Priced Out: How Dallas' Soaring Rental Costs Fuel Homelessness
Most of the complex's units had boarded-up windows, ready for renovations and a rent increase. Hernandez and others couldn't afford the higher rents and likely wouldn't have met the new management company's requirements.
Hernandez is blind and scrapes by on
"I need to find somewhere to go. I can't afford that," Hernandez said. A group called Fighting Homelessness was helping Hernandez and the others get better conditions at the apartment complex, pushing for repairs to gas leaks and action on stopping a rat infestation.
But since the notice about new management arrived, the group has been trying to find new homes for the residents priced out of the
They haven't had any luck yet. Barring any rental assistance, which they're working to get, there's nothing in the tenants' price range. Hernandez, for example, is used to spending between
"That's the reality out there,"
"I need to find somewhere to go. I can't afford that." -
According to apartmentlist.com's
Housing production in
Even as the housing market cools down – tracking with the first small month-to-month decrease in rent prices this year – it's hard to see an end in sight to sky-high rents and mortgage rates.
People attribute the rising costs to factors like inflation, issues in the supply chain, short-term rentals and institutional investors. All of these things can contribute to the underlying issue — a massive housing shortage.
The production of new homes over the last 10 years simply hasn't kept up with demand in the
Short-term rentals have stirred up a controversy in
City officials and staff are still meeting to discuss how to deal with the short-term rental market in
There are about 1,200 short-term rentals registered in the city, but active listings suggest that there are many more in
Short-term rentals have the potential to benefit cities and neighborhoods. They could lead to an increase in tourism and stimulate the local economy. Property owners can benefit by turning their homes into another source of income. Tourists can enjoy lower travel costs by using short-term rentals.
But after a while, the negative effects of short-term rentals can start to outweigh the benefits.
A report by the
"While the introduction and expansion of
"That's the reality out there." -
"There is evidence that
Housing costs are a significant share of American family budgets, and they have seen huge increases in recent years for both renters and homeowners. There's some evidence to suggest that short-term rentals are contributing to the problem.
The report says that one of the largest and best-documented potential costs of
Because the cost of housing doesn't affect people's need for it, the report says, "even small changes in housing supply (like those caused by converting long-term rental properties to
The report says studies have indicated that
Some believe the increase of institutional investors in the single-family-rental market also is taking homes off the market and sending prices through the roof.
The Congressional Subcommittee on Oversight and Investigations has been looking into the influx of investor home-buying and its effects on the market.
The 2008 recession and its mass foreclosures put a huge number of homes on the market that many individuals couldn't afford. That's when corporations began gobbling up single-family homes across the country, a report by the subcommittee explained.
No single investor owned more than 1,000 homes in 2011. That has changed drastically over the last decade, with investors making more than half of 2021 home purchases in
Emmer said investors are actually benefiting people by providing homes for rent that they otherwise wouldn't be able to afford because of poor housing policy decisions and rising inflation, both of which he blames
"While many Americans can't afford a full tank of gas or to buy meat at the grocery store, our subcommittee is focusing on institutional homeownership in the home rental market," Emmer said. "We cannot demonize institutions for facilitating this supply of quality housing that otherwise would be out of the realm of possibility for many Americans due to the economic consequences of inflation."
On the opposite side of the political spectrum, Chairwoman
"Institutional landlords have seized the COVID-19 pandemic as an opportunity to expand their reach even further into our homes,"
Institutional investors are also some of the quickest to evict, the committee's experts testified, and they often target moderate income Black and Hispanic neighborhoods. Missouri Rep.
"We cannot demonize institutions for facilitating this supply of quality housing that otherwise would be out of the realm of possibility for many Americans due to the economic consequences of inflation." -
"When I talk about 'coup capitalism,' it's a coup d'etat because there's an overthrow of the homeownership in the urban core and there's a regime change that comes in," Cleaver said. In
You can see this on the ground in
Many of those homes have been bought and refurbished to the point of being unaffordable for lower-income renters. Others have been torn down and replaced by duplexes. Those duplexes tower over the original single family homes that remain. Some residents in them say they feel suffocated and like it's only a matter of time before they're priced out of the neighborhood. Others say they're happy with what the new development has done and will do for property values
Investors also buying up apartment buildings like the one
She said the multimillion dollar firms buying cheaper homes and pricing out the middle class from homeownership are the bad apples. "Now, they can't increase their net worth through their primary home anymore," Jetti said of the homeowners cut out of the market. Her company doesn't do that though, she said.
Companies like hers can create higher density housing and bring affordability to areas that aren't affordable, Jetti said. "The revenue and the benefits of having investors that truly care about the communities can be a positive thing," she said.
It's her hope that the properties she's invested in can be tenants' "last stop before homeownership," something she recognizes is becoming less prevalent.
Jetti comes from a real estate family, and she has about a decade of experience in the industry. Jetti founded her own real estate investment firm called Vive Funds. The company's been focusing on Class B value, multi-family real estate.
In the run up to the pandemic, prices were rising in the real estate market. Jetti thought it would start to level out, but that never happened.
Then, the pandemic broke out, wreaking havoc on the economy and causing people to miss work and paychecks and eventually get evicted, even though there was a moratorium on evictions at the time.
Higher income tenants might be able to get by missing two or three paychecks, Jetti said, but that's not the case for people making less.
"It became tougher to manage assets with lower-income tenant bases because what would happen is they would miss two weeks of work because they were in the quarantine protocol," she said. "Lower income tenants, they just don't have as much of a cushion for emergencies like this."
So, Jetti's company started looking at more stable assets with solid tenant bases. From an investment perspective, what really matters is your risk tolerance, she said.
"The revenue and the benefits of having investors that truly care about the communities can be a positive thing." -
Going into a lower-income tenant base, there will be tougher management problems, she said. "The other side of that coin is by taking on more risk, you need to have more potential reward," Jetti said. "Our investors don't have the appetite for that kind of risk."
Others do. "You'll find investors on all areas of the spectrum," she said.
They don't mind maximum risk as long as it means maximum returns. Others want minimal risk for modest returns.
"What we've seen in DFW specifically is a massive increase in demand not just for single family homes but also for multi-family assets," Jetti said. "COVID ramped up the market and made it incredibly competitive."
But, she thinks things will start to cool off. They already have compared to a few months ago, she said.
"The market goes in cycles. We have our bull runs and we have our bear runs," she said. "It was a buyers market on steroids," Jetti said. "It was unlike anything I had ever seen before."
All of this, some say, is just a symptom of the underlying problem, which is that housing demand over the last decade has far exceeded production.
Historically low mortgage rates and a shift to remote work during the pandemic sent a shockwave throughout the housing market. Some reports estimate
"My hope is with the change that we're going through, that it's going to be a much welcome return to normalcy," Crone said. There are more homes under construction now than ever before, over 33,000 across DFW. However, the light he sees at the end of this tunnel isn't the brightest.
"I think a lot of builders are worried if the contracts [on the houses] are going to hold up and if those are going to get through to closing," Crone said. "But, it is, finally … starting to create a little bit of beneficial impact to the record low inventory that we've had for new housing."
Despite this, Crone said builders are wondering, "Are people still going to be able to afford the home that they thought they were going to be able to afford with the interest rates rising and being as changeable as they have been over the last few months?"
Crone said he doesn't think it's time for builders to worry. "For the last 10 years or more, we've not been able to produce enough housing to meet the demand of this market and we're still quite a bit short," Crone said. "We haven't been able to keep up, and now that we're having a little bit of time to catch up just a little bit, that's not a time to worry. That's a time to welcome the return to normalcy that, maybe, we're seeing here, barring any massive spike in interest rates, which is still of course a possibility."
"We've had in our industry a labor shortage that significantly predates, by several years, the pandemic." -
Even without higher interest rates and with all the new construction, Crone said bringing new houses on the market is no easy task. For starters,
"We've had in our industry a labor shortage that significantly predates, by several years, the pandemic," Crone said. "That's just the product of an aging workforce that's retiring, our country's inability to have a coherent immigration policy to help with it and the inability, although it's improving on this front a bit, to focus on training of the construction trades that's needed to get the next generation of our workforce out there and being part of the industry.
"When you combine that with the fact that we've added a million people or more in the last decade, it creates that perfect storm."
Then, there are supply chain issues.
According to 2021 U.S. Census data, the state's population has grown by 650,000 in the last five years and that growth is expected to continue. With that being the case, Crone said, "I don't see the situation or the fundamentals improving any. That's why I'm hoping that, to the extent we can, we can keep building and get that supply out there because there will definitely be the demand for it."
Crone said zoning reform is one of the biggest things that can be done locally to help speed the process along. "I think we have an obligation to look at, especially around here, the exclusionary history of zoning," he said. "That history is still being written in many cities."
The whole process could be a lot more straightforward, he said. "Most of the time, things have to be negotiated, many times to the nth degree, and that takes a lot of time," he said. "That adds a lot of expense and there's a better way to do it. I hope that
But, a speedier zoning process doesn't mean squat when you don't have the manpower or materials to build.
"I'm still hearing every day from builders who can't find windows in a timely manner or doors, garage doors. It still feels like we're playing Whac-A-Mole with whatever issues are happening in the supply chain," he said. "It's manifested with different products at different times, but collectively, it's slowed down the homebuilding timeframe."
It makes for a nerve racking experience for prospective homeowners.
"When you put yourself in the shoes of a prospective homeowner, you can't get your mortgage or your permanent financing until very close to the time that the home is complete," Crone said. "So, you're sitting here riding the same rollercoaster as your builder trying to figure out when this can get done and hoping it's going to happen before the next interest rate increase. That's where there's consternation on both sides of it, both with the builder trying to find these things and the homeowner hoping they do so they can lock in financing for what they can afford."
Some, including builders, are flocking to the suburbs in search of affordability. It can be just as difficult to build in the suburbs, Crone said, but you can often get more bang for your buck. Sometimes, he said, the only way you can build affordably is when you're building in the suburbs.
"For example, I never thought we were going to be looking at places like
Crone said he thinks some things will start to return to their pre-pandemic state, but the industry will still be left with the problems that have been brewing over the last decade and the uncertainties of today's economy. Even after supply chain issues get resolved, and Crone thinks they will, the industry will still be suffering from a labor shortage.
However, as people try to build more affordable homes, they're often up against people who don't want to see that growth in their backyards.
"Another problem that's kind of lurking on the horizon is just the anti growth attitudes that we see," Crone said. "Those don't fall on political lines. They're just as common in progressive jurisdictions as they are in conservative ones, and that can be a real problem too."
He said this comes up often in local zoning hearings with residents worried about how certain developments could affect their property values.
"That puts real pressure on local elected officials who realize that there's a very low participation in these elections and that these growth issues can galvanize opposition against them," Crone said. "Put it another way, I think a lot of people realize and understand. Maybe they have children or grandchildren that are struggling much more so to get a home than they did a few decades ago. So, they understand there's a housing shortage and a housing crisis, but then if somebody wants to build a fourplex down the street, they'll be the first ones to call their council members, go to the meetings and oppose that coming down the street.
"So, they'll acknowledge the problem, but they don't really want to help be part of the solution. We're seeing that in the city of
Whatever the cause, when home prices go up, they're less attainable for more people, Crone said, and more attainable homes are what made
While some may be able to pinch their pennies, cutting back on discretionary spending to accommodate for the increases in recent years, people on fixed incomes, like Hernandez, face a harsher reality. They never had much room for discretionary spending in their budget to begin with, so there isn't a lot to cut out to make up the difference.
According to the
"Now, these tenants are scattered throughout the city, they're probably in encampments or couch-surfing or whatever they're doing. So, we just added to the total population of homelessness and we don't have any solutions to remedy that."
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