America used to be a nation of home-owners. Now, many younger people do not aspire to own homes. Perhaps that is a case of sour-grapes since the cost of owning has skyrocketed.
To fill the gap, many investment companies are investing (i.e. buying up) large blocks of residential housing. Their deep pockets are part of why the cost-of-entry is so high.
I will not be surprised if they use their influence with legislators to pressure them to accept FICO® scores for renters based on the amount of damage they do to housing units.
A FICO® score is a three-digit number ranging from 300 to 850 (and up to 900 for some industry-specific scores). These scores are largely based on your credit reports (statements generated by the consumer credit reporting bureaus that detail your credit activity and current credit situation) and can help creditors assess how likely you are to repay debt.
Even though you may hear “FICO® score” and think of it as a single credit
score, you can actually have several of FICO® scores, which can differ
by industry. Source
A "good" or typical renter can be very, very profitable. A renter with a history of being hard on the facilities can rack-up $30,000 in damages over the course of several years. Which one would you rather have if you cannot vary the rent or make adjustments to the damage deposits?
The point is that "good" renters subsidize the "bad" ones. They pay much higher rents than the cost of providing the services because the one-renter-in-five who is bad can easily inflict damage that equals the monthly rent.
The obvious solution would be to have landlords report the time-frame of the rental and damage costs to a FICO® organization every time a renter leaves a property. The VERY WORST renters go through a lot of properties (they don't want to live in a shit-filled apartment, either) and the worst-of-the-worst would have a "record" in three or four years.
Mom-and-pop landlords don't have the ear of legislators. In fact, they are Progressive legislator's favorite whipping boys. But firms like BlackRock are an entirely different kettle of fish. Those fierce "speak-truth-to-power" grand-standing politicians become simpering idiots when firms like Vanguard and BlackRock call them.
I asked a granddaughter about the rent versus own and got the following points, which I am paraphrasing.
ReplyDelete1. Homeowning is really expensive, even for those without significant student debt.
2. Renting means you can move to where the better jobs are more easily.
3. It isn't like you really own the house after buying it, with the various state and local authorities taxing and mandating additional restrictions.
tweell: So, #3 means after she pays off her car loan, she doesn't own it due to recurring fees like insurance and licensing and being restricted from driving on the sidewalk or parking in the road?
ReplyDeleteYou may "own" the car once the loan is paid off, but they can make it so you can't use it.
DeleteBut with a home, they can take it away from you if you don't pay the property taxes, so in a sense, you don't really own it. It's called a tax lien. Even if you paid off the mortgage.
If they can tax it, they can take it. If they can take it, it isn't really yours.
Anon@150: Ah, good distinction 'twixt owning and using.
DeleteMaybe, maybe not - don't forget that Black rock has been hammered recently by several states due to their ESG position losing them investments and contracts.
ReplyDeleteI've heard, but not had confirmed, that they have pretty much stopped buying houses.
While prices have gone up everywhere , the increase is far from uniform - especially in less trendy parts of the country.
There are still parts of the country with reasonably priced housing and well paying jobs, it depends how much you want either...
Jonathan
The asymmetry between renters and landlords is always shifting.
DeleteFrom an over-all cost to society, it makes sense to have a sliding scale "damage deposit' based on the history of the renter. If the renter "cannot afford" a nice apartment or house, that will create a market for indestructible homes where the walls are cast from pre-stressed concrete and appliances and furniture are not supplied.
ERJ, speaking as both a renter and a landlord I would completely be on board with this. My parents always had good luck with their renters (and my sister and I the same), but the risk of a single bad one makes me reluctant to think about renting going forward. And as a renter, I presume that I will not see most of my deposit back, partially because of the subsidization of those that do not care.
ReplyDeleteI would think the industry would push for it - after all good renters mean less overall issues and maintenance costs.
The industry is fragmented aside from the politically connected Black Rock.
DeleteLike Walmart they can demand enough support from the gov.com to make so many onerous rules that mom-and-pop operations fail.
Squeezing out the middle class is part of the WEF announced goals.
It's a feature, not a bug. You will own nothing and be happy.
The Best Two Days of My Life were when I got rid of my last rental and my ex-wife. ---ken
ReplyDeleteMy problem with the system: How you can charge more rent than the purchase price to own. We rented a house short term for an employee. The deal was that the rent would go up in the future. Why not start higher, and actually reduce going forward for renters that did not cause you grief?
ReplyDeleteJerry
Purchase price to own varies month to month, depending on the housing market. Nobody wants their rent to be that unpredictable. And the carrying cost of the house may have nothing to do with its market value, especially over the short term.
DeleteLandlord-tenant law is complicated and heavily regulated. It has historically been a hot button political issue. Did you know that in some localities, the landlord is required to put the security deposit into an interest -bearing account or worse, is required to repay it to the tenant at a statutorily required interest rate (which may be commercially unobtainable)? I think in Maryland's Bethesda County, it was 12.5%.
There you go, trying to bring personal responsibility into an issue. Don't you know that isn't fashionable any more, particularly with our political and social barbarian classes? Landlords are not a protected class, and so are fair game. /sarc
ReplyDeleteFred in Texas, gotta vet your tenants. Thoroughly. Check references. Don't be afraid to say no and don't get yourself in a position where you have to have a bad tenant to generate cash flow! NO SECTION 8!!! "I'm not set up to be a government contractor, nor am I interested in being a government contractor"
ReplyDeleteAs soon as you bring any think like that into the equation, you're going to get slapped with however many 'cards' the left can find to throw on you... sigh And no, NEVER Section 8!!!
ReplyDeleteSpent 35 years in the mortgage industry. Fico scores are collected by 3 major companies. One may show a 620 and next a 590 due to credit entices not reporting to all 3. Being a landlord for 20+ years I was so joyful the day he handed me cash and I handed him the deed. Had really good renters for first 10 years but then the nightmares began. Landlords need to find someway to communicate so we are not just passing the bad ones around. As far as owning. Big day in life of grandson when he closed on his first home at 27. So proud of him. Plus's and minus's to owning. I downsized from 3800 to 1300 hundred and has been an adjustment being a renter now.
ReplyDeleteJust as there are several different agencies and scoring models for credit (with FICO being the most well known), there are also several options for tenant screening reports and scores. With applicant consent, they pull a credit check and also national criminal search, sex offender search and housing court records history.
ReplyDeleteTransUnion for example has "ResidentScore", Equifax has "Assured Tenant" (TotalVerify), etc.
Rumors say some of the big landlords have a shared Blacklist; who knows if that is true.
DeleteJonathan
Wow the agencies have really bumped up their game. We are just a small town, 10K so we kinda knew most and talked about some of the really bad ones. But the druggies are a nightmare to get out.
DeleteI personally am thankful I tolerated the ups and downs. I have been paid for it by the recent inflationary period. I employ a property manager who is adept at absorbing my cash flow with projects. At least the house is maintained in top condition. It has lead to quality tenant but I also insist on an annual inspection. And on the commercial, I do not delegate basic building maintenance to the tenent. They will not do it. Triple net and bill them for the maintenance. If they abuse the property I replace them. Roger
ReplyDelete