Tuesday, October 13, 2015

Rents Rise

One would think that ending one’s homelessness would be fairly quick and easy, once one had a housing voucher, provided by a government program. Over the course of the next few blog posts, we will explore this proposition, why in fact this might not be the case, possible solutions, and what stands in the way of these solutions. Along the way, we will touch on the state of the housing rental market, in general, and how the lack of affordable housing can contribute to homelessness.

Jonathan Chew titles a recent article in Fortune quite straightforwardly, Why rents could rise by 8% in 2016, citing a survey representing hundreds of thousands of units. No need for an advanced degree in economics to figure out why.  As, Chew says, “The reasons are manifold, but 64% of landlords surveyed identified two main factors: the twin pressures of increased demand for units and low inventory.” High demand, plus low supply, regardless of the widget being demanded and supplied, equals higher prices.

One reason this problem might be exacerbated in Dallas, could have to do with the age old dilemma, for those with the means to make a choice, of renting vs. buying. Three Florida based scholars Drs. Eli Beracha, William G. Hardin and Ken H. Johnson, have developed the eponymously named “BH&J Buy vs Rent Index”. As they describe on the Index website, it is “designed to signal whether current market conditions favor buying or renting a home in terms of wealth creation over a fixed holding period in a particular market relative to historical market conditions and alternative investment opportunities.” Right now, the index indication for Dallas, unlike for most of the country, is clear: Rent; don’t buy.

The numbers are pretty. As the site Rent Jungle tells us, “As of August 2015, average apartment rent within 10 miles of Dallas, TX is $1502. One bedroom apartments in Dallas rent for $1263 a month on average and two bedroom apartment rents average $1796.” For comparison, according to the site, as recently as January 2012, these numbers stood at $967, $977 and $894 respectively.
In fact, according to Steve Brown in the Dallas Morning News in his recent article, Soaring Dallas apartment costs haven’t put a dent in rentals, there could be a more permanent and fundamental shift at work here, then just renting until it makes more sense to buy. As he says of a recent trend in a growing number of Downtown and Uptown rental properties, “Most of their new renters — a combination of young professionals and affluent empty nesters — could save money buying a house in the suburbs.” These people are instead choosing lifestyle and proximity to downtown, over homeownership, Brown says. He quotes “Dallas developer Lucy Billingsley,” who says, “We know we have lifetime renters who will be with us now.” As Brown emphasizes, “A generation ago, apartments in Dallas were the waiting rooms for homeownership. That’s not the case anymore.”

At the same time, Brown also points out that some of the pressure comes from rental customers coming to Dallas, because in comparison to other cities on the coasts, and even Chicago, Denver, Atlanta and Minneapolis, Dallas is still a bargain. Therefore, not surprisingly, according to Bloomberg News, as cited in Finance and Commerce, “U.S. commercial real estate investors are looking inland. The Dallas-Fort Worth area of Texas, prized for its diverse job market and success luring companies that are relocating, ranked as the top area for commercial-property investment in a survey of almost 1,500 real estate executives, according to a report Wednesday by the Urban Land Institute and PricewaterhouseCoopers LLP... while the big coastal cities of New York, San Francisco and Boston, traditional magnets for buyers, were deemed less attractive.” It goes without saying, that this competition coming in can make things more difficult for those already here with less mean, less skills, and less mobile lives. And all of these developments lead to an obvious problem, which we will delve deeper into in our next post, “The Rent is Too Damn High!”

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