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Rent Control

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This may be a good topic for discussion since most of what it being built is on the high end. 

 

Has Nashville now come to the point we need rent control? BHibbs in another thread said his building across from Werthan Mills has rent control.

 

Should this be public policy? Should we have a requirement that developers build mixed income housing so everyone could afford to move tho the city?

 

Feel free to discuss. I will bring this up at the next forum meet as well. 

 

 

UA

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Would rent control as policy slow down construction because of reduced profitability for developers?

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No, rent control stifles development and often leads to deception on the part of renters  who lie,cheat,steal to secure the bigger better deal. 

 

UA your situation is a good example of someone who for years complained they could not afford to buy close-in. The situation changed and you found a deal....the market worked (in this case the bank ate the difference between the amount they loaned to build your unit and the price you paid). If an apt. bubble develops the rents will drop and some currently priced out of the area will have an opportunity.

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Rent control would be a poor idea and over time would lead to poorer quality housing and less housing.

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We are not in need of rent control as many areas in the city are not getting high rents. The further out from the core you go especially with older units, the rent is affordable. There are some units, in the central part of the city that can be found affordable as well. As long as MDHA is using tax dollars to subsidize, there is no need. Free market works.

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I'm not going to take much of a stand on this topic (as I'm not very well informed of the economics) other than to share my personal experience. I was under rent control in California. I'm not sure how it compares to rent control around the nation, but this is what it broke down to;

-Upon signing a lease, rent control was set.

-Annual rent increases were permitted at some sort of standard of living factor (I can't remember what the exact standard was), which equated to a few dollars per year. My landlord never took the option, but I would get a letter from the city each year outlining it. I think it was somewhere between $20-50 annually.

-My landlord was required to pay an annual interest payment on our deposit, by some standard interest rate set by the city. Again, this equated to a few dollars each year, but it was better than nothing.

My perception of the process was this. Landlords and tenants were generally happy with the situation. A vacant apartment would be repaired and repainted to fetch the current market rate. Under rent control, an apartment would be maintained, but not updated. The tenant would essential remain in an apartment which was market rate for the time they signed the lease. If they became unhappy with the current dwelling, they were free to move to a new updated apartment for the new market rate. If they stay under rent control, the landlord gets steady income with minimal investment. Once the tenant moves out of the rent control situation, the landlord could make improvements to bring it up to par with the current market rate. Therefore, the landlord gets steady income with minimal investment, and apartment hunters always have a stock of modern, clean housing to chose from. I saw it as a win-win. Apartment hunting was competitive, as opposed to some of my experience with Nashville where there is ample supply, but it's sometimes the case of choosing the least crummy apartment for the most reasonable price.

I'm not saying it's perfect, but I don't feel like it somehow cheated the landlords or created an infinite supply of crummy housing. In fact, I feel that all parties were generally happy with the situation.

Just my two cents.

Edited by nashvillwill

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I'm not going to take much of a stand on this topic (as I'm not very well informed of the economics) other than to share my personal experience. I was under rent control in California. I'm not sure how it compares to rent control around the nation, but this is what it broke down to;

-Upon signing a lease, rent control was set.

-Annual rent increases were permitted at some sort of standard of living factor (I can't remember what the exact standard was), which equated to a few dollars per year. My landlord never took the option, but I would get a letter from the city each year outlining it. I think it was somewhere between $20-50 annually.

-My landlord was required to pay an annual interest payment on our deposit, by some standard interest rate set by the city. Again, this equated to a few dollars each year, but it was better than nothing.

My perception of the process was this. Landlords and tenants were generally happy with the situation. A vacant apartment would be repaired and repainted to fetch the current market rate. Under rent control, an apartment would be maintained, but not updated. The tenant would essential remain in an apartment which was market rate for the time they signed the lease. If they became unhappy with the current dwelling, they were free to move to a new updated apartment for the new market rate. If they stay under rent control, the landlord gets steady income with minimal investment. Once the tenant moves out of the rent control situation, the landlord could make improvements to bring it up to par with the current market rate. Therefore, the landlord gets steady income with minimal investment, and apartment hunters always have a stock of modern, clean housing to chose from. I saw it as a win-win. Apartment hunting was competitive, as opposed to some of my experience with Nashville where there is ample supply, but it's sometimes the case of choosing the least crummy apartment for the most reasonable price.

I'm not saying it's perfect, but I don't feel like it somehow cheated the landlords or created an infinite supply of crummy housing. In fact, I feel that all parties were generally happy with the situation.

Just my two cents.

 

What city is this?  I had some friends like 25 years ago who rented a house in Berkeley.  They got a notice from the city that their house was supposed to rent for less than half what they were paying.  They ignored it as they thought their rent was reasonable.  I came away with the impression that the policy at that time was counter productive because it was so out of touch with the market values.

 

I think the devil is in the details, a well-designed program is probably good but what are the chances of our politicians coming up with a good program?  On the other hand, we have instead a complex mix of subsidies for low income renters, subsidies for developers, hidden subsidies built into the way policies work, I'm not sure anyone knows what the net effect of all these policies is (other than a lot of 4 lane freeways to BFE used by 2 cars an hour) but rents in Nashville are too damn high. 

 

It's not just a question of what I can afford, but most of what's built is too large and full of useless amenities like granite counters or whatever.  I don't need any of that crap.  Most of the new single family houses built are several times larger than anything I'd want to live in.  How did people get talked into this?  And the landscaping in these new subdivisions is absolutely awful, too formal, too small for the houses and the same plants used over and over.  Enough with the dwarf nandinas!

 

I don't expect to live in downtown, but I would like cheaper rents in Davidson Co, for small, modest dwellings in walkable mixed use neighborhoods with access to good public transit, especially in 10-15 years when I will be old enough to start questioning my driving abilities.  Currently I live in the Boro renting quite a nice little house for what I paid in Nashville for a cockroach infested slum; but if I couldn't drive I'd be totally stranded, and I drive all the way to Nashville for culture/entertainment.  Maybe by the time I'm that old there will have been enough housing built under the newer, more urbanist policies to accommodate people like me. 

 

Developers are always going to go for the rich folks first, but eventually they will run out of affluent people.  Plus, apparently they pee in the elevators.

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Well, I for one am appreciative of my building offering the rent control option, I would not be able to live where I do otherwise.
I know there are two units in Germantown(Station Lofts and Germantwon Place) that are, and one in the Gulch that was at one point (the Laurel House)

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Laurel House was $600 and under. It was kind of geared to the artists like the Artists Lofts on RMH.

 

I hear all of this talk about the free market. No-one ever shows how repressive the free market can be. Comcast/Time Warner anyone? Anyone?

 

The Free Market as it were in regards to housing only gears itself to the wealthy. Teachers, police, fire fighters, military personnel, social workers, artists, writers, church workers, outreach workers, clergy be damned. We only build for software developers, accountants, lawyers, doctors and such. After all they must have worked harder and deserve it. People with lower incomes must be lazy and don't deserve to live in the city.


We are not in need of rent control as many areas in the city are not getting high rents. The further out from the core you go especially with older units, the rent is affordable. There are some units, in the central part of the city that can be found affordable as well. As long as MDHA is using tax dollars to subsidize, there is no need. Free market works.

http://www.tennessean.com/article/20131030/BUSINESS02/310300126/Nashville-s-average-apartment-rents-hit-record-892

 

I would not call almost $900 a month affordable. Sorry Ron.

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What city is this? I had some friends like 25 years ago who rented a house in Berkeley.

It was Berkeley.

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I think you could make a better case if there was no affordable housing in Nashville (and even then I think the case is still very tough). Nashville has affordable apartments, they're just not in the "cool" places to live. There is no such thing as a right to live in a cool neighborhood. There are still plenty of places that people can live comfortably and safely. 

 

The reality is that the apartments under construction now likely would not have happened had they been unable to charge what the market would bear. Developers build when they can make money on a deal. If there's no money to be made then that capital will go elsewhere (either a different locale or a different sector), and saying developers should target a lower priced market is akin to telling a friend to only purchase mutual funds that have underperformed compared to Dow Jones Industrial Average. The money that is building is owned by individuals who choose to put their money in places that give them a high rate of return. If there isn't a high rate of return they'll just move on to the next option. 

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John, when was the last time you lived in an apartment. The last time for me was back in 97. I was paying close to 700 a month then. We are going on 20 years from there. Most folks that live in apartments are either married or have roommates. 900 is affordable for most people. That is what I would expect to pay if I wanted a halfway decent place and more if I wanted a much nicer place with amenities. A house or condo payment would be about the same. The big problem with some of the condos is the huge association fees you would have to pay. It would probably end up being more than apartment rent by a lot. Again location location location.

Most of the folks that are living in the downtown apartment are young professionals. There are a lot of folks living beyond their means for sure, but the average price point has not increased a lot till the past year or so.

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John, when was the last time you lived in an apartment. The last time for me was back in 97. I was paying close to 700 a month then. We are going on 20 years from there. Most folks that live in apartments are either married or have roommates. 900 is affordable for most people. That is what I would expect to pay if I wanted a halfway decent place and more if I wanted a much nicer place with amenities. A house or condo payment would be about the same. The big problem with some of the condos is the huge association fees you would have to pay. It would probably end up being more than apartment rent by a lot. Again location location location.

Most of the folks that are living in the downtown apartment are young professionals. There are a lot of folks living beyond their means for sure, but the average price point has not increased a lot till the past year or so.

 

H.U.D. considers a family to be "cost burdened" by housing cost if they spend more than 30% of their income on housing. So let's do the math.

 

Average median household income in Nashville (2012 Census) = $46,141

 

Approximate after taxes (using online payroll tax calculator) = $ 37,865

 

$900 month  x 12 months = $10,800

 

So at that price rent would eat up 28.5% of after tax income.

 

So a 900 per month apartment would be borderline burdensome for roughly 50% of Nashville households. 

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H.U.D. considers a family to be "cost burdened" by housing cost if they spend more than 30% of their income on housing. So let's do the math.

 

Average median household income in Nashville (2012 Census) = $46,141

 

Approximate after taxes (using online payroll tax calculator) = $ 37,865

 

$900 month  x 12 months = $10,800

 

So at that price rent would eat up 28.5% of after tax income.

 

So a 900 per month apartment would be borderline burdensome for roughly 50% of Nashville households. 

 

Another calculation we could look at is how the price of the cheaper units compares to the income below the median.  I have an impression that the income levels drop faster than the cost of housing does as you move to the poor end of the spectrum, so someone making minimum wage is not going to find anything under 30%, although I guess you can live in the projects on a sliding scale based on income.  Also I believe as rents go down, quality drops much faster than price.

 

min wage = $7.25/hour

typical full time employment for min wage workers is 36-37 hours for some reason, employers usually won't give them 40

37 hours x $7.25 = $268.25, the internet says this is $232.81 after tax  http://www.paycheckmanager.com/FreeCal/free_payroll_calculator.aspx

 

times 52 weeks  =  annual $12,106.12 / 12 = $1008.84 monthly 

 

so the burden sets in at $1,008.84 x 30% = $302.65

If you can locate another pauper to share a hovel in a slum this is $605.00, with this you should have no trouble locating a cheap and scary apartment in Antioch, however without a room mate it is literally impossible to live anywhere.  As a single oldie, I feel it is much harder to find a suitable shared living arrangement at my age than when you're in your 20s.

 

The Bureau of Labor Statistics says that in 1950 the average household spent 10.7% of its income on housing http://www.bls.gov/mlr/1990/03/art3full.pdf , so the "normal" we have learned to accept nowadays is rather higher than it probably needs to be.  The average household (not talking about urban 20 somethings dining out every night) has seen a shift over decades, food and clothing are cheaper while rent/mtg, car pmts, insurance, commuting expenses are higher. 

 

Unfortunately the things that make up less of the household budget are all variable, controllable expenses and the things that make up most of the budget now are fixed expenses, making households far more vulnerable to small economic downturns like losing one spouse's income for a while, hence the higher rates of bankruptcies and foreclosures.  So high priced housing is IMHO not just a problem for individuals but makes the whole economy more volatile.

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Like all things, this too will correct. Just give it time. Apartments are going to eventually be overbuilt, and when that time comes people are going to be able to live in some amazing places for relatively cheap prices. It's much like the housing bubble from 5 years ago. Prices were running up and no one thought it would ever stop....until it did. Once it did there were some fantastic deals to be had and housing became much, much more affordable. The reality is, there is only so much money out there and businesses of all sorts split that pie. If food gets a little more expensive then housing may eat some of that. If housing gets more expensive then transit may get cut back. If housing gets cheaper like it did 3 years ago then people can spend more on travel. When it rebounds then travel gets cut. The markets have been working for centuries, and they aren't going to suddenly not work. People are choosing to live in Nashville because it makes rational sense for the to live here. If it didn't make sense for people to live here they wouldn't. The cost of living here is offset for those people by the opportunities the city offers, and they view that to be a net positive.

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Another calculation we could look at is how the price of the cheaper units compares to the income below the median.  I have an impression that the income levels drop faster than the cost of housing does as you move to the poor end of the spectrum, so someone making minimum wage is not going to find anything under 30%, although I guess you can live in the projects on a sliding scale based on income.  Also I believe as rents go down, quality drops much faster than price.

 

min wage = $7.25/hour

typical full time employment for min wage workers is 36-37 hours for some reason, employers usually won't give them 40

37 hours x $7.25 = $268.25, the internet says this is $232.81 after tax  http://www.paycheckmanager.com/FreeCal/free_payroll_calculator.aspx

 

times 52 weeks  =  annual $12,106.12 / 12 = $1008.84 monthly 

 

so the burden sets in at $1,008.84 x 30% = $302.65

If you can locate another pauper to share a hovel in a slum this is $605.00, with this you should have no trouble locating a cheap and scary apartment in Antioch, however without a room mate it is literally impossible to live anywhere.  As a single oldie, I feel it is much harder to find a suitable shared living arrangement at my age than when you're in your 20s.

 

The Bureau of Labor Statistics says that in 1950 the average household spent 10.7% of its income on housing http://www.bls.gov/mlr/1990/03/art3full.pdf , so the "normal" we have learned to accept nowadays is rather higher than it probably needs to be.  The average household (not talking about urban 20 somethings dining out every night) has seen a shift over decades, food and clothing are cheaper while rent/mtg, car pmts, insurance, commuting expenses are higher. 

 

Unfortunately the things that make up less of the household budget are all variable, controllable expenses and the things that make up most of the budget now are fixed expenses, making households far more vulnerable to small economic downturns like losing one spouse's income for a while, hence the higher rates of bankruptcies and foreclosures.  So high priced housing is IMHO not just a problem for individuals but makes the whole economy more volatile.

 

I don't think this specific example is very useful. It comes back to the current debate about raising the minimum wage and what is a "living wage". Minimum wage jobs at McDonald's were never meant to support someone with enough to live on. People in the debate today like to say " I can't live on and or support my family on $8/hr". Well yeah no kidding it was never intended to support a family. If we are talking about housing for people who only have enough skills to work at a minimum wage job then it really is a larger conversation that just the cost of rents. 

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I don't think this specific example is very useful. It comes back to the current debate about raising the minimum wage and what is a "living wage". Minimum wage jobs at McDonald's were never meant to support someone with enough to live on. People in the debate today like to say " I can't live on and or support my family on $8/hr". Well yeah no kidding it was never intended to support a family. If we are talking about housing for people who only have enough skills to work at a minimum wage job then it really is a larger conversation that just the cost of rents. 

 

What the hell kind of elitist crap is this?  Explain yourself.  Can you actually be saying that so rare and special a thing as housing is naturally priced out of the range of a large sector of the population?

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What the hell kind of elitist crap is this?  Explain yourself.  Can you actually be saying that so rare and special a thing as housing is naturally priced out of the range of a large sector of the population?

 

No I'm saying that a family being supported by a single parent working 35 hours a week at a drive-thru is not going to be able to afford much of anything in terms of housing without significant housing assistance. Therefore I don't think minimum wage families are really even participating in the discussion going on in this thread about rent control because they are almost certainly going to need housing assistance beyond rent controls to afford acceptable places to live.

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RH can answer for himself but I did not take his post be elitist.... though it is accurate.

Entry-level jobs are just that, 'entry-level'. They are a means-to-an-end, a stepping-stone on the way up. They are not to be confused with careers. Nonetheless, entry-level jobs are beneficial to youth employment, immigrant employment, as a second family income and retirees that re-enter the work-force.



 

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No I'm saying that a family being supported by a single parent working 35 hours a week at a drive-thru is not going to be able to afford much of anything in terms of housing without significant housing assistance. Therefore I don't think minimum wage families are really even participating in the discussion going on in this thread about rent control because they are almost certainly going to need housing assistance beyond rent controls to afford acceptable places to live.

 

Well that's reasonable enough, but I do feel that the market is wildly distorted and more could be done to make small, no-frills housing available to people.  In most of Latin America and probably a lot of the rest of the world, high rise housing seems to be the norm for all but the very poor, I just don't believe it is that expensive to build these kind of buildings or shop clerks in Sao Paolo wouldn't be living in them.  Governments have every motive to distort the housing market as long as their revenue is dependent on property values, and banks and realtors spend a lot of resources trying to influence government policy and I don't think affordable housing is part of their agenda.  I suppose that's fine if the rest of us are then going to be taxed to make up the difference, but it shouldn't be framed as a subsidy for the poor so much as a subsidy for banks, realtors, developers, and low-wage employers.

 

I recall a post somewhere on this board recently where someone expressed outrage that these large 100 year old houses scattered thru places like music row could be turned into rental properties with "5 or 10 people" living in them.  That's how many people lived in them when they were built!  The average household in 1900 was 5-6 people.  Somehow people have been sold on a very unrealistic definition of what housing has to be.  I know lots of people who literally live in 1/2 of their house, the house I'm in now, when my landlord was living in it, the entire upstairs was just storage for old furniture that needed to be thrown out, the house he's in now has 3 more or less empty rooms he never goes into.  Housing could be a lot cheaper and still be reasonable.

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That's one of the best posts I've read on-line in a long time. That first paragraph really hits the nail on the head. Are there any ideas, or initiatives, being implemented in the Nashville metro for no frills housing?

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What the hell kind of elitist crap is this?  Explain yourself.  Can you actually be saying that so rare and special a thing as housing is naturally priced out of the range of a large sector of the population?

I think he's getting at the fact that there are actually fairly small numbers of people making minimum wage, and of that number a fairly small percentage who are on their own. Here's a link to a 2012 BLS report on minimum wage jobs: http://www.bls.gov/cps/minwage2012.htm#1

Some highlights -

- in 2012 1.6 million people earned minimum wage 2 million more actually earn less on an hourly basis but are exempt (tipped employees, some disabled, etc).

- there were a total of 75.3 million hourly workers and 52.3 million salaried workers, so non-exempt minimum wage earners account for 2.1% of all hourly workers and represent 1.3% of all employees. If including the exempted employees earning less than minimum wage those numbers jump to 4.8% of hourly employees and 2.8% of total employees.

-Of those making minimum wage or below 31% are teenagers and 55% are 24 years old or younger.

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That's one of the best posts I've read on-line in a long time. That first paragraph really hits the nail on the head. Are there any ideas, or initiatives, being implemented in the Nashville metro for no frills housing?

 

I'm not sure there is any type of initiative that could address the deep roots of this problem, founded as it is on the principle that Americans should only have access to certain limited types of housing and an economy that runs in large part by keeping people ignorant about financial management and enslaving them with debt.  I'm reviving this thread because I came across a very interesting piece about housing in Mexico which is relevant to this discussion:  http://oldurbanist.blogspot.com/2014_03_01_archive.html

 

The rate of home ownership in Mexico is much higher than here (80%) and only 6% of houses have mortgages.  I'm sure much of this housing is not very nice, but I would be happy with one of the little rowhouses in the photo accompanying the article.  

 

Our market is so distorted by square footage restrictions etc. that our choices are limited to a tiny range of housing types that a certain sector of the population has decided are all we should have, based on upper middle class conformism (turning all the tools of day to day life into markers of status) and on seeing houses not as places to live, but as assets (which in my view turns homeowners antisocial, as they constantly look for ways to make the community a tool to increase their own net worth, rather than to provide a decent life for the residents). 

 

And if the level of mortgage borrowing dropped to Mexican levels, the moneylenders would have to find  an honest way to make a living, perhaps investing in actual economic activity instead of asset bubbles.

 

One possible solution would be a town founded by tiny house advocates, with restrictions on the upper limit of house and lot size.  The myriad challenges involved would be interesting to see play out, but the first challenge- finding a location where this level of freedom would be allowed, that was not too remote for the residents to link themselves to urban economic and cultural activity-is by itself almost insurmountable.  Can you imagine taking such a proposal to the planning commission of, say, Williamson County?  (But see http://www.lifeedited.com/will-napoleon-complex-usher-in-the-era-of-the-microburb/ being built in Northern California)

 

Maybe this would be a good adaptive re-use for that college off West End.  Might as well propose turning it into a sanctuary for plague-infested rats.  

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