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Thread: Too many rental properties?

  1. #1
    Cyburbian
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    Too many rental properties?

    Folks-

    I just came across some figures that state that 53% of the residential units in my home town are rental properties. This feels unhealthy to me, but I have no facts to base that feeling on.

    Is this figure low, high, or normal for a suburban community?
    If this is "a bad thing," how can it be addressed?
    If this is "a good thing," why?
    If this is a stupid question, I guess you'll ignore me.

    --don

  2. #2
    Cyburbian Raf's avatar
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    Quote Originally posted by darnoldy View post
    Folks-

    I just came across some figures that state that 53% of the residential units in my home town are rental properties. This feels unhealthy to me, but I have no facts to base that feeling on.

    Is this figure low, high, or normal for a suburban community?
    If this is "a bad thing," how can it be addressed?
    If this is "a good thing," why?
    If this is a stupid question, I guess you'll ignore me.

    --don
    I guess my first question is, where did the statistic come from? I mean is it single family homes or a mix of sfh and apartments/condos, etc. For a suburban community this doesn't sound normal, however is it a good or bad thing? I dunno. Are the housing units well kept? If they are, than does it matter? If they aren't than maybe a trip down to local code enforcement to have landlord upkeep their properties would be ideal. Remember, the bay area is a high priced market, even during this downturn, and those that did own homes might now be forced to rent. So a community having a high rental right does not come as a shocker because units can include all types of housing. Take solace, at least they are occupied right?
    follow me on the twitter @rcplans

  3. #3
    Cyburbian DetroitPlanner's avatar
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    Since you are in the Bay Area that does not surprise me. People need shelter. With the housing costs in your region being so high it is nearly unattainable for someone with an average salary to save the ten to twenty percent down you need for a home. This also reflects the current lifestyle of hopping from place to place and should not be soley seen as potential section 8 housing. If you subtract out the apartment buildings, you will see that your numbers look much higher for home ownership.

    What you should be most concerned about are vacant properties, not how they are filled.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

  4. #4
    Cyburbian CJC's avatar
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    What city are you in, or at least what part of the Bay Area? That would give me a better idea as to what you mean by "suburban" - are you talking built form? Many of the "suburban" cities (in the south and outer east Bay, especially) actually have huge jobs/housing imbalances, which provides incentives (for the city, the employers in the city, developers, etc) for more rental stock, especially with the distortions of prop 13 (and other later propositions). These cities act more as a traditional center city would in many ways. For example, in every way except built form, cities like Sunnyvale, Cupertino, Santa Clara, Pleasanton, and Walnut Creek are NOT suburban.
    Two wrongs don't necessarily make a right, but three lefts do.

  5. #5
    Unfrozen Caveman Planner mendelman's avatar
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    In addition to what the others have said - what is the median and/or average rental rate? If it is market rate (ie 30%+ of average income) than wouldn't worry too much.

    Many, many more details are required.
    I'm sorry. Is my bias showing?

    Let's not be didactic in this profession, because that is a path to disillusion and irrelevancy.

    Six seasons and a movie!

  6. #6
    Cyburbian
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    Quote Originally posted by CJC View post
    For example, in every way except built form, cities like Sunnyvale, Cupertino, Santa Clara, Pleasanton, and Walnut Creek are NOT suburban.
    Yup. Its one of those.

    The figures I saw were in the "Housing Element" of the Comp Plan—some people do read those—from 2004.


    .........................................Owner-Occupied......Renter-Occupied
    Single family detached...............82%...........................18%
    Single family attached................59%...........................41%
    Multi-family..................................8%.......................... 92%
    Mobile Homes............................65%...........................35%

    Total...........................................47%............................53%


    I don't worry that rental property (in and of itself) is a bad thing.

    I wonder about the large difference between the groups "people who are voters" and "people who are property owners." If more than half of the voters do not own property in the city, what does that mean for the kinds of government they want. If a large percentage of property owners are not residents of the city (unless we assume that the 53% is owned by people who live in the other 47%), what does that mean when it comes to taxation issues (like prop 13)? What does it mean when issues like neighborhood preservation are debated?

    I was curious, and thought I'd ask you smart people/

    --don

  7. #7
    Cyburbian Raf's avatar
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    Quote Originally posted by darnoldy View post
    I wonder about the large difference between the groups "people who are voters" and "people who are property owners." If more than half of the voters do not own property in the city, what does that mean for the kinds of government they want. If a large percentage of property owners are not residents of the city (unless we assume that the 53% is owned by people who live in the other 47%), what does that mean when it comes to taxation issues (like prop 13)? What does it mean when issues like neighborhood preservation are debated?
    Thanks for the stats don, it helps things out when it comes from a legit source like a housing element. Looks like the majority of rental units are comprised of multi-family (i.e apartments/condo) and single family attached (ie. duplex, tri-plex). It is tough to read what renters will vote/will they care when it comes to those types of issues. For one Prop 13 will not change. Changing prop 13 is a dead issue because too many homeowners look at the bottom line (their property tax bill) and don't even think about what good it might bring if we somehow adjusted it so that this state can begin to rid itself of the never ending budget bust battle. (as a matter a fact a recent poll found support for prop 13 is still high even as the state cuts back services, furloughs workers, cuts in local education and raids local funds).

    When it comes to neighborhood preservation, it depends. If folks like the way things are, they tend to resist change. Than again, just because your a renter, doesn't mean your landlord doesn't live in the same city (i know mine does) or within a reasonable distance to the area. Homeowners maybe more compelled to act, but renters also feel a need to act if something like neighborhood preservation will directly effect them.
    follow me on the twitter @rcplans

  8. #8
    Cyburbian CJC's avatar
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    Quote Originally posted by darnoldy View post
    I don't worry that rental property (in and of itself) is a bad thing.

    I wonder about the large difference between the groups "people who are voters" and "people who are property owners." If more than half of the voters do not own property in the city, what does that mean for the kinds of government they want. If a large percentage of property owners are not residents of the city (unless we assume that the 53% is owned by people who live in the other 47%), what does that mean when it comes to taxation issues (like prop 13)? What does it mean when issues like neighborhood preservation are debated?

    I was curious, and thought I'd ask you smart people/

    --don
    Don, tough to say what the exact voting consequences are. Based on you saying that it's one of the cities that I mentioned, there are a few things to chew on:

    1. Median income for those occupying the rental properties is going to be much higher than in most places in the US.
    2. The upward mobility of the median renter is also going to be much higher than many other places.
    3. Average tenancy is likely shorter than what is typical in other areas.

    Because of these factors, and the basic fact that most renters in those cities likely see themselves as eventual homeowners, I wouldn't think that voting patterns would change much from what would be the case if more folks owned their homes. As to your question of whether this is good or bad, I would tend to think that it is bad long-term. You're likely not keeping many of the workers in your city as homeowners in your city. They simply can't afford to buy a home there (even households making well into six figures), so they'll move out to other areas to buy after renting for awhile. Until greater effort is made to fix the jobs/housing imbalance or salaries skyrocket while housing prices stagnate, this problem will continue.

    BTW - when I mentioned prop 13 earlier, I was mentioning it mostly because of the distortions that it has caused and the subsequent changes in behavior, especially the fact that through the implicit subsidy provided to long-term owners, it lowers holding costs to almost nothing. Along those lines, here's a fun little experiment for you (I've done it myself for Tiburon, back several years ago when I was bored). Find a subdivision in your city that was built out pre-1976 (should be almost any in your city) and has mostly like-sized and thus what should be like-valued properties. Look up the property tax data (public record) for every house in the subdivision (property taxes paid and the location that the bill was sent to). I guarantee you that you'll see at least an 80% correlation between the lowest quintile of taxes paid and an out-of-state address (Also note the outstanding mortgages - most of the time it will be for amounts much higher than the prop 13 base due to refinancing, cashouts, or HELOCs) That's where your 18% of renter-occupied SFHs comes from - there's very little incentive to sell a house here when you aren't paying beans for taxes (which can be entirely covered by even low rent) and can cash out a significant amount of money without any property or income tax consequences. I would guess that most cities that were nearly built out prior to 1980 or so will see continually rising renter occupancy levels. Tiburon has been edging up by around 2% per year, despite being almost entirely SFHs with almost no new construction.
    Last edited by CJC; 22 Jul 2009 at 10:25 PM. Reason: Fixed a typo
    Two wrongs don't necessarily make a right, but three lefts do.

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