At The End Of The Day, Tenants Are The Ones Left Holding The Bag | Nexus Property Management® Franchise

16 April 2024

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HOW LEGISLATION AIMED TOWARD HELPING TENANTS ACTUALLY HARMS THEM

This just in!!! The rental property market is tight…real tight…tight to the point that potential renters are having a hard time finding a place to “overpay” for. Supply is low. Unemployment is low. Interest rates are high. Prices on goods and services are high. Sales and rental prices are high…Simply put, the market is not moving. Just like the pipes in some rental units, the rental landscape is frozen.

At the same time, state and local legislatures are trying to intervene. The primary issue is that there is not enough housing, which naturally drives demand and prices up. However, new bills and laws, in tandem with the rising costs of services, are putting more and more stress on landlords and making it harder and harder for those who provide that needed housing. Rather than loosening up the gunk that has caused this clog, we’re seeing more and more crud being thrown down the kitchen sink.

INCREASED COSTS FOR PROPERTY OWNERS

Life got expensive for everyone after the pandemic. Point the finger or fingers where you prefer: government shutdowns, disruption to supply chains, the jump to remote work, the massive increase of cash in people’s hands. In a word, we can simplify and call it INFLATION. And while the costs of many things have plateaued, they’re still well above what they were pre-Covid and that impact has ripples throughout the economy. That means greater costs for rental property owners. Need a plumber? It’s more expensive than ever? Prefer to just go to Home Depot yourself…material costs are way up as well. In short, there’s no getting around the more expensive world that is now our norm. Margins are tighter for the vast majority of Americans, and landlords face the same uphill battle, but are commonly vilified for their efforts.

LEARN MORE: THE HARDEST VENDORS TO FIND: WHY LANDLORDS NEED TO START SEARCHING FOR VENDORS IMMEDIATELY AFTER PURCHASING THEIR RENTAL PROPERTY

THE IMPACT OF RECENT LEGISLATION TRENDS

Covid also shone a light on the issue of evictions. At a time when little was known about an unknown illness that was circling the globe and the country was in maximum caution mode, the idea of people being kicked out of their homes captured the attention of everyone stuck at home in front of their TVs. The media and governmental decision makers painted a narrative where home equaled safety…so how could any heartless person force someone out of their home?

LEARN MORE: LANDLORDS CAN’T PAY MORTGAGE BECAUSE WORKING TENANTS DECIDED NOT TO PAY RENT KNOWING THEY COULDN’T BE EVICTED FOR NON-PAYMENT

Eviction moratoria became the norm and landlords became the bad guys (and girls) even after the initial fears had subsided. There is no doubt that there is a housing crisis in this country, and as mentioned above, it primarily comes down to a lack of supply.

LEARN MORE: WHEN WILL THE CRISIS IN U.S. HOUSING AFFORDABILITY END–AND HOW?

However, legislators have continued the trend of flirting with the housing issue by instead focusing on micro issues such as lead paint and restricting rent increases. These are items that are important to the quality of tenancy but right now we don’t have a quality problem, we have a quantity problem!

So what’s the impact? Stricter lead paint restrictions are a solution to a problem that is not central right now. There are currently laws in place to ensure residencies are lead safe. Instead, these policies are going to make it more expensive for landlords and they’ll naturally need to find a way to increase their revenue. Additionally, adding more friction to rent raises doesn’t attack the primary issue. Instead, as a landlord, you might be pushed toward trying to get more rent now (and making a unit less affordable) because of restrictions that could make it harder to pay your bills when they inevitably increase.

LEARN MORE: NEXUS’ RHODE ISLAND OFFICE GENERAL MANAGER GOES OVER NEW LEAD LAWS THAT WILL ADD THOUSANDS OF DOLLARS IN EXPENSES FOR LOCAL LANDLORDS

THE TRICKLE DOWN EFFECT

We began this article by pointing out some of the causes of current inflation. If you take supply chain issues, for example, it makes sense that if you own a lumber company and you haven’t been able to sell any (because you didn’t have any) for a month, you’re going to need to increase your prices to cover your losses. The same holds true for any business and it holds true for rental property owners as well. The more costs rise for you, the more they’re going to rise for your customers: in this case, tenants. So while legislators are attempting to improve life for tenants, they’re actually doing the opposite.

The problem is that supply and demand are out of balance and the more financial burdens are passed on to landlords, the more expensive rents are going to be and the less supply there is going to be for those most in need of a place to live. In the end, tenants are the ones left holding the bag.

LEARN MORE: THE SECRET ABOUT THE MOST SUCCESSFUL PROPERTY MANAGEMENT CLIENTS

CONCLUSIONS AND NEXT STEPS

At Nexus, we believe that happy tenants make happy owners and in the current landscape it is harder and harder to provide tenants with the value they deserve for affordable costs. Legislators may be well-meaning but more often than not they are making decisions without input from local landlords. You can change this by taking the following steps:

Stay informed
Connect with other rental property owners in your area
Contact your elected officials
Write or speak to specific bill proposals

Nexus Property Management® is a national franchise with five offices across the country. All of our owners are real estate investors themselves and the majority were Nexus clients prior to opening franchise offices of their own. If you’re interested in learning more about Nexus’ services, contact any of our teams across Arizona, Connecticut, Massachusetts, and Rhode Island.

GET INVOLVED:

AS A LANDLORD YOU NEED TO GET INVOLVED: PROVIDE WRITTEN OR VERBAL TESTIMONY FOR PROPOSED LEGISLATION

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Mick Lefort is the General Manager of Nexus’ New Haven County Franchise Office and the Vice President of Operations for Nexus Property Management®, a National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.

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