
31% Can’t Pay the Rent: ‘It’s Only Going to Get Worse’ - Willson50
https://www.nytimes.com/2020/04/08/business/economy/coronavirus-rent.html
======
mkl
> through the first five days of April, 31 percent of tenants had so far
> failed to pay their rent, compared with 18 percent in the same period a year
> ago.

If the headline had said 18%, the situation would have sounded bad to me, but
apparently that's normal?

~~~
throwawayjava
Depends on how long the rent goes delinquent. It's not uncommon for the rent
to finally show up around the 15th. I used to rent out a property and would
typically write the lease so that the rent was due within 5 days of the 1st. I
would send a reminder but I didn't really start to worry as long as it showed
up before the 20th. If it took longer than that I would start to worry.

The difference here is that the percent of that 31% who really can't afford
the rent -- not now, and not any time soon -- is probably closer to 100%.

~~~
mkl
The article implied synchronised rents, and now you have too. To clarify: Are
all rents in the US monthly and due on the first of the month?

In NZ rent is weekly, on no particular day (can be different for each tenant).

~~~
dhd415
Residential rentals in the US are priced by the month and I've never seen one
in which the rent was not due on the first of the month.

~~~
kccqzy
Where I live, although the rent was technically due on the first, there's an
automatic grace period of three days without late fees so the actual due date
is the fourth.

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jacknews
Rents will have to come down or be waived.

Almost by definition "rent" is simply extracting value from the productive
economy through ownership.

If the productive economy takes a dive or disappears, the amount you can
extract must do likewise.

~~~
missedthecue
>Almost by definition "rent" is simply extracting value from the productive
economy through ownership.

What? Do you define any profit margin as such? Housing rent is not the same
thing as the term 'economic rent'. Housing is as much a liability as an asset.
There is risk with owning it. Rent payments are compensation for said risk.
All profit is just compensation for risk.

~~~
barrkel
Profit is not compensation for risk. Risk is a limiting factor in chasing
after profits, sure, but you can take unprofitable risks, and if you have a
particularly privileged position or information, you can make a profit with
little to no risk. Hugh Grosvenor, 7th Duke of Westminster doesn't exactly
take a lot of risk for his rents.

~~~
missedthecue
My point isn't that "all profit that ever occurs in this universe happens only
because an equivalent level of risk was assumed". This isn't thermodynamics.

My point is that profit as a concept exists because without it, there would be
no reason to assume risk in the first place. Therefore, profit is compensation
for risk.

~~~
barrkel
Under an ideal, efficient free market, profit exists to be squeezed out of
existence. Profit incentivizes more supply, so that existing producers have
their profit margin squeezed to zero.

The mentality that you seem to have is more like a moral justification, or
excuse, for profit. "X took risks, and got rewards, and it is therefore good
and right", to paraphrase. But there's no direct causation between taking a
risk and getting a reward; in fact many rewards come from being well
connected, having the right background, skin colour, social bearing and
milieu, and many other structural advantages, and taking risks without these
advantages leads to big fat losses.

Reducing the justification for profit to risk is a massive apology for the
inequality in society which stems from far more than mere intolerance for
risk. I don't think there's much difference in risk tolerance of young men
right across the income distribution spectrum; you see it in boy racers, in
the jousting on a Saturday night, in thrill seekers, in criminals, in all
sorts. But only a few have the privileged position to be able to put
significant capital at risk for reward, rather than their own bodies. Saying
that it's justified that people profit from this, because of "risk", is just
wrong, it's blinkered in a way which benefits the luckiest in our society.

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dbcurtis
Let's follow the money.

Tenant fails to pay rent because of economic hardship. Building owner get in a
cash squeeze and can't pay vendors like plumber, snow clearing, landscaping,
and eventually can't make loan payments.

Mortgage holders see a rise in troubled loans, eventually writing a large
number of them off for large losses.

REITs take losses on investments they must write off.

Your own retirement plan or personal investment portfolio takes a hit because
some portion of it is REITs.

Everything is interconnected. I see a lot of simplistic "landlords must suck
it up" comments in this thread. Really, who is so naive as to think that the
typical commercial property is not leveraged?

~~~
drawkbox
> I see a lot of simplistic "landlords must suck it up" comments in this
> thread.

Your answer is for the rent payer, with no economy, to "suck it up".

If the top felt the pain of recessions more than the bottom, you can bet there
would be less recessions where massive wealth value extraction happens. You
have to align the market incentives right. Make the top feel the pain, at the
bank level even, and you are gonna have better ratings agencies, better
leverage ratios, and less pump and dump bubbles setup. Right now if the top
always gains, even in pain, there will be more and more pain as they look for
gains guaranteed.

If we truly are in a trickle down system, shouldn't emergency hits to the
recession start at the top, the trickle source?

Money trickles up and down and all around, but money only trickles where other
money is found.

~~~
dbcurtis
> Your answer is for the rent payer, with no economy, to "suck it up".

You miss-read me. First of all, I did not suggest _any_ answer. I suggested
that people put more thoughtfulness into their analysis.

What I am saying is that there really is no one person to "suck it up". The
furloughed school cafeteria worker is going to take a double hit because the
public employee retirement system probably holds REITs.

Scapegoating landlords is the tactic of leftest South American dictators.
Landlords are middlemen, earning a return on providing housing liquidity. They
take on short-term risk in the form of their tenants potential inability to
pay, and long-term risk in the form of long-term loans collateralized by their
properties. The system doesn't work unless someone is willing to take on that
risk profile. Stop scapegoating landlords.

~~~
mindslight
> _long-term risk in the form of long-term loans collateralized by their
> properties. The system doesn 't work unless someone is willing to take on
> that risk profile. Stop scapegoating landlords. _

Implicit in the criticism of landlords is that the majority of this long term
loan is for an arbitrary asset valuation created by artificially low interest
loans. Most of the cost of real estate is not in the building or upkeep
itself, which is why everyone worries (or hopes) that real estate values will
drop when the debt treadmill slows. Like NYC taxi medallions, it's an
overfinancialized setup that taxes real production for the sake of the
financial industry.

So yes, looking at the individual landlords they are indeed working to fill a
market niche. But looking at the emergent system taken as a whole, it's
preposterous.

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shubidubi
I don't get why it's not ok to steal food from a grocery store but it is ok to
not pay rent. Both are basic necessities and in both cases you hurt someone
else by not paying for service (food/shelter).

~~~
SpicyLemonZest
Most people see a vast moral difference between failing to pay a debt you owe
and taking something that doesn't belong to you in the first place. If you
broke into an unoccupied apartment and squatted there, that'd be at least as
stealing food from a grocery store.

~~~
gruez
If an apartment is unoccupied, chances are it's used for speculation and/or
short term rentals. If that's the case, I'd rank squatting better than
stealing and failing to pay your rent. I'm sure others share this position,
given posts like
[https://news.ycombinator.com/item?id=22852570](https://news.ycombinator.com/item?id=22852570).

~~~
SpicyLemonZest
Or it's being renovated, or someone's due to move in next month, or all kinds
of legitimate reasons. I'm definitely on board with the idea that people
should be structurally discouraged from owning housing they don't plan to put
to use, but enforcing that by allowing people to steal non-compliant housing
seems pretty bad.

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PakG1
130 tenants? People at that level, I would have considered them to be
corporations collecting rent, not individual landlords. Well, he probably
collects everything through a corporation too, I imagine. My point is that
I've never put a face to a corporate landlord before. It's always been a
faceless corporation, even for corporations where the founding face is famous.
Reading this was weird for me. He behaves like an individual landlord too,
personally answers all the emails, doesn't have a secretary? Maybe 130 tenants
is too low a number to justify hiring help. Blows my mind.

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wtvanhest
Equity residential collected 93% of rent for April 1.

The difference in tenants is real. Equity residential tenants are higher end
rentals in big to midsized cities with strong economies.

[http://investors.equityapartments.com/file/Index?KeyFile=403...](http://investors.equityapartments.com/file/Index?KeyFile=403555723)

~~~
hn_throwaway_99
I mean, extremely unsurprising. The vast majority of white caller workers I
know are working from home. Of course, those who are in industries that are
getting slaughtered (travel, non-emergency medicine, local business services,
etc.) are having a tough time, but wouldn't expect those delinquencies to show
up until May or later.

Where I live, there is a huge service economy (restaurants, bars, gyms, etc.)
and most of those service workers were laid off extremely fast, with very
little savings to get through extended unemployment.

~~~
kian
White Caller? That's a pretty excellent Mondegreen.

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nerfhammer
> using security deposits as a stopgap

wait, is that even legal? Aren't security deposits meant to be held in trust?

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noad
Corporations are really leading the way here. If they can't preserve enough
cash to last a month and plan to strike as their opening negotiating tactic
then people should too. Why not?

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aww_dang
Meanwhile gov banks have been keeping foreclosed housing off-market for over a
decade to prop up the price.

~~~
felipemnoa
Way too lazy to verify this myself. Any links?

~~~
Rury
Apparently, there are a couple of mega wealthy properties ($2M-$20M) near me
made over 20 years ago that have never had anyone live in them _ever_ , as
supposedly banks financed them for foreign businessmen but were never repaid
the mortgages when said businessmen fled the country along with their debt
obligations. At least this is the story I was given, after buying a car from a
caretaker of two of such properties - one of which I was very familiar with,
as it had a prominent observatory built in its roof...

But that story checks out, as when the market crashed ~2008, the FED bailed
underwater mortgage assets (such as these supposedly) off banks hands to avoid
bank runs via QE. You can see that mortgage-backed securities still comprise a
significant portion of the FED's balance sheet:

[https://www.federalreserve.gov/releases/h41/current/h41.htm](https://www.federalreserve.gov/releases/h41/current/h41.htm)

[https://www.federalreserve.gov/monetarypolicy/bst_fedsbalanc...](https://www.federalreserve.gov/monetarypolicy/bst_fedsbalancesheet.htm)

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bArray
"31% Can't Pay the Rent" != "31% Are Not Paying Rent"

"Can't" indicates they are unable, whereas I suspect at least some are taking
advantage of the current situation [1]. Any situation where it's possible to
take advantage, you can almost guarantee that people will.

This is not the way forwards - not paying rent will have a large knock-on
effect for landlords (which, despite some sentiment, isn't necessarily the
1%). The US government needs to provide money if they are going to demand that
people stay at home and not work.

Ultimately they either bring the economy to a screaming halt (entirely) or
trickle money to those unable to work in order to keep things going. In my
opinion stalling the economy is a bad idea - it can cost a lot of time and
money to get it going again.

[1] [https://news.yahoo.com/rent-strike-idea-gaining-
steam-170345...](https://news.yahoo.com/rent-strike-idea-gaining-
steam-170345369.html)

~~~
capsulecorp
Start by banning China (and any other country that doesn't allow US citizens
to own land) from owning property in the US. Something tells me when you get
rid of all the foreign profit lords, that property will be much more
affordable in many areas.

~~~
FireBeyond
How do you make that happen, realistically?

"You must sell."

"Okay, this 3br house is $10MM. It's not selling."

Eminent domain?

Are we going to do that for the huge swathes of vacant homes we already have,
too?

~~~
tree3
The government already values homes for the purpose of property taxes.

~~~
FireBeyond
So you're mandating that a house must not just be sold, but that it must be
sold at or below property-appraised tax value?

That is sure to go down well.

