“Any fool can criticize, condemn and complain – and most fools do.” Benjamin Franklin
Recently, Jimmy McMillan made national headlines with his “Rent is too damn high” speech. Mr. McMillan makes this speech perennially. However, his views were reinforced with a recent study by Harvard’s Joint Center for Housing Study. The major data point that critics point to is that 28% of renters paid more than half of their income for housing. The absolute number of renters that this 28% represents is approximately 11.3 million people.
There are two principle reasons for this data-point: 1) declining renter incomes and 2) less demand for mortgages.
The first point is covered in the chart below. It’s easy to blame landlord and real estate investors for everything. However, it should be noted that real estate investors cannot be held accountable for declining renter incomes.
Regarding the second point of less demand for mortgages Mr. McMillan makes a pretty draconian assumption that renters are forced to pay this rent. In reality, renters have significant more flexibility than real estate owners. As such, they can freely move to another area with presumably lower rent rates. Real estate investors shouldn’t be looking down the end of the gun because they are simply taking advantage of the natural economic principles of supply and demand.
In summary, the old adage of “one mans problems, is anothers pleasure” remains true. Instead of complaining about rent-rates, why not either a) move or b) buy property. The later should be reinforced due to historically low interest rates and tax-advantages.
“Never tell your problems to anyone…20% don’t care and the other 80% are glad you have them.” Lou Holtz
Jimmy Moncrief is a credit officer and real estate investor. He blogs at realestatefinancehq.com.