Rental Affordability

[finehoe]

Why it's so hard to afford a rental even if you make a decent salary

Last year in America, the median asking rent for a newly built apartment was an astonishing $1,372 a month. That's about 50 percent more than the typical rent nationwide. It marked a dramatic rise from what brand-new apartments were renting for just a few years ago.

And the steep sum shows a troubling disconnect in the country's rental market: While pressure has been building on low- and moderate-income households struggling to find affordable housing, we have largely been adding new supply tailored for the wealthy.

This chart, from a report on America's rental housing from the Harvard Joint Center for Housing Studies published today, illustrates that only about 10 percent of our recently added rental apartments would be affordable to the nearly half of renter households in America who make less than $35,000 a year:



https://www.washingtonpost.com/news/wonk/wp/2015/12/09/why-its-so-hard-to-afford-a-rental-even-if-you-make-a-decent-salary

[mtraininjax]

Builders are not building new homes and new structures nationally to keep up with demand. This causes rents to rise in areas that have short supply.

Good article from Lawrence Yun, the National Association of Realtors Economist on why renters cannot escape renting....

http://realtormag.realtor.org/news-and-commentary/economy/article/2015/10/why-renters-can-t-make-move

[finehoe]

Developers are, in fact, responding to new demand.  But just from well-off renters, not middle or lower income renters.

[mtraininjax]

Developers are, in fact, responding to new demand.  But just from well-off renters, not middle or lower income renters.

It takes a long time to move the needle and it does then create trickle down effects. People moving to higher-end properties create a vacuum for middle which then creates a vacuum for lower end. From shovel to move-in can take up to two years and that is after the developers are convinced the economic cycle will carry on for longer than the carrying and hold of the project.

[finehoe]

It takes a long time to move the needle and it does then create trickle down effects. People moving to higher-end properties create a vacuum for middle which then creates a vacuum for lower end. From shovel to move-in can take up to two years and that is after the developers are convinced the economic cycle will carry on for longer than the carrying and hold of the project.

The article addresses this:

"Of course, it's true that the vast majority of our rental housing isn't housing that was built in the last few years. And, in theory, as wealthy renters move into these newly built apartments, some of the older housing supply should trickle down to more modest-income renters. From 2003 to 2013, according to the Harvard report, this kind of filtering added about 11 percent more housing to the cheapest rental stock, homes affordable to the one in five renter households who earn less than $15,000 a year.

But most of those filtering gains were offset by other losses: During the same time span, roughly the same amount of low-cost rental housing permanently left the housing stock because of deterioration and demolition. Cheap housing has also been disappearing as developers upgrade old units to "vintage" homes that command higher rents."

[simms3]

Developers are, in fact, responding to new demand.  But just from well-off renters, not middle or lower income renters.

In reality, it's not feasible to develop apartments for low to moderate income renters in most areas.  Today's B and C class apartments were yesterday's A class apartments.  The simple economics is that to build apartments, you either need subsidies for workforce housing, or you build market rate housing for upper middle class renter pool.  This really has not changed.

What has changed is the fact that incomes are not keeping pace with housing prices all across the board and decisions at the FHA and by banks and newer regulations are keeping people out of homeownership, forcing more people into the rental pool.  Combine that with growing populations of people who normally enter this country as renters and the largest generation ever in America, all in "renting age" now, and developers simply can't keep up.

The problem is exacerbated by existing homeowners who feel that the value of their property is threatened somehow by the construction of new apartment buildings.  NIMBYism has dramatically risen across the country and almost single-handedly has been the official cause of blame by an independent State of CA review on the housing crisis affecting most of the cities in that state.

Rental affordability is not an issue caused by developers.  If anything, it's a mixture of macro demographic causes coupled with regulatory causes coupled with those who have already had their cake, are eating it, and not willing to let anyone else have cake after them (mostly Boomers and older).

Developers may indirectly or inadvertently "collude" when some opportunities arise to fix price, but this is usually more a function of the fact that local, state, and federal regulations and restrictions combine under poor timing with economic expansions and general NIMBYism to force *limited* similar product opening in similar times in certain geographic areas, which results in uniform higher rental prices.  If more apartments could be built, there would be both more differentiation and more price competition.  It would also lower the cost of capital on the investment side, which has a big impact on the proforma of any development.

Developers are the solution, generally speaking, not the devil.  Here in San Francisco there is a large, whole class of people that think developers should be government employees, paid government salaries, and that the business of real estate development should be government run/not-for-profit.  These silly people also don't believe that basic laws of economics apply to cities like San Francisco.  Unfortunately, they are a large part of the population, and while they may not believe so, are far more the problem, NOT the solution.  People this disconnected from reality have no hope of turning around.  Thus literally until they are replaced somehow, or exceeded in population somehow, by more voices of reason, SF will continue to be by far the most expensive place in the western hemisphere.

Developers deserve to be rewarded handsomely for being able to build anything at all in the regulatory and politically anti-development environment that defines this city.  I can't think of many other jobs that are more risky, and more difficult/complex.  Sadly, most don't see it that way and most are wholly unaware of what really is the concept of real estate development, or the existing fees/regulatory hurdles faced by developers who are essentially partnered at the hip with funds, such as teachers' pensions, with required strict risk-adjusted returns and deadline hurdles, not to mention occasional limitations on fees that can be paid to agencies.

[PeeJayEss]

I can't think of many other jobs that are more risky, and more difficult/complex.

I'll help!
Military
First responders
Fisherman
Logger
Pilot
Garbage collector
Roofer
Steel worker
Any other construction worker
Farmer
Truck driver
Miner

[simms3]

I can't think of many other jobs that are more risky, and more difficult/complex.

I'll help!
Military
First responders
Fisherman
Logger
Pilot
Garbage collector
Roofer
Steel worker
Any other construction worker
Farmer
Truck driver
Miner

Risk is measured in more than just real and apparent danger to your safety.  Anyway, you'd be surprised how many death threats, some serious, are levied against real estate developers, and how often they are on-site in hard hat with the workers.  Not saying their job is physically risky, that was never my intent, but risk also entails throwing your money out their, guaranteeing a loan (often with recourse), etc etc and facing a very steep uphill battle to get something done without your reputation being battened down or your house taken away if there is that sort of recourse.  Developers are some of the most contentious people.  Oftentimes they are disagreeable, and they are very aggressive, they have to be.  What they do and their product, for better or for worse, whether excellent and noteworthy or cringeworthy, angers many many people, including plenty of loons out there.  You've seen some of that animosity on this website.  Sometimes that animosity is by no means harmless.  But I don't want to dwell on physical risks - that wasn't at all where I was going and somehow you missed that.

[PeeJayEss]

Risk is measured in more than just real and apparent danger to your safety.  Anyway, you'd be surprised how many death threats, some serious, are levied against real estate developers, and how often they are on-site in hard hat with the workers.  Not saying their job is physically risky, that was never my intent, but risk also entails throwing your money out their, guaranteeing a loan (often with recourse), etc etc and facing a very steep uphill battle to get something done without your reputation being battened down or your house taken away if there is that sort of recourse.  Developers are some of the most contentious people.  Oftentimes they are disagreeable, and they are very aggressive, they have to be.  What they do and their product, for better or for worse, whether excellent and noteworthy or cringeworthy, angers many many people, including plenty of loons out there.  You've seen some of that animosity on this website.  Sometimes that animosity is by no means harmless.  But I don't want to dwell on physical risks - that wasn't at all where I was going and somehow you missed that.

Oh. Next time I guess I'll use the *joking* font. I would not dare argue with your claim that the work you do is the riskiest, most difficult, and most complex in all the land, that the problem with San Francisco is the stupid government, homeowners, elderly, cake-eaters, FHA, baby-boomers, teachers, and general majority of the city population that have made it such an undesirable place to live, oh and that developers are the solution. That'd be silly of me.

[simms3]

Risk is measured in more than just real and apparent danger to your safety.  Anyway, you'd be surprised how many death threats, some serious, are levied against real estate developers, and how often they are on-site in hard hat with the workers.  Not saying their job is physically risky, that was never my intent, but risk also entails throwing your money out their, guaranteeing a loan (often with recourse), etc etc and facing a very steep uphill battle to get something done without your reputation being battened down or your house taken away if there is that sort of recourse.  Developers are some of the most contentious people.  Oftentimes they are disagreeable, and they are very aggressive, they have to be.  What they do and their product, for better or for worse, whether excellent and noteworthy or cringeworthy, angers many many people, including plenty of loons out there.  You've seen some of that animosity on this website.  Sometimes that animosity is by no means harmless.  But I don't want to dwell on physical risks - that wasn't at all where I was going and somehow you missed that.

Oh. Next time I guess I'll use the *joking* font. I would not dare argue with your claim that the work you do is the riskiest, most difficult, and most complex in all the land, that the problem with San Francisco is the stupid government, homeowners, elderly, cake-eaters, FHA, baby-boomers, teachers, and general majority of the city population that have made it such an undesirable place to live, oh and that developers are the solution. That'd be silly of me.

I was never referring to the work I do.  I am not a developer.  Nor was I complaining.  Merely pointing out some stuff that now that I have gone in and read the posted article, are points very clearly laid out in that article, too.  Nor was I really specifying San Francisco when I was referring to general demographic shifts, regulatory issues, and NIMBYism.  Whatever I said clearly struck a nerve with you.  You actually sound like a borderline loon who would vandalize a development site or worse (or show up at every meeting and appeal every EIR).  I think you kind of make my point.

But your attitude is lovely.  Lovely person you sound like.  You're all riled up and angry at me when I never addressed you, never did anything to you, and have certainly never met you.  I can only hope for all the people in your life who have at minimum met you, and those who have addressed you, and have done something to you.  Do you escalate your online shouting match with me into a gun battle with them?

[simms3]

I also want to add one touch.  In boom times such as these, as the price of everything goes up (logistics, workers [subs and contractors], materials), don't forget that everyone is still a sofa architect and/or planner and our systems are generally designed to allow for maximum community input.  Our zoning laws are now so complex that legal fees are a huge part of every development proforma.  The way we structure taxes (cap gains treatment versus ordinary) around real estate transactions makes no sense, first of all, and makes hitting deadlines and planning out the sale of a new development tedious and expensive.

And yet through all of this, the thing that can derail your project is an overzealous planning board (with no actual architectural or city planning experience, naturally), or some crabby old lady who lives a mile away who's own home value has skyrocketed with the overall demand of the neighborhood but who on principal alone will fight to her grave to see your development go down.  She might start by interjecting to open hearings that your design (maybe it was a world-renowned team that designed it) is lacking this or the other.  She'll then proceed to traffic, noise, safety, etc.

This is the system that makes it IMPOSSIBLE to put up basic boxes for middle class renters or condo owners.  This is the system that literally forces developers to go to the top of the market.

And as the article mentioned, taxpayers don't want to be burdened with providing housing for the poor.  In Jacksonville, everyone could pay just $20-40/year and it would fund hundreds of units a year in new construction affordable housing for the bottom of the market, some of which could be used to house rehabilitated addicts and help get people off the streets.

But no.  Such subsidies almost exclusively come from fees levied directly against individual market rate housing projects so that the burden of providing housing for the poor are market rate buyers/renters in a SINGLE development.  This could easily tack on 15-25% into cost and eat at where all of a development's money is made - the sale (or operating income if it's a hold).  The developer makes this up (because developer must make money for his LP and its investors - which could be your city's pension fund for all you know, AND for himself as a second equity position or there's no point in doing all of this and putting up guarantees) by charging higher rents and higher for-sale prices such that a lot of fairly basic stuff (like 220 Riverside frankly or the Brooklyn) becomes absolute "top of market".

So yea, developers are the solution.  They build the new apartments, they often lobby for lower fees and looser restrictions, they lobby for revised tax structures and origins of subsidies so that they don't individually have to take on the burden of housing an entire city's poor/working class, and generally speaking, real estate developers are about the most philanthropic rich people out there.  They are often the biggest donors to colleges, civic buildings, art museums, public spaces, etc.

[simms3]

Case in point:

http://www.socketsite.com/archives/2015/12/approved-waterfront-development-at-risk-as-appeal-splits-the-board.html
http://hoodline.com/2015/11/supes-vote-unanimously-to-let-75-howard-high-rise-move-forward

This single development (133 condos) is also going to finance the construction of $15.7M worth of affordable housing.  Not a huge dollar amount, but that's still well over $100K/unit that the developer is going to layer into its pricing.  133 new homeowners will be effectively "taxed" $100-150K depending for a few other residents to enjoy housing at well below market rents.  It's silly that it's structured this way.  It was never set up previously where "new" residents or residents who wanted to move into new housing were forced to pay an extra large premium to house people with lower incomes.  It was always more of a community effort before to provide better equality.  This completely disincentivizes new development and helps to make it virtually impossible to build stuff for that vast swath of demographic between "poor/working class" and "rich".

Couple that the with the tough fight this relatively squat 20 story building has in front of it because some people are concerned with "luxury housing being built and not contributing to the value/vibe of the neighborhood."  What's sad is that every complainer lives in an adjacent twin luxury tower of nearly the same height and of the same class (luxury condo units).  Unfortunately, they will be taken seriously.  The only thing being replaced is a parking structure of Embarcadero (waterfront expressway) era.

I'd say developers are hardly the problem, and are very much the solution.  We are all getting in our own way.  The Boomer Generation, as they are with other issues, is the focal point of the escalation in the housing shortage/pricing problem we are now experiencing nationwide.

[mtraininjax]

Jacksonville rent increase lags behind other metros, second most affordable metro to live in Florida

The median rent for a two bedroom in Jacksonville is $1,000, which places Jacksonville among the least expensive places to rent, according to Apartment List. Only Tallahassee had a lower median rent for a two bedroom apartment at $750. Jacksonville one bedrooms are renting at an average price of $850.

http://www.bizjournals.com/jacksonville/news/2016/06/01/jacksonville-rent-increase-lags-behind-other.html

Please quit belly-aching about rent and ability to find low cost housing in Jax. If you are complaining, you just are not looking hard enough!

[ProjectMaximus]

Also from bizjournal yesterday:

Expert: Jacksonville needs affordable rental rates

Shannon Nazworth, executive director at Ability Housing of Northeast Florida, said that while Jacksonville does have some of the least expensive rents in the state, the share of renters paying more than 30 percent of their income in housing costs is at 59 percent.

For housing to be considered "affordable" a renter should be paying only 30 percent of their yearly income for housing costs.

http://www.bizjournals.com/jacksonville/news/2016/06/03/expert-jacksonville-needs-affordable-rental-rates.html

[TimmyB]

This is a very real concern for us as we move down to the JAX area next year.  We will rent, as we want NOTHING to do with ownership; we want to be able to lock the door and travel for a month or two, without worrying if the house is doing ok, or the lawn, or whatever.

We have looked at SO many properties from 295 eastward to the Beaches, and to find a quality place (safe, nice amenities, decent neighborhood, etc.), it is $1400 to $1900.  Many are much higher, but we don't even count them on the list of possibles.  Granted, we are looking for a 3-bedroom, as opposed to the 2-bedroom mentioned, but that's no more than a couple of hundred difference.  I am excited by all of the upper-end communities that have been built, and the new ones that are under construction or have been announced, as I know they will put pressure on the existing complexes to either up their game or lower their prices.