Extreme rental living in Los Angeles: Want to live in a van, near the river? Or maybe a RV is more your taste?
How extreme can the housing situation get? Can things get crazier? Probably. Are people in SoCal living in a warped bubble thanks to everyone thinking they are some kind of marketing guru? When you look at the rental revolution, the answer is a resounding yes. We live in a world where Black Swans are common even though by definition they should be extremely rare. Just last year, the notion of Trump being the Republican candidate would have been dismissed. Yet here we are. Bernie Sanders? It was going to be Clinton and Bush with no outside surprises. The establishment is blind and most people fall into lemming like behavior. You are either an “R†or a “D†but in the end, the establishment on both sides is virtually the same when it comes to finances. In housing the amount of sheep like behavior is amazing. This is how we get people renting out vans and RVs as if they were luxury rooms. And that brings us to a current trend in the housing market: extreme rental living in Los Angeles.
Extreme Housing
We truly live in a Twitter universe. A large number of people are now getting their news from Facebook feeds and what is on there isn’t exactly news. I see a few posts on the feed including some for Selena Gomez, Beyonce, and Game of Thrones. You start talking about the Fed or derivatives and you might as well start talking gibberish. The proof is in the pudding as they say and just look at what qualifies as rental space today.
Living in a van in Venice:
For $300 a month you can basically live in a van in Venice. I love the ad:
“The van is not to be driven. It’s for sleeping and being quite so neighbors don’t even know anyone is living in it.â€Â
So while someone looking to buy is paying $1 million plus for crap shacks in Venice the block is going to have shadow renters living in tinted vans. How great is that? You can also shower at the local L.A. Fitness and brush your teeth by the ocean. You get 50 full square feet of living space here. I like that they have to qualify that there is no laundry on site.
This of course, is what passes as sensible today. “Hey, pay me $500 and you can live in my van. Just don’t make any sounds during the daytime as to not disturb the neighbors and all the Taco Tuesday baby boomers who may be perturb by you popping out. This is after all a “prime†community.â€
And this continues:
Here is a more “sensible†choice in Sylmar. You can rent a RV parked in front of a house for $650 per month. At least here you get utilities, a shower, and a toilet. That is a big plus. Or maybe you have dreams of living out a real Breaking Bad lifestyle:
We’ve reached an odd sort of rental revolution. People are realizing they can charge rent for pretty much anything at this point so as long as there is no recession. Renters and homeowners for the most part are month-to-month. Even if you have good equity in your property and your paycheck stops, good luck covering the mortgage. At least you can rent out a tent in your backyard for $500 a month to hold you over. Of course the blind house humpers will see this as somehow healthy. Of course whenever the mention of a correction is discussed they always think it will happen in sort of orderly fashion according to their plans. Why would it? We live in an “extreme†culture right now. It is all about keeping it real and making sure no one is throwing shade on you. Right now I’m throwing shade on housing apparently. Yet this is what is going on. Knock yourself out and plunk down $200,000 for that million dollar crap shack with an $800,000 mortgage for 30-years. Let us not even discuss the AirBnB conversion of many homes into virtual hotels in prime areas. You might think you are living in a “quite suburban hood†but your neighbor might be cashing in rental checks without your knowledge.
Extreme conditions create extreme outcomes. Yes, all of this of course is reasonable:
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122 Responses to “Extreme rental living in Los Angeles: Want to live in a van, near the river? Or maybe a RV is more your taste?”
Such rentals are risky for everyone involved. They’re illegal, which means there are no laws governing the transaction.
What if there’s a recession? What if the tenant can’t pay rent, yet refuses to leave? Is he trespassing? He might get booted out without 30 days notice.
Yet the landlord gave (illegal) permission for the tenant to be there. So it’s not really trespassing, and some tenant rights might kick in. In some jurisdictions, the landlord (not the tenant) can be fined for the illegal rental — and must also return all “ill-gotten” past rental payments to the tenant.
Landlords have no rights to enforce illegal rental agreements. They can only invoke their rights against trespass, which is problematic for the above reasons.
If you have an unruly tenant at least you can remove their stuff and drive the ‘apartment’ away.
legal shmegal, just free people making free decisions I’ve slept in my car, its fun, like camping
High end communities are very good at policing. They keep a lid on people living in their cars.
I hear Venice is very homeless-friendly. I doubt they hassle people living in vans.
I’ve spotted people living in cars in Santa Monica. They tend to park on Broadway, east of Lincoln.
In Newport Beach, the cops do not let people sleep in their cars or in the parks. However, in Costa Mesa, people are sleeping in the parks.
These rental options are nothing. Have you seen the ads on Craigslist offering to rent a bedroom for $200 or less to young women who are desperate? The ad writer is usually a middle-aged man who is offering a “friends with benefits” arrangement in exchange for reduced rent. Those ads make my skin crawl.
True, not everyone is a respectable person, but that sounds good to me. My wife gets all my money, and I get NO benefits! Exploitation & servitude happens at all levels of culture. Don’t let it bother you too much.
What some may call innovation or capitalism, I call desperation! Renting out vans, mobile homes, AirBnB, etc., are all efforts to cover the monthly bills, make up monthly shortfalls, or a way to save a buck! While this may seem like normal life to the hipsters and younger people out there , it wasn’t long ago, that a hard working family could afford the ‘white picket fenced’ house, a car, provide adequately for the family, and still manage to save some money every month! Your smartphone/latte lifestyle is masking a sad truth … that we are backsliding to 3rd world status, fast!
This is the real take away – how desperate for income streams some people have become in such prime desirable everybody wants to live there locales. These types of transactions which often run afoul of laws and regulations come with a high level of risk for the “owner”, whereas the “tenant” can easily bail out with no liability. Isn’t it curious how frauds and bubbles tend to shit in the same places? But quick, look over there, it’s a solid bet, oh never mind!
You hit the nail on the head JNS. The media and popular culture makes it seem cool, hip and innovative to participate in the so called “sharing economy”- AIRBNB, driving for Uber, etc.
People are so desperate to hang on to their current lifestyle that they have to rent out a room to a stranger or be a taxi driver with a smartphone. It all is masking a very bad reality; we are broke.
I agree with you generally but in the past we always had people renting rooms. Rooming houses were common throughout American history where people would rent rooms by the week.
During WWII the housing crisis for California was far worse than it is now. Of course you had the building boom to alleviate it and it “only” lasted about four years.
I have to question the idea of “affordable” housing as being simply housing you want to live in rather than what you can afford.
Any way these vans could go the rent-to-own route in the near future? Give everyone a stake in the ownership society, and the contracts could be bundled up and sold as derivatives.
Sounds like a win-win to me.
It’s not a van. It’s a “starter mobile home.” A “mobile home alternative.”
Looks like median price in the OC is back to pre housing collapse high. Interesting read…
http://www.ocregister.com/articles/percent-716148-prices-home.html
Good read. I also see that price increases seem to have slowed or plateaued in LA, OC, & SD where they are near or even surpassed the record highs of 2007. But I’m still seeing pricing increasing steadily and aggressively in the IE where many areas are still well below 2007 levels.
In OC, 800K and below is hot with quickly rising prices. But, 2M has slowed.
Wow!!!!! “This time, it’s different”. This is terrifying. It feels exactly like 2007-8 in Southern California with the all-cash above asking purchases at mindblowing profit level. The reasons may appear to be different but that doesn’t mean they are any less toxic or fundamentally sound. Terrifying.
I own 8.5 wooded acres with a shed, house, RV, and shipping container, water and electricity…..581.00 a month.
Can I purchase renters insurance too???
Zombie mortgages mostly worked through:
http://www.marketwatch.com/story/the-zombie-mortgage-apocalypse-recedes-as-housing-regroups-2016-05-19
This is more proof we all living in our own bubble. If you are so strapped for cash you can’t afford to live under a roof in California, there is the area between the coasts where you can rent a house for the same cost as that van.
Sometimes people don’t realize they can leave the worst of the bubble, and still live a decent life.
Then there’s this little finding a good job thing, or leaving behind family and friends, your home state. This bubble will eventually pop.
which is simply making excuses for failing instead of reasons for success. The poster is right, there are jobs EVERYWHERE, if you have qualifications. If you are rather live in a van to be next to your mom fair enough, but don’t blame anyone else for your problems when you ignore reasonable and logical solutions.
Hi Doc
Truly shocking…
if we use a factor of 30% of ones income for housing, then in LA one would need to make over $100K per year
http://la.curbed.com/2016/5/17/11692852/los-angeles-rent-affordability
Another article on affordable (lack of) rent in LA
The big divide here is whether you view residential development as a problem or a solution when it comes to L.A.’s housing crisis. Rents continue to rise, UCLA says we have the least affordable leases in America, and vacancy rates are at 4 percent or lower. Median home prices are now nearing the $600,000 mark.
http://www.laweekly.com/news/can-we-develop-our-way-out-of-this-rental-crisis-6936862
There is also an article that the young generation that are living with mom and dad are getting itchy to move out…
https://www.thecapitalgroup.com/capitalideas/article/young-adults-leave-next-tailwind-housing-market.html
All this portends of a LA housing market that will be bolstered by high rents and young adults hitting the market – either for homes (with down payments by baby-boomer parents) OR for shacking up and renting …
Who can tell me they see an end to this within this year or next year???
The ONLY thing that will cause housing to crash will be a job-loss recession. (And I am not saying when that will be.)
Considering that an increasing trend of landlords in prime everyone wants to live there neighborhoods such as West L.A. are advertising lower asking rents than their contracts from two years ago, we’re already past the top on this cycle.
Official rental price metrics are largely unreliable and behind the curve. I’ve been monitoring actual asking rents for many years in a few “desirable” SoCal locales, more intensively so over the past year, and as usual, the media’s skyrocketing rents narrative is already outdated. It happens every time.
So I’m not to believe sources that base their information on data and statistics but should trust the Hotel California model because he’s been monitoring certain areas and he’s seen asking prices go down over a two year period. Not buying it for one second!
Feel free to cling to unreliable and dated data used by mainstream sources. You’re also free to duplicate my efforts and discover that what I’ve been claiming is true. But it’s a lot easier to do the former and remain misinformed. Oh, and it’s no charge, you’re welcome.
All the reason landlords are taking advantage of this year or ugh hmm extended rent mania until things collapse with jobs. And their will eventually be job losses (recession), but when?
the recession is already here and it’s a doozy, book mark this post.
This is the best housing market manipulation can produce. My boomer friends are all selling, those 5 people have 22 houses among them. There are tons and tons of these guys all over southern California but it’s not as bad as Vancouver where 1 RE agent has interest in 18 houses. This is how inventory will skyrocket.
What nearly $1.9 million buys in Santa Monica: https://www.redfin.com/CA/Santa-Monica/2308-California-Ave-90403/home/6767847
In some cities it is not illegal to live in your car. I live in Huntington Beach, which I use to think was a nice place, but I have begun to realize it is a total dump. I can’t tell you how many people live inside their cars on the street outside my house. Or in the parks, bus stations, grocery store parking lots etc.. It makes me very uncomfortable. I have a 3 year old and I constantly worry about the creepy pedophile vans parked around my neighborhood. I have called the police about several vans who just camp out in front of my rented condo and they flat out told me it is not a crime. These people can just live in front of my house, throw their litter on the street and go to the bathroom wherever they want and HBPD won’t do anything about it. I know I sound insensitive, but it pisses me off that my husband and I work so hard and yet these freeloaders just sit around all day doing drugs in front of our house. We can’t afford to buy and our rent is very cheap, so for the time being we are stuck here. I think if housing prices stay the way they are right now, our only option is to move out of state.
It’s not insensitive to tell the truth except in opposite land, where we live today.
I feel the same way as you do. We work very hard, wake up early, rush rush rush, never any time to just relax. But when I come home all tired in the evening all I see is Section 8 people at the pool relaxing and drinking beer. Well…first of all I pay HOA dues for that pool, second Section 8 is paid by my taxes!!! Why do they get to do nothing and I have to provide for them?
There’s only one possible answer to your question – liberals (ie, democrats)
How do you know they’re section 8? And your apt complex must not be all that because if the owner could get by without accepting section 8 he/she would. It’s a royal pain to deal with it but landlords do because they’re guaranteed rent.
Just because someone lives in an RV to save money does not mean they are a pedophile. Also maybe they are the smart ones. You talk about working hard but working hard for who? Your landlord? Or the bank. Why is that the smarter thing?
I spent a ton on rent the last three years and have nothing to show for it. I’m done playing this game and going the RV route as soon as I can get one. It’s not the people living in cars and RVs that are the problem, it’s this crazy debt-based consumerist system that has virtually enslaved us. Unless you are a bank or a landlord of course. Look again at those people in the cars and vans. They are us and we are them.
People living in vans is nothing new. Google “Live in a van” and you will see articles and blogs from tons of people who have been living in vans for many years. Some by choice, others by necessity. But most of these people seem to own the van, renting a van to live in seems to be a new development.
Over a decade ago, my best friend lived in a van while he put himself through UCLA. He went on to graduate school and is now an FBI agent. It certainly worked out for him…but I still tease him about it. 🙂
cheaprvliving.com is a good place to start with info. I strongly considered doing it. Say FU to property taxes. Still have to pay a small registration fee to DMV, but its peanutes compared to property taxes.
Surprised no ‘luxury tent in backyard’ listings haven’t popped up.
For the ‘sophisticated’ homeless.
UCLA researchers already got that covered, they just need to get FHA financing approved for them-
http://www.dezeen.com/2015/07/13/ucla-citylab-students-micro-tiny-houses-prototype-affordable-housing-crisis-california/
This types of ads in the Bay Area are even more “disruptive” (as the kids like to say).
Why spend $300 dollars a month to sleep in a mini-van NEAR the beach (illegally) when you can sleep in a tent ON the beach, legally, in L.A.? You won’t have to hide from the neighbors or the police, and at least you can stand up.
Neat idea. Back in 1970 a friend and I were traveling around and spent a night in our sleeping bags (no tent) on the beach at San Diego and Santa Monica (SD and SM to all you hipsters). Best two nights of sleep I’ve ever had, lulled into a deep, restful sleep by the sound of the surf. No one bothered us back then, but I’d be afraid to try it today.
Wasn’t there a guy on this blog (not too long ago) who made a case for sleeping in a van/SUV while saving for a down payment. You can shower at 24 hr fitness and spend weekends at the beach. Where do I sign up? 🙂
Yeah, I suggested it based on my friend’s experience. After his divorce, he lived for decades in his truck with a camper shell, and parked at North Hollywood Park. He showered at the gym and hung out there. But that was back in the 80’s and it’s a million times worse now. BTW, I think I saw him, much older and homeless with a backpack, sleeping at a park. We’re getting into John Steinbeck territory these days.
If you have the right skills, it might work. My co-worker in the early 90’s had the idea to own a camper and park it in his employer’s parking lot in Silicon Valley. He could make 200K per year while living rent-free and using his employer’s work-out facilities to shower. His plan was to work 5-6 years and collect over !M and then move back to the Midwest where he could retire and live like a king.
Flo, from Mel’s Diner lived in a trailer/camper
I don’t think the van owner will get that price for rent when you can own your own van house for $399. https://losangeles.craigslist.org/lac/cto/5570782617.html
This is a bad indication that A simple worker cannot afford to rent a decent place. If this trend continues, it is better leave California. There’s a lot of goodplaces around America where you can Achieve a better life.
Is this the new American Dream? Living in a van? What’s happening to the greatest country in the world? Are they run by dumb politicians.
Greatest country? American Dream? All myths. Better wise up, the system is rigged.
Just dawned on me. The landlord in this case is leasing a van to be rented on public streets. Even though his home is nearby, unless it is permitted parking, he has no more right to that street parking as anyone homeowner or not. Even if you lived 10 miles a way you could theoretically drive a mini van onto that street and collect rent. I might have just been slow to get this. I have seen people rent camp sites in their yards, extra rooms, RV’s in the driveway. But a van that you cannot drive on street parking is so egregiously illegal. He doesn’t own that space. lol
There is no law against renting out a van. But I assume there must be some law governing the rental of a van on public streets specifically for the purpose of living in (even if the van owner has a parking permit), proven by the fact the van can not be moved by the prospective renter.
In which case, he’s technically not even a “landlord” — which is to say, the “lord” of some “land.”
He’s renting a vehicle, not a residence. Legally, it’s similar to leasing a car from a dealer.
This is a very tangled area, legally speaking. What happens if something goes wrong?
What if the “tenant” is injured while inside the car and sues? Say the brakes slip, or another car crashes into it while it’s parked. Does the “landlord’s” car insurance cover such liability? Probably not, as the “rental” of the car would void the insurance contract.
Exactly spot on
You guys are really trying to analyze the legality of renting out a van / living in a van?
if these people cared and were trying to be part of a legal society they wouldn’t be living in a van or renting out a van in the first place.
Slight increase in inventory in San Diego but most of the increase is crazy sellers. San Diego prices seem to have lurched 15 percent from January to now which have brought out the nuts trying to sell what they bought 12 months ago for 30 percent more.
To RACOOMES– why wait to leave the state. I would love for you to leave now. You belong somewhere like Texas or North Carolina. I’m sure those people in the vans are really living the life right?! If so, then trade places with them. I’m sure any of them would prefer your situation to theirs. And if your rent is cheap then quit complaining!
Tajk – You have no idea about the people I am talking about, but you immediately assume that I am the one in the wrong. These guys are drug addicts NOT families struggling to make it. They walk around my neighborhood as high as a kite all day long. I know this because I have to live next to them. Why don’t you give me your address and I’ll tell them to park in front of your house? I’m sure you’d change your mind pretty quickly.
In my opinion I sense another deal like Watts riots is coming soon, but as a retaliation at the housing dilemma. Might start finding homes and apartments being burned as an excuse to leave. If someone can’t live here then I guess they figure no one will for now.
The demographics in LA have changed drastically since the Watts riots. Watts is now almost 65 percent Hispanic and many in the area are foreign born who are used to living in crowded conditions.
It’s pretty safe to say whomever put up this ad to rent out this van is a real douche-bag.
The problem in LA is, all the jobs in SoCal are mostly in DTLA and WLA (hence the traffic). The traffic is so bad, people are willing to pay a premium to live near work, thus, pricing out the middle class. What DTLA and WLA need to do is build up, like WAY UP. I don’t know why all the new apartment / condo are mostly only 5-6 stories tall. To satisfy demand, they need to build 30-40 or 50 story buildings that are full service, with shops, markets, gym, etc. That will help push down prices and reduce traffic.
@ Jason. Many years ago when the SM Place was going to be demolished and the Promenade extended – the city of SM proposed to build 3 high rise residential towers at 4th and Colorado, each was going to be around 20 stories high. When it came time for public comments, the outrage by citizens (claiming traffic would be much worse) was enough for the city to cancel the towers.
One reason for the height limits for buildings in the Santa Monica, Mar Vista, West L.A. area is the presence of Santa Monica Airport.
Locals are trying to close down the airport. Airport defenders say that one of the airport’s benefits is the height limits on buildings. Close the airport and new buildings will be taller.
5-6 stories is the limit of Type 5 wood construction, 5 stories of wood, or 5 stories of wood over 1-2 stories of concrete podium. That’s why you see a lot of multifamily buildings of that height.
Exactly. Building more high rise condo’s is the answer to the housing problem. The thing that always gets in the way are zoning issues that do not allow for high rises to be built.
Prices are still frothy as hell in the Sacramento area and overpriced crap goes pending instantly. Major bubble here. I am a landlord for a living and I wouldn’t touch any of this stuff. I am simply improving my buildings so that when the recession hits and rents plummet again (I’ve seen it before) I will stay 100% occupied when other buildings cannot. That is how you do it, no charge for it.
I too am in the Sacramento area. Outer Eastern suburbs. Overpriced crap is an understatement. It’s now exceeded 2006 bubble prices. And everything goes pending within days. Who the hell is buying them? A house down the street from me, 18 yo, a total dump – rental for past 14 years – needs a complete renovation just went pending for $475k. 1750 sq. feet. WTH? Nobody I know has received pay raises for years. My company just paid off 500 people 2 mths ago. Layoffs at Intel down the street, layoffs everywhere. Retail stores closing everywhere, or empty and closing soon.
It doesn’t add up.
Yellen bucks desperately trying to land any yield-producing investment no matter how extremely overpriced the latter may be? Cheap debt tends to lower the inhibitions of both lenders and borrowers.
It’s a repeat of the last bubble in which people from the Bay Area are buying houses in the Sacramento Area for cash and renting them out. One change from the last bubble is that there are also many large investment companies like Invitation Homes that are buying homes and renting them out in the Sacramento area.
http://invitationhomes.com/market/sacramento-san-joaquin-bay-area/
hahahah agreed Hunan.
These are good deals. I take landscape and nature photos along the Big Sur coast every week and there are people living in their cars and vans up and down the coast. They defecate in the woods or wait until the restaurants open. Most work in the local hotel and related tourism industry. The local government authorities refuse to open up permits for people to build proper housing for everyone in need of housing. Then the locals complain about the homeless living on the highway.
I moved to an affordable Midwest town for two years to save money and came back to the Valley a year ago (due mainly to weather) to a rent-controlled building. Tenants who are off lease here just got a 4% increase (3% yearly allowed by rent control plus 1% because landlord pays electricity). L.A. rent control allows a 3%-8% yearly increase depending on inflation in contrast to San Francisco which allows only 1%. Thus even somewhat “affordable” housing here can grow out of reach for low-income renters over a multi-year time period. Instead of “yearly,” maybe there should be a cap on the number of increases an individual renter will be subject to–for example, an increase is allowed every two or three years– otherwise it’s like being a frog in the proverbial slow boiling pot.
Renter LC,
Why should the government regulate private property????… Why not the government to regulate how much you should charge for your car when you want to sell????…. Or any item you own for that matter.
Where in the constitution did the people give that power to the government???!!!….
Most of the problems in the economy are caused directly or indirectly by too much regulation and government involvement in the free markets. What we have today is not capitalism or free markets but an oligarchy and central planning with the power concentrated in the hands of the few.
If Los Angeles has rent control, that is a large part of its problem with housing shortages and sky-high rentals.
Rent controls destroy the local rental market for non-affluent renters wherever they are put in place, without exceptions. Rent control is a short term “feel good” that results in a vicious hangover. First, a landlord will do ANYTHING to get a low-rent tenant out of a unit that could command a steeply higher price in the free market, and will suddenly begin to make life miserable for the tenant. Needless to say, the property owner will leave no loophole unexploited that would permit him to regain control of the property- whether declaring that he intends to live in it, or selling it, or, if he possesses clout with the local polls, getting it upzoned and redeveloping it, demolishing the structure you’re living in.
After a decade or so under rent control, the rental housing stock begins to shrink, and tenants in remaining rent-controlled units are subject to evermore pressure- ridiculous rules, extra charges for things like too much water use- or the landlord refuses to maintain the unit and make repairs. As soon as someone moves out, the rent is doubled, or the unit removed from the market. Failure to remove rent controls in NYC after WW2 ended, resulted in hundreds of building converting to co-op, while lesser buildings were simply run into the ground and then abandoned, as happened it the formerly beautiful Bronx.
Government involvement in housing, whether rent control, or Section 8 subsidies, or subsidies for buyers, government-sponsored buyer assistance, or no-down mortgages- has greatly contributed to housing inflation and has altogether wrecked the housing market in this country. We need to remove controls and programs, not add more.
the govt. already regulated private property by propping it up with every QE and give away possible picking the speculators over the prudent and savers.
class warfare is very close to becoming reality and all of it perpetuated by the govt, wall street and bankers. Anyone whom thinks this will last is smoking the good hopium…..
It will come back to reality and many dreamers will suffer. A home is not an investment and you can be sure as the your 2 feet that it will burn many while the govt. saves the speculators whom deserve to lose everything. No more picking winners and losers.
It will be ugly…
I agree Laura. Rent control laws are anti-progressive and is one of the main reasons LA has so many slum and ghetto neighborhoods. The Section 8 program like most gov. welfare programs is wildly abused and mismanaged. The result of both of these programs is a ever-growing welfare society.
Hi Laura,
I’m not saying that I agree with rent control, philosophically, but I can certainly say that I’ve known dozens of friends in the Hollywood area (myself included, a decade ago) who only managed to stay in their places for years and years because of rent control. Many of them have been in the same place over ten years. I even knew a couple who had been renting the same place for 30 years!! Los Angeles is probably one of the most difficult place to get rid of a tenant in the country, and the only people I know who were pushed out were pushed out by new owners of their rental.
What you say may be true in other places, but, in LA, rent control definitely hurts the landlord, not the tenant.
Apparently Julian Castro didn’t get the memo on section 8. Coming to a neighborhood near you: http://nypost.com/2016/05/08/obamas-last-act-is-to-force-suburbs-to-be-less-white-and-less-wealthy/
It will be interesting to see how this plays out in the insanely priced So Cal rental market. Once again the working class (who still fancy themselves middle class) loses?
I’d be okay with no rent control as long as home owners are okay with no Prop 13. Can’t have your cake and eat it too.
The Observer: “I’d be okay with no rent control as long as home owners are okay with no Prop 13.”
No, you wouldn’t. If you’re a renter, you’d want your rent control, with or without Prop 13.
“Can’t have your cake and eat it too.”
What does cake have to do with rent control or Prop 13? You spout a cliche, as if that’s saying something of substance.
Rent control and Prop 13 are separate issues. Landlords would gladly drop Prop 13 if they could get rid of rent control, because then they could pass on property tax increases — along with many other expenses — to the tenant. But under rent control, they must absorb those increasing expenses, of which property taxes are only one.
SOL-
They are similar issues because they both distort markets one way or another. Without prop 13 you wouldn’t have owners holding onto properties forever driving up rental costs because there are no starter homes to buy, forcing people to rent for extended periods of time and needing rent control. Retirees would move on. Move up buyers would sell instead of renting out their old place. We would have more turnover and housing prices that reflect the real economy of the city.
“If you’re a renter, you’d want your rent control, with or without Prop 13.”
Most renters don’t benefit from rent control, and just like with Prop 13, the pyramid of beneficiaries tapers to a point at the top.
“because then they could pass on property tax increases — along with many other expenses — to the tenant. But under rent control, they must absorb those increasing expenses, of which property taxes are only one.”
It’s not true that landlords are able to simply pass expenses to the top line, the marketplace sets the price.
“I’d be okay with no rent control as long as home owners are okay with no Prop 13. Can’t have your cake and eat it too.”
This is one of the stupidest things I have read. If one removed both prop 13 and rent control, rents would increase dramatically. Landlords would pass the increased taxes onto tenants though rent increases. I believe that repealing rent control would be far less dramatic and have less effect on rents then repealing prop 13.
“If one removed both prop 13 and rent control, rents would increase dramatically.”
No, the market would determine the rent price level which is a function of far more inputs than landlords’ expenses or government subsidies.
Building new homes is not a free market. Rent control, which I’m NOT in favor of btw, is one answer to the limits government and NIMBY owners set.
You can only have non governmental control if it’s a TRUE free market. In this case it would mean anyone with cash could erect a new buidling without zoning, height, use restrictions and so forth.
Many people are not alarmed at rent control ONLY allowing a 3% yearly increase. However, this is a killer in the long run. Those 3% increases compounded over 10 or 15 years really add up. This is why buying at or close to rental parity in socal is likely the most important guideline there is. Signing up for a mortgage and having Prop 13 protection allows for payments that don’t change much at all over time.
Housing is red hot in the South Bay. Anything priced realistically is usually gone in a matter of days. Just my 2 cents of course.
“Those 3% increases compounded over 10 or 15 years really add up.” Really? I know people in LA who pay $600 a month to rent apartments in good parts of LA that cost $2,000 per month if you were to rent them today. The reason being is that they have been there for 20+ years and will probably die there, and oh yeah rent control.
Here we go again for the umpteenth time with the rental parity meme. If it were truly that simple, this blog wouldn’t exist.
Foremost, 3% is simply a cap and therefore isn’t a rule that rents will be increased 3% each year. Any experienced landlord knows that rents move in two directions. For those who haven’t experienced lowering their nominal rents, they either haven’t been in the game long enough or continually underprice the market.
Rent control units tend to have deferred updates and maintenance which means the rent control tenant is getting less for paying less.
Any “owner” who thinks the real cost of ownership doesn’t increase much over time either is inexperienced or hasn’t bothered to do the required math.
Prop 13 can be unwound. Anyone counting on it could be in for a rude surprise someday.
Hotel California…. Rental parity IS that damn simple, and the blog magically DOES exist
Hunan, I specifically referenced the blogger who got into his rent controlled lease last year. He/she is likely paying close to market rate rent. The people who have been in rent control units for decades are only leaving one way, that’s on a gurney.
Holo, the concept of rent parity is simple, yes. As it relates to buy versus rent, what’s imputed to that is not as simple as rent parity. If it were actually as simple as that, a blog such as this would have no traffic, hence it would probably not exist in the first place, at least not this long. The blog would instead consist of 2-3 posts a month for years on end with each post being one to two sentences regarding rental parity. Anyone who really believes in rent parity as the answer wouldn’t waste their time visiting, much less commenting on a housing skeptic blog.
I think Prop 13 has its good and bad points.
The good points:
1) If you bought a house in yesterday’s bubble for 800K and it has doubled 2 years later to 1.6M in today’s bubble, many would have a hard time affording a 2X increase in property taxes from 8K per year to 16K per year. They’d have to sell and move out of the area. Prop 13 is a good filter for these types of short term bubbles.
2) Grandma retired 10 years ago on SS and her house that she bought in the 70’s for 40K now has a 1K per year property tax. That is affordable on SS. If her house is now worth 1M, can she afford to pay 10K per year? I doubt it. She’d have to be kicked out on the street or become a trend where grandparents move in with their kids (along with their Millennial kids).
The bad points:
My older co-worker benefited from Prop 13 unfairly IMHO in the 70’s when they bought a 60K house when they in their 30’s making 20K per year. Their property taxes rose to about 1K before they sold and moved out of state in the 2000’s. At the time, they were both making nearly 150K combined before they retired. Their neighbors were paying 10X that amount in property taxes for the same services and were in their 30’s also starting their careers.
Commercial building owners really got a deal from Prop 13. There are many commercial property owners who bought in the 70’s and rent out their buildings and would be foolish to sell because they pay pennies on the dollar for property taxes while renting out at very high rates. They get the same services as the homeowner nearby.
Has anyone considered what happens when this bubble bursts? It isn’t just valuations! It is sales tax and property tax revenues. It is all those already over-stretched liabilities for everything from public pensions, to all that infrastructure, to an already grid-locked transportation system! I guess if your monied, no problem! But, if you are one of the remaining 90%, the snowball effect will be quite a rude cruel!
Oh yea! When this thing blows housing will be the least of our concerns. Food and jobs will be two high concerns.
Disagree totally. If housing was to tank 30 percent, highly unlikely, annual property tax revenue would take a hit, but not like you imagine. Just reference the housing collapse in 2009. Local tax revenue increased in 2009 and 2010 and on!
A house that was bought at 600k, pulled up in value by the bubble to 1 million, only to collapse to 500k, the real impact is small when you consider every year thousands of houses every month are sold for the first time in 30 years. Instead of 800 a year going to the city, those housing bring 800 to 1200 a month!
In reality, very few houses would suffer the full collapse, as far as property tax goes. If you have 10000 crap shacks at 1million, only the last 25 sold set the comp at 1 mil. More than half the 10000 crap shacks probably have an average tax base of 400k.
Jimbo, Americans will never have to worry about food. It will never be an episode of Walking Dead here as much as people want it to be. There is too much redundancy for food issues here. Housing is inflated big time. It will correct, house jockeys will have to find another line of work, and dumb money will be lost like every cycle… but housing will not be the impetus for a zombie apocalypse.
Southern California is essentially a desert filled with 13 million people. You lose water, or food (do to loss of transport) how nice do you think So Cal will be? 3 days without power, water or food and you are living in a dead zone. Ever see what someone will do to feed their family when they are desperate? How about water? Not to mention loss of most electricity as California is reliant on other states in the grid for its supply.
Southern California along with most of the eastern coast is the last place Iwould ever suggest a client lives if they want long term safety. Your state is the worst example of a slow motion political 3rd world collapse that I can find though New York is close but has a better water supply.
Joe what state you recommend for long term safety? But we’re not just talking about safety how abou job security, abundant and reliable food supply, water and power are the things you need to consider too. Don’t tell me you’re in California
Joe what state you recommend?
When we were young, we had a house within walking distance of Hart Park in Orange. The park is on Santiago Creek. There were in those days, a lot of trails along the creek that led down to a park in Santa Ana that was named for the creek. We used to walk down there with our kids fir exercise. I remember a guy who was living in a camper van that he parked in the park. I think that it was that guy who found either the headless body or the severed head (found a few days later). It’s a cold case now:
http://newsantaana.com/2015/04/30/sapd-reopens-cold-case-involving-a-decapitated-woman-found-in-santiago-park-in-1988/
Living in your van in a public parking lot can be exciting, eh?
As for food and lands of plenty:
My Dad was born in Czarist Ukraine, which he described to us as a land of plentiful food production. His Mother’s family was involved in animal husbandry there. Two World Wars, a Revolution and a man made famine later, that country had probably more mass starvation per capita than any other European country, and maybe any country in the World.
I think the mobile home selling in Malibu for $5.3 million has a scent of “Bubble” about it. https://anthonybsanders.wordpress.com/2016/05/22/bubble-mobile-home-in-malibus-paradise-cove-sells-for-5-3-million/
It’s a repeat of the last bubble in much of the Sacramento area. People from the SF Bay Area are buying houses with cash in Sacramento and renting them out. There are also large investment companies like Invitation Homes that buy homes for cash and rent them out.
http://invitationhomes.com/market/sacramento-san-joaquin-bay-area/
By buying for cash, I think you meant paying with non-mortgage, low-cost loans. I doubt that companies, such as cash-rich Apple, would use their money when borrowing costs are so low.
Most institutional investors who swooped into Sacramento’s housing market during the recession have gone., but all-cash deals are still common, according to RealtyTrac.
Cash sales have remained consistent for two reasons: It’s still a common method for “mom-and-pop” investors. And going all cash also has advantages for owner-occupants who want a piece of what’s still a fairly tight market.
http://www.bizjournals.com/sacramento/news/2015/02/20/big-investors-gone-but-all-cash-deals-still-common.html
http://sacramentoappraisalblog.com/tag/cash-buyers/
this is how inventory will explode when reality finally returns. I don’t think the market can be manipulated forever.
If you don’t think the market can be manipulated forever, you haven’t looked up the “Rental Backed Security”. Now that Wall Street wants a piece of your rent check, we have yet another looming asset bubble in play:
https://www.homeunion.com/blog/welcome-to-the-rentership-society/
When conditions went South in the housing market, foreclosed families ended up in rental housing. But when the Big Squeeze happens in the rental markets, displaced families will be forced into over-crowded conditions (doubling up) and, ultimately, increased homelessness. There’s NO end in sight because Wall Street, now that it has off-shored so much of American manufacturing and whatnot, is looking for stuff that CANNOT be outsourced to invest in. That comes down to very basic things like food, energy and housing — so expect more volatility there because it’s representative of the giant vacuum that is globalization shifting so much of the “real economy” offshore.
If we want to see an end in sight in our lifetimes, we HAVE to comprehend that thanks to Citizens United and other Supreme Court decisions, private (and foreign) money can essentially “buy” the abject silence of our political leadership.
IMHO, campaign finance reform is the single-most important issue we need to begin to discuss if we want to SLOW the rate at which economic booms/busts occur. If we do not want bubble-driven economic highs/lows to continue to slam the most fundamental (and personal) aspects of the U.S. economy — meaning access to affordable food, housing and energy — we HAVE TO TACKLE CAMPAIGN FINANCE. Market conditions aren’t accidents, they’re creations.
Joe, Idaho is full of preppers like you that will never likely have to rely on your basement full of MRE’s. If there is a catastrophic event like no food or grid down for extended periods of time it would be unprecedented in American history. Doesn’t seem like a strategy to center your entire life on. Plus if there is a situation such as this then I will use my training to track and kill preppers inside their compounds and then feast on the MRE’s they collected for 20 years. Prepper land and realty are not one in the same.
‘reality’
Last I checked, living in a parking place in Venice was legal. In any case, I live in a rent control unit in Santa Monica which allows me to pay fair market rate as opposed to bubble rent pricing (2/2009 lease). The last time I’ve seen this volume of lingering rental offerings and crowded Sales signs on every corner was 2008-09. Prices are double price per square foot in just 3-4 years in some cases. Foreclosures from years back are just coming to market. $1000+ a square foot for a practically windowless 1br that no one in their right mind should rent for more than 2-2500$/mo….everyone is trying to cash out on a peak. On what planet is a 1.5m purchased sell for 3.5m 3 years later except in a bubble? What will happen to these all cash buyers if their portfolios go down 20% and they are upside down on their investment RE? When the Chinese wealth unspools? It may not be a cliff like 2009 but I’m telling you, the rent and sales signage is ominous. Beachfront rentals in coastal Santa Monica should not be sitting for half a year
” In any case, I live in a rent control unit in Santa Monica which allows me to pay fair market rate as opposed to bubble rent pricing (2/2009 lease).”
I think you mean you are paying a rental rate that is subsidized by higher rents paid by your neighbors. I’m not saying rent control is good or bad, but the fact that your rent is artificially controlled by the city is a direct cause for higher rents in the neighborhood so I’m not sure it’s something to brag about, at least not in the context of the rest of your comment. I know this is just some random blog, but the words you use reflect your level of understanding on this matter.
Dean, you are right. This is just another sense of entitlement and disillusion when renters think they can dictate fair market rent just because they are locked in due to rent control laws.
Just like prop 13 for the homeowners and landlords. Subsidized by any new neighbors and it applies to all rather than just those pre 1978 buildings.
Prop 13 needs to go and the issue will pick up steam faster than ending rent control.
I don’t think other renters subsidizing this person would consider it fair. On the other hand, the observation of a rental glut corresponds with the activity I’ve been observing real time which contradicts the skyrocketing rent story.
re: Penthouse
It’s not just the rentals in prime locations sitting empty.
The new housing developments in the $700-900K range are popping up in communities like La Habra that don’t even have surrounding home values to justify those price ranges. Despite this, I have seen new housing developments spring up in a lot of cities in areas that people who have that sort of money probably wouldn’t choose in the first place. I see it time and time again in Orange County: They build a batch of new homes and 3, 5, 8 years later you can drive past at 8:30 p.m. at night and anywhere between a quarter to half are still empty.
There’s a development that someone put along a major boulevard in my city that overlooks my single-story home neighborhood. I can stand on my front porch and observe that about 40 percent of the units are still unoccupied. They started breaking ground on these units right before the financial meltdown of 2008. They didn’t finish these town homes for three years. After a super slow completion of a small parcel, I continue to see Berkshire Hathaway signs out front. I drove through and it does, indeed, seem that there’s a high rate of vacancy (few cars or people around on a weekend).
I think there is FRAUD going on and I suspect it’s widespread in Southern California. If the general population can’t afford these new homes, then demand for them shouldn’t exist. And yet they’re being built. By this time, the banks, the developers and the city planners should have observed that the demand for homes in these price ranges is weak (it doesn’t help that they tend to be built closer together, with less of a greenbelt/setback from busy streets). So why do the banks lend for these projects, why do the cities offer developers “incentives” and why don’t the prices come down when they don’t even have 3/4 occupancy 3-6 later?
The only thing that I can guess is that 1) land values make it too prohibitive to develop affordable housing, 2) tax loopholes mean that developers and/or banks don’t shoulder the risk of offering homes that are priced too high to sell in a given area, 3) taxpayers are being abused by politicians who are seeking to gentrify their communities by offering premium housing as “bait” in the hope of drumming up higher property tax revenues, 4) By developing housing, whether home or rental, that commands a higher price, the vacancy homes/units are essentially “covered”. In effect, the people who rent or buy into these communities are paying SO MUCH that they’re paying for the developer to let the other units or homes sit vacant. In other words, the property development is still profitable because instead of charging X-dollars with the need that they achieve full occupancy rates, they charge a premium to those who live in such developments so they can AFFORD to let a good deal of them sit empty awaiting a buyer for “as long as it takes”. In other words, the pricing scheme hinges on charging SO much for any one home/unit that they don’t NEED the revenue from the balance that sit empty to make the project solvent. You pay for your neighbor’s house to sit empty.
In a rational world, the fact that so many units are sitting empty in the midst of an affordable housing shortage would trigger a price adjustment. But it’s a RIGGED world and so they over-charge for the units knowing that they can let them sit vacant because your rent or home-cost to live in the community will allow them to sit there and gamble. So my advice is, if you think your property value is higher in a NEW development vs. an existing one, think again. How much of a resale value will you have in the years to come if your choice of “planned community” is somewhat of a ghost town?
California has the greatest shortage of affordable housing in the nation. Studies show that new housing stocks have been falling behind demand since the 1980s in SoCal and elsewhere in the state. Allowing inventory to come up short, despite rising population levels, can be attributed to being “too built out” to do anything about the problem — that’s the prevailing wisdom, in any case. But I would take it a step further. It’s also the case that by refusing to meet demand for affordable housing, City officials are setting the stage for housing bubbles — and the added strain on federal entitlements, to boot — as much as Wall Street ever did.
City planners, in particular, need to be held responsible for the type of development incentives they provide. Offering $800-$900K homes in a community surrounded by $400K homes is evidence that they’re guilty of gross mismanagement, if not market manipulation within their own City boundaries. After all, who better to know what the average wages in a particular community can support than municipal leaders? And yet the incentives they provide for new housing almost inevitably goes to the luxury segment. (City planners are not even zoning for new multi-family rental housing to help deal with the rental shortages, either.)
I think it’s time for the federal and state governments to intervene in the incentives that City governments use to entice developers. Building in favor of premium buyers, in spite of the affordability shortage, is NOT case of local market conditions shaping development. A free market would dictate that if there is more demand for AFFORDABLE housing vs. luxury housing, there will be more apartments and affordable homes slated for development. A free market would dictate that if NEW home developments are remain largely vacant for years to come, prices WILL come down. The entire market, however, is being rigged by every player at every level.
Nothing will change until we who live/work high-cost areas start showing up at City Council meetings and demanding accountability for the proliferation of unaffordable housing developments that any of us, who live or work nearby, can merely drive past a couple of times to appreciate are still nearly half empty YEARS after the fact. In the face of an unprecedented affordable housing shortage in LA/OC/SF, it makes no sense that developers, their lenders and city officials continue to climb in bed with one another to break ground on still MORE developments that will inflate the high-cost bubble that much more. Personally, I think it’s time people in SF, OC, LA got together and started protesting in front of these over-priced, unaffordable housing developments. Shut a couple of operations down with heavy protests, make news across several communities and counties simultaneously and send a message: STOP THE HOUSING COST INSANITY.
I lived in my van in Malibu beach for over 8 years. Used the state parks facilities and went to the valley each day to my $28.83hr job. I swam and surfed in the ocean, ate at local restaurants that had good deals on certain days, and met and had sex with quit a few beautiful free spirited women who were on their own journey. I had a lot of fun but got burned out towards the end. Fortunately, by then I had saved 50k and ended up buying my place in 2012 for 45.8k cash. My RE agent said I could list it this summer for 135k if I wanted to sell. If you dont have rich parents, don’t want to be in rental servitude your whole life, and want to be a homeowner by the time you’re 40, than doing it the unconventional way may be the only way for a lot of us in these times.
postbubblesuccess, would be so kind to tell us in what part of CA you purchased property for <50K in 2012? Thank you.
Didn’t, so he can’t
What sort of “place” in SoCal did you buy that, even today, only lists for 135k? And where is it? Certainly not in Malibu.
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