Comment by ethbr1

Comment by ethbr1 7 hours ago

Why wouldn't they just convert to owner-occupied apartments?

There's an argument to be made about affordability, but there are a lot of arguments against paying someone else, for which you receive no equity, and they get to keep any price appreciation of the property.

It'd be interesting to see a rental market that banned anything but rent-to-own contracts, where some portion of your monthly rent had to buy equity in the property you occupy. (With standardized terms for disposal, sale, etc)

timr 7 hours ago

Because most people can't afford to buy the apartment they are renting. Some huge percentage of US citizens can't scrape together enough money to pay for a car repair. How are they going to afford an apartment?

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ethbr1 7 hours ago

Doesn't that indicate we should be building more and cheaper housing?
The other components of the market aren't fixed and immutable.
If state governments wanted to mandate denser rezoning and smaller minimum unit sizes once unaffordability reached a certain level... they could.
Pointing at expensive housing and saying "We therefore have to make it cheaper by forcing more people into bargains in which they receive none of the gains" seems like the tail wagging the dog.

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- timr 7 hours ago
  
  Sure, but it wouldn't change anything, unless your plan is to make housing so cheap that it literally costs less than a month of rent to buy the whole place, I don't think you're going to have a lot of luck.
  
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  ethbr1 6 hours ago
  
  The mentioned problem isn't that renters couldn't buy a property with a month's rent, but that they couldn't do so with reasonable savings.
  Micro housing that's cheaper should certainly be able to meet that bar.
  
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tofof 7 hours ago

This is trivially false. The sum of the rents of the tenants of the property is enough to cover the landlord's purchase of the building, any interest on any loan used to secure that purchase, hire upkeep for the building, and still have money left over for profit in the landlord's pocket.
Therefore, the sum of the rents of the tenants of the property is enough to cover the purchase of the building, which is a subset of those costs.

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- timr 7 hours ago
  
  > The sum of the rents of the tenants of the property is enough to cover the landlord's purchase of the building, any interest on any loan used to secure that purchase, hire upkeep for the building, and still have money left over for profit in the landlord's pocket.
  The "sum of the rents of the tenants" isn't relevant to a single tenant, the loan isn't used to "secure the purchase", and you're confusing cash flow for total equity.
  A building owner puts down a deposit for some percentage (say, 20%) of the building's cost, gets 80% in debt, and pays down that debt over time with the cash flow from the tenants' rent payments. They make a small margin net of expenses, plus whatever equity accumulates over time.
  Setting aside the (significant) question of whether or not a given tenant would have the credit necessary to do such a thing, a tenant is not necessarily able to do the same thing, just because they can afford to pay the rent.
  
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- BeetleB 7 hours ago
  
  You're missing the downpayment.
  Real scenario: Someone buys a 4-plex for $1M. They put in $240K down payment. That's $60K per apartment. Will those tenants have that $60K they can put down to continue living there?
  Sure, they'll own it and can get it back if they sell, but the majority of tenants don't have that kind of cash lying around.
  
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JamesBarney 7 hours ago

I've always heard owner occupied apartments called condos. Is there a difference I'm not aware of?

You're paying the landlord for the cost of capital and the property management. And a 400k house in the stock market would on average generate 40k a year in appreciation. Most apartments in functional markets aren't anywhere near that appreciative.

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BeetleB 7 hours ago

> And a 400k house in the stock market would on average generate 40k a year in appreciation.
Only in your dreams. The massive value increase in the last decade is an extreme outlier. Schiller showed that in the long run, looking overall, the appreciation is only 1-1.5% above inflation.
Sure, some places do get big increases. But it's not the norm.

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avidiax 7 hours ago

Yeah, a system with implied equity from renting (something like 2-3% per year) would go a long way.

Switzerland also has an interesting system that seems designed to somewhat equalize renting vs. owning.

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