Syetarn Hansakul, senior analyst for Asia at the Economist Intelligence Unit, discusses its Global Liveability Index 2024, saying the "usual suspects" in Asia-Pacific continue to be in the top 10.
Tag: Housing rental
-
Asia’s top 4 up-and-coming rental markets that may be challenging traditional property hubs
Bangkok, Thailand has seen an 18.1% growth in residential rental prices on a year-on-year basis, according to JLL.
Alexander Spatari | Moment | Getty Images
Singapore and Hong Kong are generally considered Asia’s more vibrant real estate markets. But some up-and-coming cities are giving these traditional hubs a run for their money, with some even beating them on rental yields.
Among the known, established property markets, Hong Kong was the only one to make it to the top five in a list dominated by lesser-known cities, according to a recent report by realty services firm JLL.
“We remain bullish longer-term on more established markets like Hong Kong, but primarily we see more conspicuous rental growth in some of the region’s more developing markets including Ho Chi Minh City, Jakarta, Bangkok and Manila,” JLL Asia-Pacific Chief Research Officer Roddy Allan told CNBC Make It.
While rents in Asia-Pacific were largely stable in the first quarter of 2024, “supported by resilient leasing demand for high-quality properties and as return-to office rates and expatriate arrivals improved,” certain cities saw sharp growth, according to the JLL report.
The following four cities have led the recovery in rental growth in Asia so far this year:
Bangkok, Thailand
Residential rental growth in Q1 2024 (y/y): +18.1%
Average price to rent: THB 8,292 (about $226) per square meter annually
“Rental demand has been surging in Bangkok,” Allan said. “Much of the rental gains have been led by the luxury condo sector, but more broadly, rental demand for apartments has skyrocketed due to the prevailing rates environment and the return of tourism and expats to Bangkok,” he told CNBC.
“Inflated” selling prices, household debts and strong interest rates, have stoked the demand for rentals, according to the report.
By the end of 2024, a total of 2,800 units from 12 projects are set to be added to Bangkok’s market, which is expected to fuel rent growth even further, the report said.
Ho Chi Minh City, Vietnam
Residential rental growth in Q1 2024 (y/y): +5.9%
Average price to rent: $120 psm annually
“Vietnam’s largest city, Ho Chi Minh City, was also one of the region’s [best] performing markets from a residential perspective,” according to Allan. Rents in the city grew 5.9% on a year-on-year basis in the first quarter of 2024.
This rental growth has been influenced by the stronger rent prices recorded in new high-quality offerings in the city, according to the report.
“We also see new supply coming online in the lower-price segment and ongoing rates pressures will help demand,” said Allan.
Jakarta, Indonesia
Residential rental growth in Q1 2024 (y/y): +4.8%
Average price to rent: IDR 3,214,555 (about $200) psm annually
In Jakarta, sales of condominiums have been quite slow for the past three years and, in 2024, the presidential election has been a contributing factor to the limited sales, according to the report.
Despite the sales slowdown, demand for renting “remains robust” in the city, particularly at the upper end of the market, Allan told CNBC Make It.
“We expect new launches to remain muted in Jakarta throughout 2024 which will drive demand for high quality spaces across the city,” he said.
Manila, Philippines
Residential rental growth in Q1 2024 (y/y): +0.8%
Average price to rent: PHP 9,984 (about $172) psm annually
Manila’s residential rental market grew in Q1, as demand from executives and foreigners kept its steady rise amid a recovery in return-to-office rates, according to the report.
Leasing demand is expected to remain stable as return-to-office policies improve further into 2024, the report said.
While these lesser know markets have been on an upswing in terms of rentals, Asia’s more mature markets have declined. Singapore’s residential rental market has dropped sharply, down 15.7% on a year-on-year basis. Shanghai has fallen 3% from the previous year.
“Rents in Mainland China remain a little subdued due to the number of high-end apartments available for lease,” Allan told CNBC Make It. “Singapore has a similar situation of ample new stock,” he said.
“Over the longer term, we expect to see rents recover in Mainland China and Singapore due to more muted supply and a recovery in expatriate and wider demand for leasing of luxury residential.”
Want to make extra money outside of your day job? Sign up for CNBC’s new online course How to Earn Passive Income Online to learn about common passive income streams, tips to get started and real-life success stories.
Plus, sign up for CNBC Make It’s newsletter to get tips and tricks for success at work, with money and in life.
-
Here’s how much it costs to rent a 1-bedroom apartment across 10 major cities in Asia
Here’s the median price to rent a 1-bedroom across 10 cities in Asia.
Fraser Hall | The Image Bank | Getty Images
Renting a place is a big financial decision, especially when choosing to live in a major city where price tags are particularly hefty.
The general rule of thumb is to spend no more than approximately 30% of your pre-tax income on rent, according to financial experts.
Based on data gathered in April from various government websites and large real estate marketplaces in each country, researchers at the Global Property Guide compiled a list of median rental prices across several major cities in Asia.
The numbers listed below are based on the median buying price per square meter and the median monthly rental price for a 1-bedroom apartment in the most expensive region within each respective city:
Mumbai, India
Median rent for a 1-bedroom: $481
Buying price per square meter: $3,882
Hanoi, Vietnam
Median rent for a 1-bedroom: $688
Buying price per square meter: $2,280
Jakarta, Indonesia
Median rent for a 1-bedroom: $698
Buying price per square meter: $1,726
Kuala Lumpur, Malaysia
Median rent for a 1-bedroom: $735
Buying price per square meter: $3,903
Manila, Philippines
Median rent for a 1-bedroom: $805
Buying price per square meter: $3,813
Taipei, Taiwan
Median rent for a 1-bedroom: $816
Buying price per square meter: $17,551
Bangkok, Thailand
Median rent for a 1-bedroom: $1,080
Buying price per square meter: $6,485
Tokyo, Japan
Median rent for a 1-bedroom: $1,216
Buying price per square meter: $8,837
Hong Kong
Median rent for a 1-bedroom: $2,173
Buying price per square meter: $25,802
Singapore
Median rent for a 1-bedroom: $4,590
Buying price per square meter: $16,619
In 2023, Asia’s housing market faced a downturn amid weakening economic growth and the inflationary environment, according to a report by Global Property Guide.
“Hong Kong’s housing market woes continue, amidst [a] struggling economy,” as residential construction activity in the region fell by more than 34% year-over-year and inflation-adjusted residential property prices plunged by more than 9% in 2023, according to the report.
Prices for housing in regions of Southeast Asia such as Ho Chi Minh City, Vietnam (-1.18%) and Malaysia (-1.06%) have also fallen.
On the other hand, cities like Taipei and Singapore remain resilient despite the overall market environment — with housing prices up 5.17% and 2.74% in 2023, respectively.
Overall, the global housing market seems to be stabilizing as inflationary pressures ease in many countries and central banks pause their rate hikes, according to the report.
Want to make extra money outside of your day job? Sign up for CNBC’s new online course How to Earn Passive Income Online to learn about common passive income streams, tips to get started and real-life success stories. Register today and save 50% with discount code EARLYBIRD.
Plus, sign up for CNBC Make It’s newsletter to get tips and tricks for success at work, with money and in life.
-
Rents across the U.S. grew for the first time in 6 months — only Arizona saw price drops in every metro
Ascentxmedia | E+ | Getty Images
Rent prices for one- and two-bedroom apartments grew in March for the first time in six months.
The monthly cost for a one-bedroom apartment across the U.S. bumped up to $1,487, a 0.3% increase from February. The price of a typical two-bedroom apartment also jumped 0.5% to $1,847, according to a new report by Zumper, a real estate data site.
While prices are up overall, some metro areas saw declines. For example, the rent price for a one-bedroom apartment in Baltimore, Maryland, is $1,390, down 0.7% from a year ago, per Zumper.
Arizona is unique, with rent decreases in all the major metro areas assessed. On a statewide level, the median price for one-bedroom apartments declined to $1,311 in March, about a 4% decline from $1,365 a year ago, according to Zumper data.
The broader rental market’s slight increase in prices may be a reflection of old seasonal patterns, experts say.
“It’s kind of expected,” said Crystal Chen, a spokeswoman for Zumper. “When we get to the warmer months, that’s when demand picks up.”
More from Personal Finance:
How to use rent reporting services to improve credit
Three ways Gen Zers can build credit before renting their own place
What to know about about a condo and a co-op apartment“During the colder months of the year … the rental market tends to be cool,” said Jacob Channel, a senior economist at LendingTree. “As we get closer and closer to summer, we start to see rent prices increase in more places.”
Yet, some fundamental factors such as supply and demand may also be reflected, said Susan M. Wachter, a professor of real estate and finance at The Wharton School of the University of Pennsylvania.
Why Arizona prices are coming down
Some markets in the country are cooling more than others. Prices in the Sun Belt and the intermountain areas are coming down, and Arizona is a prime example, Chen said. Zumper defines the intermountain region as Arizona, Nevada and Colorado.
“All of the Arizona cities on our report either had flat or declining year-over-year rates,” she said.
The city of Glendale, for example, had the largest rent decline, with one-bedroom prices down over 10% from this time last year.
Arizona has a lot of supply coming online, keeping rent prices down in the area, Wachter explained.
“In the data, there’s some evidence of fundamentals at play, in addition to seasonality,” she said.
Phoenix is expected to add more than 33,000 new units available this year and many buildings in the state are offering concessions, such as waived deposits or application fees and up to two months of free rent, Zumper found.
“If you’re in that market, it’s a great time for renters to snag an amenity-rich apartment that would have been out of reach otherwise,” Chen said.
Supply plays into rent prices elsewhere
While more supply is expected to surge in the Sun Belt and the intermountain region, a lot of Midwestern and Northeast markets are undersupplied, making rent prices push upward.
“The supply coming online absolutely does vary by market,” Wachter said.
Rent prices for one-bedroom apartments are up 25% in New York City from a year ago, according to Zumper. Rent costs and high competition also plague areas such as Columbus, Ohio, and Norfolk, Virginia.
Yet, while prices increased, they’ve significantly declined from a year ago and even more compared with the market volatility from 2021 and 2022, when pent-up demand kept prices high.
“Rent prices are going up and they are expensive, but it’s not suddenly skyrocketing again,” Channel said.
“We don’t expect to see national rates spike at all like in 2021 and 2022,” Chen said. “The seasonality is coming back after two crazy years.”
While many factors affect housing affordability in the U.S., the main one, in simplest terms, is poor supply, Channel said.
“The more rental units that are built, the lower prices are likely to go, and I think Arizona shows that really well,” he said.
-
More than 18 million rental units at risk from climate hazards as extreme weather becomes more common, Harvard study finds
D3sign | Stone | Getty Images
Extreme weather and climate hazards are becoming more frequent, posing a threat not only for homeowners but for renters.
More than 18 million rental units across the U.S. are exposed to climate- and weather-related hazards, according to the latest American Rental Housing Report from Harvard University’s Joint Center for Housing Studies.
Harvard researchers paired data from the Federal Emergency Management Agency’s National Risk Index with the five-year American Community Survey to find out what units are in the areas that are expected to have annual economic loss from environmental hazards such as wildfires, flooding, earthquakes, hurricanes and more.
“The rental housing stock is the oldest it ever has been, and a lot of it is not suited for the growing frequency, severity and diversity in environmental hazards,” said Sophia Wedeen, research analyst focused on rental housing, residential remodeling and affordability at the Joint Center for Housing Studies.
More from Personal Finance:
What tenants should know to make rent improve credit
Three ways Gen Zers can boost credit before renting
‘Housing affordability is reshaping migration trends’In 2023, there were 28 weather and climate disasters with damages totaling $1 billion or more, a record high, according to the latest report by the National Oceanic and Atmospheric Administration’s National Centers for Environmental Information. These weather disruptions collectively cost $92.9 billion in damages, an estimate adjusted for inflation, the agency found.
“It’s clear that not only are climate hazards happening more often, but they’re happening more often in places where people live, which is why we’re seeing all of these damages increase over time,” said Jeremy Porter, head of climate implications research for First Street Foundation, a nonprofit organization in New York.
In addition, about twice as many properties in the U.S. have flood risks than what FEMA accounts for, according to research by First Street Foundation.
And flood insurance is only mandated for properties inside official flood zones, Porter said.
“Half the properties across the country don’t know they have a flood risk, which means the building owner may not have flood insurance,” he said.
Some renters ‘can’t afford to move away from the risk’
At a national level, 45% of single-family rentals and 35% to 40% of units in small, midsize and large multifamily buildings are located in census tracts, or neighborhoods, that are exposed to annual losses from climate-related hazards, the Harvard study found.
Units with the highest risk are manufactured housing, such as mobile homes and RVs, said Wedeen. While they’re a smaller share of the rental stock, 52% of manufactured units are located in areas with extreme weather exposure.
As the market already faces a declining supply of low-rent units available, “environmental hazards would really exacerbate the existing affordability concerns,” Wedeen said.
Renters in manufactured housing, low-rent or subsidized units are also often stuck with the housing they have or lack the same level of mobility as wealthier renters, experts say.
“These populations are more vulnerable and don’t have the financial means to protect themselves against the risks that exist,” Porter said. “It’s sort of a compounding risk when we see these increases in climate hazards and start impacting people who can’t afford to move away from the risk.”
Most of the state and local funds that cover post-disaster assistance go to homeowners, not rental property owners.
“That in turn puts a lot of burden on renters who are displaced by natural disasters and who may find it hard to find new housing,” she said.
Many homes need upgrades to withstand disasters
Low-rent or subsidized units also face preservation issues, leaving them in poor physical condition. According to the Harvard study, units renting for less than $600 per month have higher rates of physical inadequacy from disrepair and structural deterioration.
Manufactured housing units are more likely to be physically inadequate, meaning they are “much less able to withstand the impact of a weather-related hazard,” Wedeen said.
What renters need is greater investment in the existing housing stock and upgrades that can mitigate the damage to a building and improve its resilience to hazards, Wedeen said.
“Without substantial investment, displacements and units becoming uninhabitable is only going to continue,” Wedeen said.
How renters can protect themselves
It’s important for tenants to understand that they need renter’s insurance to protect their possessions.
Landlords and building owners are responsible for repairing physical damage to the unit or building from a climate-related hazard, and those repairs will depend on whether the landlord or building owner is covered by property insurance, said Porter.
But the landlord’s insurance on the building does not cover renters’ personal property.
Renters should check what type of disasters are included in their renter’s insurance policy. They may need riders or a separate policy to cover risks such as flooding or earthquakes, experts say.
While a lot of the risks are out of the hands of renters, they can research to make informed decisions and prepare.
Before moving to a new area, renters should research the floodplain, look for a building with resilient features and find out what risks that area is exposed to by using search tools such as the FEMA flood map or riskfactor.com, a search tool backed by First Street Foundation’s data analysis.
In some areas, landlords must disclose to prospective tenants if a property is in a floodplain or has experienced flooding in the past.
-
How RealPage influences rent prices across the U.S.
RealPage software is used to set rental prices on 4.5 million housing units in the U.S. A series of lawsuits allege that a group of landlords are sharing sensitive data with RealPage, which then artificially inflates rents. The complaints surface as housing supply in the U.S. lags demand. Some of the defendant landlords report high occupancy within their buildings, alongside strong jobs growth in their operating regions and slow home construction.
09:56
Sat, Feb 3 20248:27 AM EST
-
Why U.S. renters are taking corporate landlords to court
A group of renters in the U.S. say their landlords are using software to deliver inflated rent hikes.
“We’ve been told as tenants by employees of Equity that the software takes empathy out of the equation. So they can charge whatever the software tells them to charge,” said Kevin Weller, a tenant at Portside Towers since 2021.
Tenants say the management started to increase prices substantially after giving renters concessions during the Covid-19 pandemic.
The 527-unit building is located roughly 20 minutes away from the World Trade Center, on the shoreline of Jersey City, New Jersey. A group of tenants at the tower is involved in a sprawling class-action lawsuit against RealPage and 34 co-defendant landlords. The U.S. Department of Justice filed a statement of interest in the case in December 2023, arguing that the complaints adequately allege violations of the Sherman Antitrust Act.
In November 2023, the attorney general of Washington, D.C., filed a similar but more narrow complaint against RealPage and 14 landlords that collectively manage more than 50,000 apartment units in the District.
“Effectively, RealPage is facilitating a housing cartel,” said Attorney General of the District of Columbia Brian Schwalb in an interview with CNBC. His office filed the complaint on antitrust grounds. They allege that landlords share competitively sensitive data through RealPage, which then sets artificially high rents on a key slice of the local rental market.
Office of the Attorney General for the District of Columbia, November 2023
“Rather than making independent decisions on what the market here in D.C. calls for in terms of filling vacant units, landlords are compelled, under the terms of their agreement with RealPage, to charge what RealPage tells them,” said Schwalb.
RealPage says its revenue management products use anonymized, aggregated data to deliver pricing recommendations on roughly 4.5 million housing units in the U.S. The company says its tools can increase landlord revenues between 2% and 7%.
“Just turning the system on will outperform your manual analyst. There’s almost no way it can’t,” said Jeffrey Roper, a former RealPage employee and inventor of YieldStar.
YieldStar is one of three key revenue management tools offered by RealPage. The software balances prices, occupancy and lease lengths to help property managers optimize their portfolio’s yield. The company feeds data from its models into a newer tool dubbed “AIRM” that considers the effect of credit, marketing and leasing effectiveness.
RealPage told CNBC that its landlord customers are under no obligation to take their price suggestions. The company also said it charges a fixed fee on each apartment unit managed with its software.
RealPage was acquired by Miami-based private equity firm Thoma Bravo for $10.2 billion in 2021. In court filings, Thoma Bravo has claimed that it is not liable for the alleged acts of its subsidiary outlined by plaintiffs in the class-action complaints.
Renters told CNBC they discovered how revenue management software is used in real estate after reading a 2022 ProPublica investigation. Equity Residential investor materials show that the company started to experiment with Lease Rent Options between 2005 and 2008. RealPage acquired the product in 2017.
“How could we possibly know?” said Harry Gural, a tenant in an Equity Residential property located in the Van Ness neighborhood of Washington, D.C. Gural says he has been involved in legal matters against his landlord’s pricing practices for more than seven years.
Affiliates of Equity Residential are contesting a separate decision made by a local housing authority in Jersey City regarding prices set on the Portside Towers property. The company has filed a lawsuit in federal court challenging the decision, stating that the decision could result in millions of dollars in refunds for tenants.
Equity Residential and other defendant landlords declined to comment on ongoing RealPage litigation.
Redfin reports that asking rents in the U.S. ticked down to $1,964 a month in December 2023, a decline from recent highs. Prices are coming down in markets such as Atlanta and Austin, Texas, where home construction is high. But analysts believe low rates of homebuilding on the U.S. East Coast could give well-located landlords more pricing power.
“Guys like us that own 80,000 well-located apartments, we’re still in a pretty good spot,” said Equity Residential CEO Mark Parrell in a June 2023 interview with CNBC.
Watch the video above to learn about the rising tide of lawsuits against U.S. corporate landlords.CORRECTION: A previous version of this article misstated when Equity Residential purchased Portside Towers.
-
Rental markets are softening, but half of U.S. tenants spend more than they can afford, Harvard report finds
Sneksy | E+ | Getty Images
Rent prices are coming down in some areas, but not at the pace needed to relieve tenants struggling to pay rent.
Half of renters in the U.S. spent more than 30% of their income in 2022 on rent and utilities, according to the new America’s Rental Housing report by the Joint Center for Housing Studies of Harvard University.
The report considers those who spend 30% or more of their income on housing “rent burdened” or “cost burdened,” which means those high costs may make it difficult for them to meet other essential expenses.
The share of cost-burdened renters increased by 3.2 percentage points from 2019 to 2022.
More from Personal Finance:
Here are the top 10 hottest housing markets in 2024
Here’s where people are moving
How to use rent-reporting services to boost credit“Places in the market that need the most relief are at the very low end, and it’s hard to reach those people through market rate supply alone,” said Whitney Airgood-Obrycki, lead author and senior research associate focused on affordable housing at the Joint Center for Housing Studies of Harvard University.
While cost burden has increased across income levels, the consequences are much higher for low-income households, said Airgood-Obrycki.
‘We have a very unaffordable country right now’
The average residual income, or the amount of money available after paying for rent and utilities to cover other needs, has significantly dropped for lower earners, the study found.
“It’s a really important part of the conversation because … it makes it more humanizing how big this problem is,” Airgood-Obrycki said.
Renter households with annual incomes below $30,000 had a record-low median residual income of $310 a month in 2022, the Harvard study found. For perspective, a single-person household in even the most affordable counties need about $2,000 a month for non-housing needs, according to the Economic Policy Institute.
“The underlying problem is we have a very unaffordable country right now,” she said. “If you go through any sort of life crisis, you’re on the brink of homelessness.”
Most young adults have either stayed at home with their parents or are moving back in because of the cost of living.
Share of young adults living at home goes back to 1940s
Historically, what kept young adults living at home was the lack of a job; today, it’s the lack of affordable housing, according to Susan M. Wachter, a professor of real estate and finance at The Wharton School of the University of Pennsylvania.
The percentage of Gen Z adults living at home “takes us all the way back to 1940, the end of The Great Depression,” said Wachter.
The share of young adults between the ages of 18 and 29 who live at home with parents is almost at 50%, according to a study Wachter co-authored.
That is a result of young adults competing with potential homebuyers, who themselves are being priced out of the single-family housing market.
“They’re competing in a way that they haven’t before,” she said. “The home mortgage market is indirectly causing a huge spillover demand into the rental market, making the rental market not affordable.”
-
Should you pay rent with a credit card? ‘It could rapidly spiral,’ expert warns
Svetikd | E+ | Getty Images
Housing is typically one of the biggest expenses in someone’s budget, and it’s natural to wonder about the best way to pay that bill.
For renters, sometimes it’s possible to pay with a credit card. While you could earn rewards and build credit by doing so, experts say it’s typically not a smart move.
“This is a very large payment. It could rapidly spiral in terms of additional interest rate costs,” said Susan M. Wachter, a professor of real estate at The Wharton School of the University of Pennsylvania.
More from Personal Finance:
Many young unmarried couples don’t split costs equally
Here’s how Gen Zers can build credit before renting their own place
What to know to make rent payments count for creditYour landlord might not even agree to accept payment via a credit card, as they may be subject to paying processing fees.
They simply “may not want the hassle,” said Matt Schulz, senior credit analyst at LendingTree.
Here are three things to consider before you charge your rent payment to a credit card.
1. Processing fees chip away the rewards
An appeal of paying your rent with credit might be earning rewards on that expense. The typical cash back card offers 1.5% to 2% back.
But most third-party payment services and large property management companies charge credit card processing or transaction fees. Those can run between 1% and 3% of the rent charge.
“The cost of that fee may eat into the value of any rewards you might earn, so it might not even be worth it,” said Melissa Lambarena, a credit cards expert at NerdWallet.
The median apartment rent nationwide was $1,964 in January, according to Rent.com. That would generate nearly $60 in monthly credit card processing fees, or more than $700 over the course of a year.
Make sure you review the terms before you decide which card to use. Processing fees vary, and there are some cards that do not charge them, such as the Bilt Mastercard.
2. You run the risk of accumulating interest
If you do not pay the card balance in full by the end of the statement period, you risk adding interest charges on top of your monthly rent.
“Don’t pay rent with a credit card if you’re going to be charged interest,” said Ted Rossman, an industry analyst at Bankrate.
Due to inflation, more people have been racking up and carrying debt, whether from credit cards or buy now, pay later loans. High interest rates can make some of these balances harder to pay off.
The average interest rate for all credit cards by the end of 2023 was 21.47%, the highest annual percentage rate since the Federal Reserve began tracking in 1994, according to LendingTree.
3. Your credit score may dip
Using credit cards for large transactions can affect your credit utilization rate, the ratio of debt to total credit, which weighs heavily into your credit score, Lambarena explained.
“Putting rent on your card’s credit limit could hurt your credit score,” she said. “It’s usually recommended by experts not to use more than 30% of your amount of available credit.”
If you want to put the rent payment on your card, a good buffer is to make sure you have enough available balance. You can ask for a credit limit increase from your card issuer to minimize the effect to your score.
Don’t miss these stories from CNBC PRO:
-
Paying rent usually won't boost your credit score. Here's what renters need to know to make it count
Luis Alvarez | Digitalvision | Getty Images
While rent payments do not traditionally affect your credit, a growing number of so-called rent-reporting services are trying to change that.
These services track users’ rent-paying habits and report them to one or more of the big credit bureaus — Equifax, Experian and TransUnion — with the aim of helping renters build credit and potentially boost their credit score.
But these services don’t all operate the same way, and some may have less value for renters. There’s one major detail you should consider before signing up, said Matt Schulz, chief credit analyst at LendingTree: Is your payment record going to all three bureaus?
“It’s important for people to understand that you don’t just have one credit score,” he said. “You just don’t know which bureau your lender is going to use to get your information.”
More from Personal Finance:
Many young unmarried couples don’t split costs equally
Here’s how Gen Zers can build credit before renting their own place
Gen Z, millennials are ‘house hacking’ to become homeownersHow rent-reporting programs work
This week, real estate site Zillow Group launched a new rent payment reporting feature. Renters who pay through the site can now opt in to have their on-time rent payments reported to Experian, one of the three major credit bureaus, at no charge to the renter or landlord.
In order for a renter to use the Zillow feature, their landlord must be a user of Zillow Rental Manager and have agreed to receive payments through the firm.
“It aligns with our goal of providing accessibility to building credit in the rental space. It’s a really positive step in that direction,” said Michael Sherman, the vice president of rentals at Zillow Group.
While Zillow is the first real estate marketplace to report rental payment data to a credit bureau, it joins a host of different rent-reporting services already available for consumers.
There are many services renters can look into, including some that are free, such as Piñata, and others that come with service or processing transaction fees, such as Rental Kharma, which charges $8.95 a month after an initial set-up fee of $75.
There are also services geared to landlords that offer rent reporting for tenants, including ClearNow, Esusu and PayYourRent. Landlords usually shoulder the cost of these programs, but there may be processing fees depending on how you make your rent payments.
Rent reporting can help the ‘credit invisibles’
Nearly 50 million Americans have no usable credit scores, according to a 2022 fact sheet from the Office of the Comptroller of the Currency’s Project REACh, or Roundtable for Economic Access and Change.
Being “credit invisible” can affect your ability to qualify for loans and affect the interest rates and terms you are given when you apply for credit.
When rent payments are included in credit reports, consumers see an average increase of nearly 60 points to their credit score, according to a 2021 TransUnion report.
Other payment reporting programs such as Experian Boost, StellarFi and UltraFICO have aims similar to those of rent-reporting services, but with different kinds of payments. They allow users to build credit based on alternative metrics such as banking activity and payments for streaming services, electric bills and mobile phone plans.
Talk to your landlord before you sign up for a rent-reporting service on your own. They may be open to signing up as a benefit to their tenants.
While “people are creatures of habit and don’t always embrace change,” a credit building feature can help a landlord stand out in a competitive rental market, said Schulz.
“It would be significant added value; building credit is a big deal and if you are somebody who can help people build credit, you may be a little more interesting to them,” he added.
‘Three credit reports are different reports’
Before you sign up to a rent-reporting service, it’s important to understand which bureau or bureaus the company sends reports to. It may not be worth using a service that sends rent payment reports only to a single bureau.
“If a rent-reporting service only gives your information to one of [the three big bureaus], and the lender that you are getting your auto loan from uses a different credit bureau, the benefits that could and should come with that tool may not end up panning out,” said Schulz.
The ideal is that the rent-reporting company gives the data to Equifax, Experian and TransUnion.
“People hear about three credit bureaus, but they don’t understand that your three credit reports are different reports, and different companies report to different bureaus,” said Schulz.
-
Want to buy property in the UK? Now could be the right time, experts say
Luxury properties in the Kensington and Chelsea district of London, UK, on Monday, Aug. 21, 2023.
Jason Alden | Bloomberg | Getty Images
The U.K. property market has been a rollercoaster for renters and prospective homeowners alike for over a year now.
Rents soared throughout 2022 and 2023 as supply and demand imbalances led to fierce competition for rental properties.
Meanwhile, mortgage rates hit a 15-year high in Britain earlier this year, pushed upward by higher interest rates and the U.K. government’s shock policy moves in late 2022. The average rate for a 2-year fixed mortgage spiked as high as 6.86% in July and was around 6% at the time of writing, according to figures from data provider Moneyfacts.
At first glance, neither renting nor buying a property in the U.K. looks particularly attractive right now. But according to Tom Bill, head of U.K. residential research at real estate company Knight Frank, the coming months could be a good time to enter the market.
“If you’re looking at what the Bank of England does, the best time arguably is now,” he told CNBC’s Silvia Amaro.
This is because the Bank of England is likely done hiking interest rates — which determine the mortgage rates for millions of homeowners in the U.K. And although speculation has now shifted to when rates will be cut, Bill says mortgage rates are unlikely to fall sharply: “We’re talking about small movements downwards.”
The Bank of England, like many central banks around the world, has been hiking interest rates in an effort to cool the economy. Recent data, including inflation figures, has suggested that elevated rates are having their desired effect in bringing down prices — raising expectations that the central bank could begin cutting interest rates in 2024.
Mortgage lenders are also keen to gain and maintain market share in what Bill says has been a “thin” year for the industry, adding downward pressure to mortgages.
Higher mortgage rates typically lead to a decline in house prices, and it’s a trend that has been reflected in the U.K., even though prices remain above pre-pandemic levels, according to Richard Donnell, executive director for research at property data firm Zoopla.
“Prices have fallen modestly by less than 5% with house prices still £40,000 higher than before the pandemic started in early 2020,” he told CNBC.
However, transactions have fallen by 23% this year, Donnell noted, and while this is not good news for the property market, it may be good for some buyers.
“The average sale agreed is at £18,000 less than the asking price, the highest discount for over 5 years. This means it’s a good time to get into the market to negotiate harder on price with 40% more homes for sale than a year ago,” he said.
The next six months
Knight Frank’s Bill suggests that the coming six months could be a good time to get on the property ladder.
“Sentiment has notably improved over the last few weeks, so I would say if you’re trying to time your purchase, and often people try and do get their timing correct, it feels like the next six months are going to be better than the last six months,” he said.
Prices could also continue to fall, as Donnell points out. “House prices are set to fall by another 2% over 2024 as pricing adjusts to weaker buying power even if mortgage rates fall back further,” he said.
There is one potential headwind for the sales market, however: the general election expected to take place next autumn in the U.K. Bill points out that property markets often slow in the lead-up to elections, especially where a leadership change is expected — as is currently the case in Britain.
Rental outlook
Meanwhile, the rental market is expected to remain tight, with rents continuing to rise. Strength in the labor market, high levels of immigration and high mortgage rates “trapping would-be buyers” in rentals all play a role in this, according to Donnell.
“The supply/demand imbalance will remain into 2024 but demand will weaken as affordability pressures build,” he said. However, rents are still expected to increase by 4-5% next year, he said.
Bill noted that supply is beginning to pick up in some areas of the country, but that demand mostly still outweighs it. “It’s normalizing, but it hasn’t fully normalized yet.”
-
Gen Z, millennials are ‘house hacking’ to become homeowners in a tough market. How the strategy can help
A couple assembling furniture.
Drazen_ | E+ | Getty Images
Gen Z and millennials are “hacking” the housing market as high prices and interest rates make affordability difficult.
The term “house hacking” refers to the practice of renting out a portion of your home or an entire property for an additional stream of income.
Almost 4 in 10, 39%, of recent homebuyers say the practice represents a “very” or “extremely” important opportunity, according to a new report by housing market site Zillow. That share is up eight percentage points in the past two years.
Younger generations are especially keen on the idea. In Zillow’s survey, more than half of millennial, 55%, and Gen Z home buyers, 51%, expressed positive views on house hacking.
Zillow polled more than 6,500 recent homebuyers between April 2023 and July 2023. Respondents were adults who moved to a new primary residence they purchased in the past two years.
More from Personal Finance:
Homeowners associations can be a boon, or bust, for buyers
Homebuyers must earn over $400,000 to afford a home in metro areas
As mortgage rates hit 8%, home ‘affordability is incredibly difficult’The additional income from house hacking can “help make those dreams of homeownership penciled into reality, given that there’s so many affordability constraints on the current market,” said Manny Garcia, senior population scientist at Zillow.
The median sale price for a house in the U.S. was $413,874 in October, up 3.5% from a year ago, according to a report by real estate site Redfin.
The average rate for 30-year mortgages hit 8% in October, the highest level seen in 23 years, according to Bankrate. To compare, rates bottomed out slightly below 3% in January 2021.
While renting out portions of a newly owned property can help offset higher costs of a home, potential buyers will need to make a few considerations beforehand.
‘You need to earn six figures to afford a starter home’
As home prices and interest rates have risen, potential homebuyers need a salary of $114,627 to afford a median-priced house in the U.S., a recent report by Redfin found. Redfin’s analysis used the median home price of $420,000 in August.
“In many places, you need to earn six figures to afford a starter home, so it makes sense for young people who are seeing how expensive homeownership is to want options,” said Daryl Fairweather, chief economist at Redfin.
With few small starter homes available, a millennial or Gen Z buyer may have to jump on a more expensive home than they would have wanted, Fairweather said.
“Having the option to rent or have a roommate is important in an environment where there just aren’t that many small homes for sale,” she said.
House hacking may help those homeowners by providing them additional income for expenses or even help cover the mortgage.
More apartment buildings are available
The opportunity to house hack may be short lived. In some markets, new apartment buildings are under construction that will have available units next year, especially smaller, one bedrooms.
Rental market inflation, which had been stubbornly high for much of 2023, has cooled due to new inventory, pushing the rental vacancy rate up to 6.6% in the third quarter, the highest level since the first quarter of 2021, according to Redfin data.
“We’ve already seen rent prices stabilize, especially for single occupancy rentals,” Fairweather said. It’s going to be harder to rent out a room as more rentals become affordable, she added.
Despite the growth in available apartments, the U.S. is facing a “massive shortage of housing, especially affordable housing options,” said Zillow’s Garcia.
“If you’re pricing your home competitively, renting out can be a reliable source of income because there’s no shortage of people looking for a place to live,” he said.
What to consider before ‘house hacking’
While renting out a portion of your home can serve as an additional income, interested buyers would still need to gather a sufficient down payment and proof of income to show they can already afford the monthly payments.
“If you’re going to rely on rental income in order to qualify, you’ll have a problem,” said Melissa Cohn, mortgage banker and regional vice president of William Raveis Mortgage.
“They need to prove they can afford the mortgage without the rent,” she said.
Banks won’t consider potential rental income and they will require the buyer to be able to qualify for the financing without the support of potential rental income, she said.
There is another risk to buying a bigger house with the intention of renting out part of it: You could wind up stuck with an expensive mortgage and a room you can’t rent out.
If renting out part of your home — or the entire property — is optimal for you, do your research on what the current rate is for your type of home. Consult with rental managers who can help draft leases and give you a good estimate on the going rate in your area, said Garcia.
“There’s a lot of homework to be done to make sure that you’re pricing correctly when you’re posting your unit for rent,” Garcia said.
Additionally, keep in mind that there is a big chance the house you are considering may be subject to local ordinances on renting or homeowners association regulations.
Don’t miss these stories from CNBC PRO:
-
Hong Kong’s property prices won’t pop any time soon. Here’s why
Residential buildings in Hong Kong, China on October 23, 2023.
Vernon Yuen | Nurphoto | Getty Images
Hong Kong’s leader John Lee this week eased the city’s decade-old residential property cooling measures — but questions remain on whether it’s enough to boost market sentiment and low transaction volumes for the private housing sector.
“Although relaxation of property restrictions was highly anticipated, the BSD [buyers’ stamp duty] cut from 15.0% to 7.5% surprised us; the other relaxations were in-line,” Citi’s Ken Yeung wrote in a note.
He doesn’t expect the move to reverse downward trend in Hong Kong’s property prices as interest rates remain high.
According to data from real estate agency Midland Realty, the second-hand property market average turnover ratio between 2017 and 2023 stands at 3.7%. That’s compared with 8.7% before the cooling measures took effect in 2010.
Buggle Lau, chief analyst at Midland Realty told CNBC the average turnover ratio in 2022 to 2023 are at historic lows, as property prices have corrected down by nearly 20% since their peak in August 2021.
He expects the policy address will give property prices “a chance to stabilize” and for volumes to pick up.
For the market to fully recover, both in terms of price and volume, interest rates will have to come down next year, the property analyst said.
He expects a further 5% downside on prices in the first half of next year should there be a rate cut.
Homeowners’ struggles
Hong Kong homeowner KC Mok has been trying to sell his apartment before his family immigrates at the end of the year — a popular reason for people selling their property in recent years.
The 41-year-old told CNBC that his 707 sq. ft. 3-bedroom apartment is currently listing at $9.5 million Hong Kong dollars ($1.21million), 20% lower than his purchase price in 2019.
He said many people have been viewing his place, but the only offer he received so far is a mismatch.
“Now when we come to selling the apartment, we found that the value of the apartment [is] already like $2 million dollars less, so a little bit depressed but we have to leave so it’s the timing maybe,” Mok said, acknowledging that the latest cooling measures “will help a little bit” for his situation.
Meanwhile, 33-year-old Kitty Yiu considers herself “lucky” as she sold her apartment and started renting in February, just before property prices fell and interest rates rose.
Yiu gave birth to her firstborn earlier this year and needed a bigger home to accommodate her growing family.
“To be honest, we are still in a struggle to see whether we should buy a new flat, like to buy a flat again,” she said.
“I think the price at this moment is still high, even if it’s having a downward trend, but for me I think it’s still overpriced,” said Yiu who doesn’t think the latest policy relief would increase her appetite to purchase a house.
Unlike Mok and Yiu, Eugene Law faces the struggle of rising mortgage rates as a new homeowner.
Together with his mother, Law, who is 30, purchased a flat at pre-construction in 2021 and moved in last year. His mortgage rate started at 1.9% and is currently at 3.375%. That means he needs to pay an additional HKD $6,000 ($767.09) per month for the interest, which he says makes him feel “so bad.”
“[It was] unexpected … because I expected the HIBOR may rise but I didn’t expect the prime rate will also rise, and also in a very high percentage.”
Prospective homebuyers in Hong Kong can choose to peg their mortgage rate with HIBOR or prime rate – known as the “H Plan” and “P Plan.” HIBOR refers to the interest rate for interbank borrowing, while prime rate is determined by individual banks.
In a low interest rate environment, the prime rate is usually the more popular choice as it is considered more stable, and easier for the mortgagor to make financial plans.
Despite regretting the timing of his purchase, Law said the latest easing of policy would not have affected the decision.
Risks for Hong Kong property
A recent report from UBS showed Hong Kong is the 6th overvalued city on their Global Real Estate Bubble Index. Zurich, Tokyo and Miami are the top three.
“Biggest risk [to Hong Kong’s property market] will be [a] pro-longed high-rate environment, and hence further mortgage cost increase. Longer run will be geopolitical risk,” said UBS’s china property market Mark Leung in an email to CNBC.
While describing the current sentiment as “a bit weak,” he expects the policy address would release sizable purchasing power from non-local expats who are waiting to become permanent residents.
With the second-hand market bid-ask spread remaining high and many homeowners not willing to sell their properties at a discount, Leung said he expects little room for property prices to reverse the downward trend.
For the primary market, he expects developers will now be more willing to cut prices in order to boost sales and “recycle cash, given higher interest rate environment.”
“Price-wise should be muted, as we think developers may be aggressive in price setting, hence cap the price rebound potential,” he added.
-
How Wall Street’s REIT giants are reshaping U.S. real estate
U.S real estate investment trusts today manage $4.5 trillion in real estate worldwide. Many groups on Wall Street offer these tax-friendly funds to retail investors.
KKR’s real estate business is one of the big players in the REIT game. The private equity firm manages multiple REIT funds. The KKR Real Estate Select Trust, which currently manages $1.5 billion in assets, paid a dividend of 5.4% to its investors in July 2023.
But the benefits extend beyond returns.
“When you look at the after tax equivalent of that yield, it is very compelling.” said Billy Butcher, CEO of KKR’s global real estate business. “The depreciation from our properties has covered 100% of the income generated by our properties, and there’s no tax on that dividend,” he said in an interview with CNBC.
Larger funds sometimes contain a diversified pool of assets. Categories may include office, student housing, casino, timberlands, radio and cell towers, server farms, self-storage properties, billboards, and much more.
“Back in the 1960s, there were three or four different types [of REITs], said Sher Hafeez, a managing director at Jones Lang LaSalle, a real estate services firm. “Now, I can count at least 20 different types.”
Top performing REIT sub-sectors in recent years include data centers, self-storage properties, residential housing and tower REITs. Residential housing delivered a return of 16% from 2010 to 2020, according to a S&P Global Investments report.
The investor-friendly tax rules can also increase the pace of large-scale development.
“Having REITs there as a potential exit helps the market, and helps the availability of financing,” said Michael Pestronk, CEO and co-founder of Post Brothers, a Philadelphia-based housing developer.
Some funds like Invitation Homes and American Homes 4 Rent were founded in the yearslong slowdown in U.S. home construction. At the time, REITs bought and managed commercial-scale properties, which could include products like master-planned communities or traditional apartment complexes.
In recent years, publicly traded trusts have targeted single-family rental market, and today, these REITs have grown tremendously — enough to build new neighborhoods in their entirety.
Watch the video above to learn the fundamentals of real estate investment trusts.
-
The 5 U.S. metro areas with the highest single-family rents — 3 are in California
Downtown Los Angeles.
TheCrimsonRibbon | Getty Images
5 U.S. metro areas with highest monthly rents
These U.S. metropolitan real estate markets had the highest median single-family monthly rents during the second quarter of 2023:
- Los Angeles; Long Beach, California; Anaheim, California: $4,984
- San Diego; Carlsbad, California: $4,862
- Naples, Florida; Immokalee, Florida; Marco Island, Florida: $4,821
- Bridgeport, Connecticut; Stamford, Connecticut; Norwalk, Connecticut: $4,750
- San Jose, California; Sunnyvale, California; Santa Clara, California: $4,629
5 U.S. metro areas with lowest monthly rents
These U.S. metropolitan real estate markets had the cheapest median single-family monthly rents during the second quarter of 2023:
- Little Rock, Arkansas; North Little Rock, Arkansas; Conway, Arkansas: $1,267
- Montgomery, Alabama: $1,394
- Birmingham, Alabama; Hoover, Alabama: $1,441
- Louisville, Kentucky; Jefferson County, Kentucky and Indiana: $1,492
- Cleveland, Ohio; Elyria, Ohio: $1,506
Beware of the ‘hidden’ costs of moving
Some 40% of Americans are eyeing a move at some point in 2023, according to a recent survey from moving website HireAHelper, and financial pressures are among the top reasons for relocating.
However, financial experts warn consumers about some of the unexpected expenses.
“Probably the most overlooked hidden cost is when you are looking for the next job,” said certified financial planner Michael Hansen, co-founder and managing partner of Frontier Wealth Strategies in Walnut Creek, California.
What you might save in dollars, you may lose in connection, collaboration and community.
Eric Roberge
Founder of Beyond Your Hammock
It may be appealing to move to a cheaper state to work remotely, but telecommuting may not be possible for your next role, he said. Before moving, you should consider your new city’s job market and possible in-person job opportunities.
“What you might save in dollars, you may lose in connection, collaboration and community,” said CFP Eric Roberge, who recently decided to move back to Boston after living in a lower-cost area.
“Although you can’t necessarily quantify that and put it in a spreadsheet the same way you can a budget with a rent or mortgage payment, being with your people is absolutely worth something,” said Roberge, founder of financial planning firm Beyond Your Hammock.
-
Less than 5% of U.S. housing supply is accessible to older, disabled Americans. These changes may help
Lucy Lambriex | DigitalVision | Getty Images
Despite a sizeable elderly and disabled population in the U.S., there is not enough affordable housing to accommodate those individuals.
“For millions of Americans, adequate housing is more of an aspiration than a reality,” said Sen. Bob Casey, D-Pa., who serves as chairman of the Senate Special Committee on Aging, at a Thursday hearing.
“In particular, too many older adults and people with disabilities cannot afford accessible housing,” Casey said.
About 26% of the U.S. population — or about 61 million people — have a disability, Casey said. At the same time, 1 in 5 Americans will be older than 65 by 2030.
Accessible homes — which offer specific features or technologies — can help older and disabled individuals continue to live in their own homes or in communities they choose. That may include wider doorways, lower counters and sinks and accessible bathrooms.
Yet less than 5% of the national housing supply is accessible, Casey said. Moreover, less than 1% of housing is available to wheelchairs.
More from Personal Finance:
Is raising taxes the answer to Social Security reform?
Medicare Part B premiums may increase due to Alzheimer’s med
Social Security phone disruptions have led to longer wait timesLeaders on both sides of the political aisle agree the shortage of adequate housing is a problem.
The U.S. is between 3 million and 6 million houses short of what the market needs, noted Sen. Mike Braun, R-Ind., ranking member of the Senate aging committee.
The problem has been complicated by state and federal regulatory burdens, higher infrastructure costs, supply chain constraints, work force shortages and increased materials costs due to inflation, Braun noted.
“Sometimes we’re at odds in terms of what we should do, but there’s always practical legislation in the middle, and I’d hope that we can have those conversations that get us there,” Braun said.
Suggestions for improvements emerged during Thursday’s hearing.
Develop affordable, accessible housing
For Dominique Howell, a disability housing advocate based in Philadelphia, finding an adequate place to call home that can accommodate her disability has been a struggle, she testified at Thursday’s hearing.
Five years ago, Howell said, she was “wrongfully evicted” from her home, along with her daughter, who was 3 years old at the time, and her grandmother.
Howell was initially prohibited from entering a shelter, due to the home- and community-based services she receives. After finding legal representation, she was able to enter the shelter, though she slept in her power wheelchair for a year.
Today, Howell and her daughter have found a home. However, it still has accessibility challenges, she said. When the elevator breaks, she and other residents are sometimes forced to spend weeks in their homes.
“Housing is a human right and unfortunately for too many Americans, especially people with disabilities, are not being equally granted the right of housing they can afford that is accessible,” Howell said.
To address the situation, Pennsylvania and other states should “develop affordable accessible housing to match the needs of residents,” she said.
Retrofitting older homes to update them and improve accessibility may be one solution, said Jenny Schuetz, a senior fellow at Brookings Metro. However, updating millions of homes is an “enormous task” that would require both private and public capital, she said.
Making homes more affordable for elderly and disabled populations is crucial, said Allie Cannington, senior manager of advocacy at The Kelsey, a disability-forward housing developer.
“For people with disabilities who rely on Supplemental Security Income and other forms of federal assistance, there is no U.S. housing market where rent is affordable,” Cannington said, an issue that affects more than 4.8 million people with disabilities.
Encourage new housing construction
The U.S. has not built enough housing since the Great Recession to keep up with job and population growth, noted Schuetz. To fill the gap, the U.S. needs about 3.8 million additional homes nationally, according to estimates, she said.
Local markets are also feeling the effects. In Indiana, for example, 18,000 to 22,000 new houses per year are needed in order to meet average demand, according to Rick Wajda, chief executive of the Indiana Builders Association. Yet the state only reached those levels of production in 2020 for the first time since 2007, he said.
To reverse the “underbuilding” trend that has been prevalent since the Great Recession, there should be financial incentives for local governments to revise zoning to allow for more kinds of structures, Schuetz said.
Regulations may be relaxed to shorten delays that often lead to increased building costs, according to Wajda. Permit, hookup or impact fees, as well as development and construction standards, may get in the way of development, he said.
Restrictive building codes may also add thousands of dollars to a house’s cost, thereby adding thousands of dollars to the cost of a house, Wajda said.
“All regulations should be examined for their impact on housing affordability,” he said.
To address the shortage of accessible and affordable housing for vulnerable populations, Casey has proposed a bill that would require a percentage of homes built through the Low-Income Housing Tax Credit Program to meet accessibility standards.
It remains to be seen whether the proposal will receive the support needed to become law.
-
East Coast mayors call for more office-to-apartment conversions
Mayors in cities across the U.S. want to loosen rules that can slow the pace of office-to-residential conversions. In some instances, cities have offered generous tax abatements to developers who build new housing.
“We have a great opportunity to change the uses in the downtown,” said Washington, DC, Mayor Muriel Bowser at a December 2022 news conference in support of her housing budget proposals.
“It’s absolutely a budget gimmick” said Erica Williams, executive director at the DC Fiscal Policy Institute, referring to Bowser’s 2023 proposal to increase the downtown developer tax break. “We fully support the idea that some of these buildings could be turned into residential properties or into mixed-use properties, but that we don’t necessarily need to subsidize that.”
In New York City, a task force of planners assembled by Mayor Eric Adams is studying the effects of zoning changes, and possible abatements for developers who include affordable units in conversions.
Cities like Philadelphia have previously embraced these policies to revitalize their downtowns. In Philadelphia, homeowners and investors received more than $1 billion in tax breaks for their renovation projects.
A small collective of developers have taken on this challenging slice of the real estate business. Since 2000, 498 buildings have been converted in the U.S., creating 49,390 new housing units through the final quarter of 2022, according to real estate services firm CBRE.
Prominent investors Societe Generale and KKR have worked with developers like Philadelphia-based Post Brothers to finance institutional-scale office conversions in expensive central business districts.
“Capital has gotten much more limited,” said Michael Pestronk, CEO of Post Brothers. “We’re able to get financing today. … It is a lot more expensive than it was a year ago.”
Many experts believe local governments will alter zoning laws and building codes to make these conversions easier over the years.
“Our rules are in the way, and we need to fix that,” said Dan Garodnick, director of New York City’s Department of City Planning.
Watch the video above to learn how cities are getting developers to convert more offices into apartments.
-
U.S. cities are filling up with luxury apartments despite ‘housing recession’
Scores of luxury homes are coming to major cities across the United States.
Analysts at Yardi Matrix projected that more than 400,000 units were completed in 2022, and they expect another strong showing in 2023. Experts believe much of this new stock is built with upper-tier customers in mind.
“You often see new housing branded as ‘luxury,’ in part because it’s new,” said Ethan Handelman, deputy assistant secretary at the U.S. Department of Housing and Urban Development. “When you get to affordable housing, we need to be providing some additional capital and/or rental assistance to help make that housing affordable to the people who need it most.”
Market-rate rents for new apartments can easily be multiple thousands of dollars monthly. For many high-wage earners in cities, this is achievable. But for moderate-income Americans, the sky-high prices appear disconnected from reality.
“The marketplace is structured not to house certain people. We need to admit that,” said Dominic Moulden, a resource organizer at Organizing Neighborhood Equity DC.
Builders say the high cost of housing in the U.S. is related to the large amount of regulation in the housing sector. For example, they say, many U.S. cities are short on land due to restrictive zoning codes.
“Currently, 40% of the cost of multifamily development is in regulation,” said Sharon Wilson Géno, president at the National Multifamily Housing Council. “We have to do something about that if we’re going to build more housing.”
In 2022, the Biden administration announced a housing action plan that aims to shore up housing supply within five years. But these efforts may not have a material impact on prices for some time.
“Unfortunately, I don’t think we’re going to see rents going down a whole lot over the next one to two years,” said Al Otero, a portfolio manager at Armada ETF Advisors. “Developers cannot make a profit at those more affordable price points. Therefore, we see the development and the new construction at the much higher, higher end of the spectrum.”
Watch the video above to see why the United States is awash in new luxury apartments.
-
Rent control policies are gaining support nationwide. Here’s why economists still think it’s a bad idea.
In December 2022, $1,981 was the typical monthly rent in the United States — a 7.4% increase from the year prior. But while rent has begun to stabilize nationwide, rent affordability remains difficult for many Americans.
“There’s literally nowhere in the country where a tenant is not burdened by their rent,” according to Leah Simon-Weisberg, an adjunct professor of law at UC San Francisco.
In response, support for rent control policies has gained traction.
But this isn’t the first time such policies have had widespread support. After the massive economic disruption caused by World War II, the federal government imposed rent control on roughly 80% of rental housing between 1941 and 1964.
Over time, it was abandoned because prominent economists unanimously argued against the policy. That sentiment mostly continues today.
“There are various surveys of economists. One done by IMG showed that only 2% thought that rent controls in places like New York and San Francisco were having a positive impact on affordable housing,” said Jay Parsons, chief economist at RealPage.
Economists argue that rent control would deter developers from building more homes, which would only worsen the housing supply crisis in the United States.
America already suffers from a deficit of 3.8 million homes, especially at low-income price points, according to Habitat for Humanity.
“We have not invested as a nation in building the supply of housing in a variety of communities, in a variety of different price points. We’ve instead relied on the private sector to do so,” said Sharon Wilson Géno, president of the National Multifamily Housing Council. “But unless that money comes into the market and investors see that as a better investment than some other kind of equity or some other kind of investment, they’re not going to come.”
Watch the video to find out why so many economists are against the idea of widespread rent control.
-
This 26-year-old pays $0 to live in a ‘luxury tiny home’ she built for $35,000 in her backyard—take a look inside
In 2019, I bought a three-bedroom, 1,400-square-feet house in Atlanta, Georgia for $196,000. I figured I could earn extra income by renting out the spare rooms on Airbnb, especially since I traveled a lot for work and was rarely home.
Unfortunately, the bookings dried up in 2020. No one wanted to share a house with a stranger in the early days of the pandemic. My work travels also stopped, so I was living alone in a house that felt too big.
But that May, as I stared out the kitchen window into my huge backyard, something clicked: I could use that space to build a tiny home to live in, and fully rent out the main house.
How I built my luxury tiny home
Before getting started, I had to submit building, electrical and plumbing permits to the city planning office.
Then I purchased a shed from Liberty Storage Solutions and hired a local contracting team to pour a concrete slab foundation. They got to work in October 2020.
Overall, it cost me around $35,000 to build the home, which includes the prefabricated shed structure, labor and material costs.
Instead of taking out a bank loan, I cashed out $8,500 in stocks and put about $20,000 on my credit cards to pay for everything. I was able to pay off this debt last year.
While the house was being built, I rented out my primary home and rented a room from my neighbor for $300 a month.
Precious’ tiny home sits in the back corner of her 7,280 sq. ft. backyard.
Jeffrey Beard for CNBC Make It
After we finished building the 296-square-foot tiny home in March 2021, I immediately rented it out on Airbnb for a few months to recoup costs.
By charging between $89 and $129 per night and $1,300 for monthly leases, I was able to bring in almost $32,000 in gross rental income. And this January, I moved into the tiny home to save on living expenses.
Here are the monthly associated costs for both homes:
- Mortgage and property taxes: $1,200
- Electricity: $190
- Water: $110
- Internet: $80
Total: $1,580
All of this is covered by the $2,725 I make from renting out the main house, which means I’m able to live in my tiny home for free.
A look inside my loft-style backyard home
To give the place a light and airy feel, I painted the walls a coastal blue shade and added some rustic touches like a wooden ladder leading to the loft’s queen-sized mattress.
Nestled under the sleeping loft is a small desk, which she uses to check emails and catch up on work.
Jeffrey Beard for CNBC Make It
In addition to the daybed that doubles as a couch on the main floor, there’s a full bathroom, kitchen and breakfast nook.
The rustic barn sliding doors provide easy privacy.
Jeffrey Beard for CNBC Make It
The bathroom features a shelf for extra storage and a glass shower door, which makes the room feel bigger.
Jeffrey Beard for CNBC Make It
My favorite area is the kitchen. Most people are surprised to see that it has a full-sized fridge and extra large sink.
The kitchen has an induction cooktop and a small breakfast nook.
Jeffrey Beard for CNBC Make It
The eight separate windows, wall mirrors and glass shower door all make the space feel bigger. I sometimes forget I’m living in a shed.
Small details like this mirror make the space feel larger and more homey. “I sometimes forget I’m living in a shed,” says Precious.
Jeffrey Beard for CNBC Make It
The “tiny house” lifestyle
I’ve had to downsize my wardrobe and shoe collection. But rather than getting rid of clothes I still want to keep, I store some at a friend’s house. Every few weeks, we do a wardrobe swap.
Precious’ dog Sachia also lives in the tiny home with her. She plans to entertain friends in the backyard when the weather gets warmer.
Jeffrey Beard for CNBC Make It
I don’t have friends over very often, but once the weather gets warmer, I plan to use the fire pit as a hosting area.
Having this home has given me a ton of real estate options, including rental income and backup housing for myself or aging family members.
I believe that tiny homes will play an important role in offsetting the global housing crisis. Last year, I gave a TEDx Talk about how they can help create a sustainable sharing economy for land.
When it’s nice outside, the spacious porch is a great place to enjoy the fresh air with some coffee.
Jeffrey Beard for CNBC Make It
In 2021, after realizing effects of vacation rentals on the real estate market in Atlanta, I stopped listing my properties for short-term rental on sites like Airbnb. Renting out more and more space for vacations means less space for folks who need long-term homes.
I’ve since decreased my portfolio and am renting to local students and low-income workers. My plan is to add an attached guest suite to the main home and provide even more stable housing.
Precious’ least favorite part of her home is the loft area, which doesn’t have much clearance for anything but sleeping.
Jeffrey Beard for CNBC Make It
This year, I’m excited to fully experience the tiny home lifestyle for myself. It’s amazing what you can do with a bit of backyard space.
Precious Price is a TEDx speaker, marketing strategist and social entrepreneur. In 2021, she founded LANDRIFT, a digital real estate marketplace, amidst the conversation around the impact of short-term rentals on housing affordability and availability. She holds a master’s degree in management information systems from Indiana University. Follow her on Instagram, Twitter and YouTube.
Don’t miss: