Yves here. Despite a very favorable CPI report, readers have continued to complain during the weeks going into the data release about inflation. Some experts contend that this unhappiness and stress is due to the past big price increases still hurting, so that the lack of a rollback (made worse by even comparatively modest increases) still has consumers budget-stressed. But one area where the computation of inflation is much debated is on the housing cost component. The post below is consistent with the idea that continuing cost increases, particularly those suffered by renters, are not adequately reflected. It is hard to square landlords making out like bandits with tenants being less squeezed.
Wolf Richter also has a good post today, Beneath the Skin of CPI Inflation: A Stunning Outlier Services CPI Drove Down Everything Else. One of the first items he discusses in his detailed breakdown are the housing components of CPI. Both primary residence rent and owner equivalent of rent increased month to month, by 4.8% and 5.3% annualized, which are not inconsequential even if lower than the rate of increase in 2022 and 2023.
Note that the post below does not pretend to cover the entire rental market but the behavior of the biggest landlords. Nevertheless, one has to wonder how much smaller landlords are also jacking up rents, operating under the big boys’ umbrella.
By Julia Conley, staff writer at Common Dreams. Originally published at Common Dreams
With monthly inflation down to its lowest point in more than two years and heading toward the Federal Reserve’s target, the Biden administration on Wednesday celebrated “welcome progress.”
But an analysis from Accountable.US showed how more than 100 million people who rent their homes in the U.S. are not seeing the benefits of what one Biden spokesperson called “the great American comeback” in their housing costs, particularly millions of people whose homes are owned by corporate landlords.
The government watchdog found that the six largest corporate landlord companies brought in close to a combined $300 million in increased profits in the first quarter of 2024, with the profits mostly stemming from rent hikes.
Overall in the U.S., rent prices have skyrocketed by 31.4% since 2019 while wages have increased by just 23%, meaning tenants need to earn nearly $80,000 per year to keep from being rent-burdened and spending 30% or more of their income on rent.
The six companies included in the Accountable.US analysis on Wednesday have more than rent increases in common: They have all faced lawsuits regarding their use of the property management software company RealPage, which is alleged to have used an algorithm to fix rent prices, impacting about 16 million rental units in the United States.
The largest net income increase Accountable.US found among the six corporate landlords was that of Camden Property Trust, which increased its net income by 97% in the first quarter of this year to $85.8 million. The company spent $50 million on stock buybacks that it said were made possible by its “weighted average monthly rental rate,” which went up nearly 2% year over year.
“Big corporate landlords have kept right on raising rent on everyday families regardless of how high their profits have grown.”
Essex Property Trust increased its net income by 76% year over year to more than $285 million, also raising rents by 2.1%, while Equity Residential’s income jumped 39% to $305 million as it increased its rental rates by 3.4%, with tenants paying an average of $3,077.
AvalonBay Communities saw its net income increase 18% to $173.6 million, apparently owing both to its “rental and other income” revenue going up by 5.6% and its “management, development, and other fees” for tenants soaring by 68.4% to nearly $1.8 million.
“Big corporate landlords have kept right on raising rent on everyday families regardless of how high their profits have grown. Adding insult to injury, many landlords rewarded a small group of wealthy investors with new handouts at the expense of struggling tenants,” said Liz Zelnick, director of the economic security and corporate power program at Accountable.US.
The group’s analysis was released weeks after the Federal Bureau of Investigation conducted a raid on an Atlanta-based property management firm in the Department of Justice’s antitrust investigation into RealPage regarding “allegations of a nationwide conspiracy to artificially inflate apartment rents.”
As Competition Policy International (CPI) reported earlier this month, “RealPage’s system, which provides rental price recommendations based on real-time data from landlords, is alleged to be a key tool in manipulating the rental market. The firm’s influence covers 70% of multifamily apartment buildings.”
“The scheme purportedly operated by encouraging landlords to adopt RealPage’s pricing recommendations, a practice they follow 80-90% of the time,” reported CPI. “This coordinated approach reduces the availability of rental units, driving up prices. One of the architects of RealPage’s system reportedly stated that the aim is to prevent landlords from undervaluing their properties, ensuring consistently higher rents across the board.”
Zelnick said it was “unsurprising that some of the same companies that needlessly inflated housing costs have worked closely with a software company accused of helping landlords coordinate a massive price fixing scheme. Through-the-roof rent hikes based on greed—not need—have kept many Americans from getting ahead, which is why Congress must do more to support the Biden administration’s affordable housing actions.”
President Joe Biden has urged Congress to pass legislation to stop price gouging by landlords and to build millions of affordable rental units.
A quick way to stop a lot of this price gouging is simply to impose a punitive tax on any unit that’s left vacant for more than 30 days and then doubling the tax at 60 days.
Since 1890, real home prices increased in line with inflation. This relation changed after 1998, with real home prices increasing far faster than inflation:
https://fred.stlouisfed.org/graph/?g=YcwR
January 30, 2018
Case-Shiller Real Home Price Index, 1992-2024
(Indexed to 1992)
Correlation != causation, but I can’t help but note that the repeal of the Glass-Steagall act happened in 1999, right around the time that home prices started their crazy-pants arc.
Hat-tip, or another more graphic gesture, toward Robert Rubin, Phil Gramm, excuse me, Dr. Phil Gramm, PhD, and their ilk. Playing with house money took on new meanings in the Millennarian era, and reached its, uh, nadir around 2008ish. That structure lives on, extracting more from the unwashed and borderline precariously-housed.
Better yet, cut to the chase and ban corporate ownership of homes.
But corporations are people, my friend!
Even as a joke, that isn’t funny, because it serves too many people in power and grants them extra rights and influence on government and society that actual humans don’t get. We live in the 21st Century. The idea that a corporation is a fictitious person (emphasize “ficticious”) was an invention of the 18th-19th centuries as a means of understanding and developing a means where actual persons could get together and organize an entity that had certain legal abilities that humans had. That fiction is no longer necessary in this day and age, since we know that government can grant corporations those legal abilities without having to use the fiction that corporations are persons.
“Henry George to the courtesy phone, please …”
Also, systems like RealPage are Akerlof and Shiller’s Phishing for Phools on steroids.
https://press.princeton.edu/books/hardcover/9780691168319/phishing-for-phools
Matt Stoller might answer that phone: his version of this surely linked on NC at some point:
https://www.allsides.com/news/2024-06-04-1415/general-news-corporate-landlord-was-raided-fbi-rent-fixing-investigation
Where real earnings are up about 1.5% since 2020, rents are up almost 24%:
https://fred.stlouisfed.org/graph/?g=G5Ya
January 4, 2020
Real Average Hourly Earnings of All Private Workers, 2020-2024
(Indexed to 2020)
https://fred.stlouisfed.org/graph/?g=HKys
January 15, 2020
Consumer Price Index for Rent and Owners’ Equivalent Rent, 2020-2024
(Indexed to 2020)
https://fred.stlouisfed.org/graph/?g=Fn2B
January 15, 2020
Consumer Price Index for Rent and Owners’ Equivalent Rent, 2020-2024
(Percent change)
That wont happen because we made housing an investment before residence. Also people complain about home prices as renters. When they become home owners, then they oppose new housing. USA has too many pseudo capitalists who need govt dole in the form of tax breaks for home owners.
Last but not the least, ZIRP or zero interest rate policy & money printing or QE by the FED propped up all the asset prices. Nothing will change in the US. Youll get some band aid or silly fixes at best.
61,000 homes are empty in San Francisco: report
Challenge to San Francisco’s ’empty homes tax’ moves forward
Market manipulation = market failure.
Greedy landlords can keep homes vacant to keep prices high if they want to.
It’s in the Constitution.
“Full speed ahead and damn the consumer!”
When Adam Smith said ‘laissez faire’ he meant that markets should be free of manipulation. Plutocrats say he meant ‘free markets’ should be freely rigged.
Homeowners who rent out a room, share or duplex, are being forced out of business by California’s draconian Just Cause Eviction laws, with more severe local variants being forced on them. Ex. Fairfax, California.
Owners renting units, sheds, garages, yurts, legal or illegal, can only raise rent small % of CPI. Tenants have the right to sublet to anyone, and any number of people they choose, including pets, at any price and profit. This supercedes any written lease.
If for any reason, tenant, other than non payment of rent, fire, flood, relative moving in, remodel, owner has to pay 6 months hotel for them and board their pets. It’s actually worse than this.
This law was written by the Democratic Socialists of America and voted in by the 4 out of 5 Town Council members who are from back east. Here’s the reaction of the furious townspeople:
https://www.fairfaxresidents.org/fairfax-residents/summary/
Effect is to shrink number of rentals as mostly elders counting on room rental to help pay medical bills and eat are scared to death of people moving in, paying one month’s rent than squatting. Another way to get old people to sell and leave town, or the state. Now state laws signed limiting first and last month’s deposit size are coming into effect.
Prediction, once most small landlords put out of business and majority of new and old housing is corporate owned, all the rent and eviction controls mentioned above will quietly vanish. Squatters will be arrested and jailed immediately. No one, certainly not young people will own anything nor build equity.
This November, the town above will probably repeal the law and kick the carpetbaggers out.
Sadly, my landlord hasn’t had many problems evicting tenants, despite San Franciso’s very tenant-friendly just cause eviction protections (I’m a renter, in case you can’t guess). From the blog post you linked to: “2. For ‘Rent Stabilization’ the max yearly rent increase is 60% of CPI or 5% which ever is lower. Cal state law is max increase of 5% + CPI or 10% which ever is lower.”.
Since this goes beyond what is required by AB1482, one would think Fairfax residents should have a say. Was this change to the Fairfax Rent Control Ordinance properly Noticed at least 72 hours in advance of the Town Council Meeting? If not, this may be an abuse of administrative discretion by the Town Council, and could be challenged on due process grounds for violation of the Brown Act.
https://la.curbed.com/2019/9/24/20868937/california-rent-control-law-bill-governor
Laissez faire, loosely translated as leave us alone to do as we will.
They used to say Do as thou wilt.
You others, you’re on your own to wilt.
Don’t ask about regulations, oversight or equitability. There aren’t sufficient profits in those.
Adam Smith was annoyed that opportunities available to him were constrained by the mercantilist monopolies of his time. Hence ‘laissez faire’, conveniently misrepresented by FIC revisionists to mean the opposite of what Smith intended.
How Adam Smith became a (surprising) hero to conservative economists
And here I am, reduced to making explanations to weakly-interacting fermions. You should feel sorry for me.
When will the Chinese come and start overproducing housing?
Lol I like it! 👍
We suffered through an anomolous 301% proposed land value increase on our bi-annual property tax assessment. We appealed, and had a 13% reduction from our local tax board. My wages have not increased 288%. Oh well. Suck it up, Buttercup! Capitalism and Markets! I am not sitting on a gold mine— if and when we are forced to sell, we will lose our dream, and be displaced to I have no effing idea where. I am frankly a bit miffed at the potential taking of our dream by the infallible Mister Market and Capitalism. It’s a nice problem to have. White man problem.
I frankly believe that the ‘state’ should not assess on a possible sale and possible value, until and only when that sale occurs, and two unrelated parties have determined the market, for realz. Heck, go nuts and charge a real estate transfer tax on the new value. Until that time, assess on my basis. OK, off the NC couch, soap box put away.
We own a couple rentals, our kids occupy, so they are making the payment and buying their inheritance. Very Small Potatoes: Wretched Mess Enterprises.
BUT, the property tax increases in our County, one of the up and coming broken local economy amenity towns in the Rockies, are from 28-41%. Our Homeowners insurance premiums… personal, and commercial for the rentals, are up in the 20% range… property casualty in an age of worsening weather catastrophes.
We do not absorb these cost increases. We pass them along to the tenants. BUT, they are not a profit center for us- we do not pad the demanded rent. We are trying to provide work force housing.
But there is a significant negative inflationary effect… no doubt.
Our local economy dog shit wage little appalachia of the rockies is still a service sector low wage reality where the average single family home price is now $928K . Per bedroom rent is now $900/ bedroom. Ten years ago it was $300 or less.The local business are not able to find workers. The wage-to housing gap, debt/ housing to income cost —is broken here. And in many places- not only the Rockies. Full stop.
I recall reading recently that there are an estimated 14 Millions vacant housing units. Mister Market is mis -allocating significantly… that number exceeds unit demand, as I hear it.
No idea what the remedy is— one can’t force a Landowner to rent to the Other, The Unwashed. Or to lower rents. Or can they?
I think back to Dr. Zhivago, and the scene where Omar Sharif returns to the family manse, which has been re-jiggered as a post revolution prole-housing coop, occupied by a cast of characters. And the looks he gets!! There are only so many campers, and cars and bridge decks—we may get there, yet!
The shining city on the hill…
Wow, thank our lucky stars for Prop 13, which is only padded a little bit with add-ons, but never for added-on value.
It’s a shame locals up there are being forced out in such a manner, not to mention the great increases in not just insurance but upkeep.
My AirBnB Barometer locally is showing a slowing trend, where weekends are pretty full, but not as much during the weekdays in the busiest time of the year.
My wages have not increased 288%.
You can always get a better job. Also cash in on the crytocurrency free-money bonanza. You can also rent your kids out to do piecework. Shoes optional, and in Louisiana you don’t have to give them lunch breaks. Those are cost savings. Like I told Richter, poor people who struggle to hold down three part-time jobs have only their own laziness to blame for their poverty.
I recall reading recently that there are an estimated 14 Millions vacant housing units.
And when Biden pushes through his bill to subsidize the contruction of 2 million new homes, you’ll have 16 million vacant housing units. People can’t afford homes because they won’t rent out their kids at competitive prices. But private equity can.
We need to bring back the guillotine for private equity, a few loose heads will get them in order! :-)
Thus decreasing the surplus population. Are there no prisons? Are there no workhouses? Perhaps we should try legal reforms and reregulation before considering, um, surgical options.
And if they can reverse Roe, they can reverse Citizens United. Bwa ha ha! I crack me up.
I can confirm that the landlord and property manager for our warehouse and office in Seattle has gone off the rails with Common Area Charge increases of 74% (reconciled back to 2022) and then another 109% (reconciling 2023). We kicked up a huge cloud of dust and basically told them we would be insolvent in short order (we are a small specialty food business operating for over 30 years). They agreed to cap the increases for those years to a modest increase, but after this year we’ll probably be thrown to the wolves.
Our facility used to be run basically like a handshake, family business, but the president of the company who was the landlord retired and new management decided to hire a private equity group who has a property management arm. Of course the actual service on the property is worse.
And their modus is of course to suck us all dry.
We’ve been talking to our lawyers and all options are on the table, but we’ve quickly found out how dishonorable these people are. Heaping stress on people just to make a few extra bucks.
And their modus is of course to suck us all dry.
“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.”
– Adam Smith, Wealth of Nations, III, iv, p 448.
They’re grabbing while the grabbing is good. The droughts and crop failures and desertification culminating in the collapse of civilization won’t leave many opportunities for plunder, er, rentier profits. PE already owns or controls at least 10% of the US economy so they have a ways to go. Retailers, medical practices, vet practices, educational facilities, retirement communities, pension funds – all present opportunities for piecmeal liquidation and reinvestment in floating cities, luxury submarines, and orbiting Elysia where the laws and mobs with torches and pikes can’t touch them.
No, I would not kid you about such a thing.
I like common dreams…Have gone there daily since it started. But their economics breakdowns of wages and such has always left me cold. Reich, is posted all the time. etc. I know people can dispute my own US census date per capita income (out of date though, from 2019), that says even per capita lower income in rich California is at $30,000 or so, and this article is about renters. Which is about 60% of the actual population now. The working class. When we talk about renting, can we talk about ‘those’ wages? And not use ‘household income’ (which can be 1,2,3 incomes in a household) and not ‘median’ wages? Does anyone here actually believe that the bottom half has seen a 23% rise in wages since 2019? Or that a $80,000 a year salary is any realistic metric to discuss rising rents of the bottom half? And does anyone else notice that wages are often taken from ‘full time workers’ stats. What about the part time workers?
I can think of one way to fix the housing problem that may also take care of several others. Unfortunately, it removes the market element entirely and would likely torpedo several dependent markets as well, which means it’ll never happen:
The federal government comes in and builds the housing (whatever type is necessary). No incentivizing behavior by using the tax code. No private sector involvement. No contracting. No profit. It builds and gives it away, with a caveat: it can’t be sold, only given back to the federal government when no longer needed or wanted.
Maybe it can use some of the bloated military budget to do this, or even directly use the military personnel themselves – they are there to take orders, so give them the order to build, if possible.
If the government doesn’t treat housing as some kind of investment, everyone else will have to act accordingly, or at least cut back on some of the insanity.
It’s probably a stupid idea, but it sounds smarter than low income housing credits or temporary tax incentives or the vast inscrutable complicated patchwork of programs done by state and local governments that don’t amount to shit or are giveaways to land barons. And my idea has the added bonuses of both causing PE to exit the landlord game as quickly as they can dump the assets, and of ending the cottage industry of housing industry “experts” reading the tea leaves and writing garbage articles about what the housing market needs in order to solve the problem.
All this would require political will and the backbone for a fight, not to mention a willingness to wreck a few things for very comfortable interests. But it’s something that many would actually get behind and support.
But what do I know? I could just be incendiary and say arm the homeless, but they’d probably just use them on each other.