Why won't rents stop going up?

[pinkmint]

Anyone have insight on this? We rent because buying is not realistic for us. We are relatively "low income". 

 

3 years ago DH and I moved with our kids from what most people consider a more desirable part of the country, the west coast, where we both grew up but couldn't afford to stay, to a less desirable part of the country largely to take advantage of lower cost-of-living and better job prospects. But now, even in those 3 years since we've been here, we find that there's increasingly less hope for us to ever leave our current, not so nice rental home, because rents in the area are steadily going crazy. Rising much more than inflation and wages.

 

DH works near the center of a biggish city (and we live in a medium-ish suburb about 45 min drive). Every rental near his work is either scary-ghetto, or way too nice and expensive for us. There is no in between and it seems like their used to be. What is the deal with that too? Seems like our only options are to live in a far flung rural-ish suburb with a 3 hour commute. I do not like that option at all. 

 

I dislike driving and want to be near public transit, parks, libraries, walkable areas, which are all helpful when you are lacking in income. But no, it's all skyrocketing rents to cater to young, hip, childless, and/ or wealthy people. I just want to live my life. I don't care about being hip. I just want to not have to drive an hour to get groceries. 

 

Anyone know what's going on?

 

 

[pinkmint]

I feel kind of old at this point but even on the west coast and southern California (where I grew up) I remember when it wasn't even that expensive. When I look up all the apartments I used to live in, and grew up in, it's insane how the rents have gone. I mean is there a good reason for rents to quintuple? 

[kewb]

I would speculate that it is supply and demand. If the landlords can get someone to pay that rent then they will raise the rent.

Other expenses keep going up as well. Cost of services for maintenance, property taxes, etc.

[Butter]

Supply and demand, most likely.  Many people want the public transit and proximity to stuff.  It used to be people with more money wanted to be outside the cities, but often now they want to be inside.  They are willing to and can pay more for decent areas.  Rents in suburbs are going up because in many places the housing market has recovered and house prices are increased.

[sarasue7272]

Are you near Atlanta? That is exactly what it is like in the suburbs here. I pay rent higher than any mortgage I would get on my current house. I can pay this much for a similar house, or pay $200 less for a house half the size and/or in a bad area. I have definitely noticed that housing is either small and cheapish, or exorbitantly priced McMansions that are 4ft from each other. No in between!

[pinkmint]

Where are all the normal - lower income people supposed to live? 

 

We live in an area that is much more on the "undesirable" end of the spectrum but we had hoped that could change but the way things are going I don't know anymore. 

[Carrie12345]

Taxes.

 

Here, I could buy a house very inexpensively. The tax payments would be higher than the mortgage, though.  They just keep going up every year.

[HomeAgain]

15 years ago here nobody wanted to live here.  Like, nobody.  I think there was one main road through the town and just about every house was selling for under $100,000.  Rent was dirt cheap.

Jobs were added, people came in in droves, and there was a housing shortage.  Now, people are getting quadruple what they paid for their homes and they're snapped up in days.  It went from one extreme to another.  Things are starting to settle now since several new neighborhoods were built, but even so, we stand to make a good bit on our home when we sell.

[Kalmia]

I read that there has been a huge demographic shift in the choices of the latest generations. Wealthy Baby Boomers and Generation X fled the cities to live in suburban areas especially when they were ready to raise children. Now, in a very distinct shift wealthy Generation Y and Millenials are choosing to move to the cities and raise their children in the cities. This is driving the prices in urban areas extremely high and so the urban lifestyle, once one of relative poverty, is now a luxury good.

[Kalmia]

Do you live in NY? The taxes on our house in NY go up between $500 and $1000 a year! That gets passed on to tenants, and may explain some of your rent increases.

[pinkmint]

I live in TX. 

 

It looks like everyone else had the idea we had to move here. Meeting California transplants is not unusual. Houses are snatched up within hours and rents are increasing seemingly by the day. 

[Word Nerd]

It's basic supply and demand.

[elegantlion]

Where are all the normal - lower income people supposed to live? 

 

We live in an area that is much more on the "undesirable" end of the spectrum but we had hoped that could change but the way things are going I don't know anymore. 

 

I live in a rural town that is 30 minutes from a town of 75k and 30 minutes in another direction from a major city.- that's 30 highway minutes, very little development in between the two except a few dotted small towns. I live here because even with commute to school in town of 75k, my expenses are cheaper. A lot of people that live here work in the major city and drive. 

[pinkmint]

Seems like one of the only consolations of being poor was that at least you could live walking distance to a laundromat, didn't need a car because of good public transit etc. Now what? 

[Kalmia]

You might benefit from doing the math on the commute and adding up all the expenses related to the car. If you got rid of the car and used that money to move to a slightly more expensive place withing walking or biking distance of work, the library, and grocery shopping you'd have more time as a family.

 

I heartily recommend this blogger (be aware he swears often and with vigor!): The Mr. Money Mustache blog originally started out to help people with $70,000 + salaries retire early, BUT the advice for saving money is applicable at all income levels.

 

http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/

[Lady Florida.]

I have no idea what's going on, but what I know from the few people who rent tells me a monthly mortgage is usually less than monthly rent. Maybe the cost of owner maintenance is going up and owner's have to raise rent accordingly. 

 

We considered renting between houses  but when I look at rent costs, it's cheaper to go from owning one to owning another.

[Kalmia]

Here is an NPR article on the demographic shift.

 

http://www.npr.org/2014/10/21/357723069/millennials-continue-urbanization-of-america-leaving-small-towns

[Amy in NH]

You might benefit from doing the math on the commute and adding up all the expenses related to the car. If you got rid of the car and used that money to move to a slightly more expensive place withing walking or biking distance of work, the library, and grocery shopping you'd have more time as a family.

 

I heartily recommend this blogger (be aware he swears often and with vigor!): The Mr. Money Mustache blog originally started out to help people with $70,000 + salaries retire early, BUT the advice for saving money is applicable at all income levels.

 

http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/

 

This is ridiculous.  How does anyone expect people barely affording their basic living necessities (food, clothing, shelter, transport to and from work) to save money?  There have been months we've been dimes away from having utilities turned off.  And we're supposed to save?  Save what?!

 

Edited December 23, 2015 by Amy in NH

[Amy in NH]

15 years ago here nobody wanted to live here.  Like, nobody.  I think there was one main road through the town and just about every house was selling for under $100,000.  Rent was dirt cheap.

 

Jobs were added, people came in in droves, and there was a housing shortage.  Now, people are getting quadruple what they paid for their homes and they're snapped up in days.  It went from one extreme to another.  Things are starting to settle now since several new neighborhoods were built, but even so, we stand to make a good bit on our home when we sell.

 

Yes, but that money won't buy you very much when the housing prices are through the roof! 

 

[pinkmint]

I've looked at Mr. Money Mustache a couple times. 

 

Blogs like that don't do me much good because if I remember correctly he has no mortgage payment (or rent), so he makes it sound impressive that he lives of $30 k a year with a family but if we had no rent or mortgage we'd be doing great too. 

 

The Peaceful Mom blog was helpful a few years back when she wrote a series how she and her family live off less than $30k a year with paying $1000/ month in rent. 

 

I have a hard time with money saving blogs that are written by people with huge financial advantages in life... but maybe I'm bitter. 

[TechWife]

This is ridiculous.  How does anyone expect people barely affording their basic living necessities (food, clothing, shelter, transport to and from work) to save money?  There have been months we've been dimes away from having utilities turned off.  And we're supposed to save?  Save what?!

 

 

I "liked" your comment, but I don't "like" it, KWIM? I understand exactly what you are saying, though! 

[Cinder]

Are you near Atlanta? That is exactly what it is like in the suburbs here. I pay rent higher than any mortgage I would get on my current house. I can pay this much for a similar house, or pay $200 less for a house half the size and/or in a bad area. I have definitely noticed that housing is either small and cheapish, or exorbitantly priced McMansions that are 4ft from each other. No in between!

 

Atlanta was my first thought too. I suppose it's crazy like this nearly everywhere.

 

ETA: I took too long to finish my post. lol. I see you're actually in TX.

Edited December 23, 2015 by Cinder

[SparklyUnicorn]

Rents are pretty low in my area.  It's not a particularly attractive area though.

 

Although, we paid a lot more for rent than for our mortgage (even with taxes, insurances, water, trash, and school taxes added onto that).

 

 

[Kalmia]

This is ridiculous.  How does anyone expect people barely affording their basic living necessities (food, clothing, shelter, transport to and from work) to save money?  There have been months we've been dimes away from having utilities turned off.  And we're supposed to save?  Save what?!

 

 

I did mention that the blog was for people with high incomes trying to retire early, but cars are an incredible drain upon the finances of people of all incomes. I linked to it because it was the first one I could think of that broke down all the costs of car ownership in a clear way. I am aware that the investing part of the article is immaterial to this particular discussion. I suppose I should have Googled, but that other article was fresh in my mind. I have read many of the OP's posts and like her a lot. I have been in financial distress in the past and do relate. I have suggested The Complete Tightwad Gazette (from the library) in threads she has originated. It is one of the very few books that gives concrete penny by penny strategies for people in low income situations. I used it myself ten years ago and find myself in much better circumstances today as a direct result.

 

Here is a completely unbiased article on the cost of car ownership.

http://www.consumerreports.org/cro/2012/12/what-that-car-really-costs-to-own/index.htm

[JumpyTheFrog]

The Mr. Money Mustache blog originally started out to help people with $70,000 + salaries retire early, BUT the advice for saving money is applicable at all income levels.

 

I think the above quote means that his blog (which I like) can help everyone learn to spend less...not that someone earning poverty level income is expected to have much in the bank.

[Pegasus]

This is ridiculous.  How does anyone expect people barely affording their basic living necessities (food, clothing, shelter, transport to and from work) to save money?  There have been months we've been dimes away from having utilities turned off.  And we're supposed to save?  Save what?!

 

 

Not ridiculous, IMHO, but targeting upper middle income people who spend without careful consideration and then don't have anything to save.  Still, ALL income levels could probably do better, being that we are human and all, and MMM is really all about being conscious of where your money is going.

[JumpyTheFrog]

Well, the housing bubble drove the costs of buying way up, which means that newer landlords have much higher expenses than ones that bought decades ago. Then the housing crash/recession led to many people being foreclosed on, so now a good chunk of those people are renting. The demand for rental houses is up, but the supply isn't up as much, so prices have increased. (Plus, the last I knew, many banks were waiting years to sell foreclosed properties, resulting in something like 18 million empty houses that might otherwise be turned into rentals.)

[luuknam]

IIRC you're in DFW, yes? DFW has been booming for quite a while now. McKinney was the fastest growing city in the US for a while a few years ago, iirc, and Plano went from nothing to being huge between the time my wife was 2yo and when we lived there 10 years ago. IOW, it's not any less desirable than the west coast. Your expectations were simply wrong (though, iiuc, it's still cheaper than much of the west coast).

[pinkmint]

Not ridiculous, IMHO, but targeting upper middle income people who spend without careful consideration and then don't have anything to save.  Still, ALL income levels could probably do better, being that we are human and all, and MMM is really all about being conscious of where your money is going.

 

This is true. I am very human and could stand to manage what we have better. I'm sorry if I sound dismissive about MMM. 

 

It's just discouraging when managing money slightly better seems to get you basically nowhere. I think a lot of poorer people struggle with this, hence why they buy booze and cigarettes because why bother. But I do want to do better. I have started closely tracking our spending lately. 

[pinkmint]

IIRC you're in DFW, yes? DFW has been booming for quite a while now. McKinney was the fastest growing city in the US for a while a few years ago, iirc, and Plano went from nothing to being huge between the time my wife was 2yo and when we lived there 10 years ago. IOW, it's not any less desirable than the west coast. Your expectations were simply wrong (though, iiuc, it's still cheaper than much of the west coast).

 

Yeah, I guess DFW has been booming for a while. It still was and is a bargain compared to most of the west coast. But like I said, even in the 3 years we've been here I've been amazed at the rising rents. But yes, looks like part of it is that we had wrong expectations. We came here because of an opportunity to move and thought it would be better. In some ways it has been. 

[Peaceful Isle]

I have wondered that too. Around where we live, families are starting to move in together to save money. Grandparents are housing their kids, or couples are having their parents move in with them. The rent can be 2-3 thousand a month here, for just a normal size home. It's really unbelievable. Small , I mean studio small, apartments are almost a grand a month here.

[Kalmia]

Some apartments aren't advertised. It wouldn't hurt to ask your husband to actively spread the word at work that he and his lovely family are looking for a place to rent close to work. Someone might know someone who rents cautiously through word of mouth rather than having to sift through hundreds of applications from strangers. It might not work right away but it is worth a try.

[vonfirmath]

Taxes.

 

Here, I could buy a house very inexpensively. The tax payments would be higher than the mortgage, though.  They just keep going up every year.

 

Since we bought 3 years ago (Austin suburb), our mortgage has gone up $150/mo because of taxes and home insurance. If we were landlords, we would need to pass those costs on to the renters.

Edited December 23, 2015 by vonfirmath

[Happy]

You might benefit from doing the math on the commute and adding up all the expenses related to the car. If you got rid of the car and used that money to move to a slightly more expensive place withing walking or biking distance of work, the library, and grocery shopping you'd have more time as a family.

 

I heartily recommend this blogger (be aware he swears often and with vigor!): The Mr. Money Mustache blog originally started out to help people with $70,000 + salaries retire early, BUT the advice for saving money is applicable at all income levels.

 

http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-commuting/

Walking is good in some areas...but when it's 102 in the shade most of July and every day in August, walking becomes less desirable.

[gardenmom5]

I'm sorry you're having a hard time.

 

it's supply and demand - it has always been supply and demand. that's the marekt.  rent is not stable (except in markets with rent stabilization laws), and never has been.  mortgage payments are stable (provided you have a fixed rate mortgage.)

 

there is also the fact that property costs for the property owner also go up every year.  even though their mortgage payment is stable - taxes and insurance also go up every year.   and if your rent includes utilities, garbage, etc. - those go up too.

[Frances]

Besides more people wanting to live close in rather than the suburbs and more people renting rather than buying for a variety of reasons, in some parts of the country foreign investment in housing has really been increasing. In the major city near us, an apartment complex recently sold for a record amount per square foot to investors from Singapore. And despite a severe housing shortage with the lowest vacancy rates in the country, it will be converted to luxury temporary stay suites for executives. Local real estate developers and investors are working with state and local governments to try and address the housing crisis, but I don't imagine distant investors care about anything except the return on their investment.

[JFSinIL]

Rent can be more than a mortgage for the same space since the owner has to cover taxes, insurance, maintenance, probably mortgage unless they own the structure...plus they may need to make a profit, too. We hope to help our dd get out of her two-bedroom apartment (rent higher than we pay mortgage/taxes combined on our five bedroom two-story house in the same area) as she can afford the mortgage/taxes for a small two - three bedroom house here and still be paying less than she is now.

Edited December 24, 2015 by JFSinIL

[idnib]

I agree it's supply and demand. One reason not yet mentioned is that rentals are in high demand because it is becoming more difficult to save up a down payment for a house.

[gardenmom5]

Rent can be more than a mortgage for the same space since the owner has to cover taxes, maintenance, probably mortgage unless they own the structure...plus they may need to make a profit, too. We hope to help our dd get out of her two-bedroom apartment (rent higher than we pay mortgage/taxes combined on our five bedroom two-story house in the same area) as she can afford the mortgage/taxes for a small two - three bedroom house here and still be paying less than she is now.

 

that's the same here for 1dd - who owns a house. even if she were renting something comparable - it would be alot more, and she's only owned it for two years.

[Butter]

Dallas Fort Worth is not an especially low cost area and costs are going up.  The GS (government service) payscale includes a specific one for DFW.  To calculate what someone makes on the GS scale, they take the base salary and then a locality pay percentage over that.  Most of the country is about 14% while DFW the locality pay is about 20%.  That means, for example, a GS 12 Step 1 is most of the country will be paid $70,192 and $74,195 in Dallas Fort Worth.  For comparison, they'd be paid $76,378 in the Washington DC area where is is very expensive to live.

[mamajag]

I've looked at Mr. Money Mustache a couple times.

 

Blogs like that don't do me much good because if I remember correctly he has no mortgage payment (or rent), so he makes it sound impressive that he lives of $30 k a year with a family but if we had no rent or mortgage we'd be doing great too.

 

The Peaceful Mom blog was helpful a few years back when she wrote a series how she and her family live off less than $30k a year with paying $1000/ month in rent.

 

I have a hard time with money saving blogs that are written by people with huge financial advantages in life... but maybe I'm bitter.

Many people have those "advantages" because they scrimped and saved and focused on getting rid of all that debt, though. I'm sure there were years where MMM didn't have quite the same life. Besides, even if I can't take advantage of all of his advice, I can find useful bits that help me get to the place where I can take advantage of more of his advice. It's a process. If I had clicked away from YNAB and MMM because I couldn't do everything that day, I'd still be living paycheck to paycheck.

 

When I first read your post, I figured you were in Austin. I just moved here and am amazed at house and rent prices. We're doing okay with it, but we had to get a more expensive apartment than I wanted because here GSDs are "vicious dogs" and I didn't have many options.

[Arcadia]

Some retail plots were abandoned in my city and big landlords snap those up to tear down the old buildings and build rental apartments with street level retail. So the rents at the new building is going to cost more than the rents at the older building less than a block away.

 

Thats to explain the mish-mash of scary-ghetto, or way too nice and expensive you mentioned.

[Carol in Cal.]

I'm a landlord with one house only.

For quite a few years we took a loss on our rental house every single year.

 

Finally rents caught up with our expenses.  From then on we were finally in the black.  But around here, people from outside the country have been buying up houses to rent them out, paying cash for them, and turning them over to management firms to rent out.  Their ROI is going to be really low for years, and they don't like that.

 

We rent a little below market, and we raise the rent more slowly than the market when we have a stable tenant.  We are not required to by law, but that's our policy because we want to be fair and reasonable.

 

You might look for individual landlords like us that you would have a personal relationship with. 

 

The corporate landlords simply charge what the traffic will bear, which means that if the rents on Craig's List are higher than yours, yours will be going up.

Edited December 23, 2015 by Carol in Cal.

[Ravin]

http://m.motherjones.com/politics/2013/11/wall-street-buying-foreclosed-homes

 

This may have something to do with it.

[pinkmint]

Interesting article Ravin. I will have to finish reading it when I have more time. It wouldn't surprise me though that some large greedy forces are at work. 

 

Interesting about DFW too, Butter. Looking back, we were under-informed to an extent when we moved here. I remember a deflating moment after we had been here a few months where I realized this is not a low cost-of-living area. Still there is a big swath between downtown Dallas and Ellis county where many houses are valued at $50k - $75K. Thats where we are. It's a whole 'nother world from Plano and that whole area. It's cheap but there are reasons for that. Race definitely plays into it, which has been eye opening as someone who is from a whole different race ballgame on the west coast. 

 

 

Edited December 23, 2015 by pinkmint

[Artichoke]

This is ridiculous.  How does anyone expect people barely affording their basic living necessities (food, clothing, shelter, transport to and from work) to save money?  There have been months we've been dimes away from having utilities turned off.  And we're supposed to save?  Save what?!

 

 

 

Our family has been there and done that.  If you're in the mood for recommendations, grab a copy of the Tightwad Gazette.   The prices are dated, but the ideas are timeless.  

[Carol in Cal.]

http://m.motherjones.com/politics/2013/11/wall-street-buying-foreclosed-homes

 

This may have something to do with it.

Holy shit, this is absolutely appalling.

I have several other expletives at the tip of my tongue right now. 

 

Terrifying.

 

Also, cash offers are easier for the seller, and around here often produce a discount.  The article claims that Blackstone is outbidding the typical families that normally buy these homes, but here sellers are accepting lower offers if they are 'clean' cash offers, because there is no muss, no fuss, and especially no financing contingencies.  So there is an immediate profit in that the buyer is buying under market value.

[Murphy101]

Where are all the normal - lower income people supposed to live?

 

We live in an area that is much more on the "undesirable" end of the spectrum but we had hoped that could change but the way things are going I don't know anymore.

Everything except wages keeps getting higher and higher.

 

All those supposedly normal lower income people?

 

A whole lot of them are moving in with their parents, siblings, or grown children.

 

My husband wants to move out of state from one low cost state to another.

 

But we have a mortgage on this house. There is no way I'm putting this house up for sale. He can live in that state alone for a long time until we can buy there.

 

Why? Rents are insane in both states.

 

I will rent this to my sons and get another mortgage if we can there or dh will just have to stay on his own there. It would be financially ruinous to do otherwise. He says it is VERY common for men to be doing this. He currently has a 2 bedroom appartment that him and 3 other men share. They are all living on different schedules in that area and commuting home in their days off. One guy has to fly three states away. All in the same boat. They can't afford to rent a home for their families to join them and they can't sell their homes for enough profit to buy a new home and lastly, every single one of them are contract employees, so buying anywhere is precarious. More and more companies are not keeping a payroll. They contract out for nearly everything. So if you KNOW you will likely have no job stability in a place for more than 2 years - it's kinds of silly to buy and yet you can't afford to rent.

 

I think I read somewhere that the median job length expectancy is now less than 3 years?

 

Anyways.

 

Just a rambling bit of sympathy.

[Artichoke]

http://m.motherjones.com/politics/2013/11/wall-street-buying-foreclosed-homes

 

This may have something to do with it.

 

Thanks for posting this.  I'll be looking for more about this topic. 

[knoxinsox]

We just relocated to Ellis County, south of that "Swath" you are talking about, and hubby works in South Dallas. I45 is not a bad commute at all, about 25 minutes to his job--we intentionally went south of the city to avoid traffic on I20 and north.   The houses down here are renting at about $1K-ish for a 3 or 4 bedroom older home.  I'm a half mile from the PO, library, stores...it seems awesome to me, (even though its double what we paid in SC), because we just lived for 2.5 years in West Texas and the rent was sky high.  I can see us buying here eventually---I love all the older homes here.  

Edited December 23, 2015 by knoxinsox