Homeownership has been a mainstay in suburban areas, where the typical house is a single-family residence or possibly a duplex. Residents in these areas have tended to be middle- or high-income earners. All of this is starting to change as the demographic is switching to Millennials and Gen Z homeowners. The majority of residents in suburbs are now renters, unable to afford to purchase a home.
Millennials and older Gen Z people inherited the effects of the Great Recession, which delayed their careers and consequently their ability to own a home. This also compounded with student debt, since Millennials are a highly educated generation. All the while, prices are increasing but wage growth is stagnant. While some of these people recovered somewhat since the Great Recession, others were still trying to get back on their feet or were just entering the job market when the 2020 recession hit. Most of Gen Z is still not old enough to own a home, so it’s unclear whether this would extend to them as well.
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The National Association of Realtors (NAR) has been pushing for an end to the eviction moratoriums, citing the struggles of landlords who are losing profits without either getting payments or having any occupancies to fill. This isn’t an unexpected position, since 38% of NAR members are landlords, but it’s clearly in their personal interest and not the interest of the majority. Beyond this, only 1.8% of landlords are actually delinquent in their mortgage payments, so the majority of them aren’t truly struggling too much. Furthermore, there’s actually a better solution even for the small percentage of landlords that are having issues.
Ending the eviction moratorium is not going to do anything to enable people to afford rent payments. It could help landlords slightly by reducing their upkeep costs, but it’s not likely to bring in new renters. Most units would remain vacant, merely exacerbating the homelessness issue in the US and weakening efforts to curb the ongoing pandemic. California’s SB 91 is a good example of a better solution: It keeps tenant protections in place while still giving landlords 80% of the rent payments they would receive, in exchange for waiving 20% of the payment. This is a better deal for the landlords than evicting their tenants if the unit is simply going to remain vacant. More efforts like this one are going to be the solution to this crisis, not ending eviction moratoriums.
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Whenever a tenant is moving out, they’re always expecting to get back their security deposit. But they may not get back all of it, as landlords are looking to deduct part of the security deposit to recoup as much as possible. While there are not very many laws regarding security deposit deductions, there are a few, and there are several guidelines.
Legally, a landlord has 21 days to mail the Security Deposit Refund letter to the tenant’s forwarding address, counting from the day the tenant returns the keys. If repairs won’t be complete within 21 days, the landlord still needs to provide estimated costs, and must provide the actual costs within 14 days of completion of the repairs. In nine cities in California, landlords must pay interest on security deposits, to be paid each year and at the end of tenancy. The rates vary each year and the payment deadline varies by city, so if you are a landlord, be sure to check with your local rent control board or city government if you live in one of these nine cities — Berkeley, East Palo Alto, Hayward, Los Angeles, San Francisco, Santa Cruz, Santa Monica, Watsonville, and West Hollywood.
The types of expenses that can be deducted are unpaid rent, cleaning, repairs, and restoring or replacing items specifically mentioned in the lease. Before and after pictures are important in determining whether the landlord can charge for cleaning. As for repairs, normal wear and tear cannot be deducted, but major damages can. If something needs to be replaced, replacement costs are usually calculated based on the item’s expected remaining life expectancy, not the full value.
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If a property is available to rent for a period of 30 days or less, this is called a short term rental. One common example is Airbnb. Various jurisdictions within California have laws limiting short term rentals and requiring permits. You may be wondering why short term rentals are treated differently from standard rentals. There is actually a good reason for this.
In many respects, a short term rental is actually more like a hotel stay than a rental. Even though the definition allows for stays up to 30 days, both short term rentals and hotel stays tend to be significantly less than a month. In both situations, the rooms change hands frequently. Being quite similar to a hotel in this respect, it makes sense that short term rentals would be regulated as a business rather than a real estate transaction. And in fact, hotels may actually be less of a problem for the real estate market — they were never designed to be stayed in for long periods, while short term rentals detract from available housing supply. With reduced supply, this also increases rent prices and forces out some longer term renters. That’s why large cities with high rent prices like Los Angeles and San Francisco require owners of short term rentals to restrict the number of days per year that the property is rented out, or to reside in the property themselves a certain length of the year.
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We’re all aware that the pandemic has disproportionately affected lower-income residents, including renters. But there are many statistics to look at when examining trends in the rental market, and some of them may not be so obvious. Who, when, where, and how much are all questions to consider.
The when is the most obvious — as a result of the pandemic, there were very few rental applications in the spring when the lockdowns began. What you may not know is that this is approximately when rental application volume typically goes up, so the normal rental market was effectively delayed by about two months. The period was shorter as well, ending in July rather than August as usual.
In prior years, the most frequent age group for renters was Millennials, followed by Gen-Xers. While Millennials are still at the top, their percentage among renters is shrinking, and Gen-Xers have lost their second place spot to a new group, the Gen-Zers. This is particularly striking because most people in Gen Z are not actually old enough to sign a rental agreement. What happened is that Gen Z was the only group to have an increase in percentage of renters, as every other category dropped, including Boomers who still retain 4th place. 16 of the 30 largest cities in the US had an overall decrease in rentals, and even in those few cities where the percent of people moving in was increasing, the percent of people leaving accelerated even more.
The good news for renters is that average rent prices in expensive cities are dropping from last year, which is particularly important because average income for renters stagnated in 2020. Only one city among the 30 largest, Baltimore, had an increase in rent prices leaving it above $1300. All the others with prices above this figure had a drop in rent prices. The largest dollar increase was $62 in Phoenix, from $1120 to $1182. By contrast, average rent prices dropped $640 in San Francisco, from $3695 to $3055.
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