In any city where the majority of people are renters, the projected rise of a 5% increase in rent is anything but good news.
Over 61% of households in Los Angeles are inhabited by renters; one of the highest rates in the country. Under the city’s Rent Stabilization Ordinance (which limits annual rent increases to about 3%, as long as the same tenants are in the unit) tenants have some protection. However, this law only applies to housing built prior to 1979 (when the Ordinance came into effect); an ever-shrinking housing stock in this city.
As the increase in rent skyrockets, Landlords are motivated to get rid of longtime tenants paying below-market rent. Landlords cite they have been hit with significant increases in real estate taxes, and rising fuel costs, and deserve compensation.
Owning a rental investment property hasn’t always been so profitable for Landlords. In fact, between 2000-2004, rents were not being increased because most tenants were vacating rental properties to buy houses or condos (300,000 apartments were converted to condos for sale during this time in Los Angeles).
This home-buying frenzy spurned investors to purchase an abundance of condos in cities like Miami, San Diego, and Las Vegas, hoping to flip them for a quick profit. However, a majority of these properties have been empty since the market faltered, and investors are now seeking tenants to help pay the mortgage.
Unfortunately, rent increases seem set to rise in the majority of markets, nationwide, and it seems that this trend is likely to continue for at least 3 years. Even with the expected 4% increase in paychecks this year, it is becoming increasingly difficult for most tenants to save enough money to buy a home; rents are rising because the payment gap between renting and owning remains wide.
So, if you are looking for a change of scenery, and are frustrated with the expense of finding a decently-priced rental in Los Angeles, then Miami, San Diego, and Las Vegas should be considerations on your relocation list. Not only are the rental prices affordable, but you also have the opportunity to purchase a property for a reasonable amount.
With rents scheduled to rise 14% higher than what they were in 2004, what hope is there to bridge the ever-widening gap between the haves and the have nots.
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