all gravy!' If you're over 30 and feel like you've heard this story before, you have....

Several thousand more per year doesn't sound too far off: if you own, you're responsible for home repairs: roof, HVAC, electrical, plumbing, appliances, siding, painting, etc.

I budget $2,000 a year for repairs on a modest-sized home; most years it's under $1,000, but HVAC and roof are infrequent and fairly expensive.

Even if we say that the owner is spending those several thousand dollars on maintenance that just means they're cash flow neutral. They are still making thousands through increased equity and appreciation.

Well, yeah, except 2008 kinda put a dent in that.

Only if you were forced to liquidate before the rebound. Even if you bought at the absolute peak in ~2008 you'd still be way ahead today.

Not if you live in Phoenix[1], Miami[2], Las Vegas[3], Chicago[4] or a host of other US cities.

[1]https://fred.stlouisfed.org/series/PHXRNSA [2]https://fred.stlouisfed.org/series/MIXRNSA [3]https://fred.stlouisfed.org/series/LVXRNSA [4]https://fred.stlouisfed.org/series/CHXRCNSA

You're not accounting for equity changes. Even if you lost 20% of your house value you've paid down more of your mortgage than that.

On a typical 30 year mortgage you haven’t paid much principle in the first 5-10 years. So if you’re still down 10% (as some of those cities are), you could still be in the red.

For a 4% loan you pay off 10% of the mortgage in the first 5 years and 22% after 10 years.

I'm in my first mortgage, 30 years on ~$200k, almost nothing down. Starting to look at selling next year, which will be year 10.

If it sold for the price I bought it, I'd walk with at least $40k of equity after closing costs. But it's also increased in value about $60k.

And I'll have maybe $10k in maintenance and fix up costs over that decade.

It depends on the neighborhood and unfortunately the racial and the economic makeup of the neighborhood.

https://www.forbes.com/sites/forbesleadershipforum/2012/12/1...

Anecdotally speaking, I bought a house in a new minority subdivision in 2003 brand new build. The value went up by about $40K by 2008, crashed to $40K less than I bought it, and today it’s still worth $4K less than I bought it in 2003. It’s still a nice neighborhood so it hasn’t gone “downhill”.

Being the numbers oriented, unemotional person that I am, I did a strategic default in 2012 realizing that I could be eligible for an FHA 3.5% down loan in 3 years after the foreclosure, applied and received a loan exactly three years later and had a house built in a new subdivision in a predominantly White neighborhood. The value of the house has gone up $70K in 3 years and a house with basically the same floor plan is being sold for $70K more than mine was 3 years ago. .

And to hopefully stave off some of the expected replies:

- No the world shouldn’t work like that. But to paraphrase Buffett, “the world can stay racist longer than I can stay solvent”.

- No I’m not racist and it’s not that “I don’t want to be around Black people”. I am Black.

- Yes I know “White Flight” is a real phenomenon. But there is also a well studied “tipping point” when that occurs. I don’t see that tipping point happening.

If you live in your house instead of paying transaction costs to sell, lower property value just means lower property taxes and a more prosocial working class neighbors.

What it put a dent in was the expectation that real estate prices only went in one direction. (Of course, the popping of several previous real estate bubbles should have dented that before 2008, but....)

A townhouse in the western Chicago suburbs I bought in 2006 for $280k and walked away from in 2012 finally sold to the next owner this year for $208k. It will still be another decade or two (if ever, depending on the rate at which property taxes rise to offset Illinois pension obligations) before it appreciates back to what I paid.

The landlord makes the down payment and the landlord takes the risk.

Landlords absolutely incorporate home repair costs into rent. I'm shocked at the number of people who assume that landlords just eat the cost of maintenance. Just because you aren't forking over the money directly to the repairman doesn't mean you aren't paying.

This is something I think about as well. In my Midwestern city, some neighborhoods seem to be 60%+ landlord owned and always increasing. For every home sale to a young couple or first time owner it seems like another house is purchased in cash by some mid-size wanna-be property baron or a mega real estate conglomerate that already owns 200+ homes in the city.

It definitely feels like we're moving towards a system of feudal property barons extracting rent from people who are quickly being priced out of the means to own their own home.

We really need some stronger regulation on renting.

I'd like something along the lines of federal rent control. Limit the rent that can be charged to reduce the profitability of buying up house after house. This would be unpopular with the current owners of homes as it would lower property values, but over time they would remain much more stable.

i agree with your sentiment, but i don't think that rent control is a federal concern. we need to hold our state legislators accountable here. living in CA frustrates me in that regard, because we cannot pass a single f'ing bill about housing affordability generally, even though democrats have a super-majority and every politician and news outlet talks a big game on the topic. i'm ready to vote against every incumbent at this point.

in any case, part of the solution is to equalize the capital gains tax with income tax rates and have the capital gains tax escalate with the number of homes owned (but keep a small tax advantage for long-term owners of a primary lived-in home). and get rid of 1031 exchanges for investment property, which greatly advantage large capital holders over the average citizen.

There are too many loopholes with holding property. You can create and diversify among enough companies and eventually you won't have to pay tax at all.

No politician will vote for this because they know where their bread is buttered. It would be suicide as they would find out when they lose every large donor. I doubt we'll ever get people into office that would vote for anything to disadvantage property holders.

Even if you vote it in through a referendum, I expect a judge will crush it through some weaselly interpretation of the constitution or other precedent. California in particular has had several major referendums reversed by the courts. Will of the oligarchy, not that of the people.

Why federal? The federal government has no authority to do so. Housing is literally, more than any other market, an intra state matter, and the feds cannot regulate intra state trade.

Then we need to fix that. No state will pass legislation along these lines because it will put them at an economic disadvantage to every state that doesn't.

I mean, and if a country does that it puts them at an economic disadvantage to every country that doesn't?

I can't seem to reply to your other comment so I do so here.

It is entirely different to move your company or business to another country vs another state. Most people are not going to expatriate and most companies wouldn't gain much from doing so. Property is already much cheaper in Mexico, but you don't see anybody with a high-skill workforce moving there.

Much simpler would be to raise property taxes to a reasonable level and redistribute that via a citizens' dividend /UBI. That gives you free market efficiency with no rent-seeking non-local owners sucking away the wealth, only reasonable fees for management and liquidity services.

> we've had 12% yearly rental increases for a decade straight now, despite living in bumblefudge-nowhere Midwest

Quick math for the rest of you out there: That means they paid 1000 in 2009 and now pay ~3500 in 2019.

Also, yes, I feel you there. Our rental agreement states a mandatory 10% increase if you rent from year to year. I've no idea why the company is this stupid though. The rents around us are falling or staying steady these days. So we just move to the block over every year and the old place stays empty for 3 months before then being rented out for the same or less than we paid. I'm sure there is some tax thing involved here that makes it so they don't have to care all that much.

Also, yeah, we don't have a lot, and we can just move houses in about a weekend in my 4-door.

It's similar to a telecommunications giant - as the customer, you need to pay a cost of switching (moving expenses, hookup fees etc.).

So it's in their best interests to try to squeeze customers when possible, even with the occasional person that moves out, they'll net a lot more from tenants who just don't bother to dispute the increase.

True! We've decided to be nimble, and it does take a toll (no pool tables, no big patio furniture, smaller couches, etc). But saving the cash is worth it to us. 12% on 1000k/mo rent comes out to an extra 1440/year that could be saved. To us, such a thing is worth the weekend of moving hell.

Don't you also lose a lot of the deposit money you put down on the old apartment and the services that went along with it though? Not to mention that moving is more than a weekend of shuttling around possessions (if you don't own much), you also have to change your address with everyone, sign up for new utilities... I always burn a lot of money and time when moving.

> Don't you also lose a lot of the deposit money you put down on the old apartment and the services that went along with it though?

Wait, what? It's a deposit, you get it back at the end of the lease.

Like, granted, if you have a lot of damage to the carpets, sure, you're gonna be out $80 for the cleaning of them. But I've always gotten it back in full after a month or so.

For me, moving is litterally a weekend (maybe including a Friday afternoon). We really don't have much to move. I'm not joking.

Also, my state allows you to just forward the mail to the new address for free. It only lasts a year, but you can re-up that at any time. We've just done that without much worry and we also have a lot of online stuff that works through the phones and whatnot.

I guess I'm just old hat at doing this kinda moving stuff. It's not much stress for me, though you are right, it is some extra stress. For us, it's worth the savings.

In my experience I lose hundreds on my deposit every time (with very little actual wear to validate that loss). I've only ever rented in major cities though, so maybe it's less aggressively slum-lordy elsewhere.

If you do have more possessions than you can move yourself, or your moving long distances, you end up spending a ton of money. Movers usually cost me 5-10k and I didn't even have a lot of stuff (2bd apartment worth of possessions). Ditto if you need your car(s) moved.

> Movers usually cost me 5-10k

Wow! That is insane!

Here it's about $800 for anything less than 3 hours each way per truck load. And I think that is a rip-off. I've seen college towns that'll charge $50 for frat bros to move you about town all said and done (but then again a frat bro is moving your TV, so beware).

> Movers usually cost me 5-10k

For me, moving about the same amount is going to cost $1000 including storage for a month. I guess if you are also having the movers pack everything, it might cost that much, but I've heard of people moving across the country for less money.

I bet moving costs at least $400 out of pocket plus you have to value you time. 2 people packing and moving is 20+ hours each. 40 hours * $20/hr = $800 so you are breaking even at best.

Well, you loose that bet then! ;)

Also, paying myself is a strange concept. Yeah, it's 'lost time' but only to me and my family. It's not like other forms of employment. Besides, it keeps us a bit lighter on the clutter, though we would like some more things in life. $800 payed to myself is a lot different than $800 paid to some movers.

$1440/yr seems hardly worth the effort for he hassle and cost of moving every year. Compounding rent increase over years makes it substantial.

I suppose you don't have kids though, which may simplify things.

> I'm sure there is some tax thing involved here

Loyalty tax, perhaps. They expect people to just "take it".

"Our rental agreement states a mandatory 10% increase if you rent from year to year"

Why even sign that agreement? That landlord obviously isn't going to give a toss if there's a issue. Its just a huge red flag for me.

> Why even sign that agreement?

Honestly? It was a good place and a good price. We've no intention of dealing with that issue either. We tend to move every year as the jobs change. Would we like to stay in this place for longer? Sure! But it's unlikely to occur.

When I rented the company sent a letter every year asking us to agree to a 8-12% hike. Every year we ignored the letter until they called and we talked them down to either keeping the rent the same or raising it only a couple of percent. It's one of the headaches of renting, but it makes a huge difference over time.

A fixed mortgage is much less painful.

> A fixed mortgage is much less painful.

I'm in total agreement, but the housing prices around here aren't very good (obviously expensive). Besides, we don't have stable work yet, so locking into a mortgage that will go underwater isn't wise.

> That means they paid 1000 in 2009 and now pay ~3500 in 2019.

Which means they're almost certainly exaggerating, unless they're in a condo in downtown Chicago, but they did say "bumblefudge-nowhere" so I'd say just straight BS.

Were you a month to month tenant? If not, why would you sign a lease that lets the landlord break it with 60 days notice? Doesn't that kind of defeat the purpose of having a lease in the first place?

Every lease I've seen has a provision that allows the Landlord to kick you out if you are deemed to be a nuisance.

IIRC there are renters rights in many areas that make this more difficult, requiring a court order typically, but not all areas have this and Landlords will put those clauses in the lease regardless just in case the tenants aren't familiar with the law.

I mean, most HOAs will kick you out if you are deemed to be a nuisance, as can a city council.

HOAs don't have the power to evict you from your own house. They might act like they do, but they don't. Their power basically ends at sending sternly worded letters and in exceptional cases putting a lien on the property. If the homeowner just ignores their letters they can't do much.

Yes, they can? An HOA is added to the deed agreement. A typical HOA will be allowed to put a lien on the house if you do not pay them the agreed upon fee, and -- crucially -- whatever other fees they determine. Thus, if an HOA wants to kick you out for any reason, they mostly just have to continue to fine you until you can no longer pay, at which point they ask a judge, and take the house.

You can’t foreclose a house due to a lien. It only impacts selling the house.

Yes they can? https://www.nolo.com/legal-encyclopedia/hoa-liens-foreclosur...

In california for example, an HOA just has to get you to have $1800 in unpaid fines before they can simply evict you and sell the house to recuperate the costs.

> we've had 12% yearly rental increases for a decade straight now

That was part of the motivation for buying my first house. The rent was going up $50/month every 6 months, and the mortgage was going to cost only $100/month more than the rent. I figured in a year I'd break even, and in 2 years I'd be ahead.

lol at assuming mortgage is the only expense to owning a house

More like lol at assuming your rent doesn't cover the other expenses of owning a house. You think your landlord is just taking the loss? When you rent, you are paying, if not directly, for every expense associated with the house, plus extra for the landlords profit margin.

The rental market and the home buying market as separate and not perfectly correlated. In SF right now, it's cheaper to rent than to buy, so yes, if a landlord bought today and rented it out they'd be taking a loss.

The thing is that landlords may have purchased the place a long time ago. They can still make a profit with rent being less than what a mortgage+ would be today.

From a different perspective, 60 days is too long if you are a landlord trying to evict a drug user who has not paid rent in 60 days.

I’d like to invest in rental property, but would never want to be a landlord. My mother rented out a house and the renter trashed it.

Price controls do not work. High home prices are a symptom of a lack of available housing and the only way to fix the lack of housing is by building more housing.

High home prices are often a symptom of easy money and inflation localized to that sector. (Specifically, the houses described in the article seem to be poster children of this type.) That was the whole 2008 thing, right?

I know landlord-tenant laws vary a lot, but how could you be subject to random evictions with only 60-day notice? Most places I've lived, you sign a one year lease. The landlord can't evict you while the lease is in effect as long as you are abiding by the terms of the lease.

You must not live in Georgia or the South.

Rental contracts are not valid in the South and one party can unilaterally end the agreement for no reason? That really sucks, if so.

https://www.nolo.com/legal-encyclopedia/the-eviction-process...

Georgia:

"If a landlord does not have cause to terminate a tenancy early and evict a tenant, then the landlord must wait until the lease term has ended before expecting the tenant to move. In some cases, the landlord may still need to give the tenant written notice to move.

"Month-to-Month Tenancy

"If a tenant is in a month-to-month tenancy and the landlord wishes to end the tenancy, the landlord needs to give the tenant a written 60-day notice. This notice will inform the tenant that the landlord is terminating the tenancy and the tenant must move out of the rental unit by the end of 60 days. If the tenant does not move out of the rental unit by that time, then the landlord can file an eviction lawsuit with the court (see Ga. Code Ann. § 44-7-7). For more information on this topic, check out Georgia Notice Requirements to Terminate a Month-to-Month Tenancy.

"Fixed-Term Tenancy

"If a landlord does not have cause to evict a tenant who is in a fixed-term tenancy (such as for six months or one year), then the landlord must wait until the end of the term before expecting the tenant to move. The landlord does not need to give the tenant written notice to move unless the terms of the lease or rental agreement specifically require the landlord to do so. The landlord can expect the tenant to move by the end of the term."

The rental contract includes a provision for either party to terminate the lease with notice.

Of course, there's no penalty if the landlord initiates it, but you lose your deposit if you do.

> When we rented, we were subjected to eviction at any time, for nearly any reason, for basically no notice (60 days, which in the US is effectively zero notice). Your subjected to every whim the crazy wildly-irrational housing market throws at you (we've had 12% yearly rental increases for a decade straight now, despite living in bumblefudge-nowhere Midwest).

Not saying you're wrong but at least where I've lived, I could very easily find a new place to live in 60 days. I think usually landlords give the terms of a new lease much less than 60 days away from the end of the current lease, and most people usually don't decide to move or stay before they know how much their current place is going to cost.

For a family, 60 days to pack everythig you own, and move, while supporting everyone is not easy at best, and untenable at worst. When I was single this was not the case.

This doesn't pass the BS test, especially if you are local. I have moved across town; with a family and a day job, in around 15 days, with most of the move taking place the first 7. Out of town, I can see 30 - 45. It would require planning and a UHaul (if within 250 miles) and a semi-truck moving company if further out than that. It literally just takes a bit of planning and follow through.

There are a lot more hoarders in this country than anybody will admit.

Some people will never move at all because the thought of having to "go through all our stuff and pack it all" is too daunting.

I do not see how this possibly applies to renters though.

>housing security

There is no such thing unless your home is paid off.

If you have a mortgage and are hit by a catastrophic life event that leaves you without a job and depleted of your emergency fund, your home is gone.

If you stop paying rent your ass is on the street in days.

Stop paying your mortgage and it can be months or years.

It takes at least 60 days in most areas of the US to evict a tenant.

> If you have a mortgage and are hit by a catastrophic life event that leaves you without a job and depleted of your emergency fund, your home is gone.

That risk exists regardless of whether you rent or own.

The risks he mentioned are unique to rentals. It's very common for leases to essentially say "We can kick you out if we feel like it," no justification necessary. Even if the lease stipulates some justification, they'll find a way around it ("Our maintenance crew noted your excessive noise on 37 separate occasions. You also have a wreath hanging on your door, which is another violation of the lease.").

It's extremely rare for a mortgage to contain any sort of terms that allow you to be arbitrarily kicked out of your home.

The mortgage might be more secure, but an HOA can turn your life upside down if it's run by power-hungry busybodies and they can destroy the property values of the whole neighborhood while they're at it.

I've lived in several HOAs in the past, and yeah, they can be a pain. But in my experience, they are mostly concerned with not destroying the property values. In practice, they're only interested in stuff that's egregiously stupid. (Say that crazy old lady with the weird, creepy Halloween decorations including the beheaded baby that stay out from Labor Day to New Years.)

Plus, it's easy enough to avoid HOAs.

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