Because renters are a 68% majority here in San Francisco, I decided to position myself as a renter at one of these random mixer parties my friend invited me to. The age demographic was between 24-35 and the theme revolved around sustainable living. We got to talking about why do rents keep on going up.
Landlords are considered the enemy in our famously liberal city and I wasn’t in the mood to defend myself for owning rental properties. It doesn’t matter whether I saved and took risk. All that matters is I’m a bad guy for charging rent.
Why Do Rents Keep On Going Up? Arrr!
I armed myself with common phrases such as,
“Landlords are evil!”
“I can’t believe how expensive everything is in the city!”
“Damn those Facebook, Twitter, Square, and Googlers jacking up our rents!”
“The city needs to regulate rents further as this is getting out of control!”
“My greedy landlord wants to raise my rent by 10%.”
“My landlord will have to pay me big bucks to get me to move if he wants to sell his place as I ain’t moving!”
and my favorite…..
“Let’s vote on more government spending since homeowners have to pay the bill through their property taxes and we don’t!” * Evil laugh at the end *
Little Do Renters Know
Little do my fellow renters know that landlords are wisening up to the fact that this is how renters perceive landlords. Most landlords started off as renters, so we know how it feels to be a renter. Yet for some reason, so many renters feel we come with silver spoons in our mouths.
Renters don’t see all the years we spent scrimping for a downpayment. They don’t experience the dismay of seeing our cash balance get wiped out after we cut a huge check for the downpayment. Renters don’t see the upkeep we have to do once a tenant moves out. All they see is a landlord cashing their rent check every single month.
Landlords will experience forever rising costs thanks to labor and materials inflation. We must also perform regular maintenance such as painting the walls, changing the carpet, upgrading the plumbing, and changing the appliances. We’ve come to accept these costs as landlords. Renters should also logically expect rents to go up forever as well.
What landlords should also expect is for our property taxes to go up regardless of the state of the economy!
Thus every property owner needs to fight their property taxes every year. You cannot trust the government to decrease your property’s assessed value during recessions because they want to make as much from you as possible. Furthermore, every property owner who lives in an area primarily populated with renters needs to keep on top of new legislation.
San Francisco residences voted on some multi-billion dollar high speed train to LA because they thought they didn’t have to pay for it since it would go on homeowner’s property tax bills. They were wrong. Rents are up over 15% year over year and rising.
Careful What You Vote For
The number one reason why I wrote the article, “Renters Should Pay More Taxes” is because I want renters who vote on more spending but don’t have to pay for it, to feel the anger of what it’s like to pay more taxes. By the 150+ comments in the article, it’s obvious renters don’t want to pay more taxes!
Hence, if renters don’t want to pay more taxes, why do they think property owners would be happy to pay higher property taxes? It makes NO SENSE! You cannot have it both ways. The reason why rents keep on going up is because of ever increasing irresponsible legislation that spends more than it makes. The rising costs of construction and general inflation are also important reasons for ever rising rents, but those are largely out of our control.
There is too much free-riding in this economy. It is absolutely wrong for one group of people to vote on legislation to raise taxes on another group of people without having to pay more themselves. This is called stealing. But I guess stealing is OK, so long as you’re the one receiving the benefits.
The more people vote on wasteful government spending that hits homeowners, the higher rents go. Landlords aren’t going to eat all the costs for such frivolous spending, renters are. Landlords will learn how to raise the rent without feeling guilty. Please think thrice about the next big spending plan which promises you great things at another’s expense. You won’t be able to stick it to your landlord, because your landlord has had enough.
Untemplaters, are you a renter or a landlord? What are property taxes like where you live? What are your thoughts on why do rents keep on going up?
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This may be a bit of a way-out theory. But in the bigger scheme of the “system,” the system wants more in the labor force and longer hours in the labor force. So, keep the rent high, and going higher, and people will have to work longer hours, or at several jobs, just to have a place to live.
My plan, is not to make more money, but to find ways to spend less. I just moved from a two-bedroom to a one-bedroom, and when the rent goes up here, I’ll move to a studio, or I may try to qualify for Section 8.
I am a former public school teacher and educated.
That’s definitely an interesting way to look at it. I agree with you that there’s a lot of pressure out there to work longer hours, especially since a lot of companies want to squeeze the most out of every person they can before expanding and hiring more people.
I like your plan on focusing on spending less! It feels great to downsize and simplify, and save money in the process.
so why do so many people WANT to live in the bay area?
you can rent out a nice 2br apt in cleveland or detroit for about 600 bucks per month
you pay to be in that city and close to the ocean – and you obviously can’t afford a house there, so you struggle to make rent and then when you are 60 and still broke and have no savings…
you are just digging your own grave by living there – but sheeple do as sheeple do
People who come visit the Bay Area can easily understand why so many people want to live here. The food, weather, diversity, jobs, clean air, and coastline to name a few. Cleveland and Detroit are completely different.
Where do you live and have you ever been to the Bay Area before?
Edward Antrobus says
Property taxes are outrageous in NJ. My parents’ rent held steady for well over a decade before their landlord had to start raising it because it was no longer covering the property taxes. In the last 8 years, their rent has gone up 50%
Michael @ The Student Loan Sherpa says
This may sound counter intuitive but I believe that the sluggish economy has led to an increase it rent prices. The tough conditions have left many would be buyers to remain renters. With more renters, there is more competition and the price goes up.
I usually only raise rents until a tenant moves our of one of my properties. I don’t mind taking a slight loss in order to keep a good tenant.
When I adjust the rent, I usually base it on what other rental properties are charging in the area. I don’t want to overprice my property and lose tenants, or go too low and not capture the best rent possible.
It is a case of supply and demand! Building stopped for a period of time which reduced the supply of housing and less people could get mortgages so more people have to rent. Places like San Francisco have limited areas where you can build anyway. Rents will increase!
Amen! As a landlord, I HAVE to pass on any increased taxes to my renter. Unfortunately, after upkeep and expenses, my rental unit earns a decent but not wonderful return. If it’s going to be a good investment for me, there needs to be a margin.
BUT it isn’t just me. I also increase rents when it’s competitive to do so. When taxes are raised, EVERY landlord now has a reason to raise rents.
My Financial Independence Journey says
I can’t speak for San Francisco. But in the areas where I’ve lived, rents mostly rise with demand. Less demand, slower rising rents. More demand, higher rising rents.
Jenny @ Frugal Guru Guide says
I was chuckling over your 10% rule for cars versus 30% for housing. Only in California and a few other spots would 30% of your gross for housing seem like a number of a frugal spender!
That’s the price of living in CA–both from a renter’s point of view and from a landlord’s. It stinks, but there seems to be no changing it. Californians seem completely immune to the common sense measures that would improve the situation for everyone.
Financial Samurai says
The 30% is the MAX. Unlike cars, housing actually has the ability to appreciate in value, hence a more lenient ratio.
John S @ Frugal Rules says
I think it’s a natural progression and renters can either not like it and move or simply deal with the fact that taxes and prices go up. Did I like raising rates when I was a renter – no, but it’s simply a fact of life and you just need to get used to it. In regards to property taxes where I live – Omaha – we have terrible property taxes. They’re actually higher than in California. There are regularly pieces in our local paper that Buffett pays quite a bit less for a house that he has in LA ( I believe) than he does on his more modest home here in Omaha.
Debt Blag says
You had me until you got here: “The reason why rents keep on going up is because of ever increasing irresponsible legislation that spends more than it makes.” I’m a landlord twice over and that’s not why I increase rent.
I am not a landlord yet so I don’t know how it is to be on that side of the fence. I cant understand though why if as a renter you dont want increase rents you would want the landlord to pay more taxes. Its like you want higher gas prices but lower cab fare, sort of. Property taxes here in Florida I guess aren’t that bad its what I am use to so I don’t complain. I think rents keep going up because less people are buying or can buy homes so they are forced to rent. Supply demand. No sooner then a day after we left our apartment it was rented. Go figure.
You said it correctly that SF is mostly renter occupied and therefore the large majority of voters will happily vote to pay for city improvements and budget issues from property taxes. It doesn’t occur to them that there is no free lunch and higher property taxes will translate into higher rents. I know a few people who don’t really like their apartments but they choose not to move to a better place because they are currently under rent control.
I am a landlady and I pay over $2,300 per year in property taxes, it hasn’t move much in 4 years. In France you pay property taxes as the owner and occupier taxes for whomever lives there, so you or your renters, for street cleaning, garbage collection, street lightening, etc. If you have a fixed mortgage, over 25 or 30 years your mortgage will become increasingly small while the rent keeps up with inflation, but that is the reward for having put down a deposit (instead of keeping it cash or investing in the market), all the landlord’s headaches so I think it is normal rents are raised reasonably. Now the NYC and SF market seem to be increasing really quickly and a lot so I see why it can seem unfair to renters on a non FB salary.
Natural progression. When taxes go up, landlords *will* pass it on to the renters. If people are voting without realizing this simple fact, they deserve the unpleasant surprise! 🙂