Just a Landlord

The NY Mag has an excellent, sorry depressing, article about “Dr. Doom” Nouriel Roubini prediction of an extended depression.

In September 2006, Nouriel Roubini told the International Monetary Fund what it didn’t want to hear. Standing before an audience of economists at the organization’s headquarters, the New York University professor warnedthat the U.S. housing market would soon collapse — and, quite possibly, bring the global financial system down with it. Real-estate values had been propped up by unsustainably shady lending practices, Roubini explained. Once those prices came back to earth, millions of underwater homeowners would default on their mortgages, trillions of dollars worth of mortgage-backed securities would unravel, and hedge funds, investment banks, and lenders like Fannie Mae and Freddie Mac could sink into insolvency.

His predictions for 2020 are far more dire

A decade later, “Dr. Doom” is a bear once again. While many investors bet on a “V-shaped recovery,” Roubini is staking his reputation on an L-shaped depression. The economist (and host of a biweekly economic news broadcast) does expect things to get better before they get worse: He foresees a slow, lackluster (i.e., “U-shaped”) economic rebound in the pandemic’s immediate aftermath. But he insists that this recovery will quickly collapse beneath the weight of the global economy’s accumulated debts.

Go read the article

The AASEW has done a lot of great things for the industry and sustainable rental housing.

One that benefited many owners was the change to Sheriff moves to eliminate the mover, which is a large portion of the costs.  

Our attorneys, working against their own personal interest, changed the law to allow LLCs to be represented by a member or agent, rather than requiring an attorney. This saves a lot of money as well as making the case less confrontational.

Here are the laws passed through the work of the AASEW in:

2018  https://bit.ly/3bryZ0Y
2016  https://bit.ly/2Lj7NXM
2014  https://bit.ly/3dCRRM1
2012  https://bit.ly/2zx3NQZ

It is important that we work together as an industry for the betterment of all.

What is missing from the MN tenant advocates’ demands below is the cost of operating rental housing includes far more than mortgage expenses.  There are taxes, which are mention, but not asked to be forgiven by the tenant groups, insurance, maintenance, management costs, utilities

I’m sure most of the proponents of this are still expecting to still be able to take a warm shower, which is not possible it the owner can’t pay water and utilities as well as other “luxuries” like having the trash emptied weekly, the sidewalks shoveled, the lawns mowed, to have someone answer their calls, and have someone repair what breaks, etc.

In many cases the mortgage cost is less than half of the operating costs.

And why are property taxes the sacred cow? If governments are supporting the nonpayment of rent, then they should also support not receiving property tax and other payments such as sewer, water, municipal electricity, garbage pick up fees, etc.  Tenants and municipalities alike should not expect properties to be maintained or improved if they sanction rent abatement.

The world is changing.  If we are not at the forefront of these changes, many folks in our industry will be bankrupted.  

While today’s tenants benefit from such actions in the short term, they and future tenants will pay a large price in the unavailability of housing and the higher costs of what is available as seen in the years post-2008.

Subject: Letter to residential landlord

Some tenants organizations in Minnesota prepared the following letter for their members to send to their landlords.

I think you might enjoy reading it. Dale
Dale A. Whitman Professor of Law Emeritus, University of Missouri

To Whom It May Concern:

We hope you are all staying healthy during this time. We are reaching out regarding our rent for the upcoming months. A State of Emergency has been declared in the United States of America and the State of Minnesota due to the COVID-19 global pandemic. As a household, we have lost income due to forced work closure, reduced hours, and insufficient or unavailable unemployment insurance.

We are emailing you to inform you that though we had been able to pay rent on April 1st due to careful planning, we will be unable to pay rent on May 1st. Until we are able to leave our home and return to our jobs, which is impossible under the stay at home order, we are all holding on by the skin of our teeth. In addition, we are unable to accrue the May rent as a debt. Due to our inability to work, we are all facing limited resources and increased financial instability for the time being. We love this house, and we’ve enjoyed being your tenants. We would like to continue living here long term.

We understand that our ability to pay rent will affect your ability to cover your expenses as well; likely, our rent at least covers the mortgage payment and taxes on this house. Having a stable home is a critical part of the healthcare infrastructure that protects us all from illness. It is our collective responsibility to stop the spread of COVID-19 during this time of emergency, in order to keep ourselves and our communities safe.

We believe that mortgage and rent moratoriums at the state or national level are real possibilities at this moment, and we hope that our government steps in to support you and us, but again: we cannot take on this rent as debt. We need a rent freeze, and we support you in seeking a freeze on your mortgage. Some people in our networks are already receiving this support from their landlords.

The social and economic effects of the global pandemic are predicted to last over a year. We encourage you to join us in contacting elected officials to call for an immediate Universal Suspension of Mortgage and Rent Payments.

Representative Ilhan Omar (612) xxx-xxxx
Governor Tim Walz (651) xxx-xxxx
Senator Tina Smith (651) xxx-xxxx
Senator Amy Klobuchar (202) xxx-xxxx

This is a very stressful and uncertain time, and we are all trying to do our best to stay healthy and afloat. Thank you for your support and understanding,

Tenant names removed

As an industry, rental housing providers must be present to PREVENT harmful legislation, because it is much more difficult to be made whole after the fact.

If the government does something that causes a large number of owners to fail, those owners will not have financial resources to fight back. They will be merely trying to feed their families.

This is not just bad for the owners that lost, but bad for tenants as well. In the years after the 2008 crash, there was a significant consolidation of rental ownership in Milwaukee. The city went from around 36,000 individual owners down to ~23,000 at a time that homeownership plummeted. Today Milwaukee has 41.8% owner occupancy. Nationwide that number is 65.1%.

Consolidation and owners doing what they could to survive the ’08 crisis has driven rents up significantly.

Those owners that come out of 2020 intact will likely be stronger than today. But not necessarily as municipalities will suffer more financially this go-round than in 08.

Owners that don’t fare well in the next few months will continuously be looking over their shoulders, hoping Jeff Bezos’ latest robot doesn’t take their job at the Amazon warehouse.

Or our government can keep printing trillions of dollars of new money and when end up like Venezuela where a quart of milk costs 4,200 bolivares, 11% of the monthly minimum wage. In 1990, a VEN bolivar was nearly equal to USD.

Hyperinflation, while bad for working folks, is good for those who enter it with assets and debt. Your debt remains in old dollars that you are paying off with new, cheaper dollars. Your assets acquired before the inflationary cycle will rise in value.

Look at what happened in the US during the late seventies and early eighties with annual inflation and interest rates on standard bank loans hit 18% in 1980. I was buying everything I could get my hands on. It was a risky, but good play when interest rates corrected and I could refinance at low rates like 12% APR. Yes, you can make money on rentals financed 90% at 18% APR. But you do have to pay almost nothing.

Look at average new home prices Dec 1977, when I started in real estate, $52,700 to Dec 1987 at $111,800.

Then look at historic interest rates. They were “cheap” in 1975 at 8.8% and cheap again in 1986 at 9.3% with a belly of 18.6% early 1981.

Yes, I do laugh when I hear investors fretting over half percent fluctuations in rates.

I’ll end this overly long post with there will be a huge risk to some, but also huge opportunities for others in this economy that we’ve never seen before and have no idea how it will turn out.

https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=406450

H.R. 6321 includes provisions to protect consumers, renters, homeowners, and people experiencing homelessness, including a bill from Congressman Jesus “Chuy” Garcia’s (D-IL) to place a temporary nationwide ban on landlords filing evictions on renters.

Without assistance to the property owners we will see failures and abandonment which will exceed the 2008 financial crises.

Cities like Milwaukee, with only 41.8% homeownership, will be crippled as rental property owners stop paying taxes, sewer and water. Add to that the cost incurred when the municipality has to maintain and sometimes raze tax foreclosed homes.

I had noted there was an uptick in tax foreclosures in Milwaukee hitting MLS in the last two months, that is well prior to any COVID impact.

Rental housing advocates on all sides must work together, more so today than ever, and it was important back in the BC days. (Before COVID) 

We must work collaboratively with tenant advocates, whom some perceive to be on the “other” side. Advocates and rental owners are more like two sides of the same coin. You would not survive as a landlord without tenants, and tenants need the housing we provide.

There will be legislation and new rules impacting rental housing… SOON. Whether the changes will help both tenants and owners, or whether that legislation causes long term problems, will be determined by whether our voice is heard.

The Apartment Association of Southeastern WI has good people working on our behalf on these issues, Heiner Giese and Joe Murray, plus a dedicated Board and membership.

The Wisconsin Apartment Association has good people working on our behalf on these issues, Gary Goyke, and Chris Mokler, plus a dedicated Board and membership. 

All four lobbyists work collaboratively with each other and with the other stakeholders regardless of political affiliations. 

Legal Action and Community Advocates are working to find help for tenants so they can pay rent. Amazingly, their messages have been that tenants still must pay rent even though they cannot be evicted until at least May 27th.

These efforts to be heard and understood at the statehouse take time, energy, and, sadly, money.

You can do your part to help us help you by joining one or both groups. Not only are you supporting the industry that helps support you, but you will be in the “know” sooner than those who are not members of apartment associations.

I’ve been a member of the Apartment Association of Southeastern WI since 1989, and a board member for nearly all of those years. As of today, I am also a member of the Wisconsin Apartment Association. 

Links to join:

Apartment Association of Southeastern WI

Wisconsin Apartment Association:

https://www.waaonline.org/account/create-account.php

Don’t do it for me. Don’t do it for the associations. Do it for you.;-)

On its surface the article is about homelessness in Seattle, but it outlines many of the challenges we will face in coming years such as rent control and programs favoring public housing over private.

https://www.city-journal.org/seattle-homelessness

You may ask, for example, what is wrong with supporting public housing?  
Public housing would be great if it provided housing to those who are often “unrentable” in the private market such as those with serial evictions, recent or serious criminal convictions, addiction issues, poor housekeepers, sex offenders, etc. 

Yet public housing screening policies often exclude those difficult to house populations, while directly completing with private sector owners, taking the best tenants due to their incentivized rents.  So we are ultimately competing with our own tax dollars working against us. 

It seems many of the same people who want to implement rent control are the same folks who support exclusionary zoning for their neighborhoods and communities. NIMBY Not In My Back Yard

The answer to housing costs, like most things, is to increase supply. When there is an abundance, sellers, or in this case landlords, must reduce prices to compete. When supply is restricted and demand is increased, you can get more.

Here is an interesting New York Times article on one such NIMBY fight. The wealthy residents weren’t to happy with allowing multi units in there community:

In letters to elected officials, and at the open microphone that Mr. Falk observed at the City Council meetings, residents said things like “too aggressive,” “not respectful,” “embarrassment,” “outraged,” “audacity,” “very urban,” “deeply upset,” “unsightly,” “monstrosity,” “inconceivable,” “simply outrageous,” “vehemently opposed,” “sheer scope,” “very wrong,” “blocking views,” “does not conform,” “property values will be destroyed,” and “will allow more crime to be committed.”

An amazing story of the lead up to the housing bubble

http://www.workingre.com/interview-appraiser-who-brought-down-countrywide/

Among the many firms and individuals who acted irresponsibly, and maybe criminally, perhaps none did so with such flair and recklessness as Countrywide Financial.  Before its rescue-sale to Bank of America (BOA), Countrywide was the largest mortgage lender in the United States.

Here is the first “final” draft of the one page form and flowchart for animal accommodation request. This is only a draft, put out for feed back and comments. This form is based on HUD’s recently released Guidance on Documenting a Person’s Need for Assistance Animals in Housing.

I previously posted a draft flowchart for reasonable accommodation requests for assistance animals to use while making the determination.

Initially I did not feel the new HUD guidelines offered much relief from the problem with people who skirted no pet policies with fake “service animals”

After working through this I feel that this will prevent many of the problem we are currently experiencing, while protecting the tenant that has a true need for a service or support animal. While fake service animals concern me, I have no sympathy for the owner that would deny or charge extra for a seeing eye dog, a service dog for a person in a wheelchair, a person suffering from PTSD, etc.

Clarifying that the accommodation only applies if the requester has a disability that imposes a substantial limitation on major life activities is important.

Clarifying that property owners can request documentation of both a disability and the need for a disability-related need for the animal from a licensed professional rather than having to accept some $29 vest from Amazon as proof is important.