Feature

Housing: The rise of the rental economy

Because of the tightening credit market, former homeowners who can’t afford a mortgage are being forced to rent, while homeowners who can't sell their houses are being forced to become landlords.

It’s a brave new world for housing, said Brad Reagan in SmartMoney. Because of the tightening credit market, many former homeowners who can’t afford a mortgage are being forced to rent. At the same time, homeowners who need to relocate but can’t sell their houses—or who have vacation properties they can’t sell—have grudgingly become landlords. Neighborhoods and municipalities aren’t sure how to deal with such sudden changes. “Many towns and subdivisions are barring their doors, arguing that tenants usher in neglect, misbehavior, and even violent crime.” Nationwide, as many as 40 percent of communities governed by homeowners associations limit rentals or ban them altogether. Some neighborhoods are easing restrictions in order to keep homeowners out of foreclosure. But others have rolled out “even tighter” rental rules, in an attempt to keep home values high.

The increase in rental properties on the market is driving down monthly payments for renters, said Barbara Kiviat in Time. During the last three months of 2008, average rents fell nearly a half a percentage point nationwide, marking the first quarterly drop since early 2003. While the glut of unoccupied condos and houses has a little to do with falling rents, the bigger factor is jobs—or rather a lack of them. “When people—especially young adults, who are prone to rent—don’t have jobs, they’re more likely to stay with family or find a roommate instead of renting a place of their own.” Landlords may not welcome the news, but this year renters will have the leverage to bargain.

For that and other reasons, renting out your home may not be ideal for everyone, said Melissa Kossler Dutton in the Associated Press. For many desperate homeowners, “the role of landlord is something they’d never considered.” For some, though, it may be the only option. But before putting out the “For Rent” sign, get in touch with a property management company to find out how much you can realistically charge. “Homeowners are often disappointed to learn that their home would rent for less than their mortgage payment” in the current market. Eventually, you’ll also need help in navigating local rental laws, marketing your property, and screening applicants. Finally, don’t be hasty. After all, you’re handing over the keys to what is probably one of your biggest single investments.

Recommended

Study: Climate change made summer droughts 20 times more likely
Part of the Guadiana River in Spain has dried up.
global warming strikes again

Study: Climate change made summer droughts 20 times more likely

North Korea launches another missile toward South Korean waters
A view of a TV screen on Oct. 4 in which a North Korean missile is being fired.
Yet Another Launch

North Korea launches another missile toward South Korean waters

At least 50 killed during airstrike on Ethiopian school
A view of protestors waving Ethiopian flags in the country in 2021.
Rest in Peace

At least 50 killed during airstrike on Ethiopian school

OPEC to slash oil production
The leaders of the OPEC nations are seen during a recent conference, during which oil production was slashed
Pain at the pump?

OPEC to slash oil production

Most Popular

Lizzo invited for an encore flute performance at James Madison's home
Lizzo
play it again sam?

Lizzo invited for an encore flute performance at James Madison's home

Russian war bloggers warn Ukraine is threatening Kherson defensive lines
Ukraine inroads in Kherson
War on the Rocks

Russian war bloggers warn Ukraine is threatening Kherson defensive lines

Survey reveals less than half of Americans plan to get flu shot this season
influenza vaccine syringe photo
Masks trump flu vax

Survey reveals less than half of Americans plan to get flu shot this season