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IT WOULD BE EASY to sell my home “in a snap” for a no-obligation, all-cash offer—or so I was told in a mailing I received last week. I frequently get letters, texts, emails and phone calls from companies that want to buy my two-bedroom condo for cash.
It’s tempting to sell. I’m retired, and both my children have left to find their fortunes in bigger cities. But I suspect the new owner would then rent out my unit for some jacked-up price. That’s happening across the country, as 60 Minutes and other news media have documented. The buyers, of course, are just being capitalists and taking advantage of a housing shortage in many cities. But where does that leave lower-income families, including retirees?
A wood frame two-bedroom, one-bath bungalow in an older neighborhood in my college town is renting for $1,500 a month. The landlord wants proof of income that’s three times the rent. That’s $54,000 a year, which is the median household income in our area. But what if you’re a single parent with a service job? Or a single retiree like me? That $54,000 is considerably more than my fixed income.
My son rents a two-bedroom, two-bath apartment in a relatively new building in Atlanta. His landlord wants to increase his $1,900 monthly rent by $400, a 21% hike. Management refused to negotiate with him, so he’s moving to a one-bedroom unit elsewhere and will still come out ahead, even after moving costs.
My daughter’s landlord in Orlando raised her rent 4.8% to $1,625 for her suburban ranch house. The landlord insisted on only a 12-month lease, even though my daughter and her husband would like to stay longer while they save to buy a home. The house is owned by an individual and managed by a company.
As long as my millennial children stay in big metro areas, I fear they’ll never become homeowners, despite their relatively high incomes. I live in a university town, and I see no reason for the skyrocketing rents here for homes that aren’t considered student housing. Those two-, three- and four-bedroom apartments next to campus are renting for $1,000 per room.
Some experts blame builders for their emphasis on large, single-family houses because that’s where builders make the most profit. Renting an apartment, duplex or smaller house used to be a segue to buying your first home. Now, it’s a permanent status—because renters can’t afford to save for a house down payment.
I don’t want my condo to become part of this “filtering,” where housing moves into a higher price tier and an anonymous company demands outrageous rents from people scraping by. In the past, houses and neighborhoods filtered down in price as they aged, according to this article. That’s no longer as true today.
The author cites stats from Los Angeles that show most of its affordable housing was lost to higher rents and not because the buildings were demolished, replaced or renovated. Elected local leaders’ usual answer is to build more affordable units, but those rents are rising faster than incomes.
I love that my condo has increased in value. It’s really my only asset. But if I choose to sell and move, I’ll want a buyer who lives here and not a company that will gouge others and fuel the increasingly unaffordable housing market. As a condo board member, I also believe owners who occupy their units take better care of them and show interest in the entire condo community.
Of course, I might just have to stay for financial reasons. Why? I’d likely pay more in rent than I do now for my fixed-rate mortgage plus condo fee.
Ron Wayne spent 26 years working for newspapers in Pennsylvania and Georgia before becoming the editor in the University of Florida’s main news office. During his 10 years working there, he earned his master’s degree in mass communication and taught as an adjunct in the College of Journalism and Communications. Since retiring in 2020, Ron’s resumed writing regularly, both for HumbleDollar and on Medium.com, where he’s launched a publication for single retirees who need to be extra thrifty. Check out Ron’s earlier articles.
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You live in a University town and you can’t see the greed that is right in front of you. Student Loan debt equals $1.6 Trillion which exceeds Auto Loans ($1.55T), and Credit Cards ($0.99T). If you are in search of “greed” and “jacked up prices” and “price gouging”, look no further than your local university President who lives in a mansion. College Tuition has been increasing at twice the rate of inflation for more than 30+ years. That is more of a problem for home ownership among young people than rents.
Rents almost everywhere have surpassed inflation rates, and there are many reasons, for sure. Tuition hikes for state universities in Florida have been relatively small, and most students enrolled here are going for almost nothing if they have qualified for a lottery-funded scholarship program. That seems to allow many students and their parents to pay exorbitant prices for rent. But lower-income residents such as single parents and others who never went to college are feeling the impact of the record increases. (Plus I wouldn’t call the president’s house a mansion here. It was also funded completely by donors).
If you are getting your financial “news” from CBS’s 60 minutes, you are going to be highly misinformed. You seem to have a strong bias against landlords just because a left wing news outlet told you they are bad people. You use phrases like “jacked up rent”, “outrageous prices”, you “blame builders” for building the type of houses people want, and claim that a “company that buys your house will gouge others”.
Rents are going up because housing prices are going up. Housing prices are going up because of inflation caused by bad government policy (too much spending by the Federal Government and too much stimulus by the Federal Reserve Bank). As late as Feb of 2022, the Federal Reserve Bank kept interest rates at zero and was buy $75B (approx) of month of US Treasuries and MBS even though inflation was running at 8%. The federal government is still running $1 trillion dollar plus deficits to stimulate the economy while the Federal Reserve Bank is raising rates to try to slow the economy to reduce inflation.
Are you planning to sell your house at a below market price or are you going to “gouge someone” and take a “jacked up price”? The economic literacy of the latest batch of Humble Dollar writers is really poor. Humble Dollar used to be a place where intellegent personal finance advice was provided.
Whereas I fundamentally disagree with the causes of inflation asserted in the reply, it makes a very important point about the terms “gouge someone,” “jacked up price,” and similar language. This retirement blog celebrates regulated capitalism. Private ownership of real estate is a fundamental underpinning of this system. in 2018-19 one of my kids (with a few roommates) was renting a whole house in Baltimore for less than another was renting one room in a 2BR in Coral Gables, FL. They have a similar differential now, Another example. My house is bigger and closer to public transportation than another family member who owns a smaller house in a more exclusive town less than a 15 minute drive away, but their property taxes and home value are each double mine. That’s the market we have. This is the system we discuss gaming in this blog. Is is fair that I live in a big house while down the hill people are scrambling in public housing? Probably not. But if I ever sell this house, I’m going to look for the best price, not at who (or what) the buyer is. Furthermore, when I was a landlord, I took a discount on the rent because I wanted to be able to sell the property, so part of the deal was the renters had to allow for having the property shown, not due to altruism on my part.
I get those all the time too, I’m sure they would be low-ball offers.
In our area (rural NH) property taxes are $500/month for a single family home due to the school’s every increasing budget. I don’t see how people think rents can be lower; some seem to ignore the taxes when they blame landlords for being greedy.
My first mortgage in Pittsburgh, PA was $279/month, which included the property taxes. I don’t know if we’ll ever move, but the taxes have increased almost $200/month since we moved here 10 years ago.
My experience in Westchester County outside NYC is that house prices are going up much faster than property taxes. This means that taxes are being discounted relative to home values. So relative to resale value, this is a great deal. But it doesn’t reflect that we can’t tap the equity in our homes to pay the taxes (unless we borrow at a higher rate). So on the one hand, there is constant complaining about taxes due to the quarterly checks we need to write, but on the other hand, the ratio of resale value to property taxes keeps improving for the seller.
Perhaps counterintuitively, you keeping your residence off the market to keep anyone from paying an increased rent actually helps to keep prices high due to keeping supply low. Obviously, your one unit would not influence the market much, but the idea is that with increased supply, a lower price would eventually be achieved.
Though the increased supply would only result if Ron’s next stop was a cardboard box….
Haha, true! Or a van down by the river.
(Or, to another market, in with family friends, into a second residence, etc.)
Rather than simply concluding that renters are being gouged, perhaps you should consider the fact that many rental properties were recently purchased or built at inflated prices. The fact that increased interest rates have caused many of these companies to stop buying also suggests that they may not be making excessive profits.
I’m sure that’s part of it.
My Millennial daughter had to move last year just a month after being in a serious car accident. She was injured and not working, so I had to be a guarantor for her new apartment. The rent, for a small, old 1 bedroom apartment, was $2300/month, and they wanted proof of income for 5.5 times the rent (!!!). I had to get out my calculator to see if I qualified, even though I make a good salary. Thankfully, her next move included a roommate to share the expenses, but it’s still $1400/month for her own room and bath. This is in California, but yikes. I live in a college town myself, and yes, $1000/month for a room in an apartment or house near campus would be typical here, maybe even low.
Yikes indeed! My father was a landlord most of his life, but I think he would not want to gouge people as seen in today’s market.
Through the Roof says it all. An interesting article in the AJC talks about the reasons for the high rents.
https://www.ajc.com/american-dream/about-this-series/
You need a subscription to read the AJC article. I can’t get past the paywall.
They don’t offer a limited number of free articles per month.
thanks for the article
Have you considered renting out your condo yourself?
Yes, but I would most likely pay a lot more in rent or for a new mortgage elsewhere and my fixed income won’t allow that.
Great read. Interesting how your current situation correlates on the opposite side with your kids. My Fiancée and I just bought a condo from an owner that rented it out. It wasn’t in terrible shape, aside from some unwanted items left behind. Our future plans with our place are wide. We could rent it to someone and purchase a single-family home. Or keep it and buy a vacation home to rent out when we’re not there. And of course, we could just sell. Your last paragraph is true with us currently. We have many friends that rent places similar in size and amenities whose rents are significantly higher than our mortgage plus association fee.
Good luck with your plans
My condo community has strict limits on the number of units out of the 108 that can not be owner occupied for just the reasons you state.
I have never been a landlord, except years ago renting my vacation home during the summer, but I suspect what happened to rents is not just gouging, but also rising costs faced by the landlord just like the rest of us and as you note the cost related to how units are taken care of by renters. I can attest to that from experience.
My HOA fee increased by nearly 20% last year, my property taxes also increased.
I wish such a limit were part of our bylaws. However, we have just 34 units and our board has done a great job of keeping the HOA the same for at least 6 years or longer.
I think that is a bad idea. I have lobbied our Board to never have zero increase even if it is only five dollars. It’s hard to believe HOA expenses have not increased in all those years.
The reason is to try and avoid future assessments. My cousin just was assessed $21,000 in her condo for major repairs.
Having adequate reserves is very important, very, as is maintain the reserve.
I just joined the board two years ago or so, and I’ve seen the numbers work. When I first moved here 16 years ago, reserves were very underfunded, but over the years we’ve managed to replace roofs on the 8 buildings. Now time to replenish the accounts. I think I had $1K assessments just once or twice many years back. As it is, we have one board member who wants to reduce the fees, which I know is a mistake.