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It is often heard that homeowners have all those repair and maintenance costs to worry about, but renters pay those costs as well. They are incurred by a landlord but net after-tax costs are simply tacked onto rents.
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Originally Posted by ohio_peasant
So yes, of course, the landlord's costs are passed onto the tenant. But those costs are lower per-unit, because of economies of scale.
It depends, of course, on the price elasticity of demand and the price elasticity of supply -- the slopes of those demand and supply curves.
Some costs are eventually passed on, but rarely all costs, and rarely zero costs.
Today, there are lots of areas in this country, where cost of owning a home, is no harder for the average person than it was in 1955-1956 era when we bought our first home, in the heart of the Silicon Valley (Cupertino, Ca). Cost $13,750 with a $0 down with a VA loan. 10 years ago, the same houses on that street were selling for $850,000 when they were 50 years old. Today in that same area of the Silicon Valley median (Cupertino Ca.) median home sells for $1,765,900. This cost raise is absolutely ridiculous.
Yeah, but you get to breathe the same air as Tim Cook.
It depends, of course, on the price elasticity of demand and the price elasticity of supply -- the slopes of those demand and supply curves. Some costs are eventually passed on, but rarely all costs, and rarely zero costs.
In other and perhaps more useful words, landlords tend to pass on every penny of costs that they possibly can. Landlords are better at writing sob-story letters to tenants explaining how sorry they are that they have no choice but to raise rents due to recent increases in something or other than they are at actually eating any portion of those increases themselves. And as the landlord/tenant playing field is hardly a level one, most tenants will just suck it up. It's easier than moving. Especially since local landlords all tend to turn at the same time and in the same direction -- as if they were all part of some silvery school of fish.
That isn't the whole story though. Owners of rental properties do have an underlying cushion of tax preferences that provide some degree of flexibility in cases where markets begin to soften for some reason. Such developments raise the ugly specter of rising vacancy rates which are not at all good for cash flow. In such cases, a landlord might well prefer to receive lower rents from the same number of tenants than to receive the same rents from a smaller number of tenants. Under such circumstances, a landlord may -- in the short run -- choose to eat some costs until market conditions improve. They will revert to more typical behaviors once such improvement occurs.
It depends, of course, on the price elasticity of demand and the price elasticity of supply -- the slopes of those demand and supply curves.
Some costs are eventually passed on, but rarely all costs, and rarely zero costs.
Shelter is crucial to survival and well-being, and so its demand is fairly inelastic at the low end. That's why half of all low-income renters are spending at least half their income on shelter, while most middle class Americans find unfathomable such a steep rent burden.
It's easy for middle class Americans to scoff at the idea a poor person would pay two-thirds of their income to live in a dump, but many people will pay it to avoid worse alternatives.
Rent burdens will continue for some time to get worse, before they ever - or at all - decrease.
Shelter is crucial to survival and well-being, and so its demand is fairly inelastic at the low end. That's why half of all low-income renters are spending at least half their income on shelter, while most middle class Americans find unfathomable such a steep rent burden.
It's easy for middle class Americans to scoff at the idea a poor person would pay two-thirds of their income to live in a dump, but many people will pay it to avoid worse alternatives.
Rent burdens will continue for some time to get worse, before they ever - or at all - decrease.
Food is crucial as well. Do you believe that grocery stores and farmers should be forced to sell their goods at a reduced price because low-income folks need to eat?
If shelter is crucial to survival, then it's on the individual to make sure they can afford that shelter.
Shelter is crucial to survival and well-being, and so its demand is fairly inelastic at the low end. That's why half of all low-income renters are spending at least half their income on shelter, while most middle class Americans find unfathomable such a steep rent burden.
This is where "living wage" arguments come from. If people are spending 50% of their income on shelter (as against a recommended upper limit of 30%), it is not because rents are too high, but because wages are too low.
Food is crucial as well. Do you believe that grocery stores and farmers should be forced to sell their goods at a reduced price because low-income folks need to eat? If shelter is crucial to survival, then it's on the individual to make sure they can afford that shelter.
Are you aware of SNAP and FARM programs? Have you ever visited a food bank? Are you aware of what a total crock the "protestant work ethic" is?
Though Perma Bear has been widely excoriated for a petulant refusal to adapt and to manage his expectations, something in his lament resonates with me. 20-25 years ago, I was in a position similar to his. I exchanged a vibrant coastal locale for a sleepy Heartland burg, not to chase cheap real-estate, but to pursue my career. Now I find myself trapped. Sure, the 401K is doing alright (assuming that the stock market doesn't crash again!). But other aspects of life haven't exactly blossomed. There's much to be said about broadening oneself, taking risks, accepting temporary reversals in favor of longer-term gains, and so forth; let the platitudes and bromides accumulate. There's certainly an aspect of truth to them. But it's also true, that low-cost places are low-cost for a reason; and that reason isn't merely fashion and caprice and the herd-mentality of so-called elites and their hipster spoiled offspring.
So, yes, folks earning $70K in the Bay Area would need to relocate if they insist on buying a house. But there's a tradeoff in all such moves. Is there net benefit in buying your little piece of heaven, in the middle of hell?
First-world problems.
There's a little girl in Nigeria who got up this morning to search for sticks that she hopes to sell as firewood to someone with a bit more money than her family.
If she doesn't get raped to death by bandits in the meantime.
Yes, and I sometimes need to remind myself that I live better than 99% of the people who have ever lived on the planet, and better than 80% who live on the planet right now.
The ONLY reason I would love to have been in the 50s is so that I could have purchased a 2 door 57 Bel Air. Other than that, you can keep the 50s.
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