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Welcome To The Blackstone Recovery: Over 11 Million Americans Spend More Than Half Their Income On Rent

Tyler Durden's picture


As we wrote most recently in November, the median asking rent in the US just rose to an all time high...

... explained by the lowest US homeownership rate in nearly 20 years.

And while the charts above mean another year of record bonuses for America's largest landlord, Wall Street-based Blackstone, they also mean something else for millions of ordinary Americans: a choice, which as Bloomberg summarizes, “We either eat, or we pay rent.

Indeed, in the new normal, the recovery means an ordinary American worker either has a roof above their head, or food on the plate. The two increasingly are exclusive.

No, that's not a joke: here are the facts - an estimated 11.3 million Americans were spending more than half their income on rent in 2011, according to the Harvard analysis based on latest available Census data. That number represented a 28 percent increase from 2007.

But... but ... how is this possible? After all, the recovery, right?  Wrong.

Stagnant incomes and increased demand for cheap apartments spurred the rise. Between 2007 and 2012, real median renter incomes fell by 7.6 percent, based on Census data compiled by the Joint Center. The number of renters climbed 11 percent between 2007 and 2011, U.S. Department of Housing and Urban Development data show. A Census report released this month found that 31.6 percent of Americans lived in poverty for at least two months between 2009 and 2011, an increase from 27.1 percent over the 2005 to 2007 period.

And the nail in the coffin: the annual rate of change in real disposable income per capita just went negative.

The rest of the story is well-known. Wall Street landlords, who have access to cheap funding, demand a high cap rate, and as a result rents keep going higher and higher, and since the cost of capital is still sufficiently low to where even a less than fully rented out complex will generate a positive return, there is no impetus to lower prices in order to generate more demand (well, everywhere except perhaps in New York of all places, where rents continue to decline). Alas, for others this dynamics means being forced to move out (and not being able to squat in a house in which the mortgage has not been paid for years). Such as Hector Pinedra:

Hector Pineda spends 60 percent of his income renting a $1,500-a-month apartment for his family in Alexandria, Virginia. With housing around him slated to be torn down and replaced by pricier units, the 33-year-old cook worries his rent will go up or his building too will be demolished.


In the neighborhood where Pineda lives with his wife and their two sons, redevelopment will claim many of the area’s 2,500 affordable housing units, starting as early as this year, said Derek Hyra, an associate professor of Urban Affairs and Planning at Virginia Tech and a member of the Alexandria Planning Commission.


While the city and developers have pledged to provide 800 affordable apartments, Pineda says he expects many of his neighbors will have to move to find lower rents.


“This project is for people with money,” said Pineda. “I, working to clean homes, in a restaurant, can pay $2,000 to $3,000 for an apartment? Never.

Hector is just one of millions of Americans who are in the same boat. And what makes it worse is that any potentially affordable housing will soon blow up, literally.

The cheapest housing units across the nation are the most likely to be demolished, and new construction typically commands higher rents, according to an analysis by the Harvard Joint Center for Housing Studies. Meanwhile, foreclosures that soared after the housing bubble burst in 2007 turned thousands of former homeowners into renters, heating up competition for affordable units.

And when there is an entire group of people - read potential voters - that is increasingly angry due to the capital misallocation courtesy of the Fed, what happens? Why the government gets involved of course.

The number of households who were potentially eligible for housing assistance ballooned to 19.3 million in 2011 from 15.9 million in 2007. Meanwhile, the number of very low-income renters receiving support barely climbed, to 4.6 million from 4.4 million, the Joint Center analysis found.


Programs including the Section 8 housing choice voucher program didn’t expand in line with rising demand during the recession. The vouchers are the federal government’s main program for helping very low-income families, seniors and the disabled afford private housing and are administered by local agencies. By subsidizing rents, they can reduce payments to 30 percent of earned income.

Unfortunately, when the government gets involved, it always gets worse. And get involved even more it will. Guaranteed:

The number of renter households will increase by between 4 million and 4.7 million over the next decade, based on Joint Center projections. As baby boomers age into retirement the number of renting seniors will increase by 2.2 million, and that increase in fixed-income renters will drive up demand for assisted units.

But since the government's incursion will merely accelerate the unaffordability of prevailing housing prices, this means that America is set for the first wave of reverse migrations, away from the coastal megapolises and into the heartland, in decades: "Without a clear fix, people and businesses may leave the most expensive rental markets -- such as San Francisco, where rent appreciated 10.6 percent year-on-year in December 2013, according to data from real estate researcher Trulia Inc., based in San Francisco. They may move to places where workers can afford to live, said Mark Calabria, director of financial regulation studies at the Washington-based Cato Institute."

That, or they may just opt out for the kind of "affordable" housing they can still get Uncle Sam's loans to fund: cars.

And so, the New Normal recovery will truly be televised: from the "bedroom" on the rear seat of your government loan-purchased Chevy Tahoe.


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Mon, 01/13/2014 - 17:54 | 4328501 ZerOhead
ZerOhead's picture

< A robust economy

< Afrobust economy


Predictions for team Obama/Yellen in 2014...

Mon, 01/13/2014 - 17:56 | 4328509 ihedgemyhedges
ihedgemyhedges's picture

Ahhhh, Blackstone.  They will happily structure a PIK for one of their big deals, but as a slumlord I bet you that you will not get a good response if you pay your rent as a PIK instead of $$$$$.......

Mon, 01/13/2014 - 18:06 | 4328525 TruthInSunshine
TruthInSunshine's picture

Thanks, Bernanke!

Thanks, Obama! (Blackstone bankrolled Zero)

*Friendly Reminder: There are a minimum of 12 million empty/vacated, non-rented, non-occupied residential structures on and off (if underwater) bank balance sheets.

I see and know of such homes EVERYWHERE, even in "middle class" suburbs.

What a lovely equilibrium this "recovery" has, no? Nothing manipulated or artificial about it in any way...

Mon, 01/13/2014 - 18:06 | 4328545 eclectic syncretist
eclectic syncretist's picture

Blackstone better have an army of top tier lawyers ready for lots of work, because once they control the housing/renting market they are going to need it.

Mon, 01/13/2014 - 18:34 | 4328628 Four chan
Four chan's picture

principal writedowns are the only way out for the fed, banks, and home owners.

Tue, 01/14/2014 - 03:23 | 4329981 the0ther
the0ther's picture

Given that username, spose you could get on that nasty site and convince the geek army to Fuck up that nyc principal who runs the rat infested school? Please??

Mon, 01/13/2014 - 19:37 | 4328834 Duke of Earl
Duke of Earl's picture

The slumlord's pic is worth the click-through.

Mon, 01/13/2014 - 20:14 | 4328977 cynicalskeptic
cynicalskeptic's picture

NY post got in lots of trouble for their headline on his death - tasteless but priceless Post.....

Tue, 01/14/2014 - 03:13 | 4329951 AldousHuxley
AldousHuxley's picture

The real wealthy extract rent from populace from using exclusive private ownership of real estate they control via highest power on land....the government


Mon, 01/13/2014 - 18:31 | 4328590 TruthInSunshine
TruthInSunshine's picture

Blackstone is the de facto AUM of the Fed itself, so expect the U.S. Government (Congress, Treasury, Executive Branch, etc.) to do everything & anything in their powers to keep as many of those 12 million empty residences (the shadow inventory) from being listed for sale, rent or otherwise coming to market, as they have to "get to work" for their bankster masters.

A tsunami of price deflation will ensue if they don't sloooooowly trickle that stream over many, many years. Given that 1/3 of banks are insolvent but for mark-to-fantasy accounting rules already, there'd be bank blood flowing like a tidal wave.

Bankocracy USSA.

Mon, 01/13/2014 - 19:00 | 4328706 Simplifiedfrisbee
Simplifiedfrisbee's picture

This is outrageous! I have been priced out of the housing market because I have morals and will resist because I hold a small amount of virtue that allows me to stand firm on my decisions. Even if I would have bought during the onslaught of deflation from 2009-2011, I would have been surrounded by either boomers selling, FHA "owners," or rentals from blackstone.

I want to verbally defecate on hell bound Bernanke, Yellen, political sell outs, multi-national conglomerate CEOs, and their staff. Indignation is highly activating and will nurture my resistance until my passage away from this human created monstrosity of deceit and usury(aka as a neo-feudal kleptocratic corporatocracy).

Until my time arrives to leave, I will not be blinded to the truth and will form what is necessary to strive for Liberation.

Mon, 01/13/2014 - 20:51 | 4328986 666
666's picture

This year, Hector will no longer say, “We either eat, or we pay rent.” He and many others will instead say, “We either pay ObamaCare premiums, or we pay rent.

Tue, 01/14/2014 - 17:19 | 4331785 Kobe Beef
Kobe Beef's picture

Yeah, fuck eating.

Mon, 01/13/2014 - 18:30 | 4328612 Harbanger
Harbanger's picture

The rent is never too damn low!  Occupy those vacated residences and let the gov manage housing.

Mon, 01/13/2014 - 23:01 | 4329451 OceanX
OceanX's picture

"12 million empty/vacated, non-rented, non-occupied residential structures on and off (if underwater) bank balance sheets."

What do you suppose the backlash would be if the population got the idea that all of these vacant houses were used by pedophiles to commit crimes?

Years ago, the residents of Detroit burned all the vacant (crack houses) in their neighborhoods...

Tue, 01/14/2014 - 17:20 | 4331788 Kobe Beef
Kobe Beef's picture

Nah, they burned everything. Because it was Detroit, most of what they burnt was crack houses.

Mon, 01/13/2014 - 18:28 | 4328610 Mr Pink
Mr Pink's picture

The best part is Blackstone is taking the rent money and in 2 years these properties will be stripped and abandoned. Then...wait for it...they get a bailout!

Mon, 01/13/2014 - 17:57 | 4328513 flacon
flacon's picture

...and there was much cheering and rejoicing in the land..... (crickets)....

Mon, 01/13/2014 - 19:46 | 4328876 Offthebeach
Offthebeach's picture


Eastern Massachusetts county. 

I know a guy existing in abandoned boat in the woods. We have a couple blue tarp camps in woods that I know of, maybe more. Lots of illegal apts, the closets are turned into a micro, hotplate and sink kitchen. Bath down the hall. People living in rough finnished basements. Living in cars. Abandoned passenger rail cars. One guy lived in a uber rich guys woods. Dug a underground knoty pine mini palace so hidden the NVA would of been proud. Deer hunters found it. Lots of abandoned, forclosed houses and commercial spac.A couple of tradesmen living in industrial bays/ garages.  

A few families stopped mortgage payments years ago. Still in the house.

I have no idea of how many people live off rice and church can food, have the heat off cause they cant afford power, oil, taxes. Turn the main oil burner switch on only for a few hours.  Ditto the main electricaI  breaker

I walk for health and there are a lot of really really blackout dark houses at 7PM that I know people live there.


The important thing is to keep asset prices high. 2-3 decades and incomes should recover


Tue, 01/14/2014 - 02:11 | 4329889 401K of Dooom
401K of Dooom's picture

You live in Massachusetts?  Get out of there now!  That state is imploding slowly.  The implosion is following an exponential curve and soon it will be horrific.  Move to a part of the country that no one else wants to go to.  I'll give you a hint.  Look at your favorite apartment hunting website.  Look at other states and see what rates you can get.  That state is going to kill itself with skyrocketing property values.  It will end just like the Weimar Republic. 

Mon, 01/13/2014 - 17:58 | 4328504 10mm
10mm's picture

Everything going according to plan. A house/apt is to support shelter. Not fuckin schools, pensions, fsa.

Mon, 01/13/2014 - 20:20 | 4328989 cynicalskeptic
cynicalskeptic's picture

Serfdom comes about when people trade their freedom in exchange for a place to live and a portion of the food they produce for their Lord and Master.   

We are moving back in that direction.   People willingly selling themselves into serfdom in exchange for a minimum level of shelter, food and 'protection' from the others who have nothing.

Mon, 01/13/2014 - 17:55 | 4328505 Critical Path
Critical Path's picture

Yes we can?

Mon, 01/13/2014 - 17:57 | 4328515 williambanzai7
williambanzai7's picture

Mon, 01/13/2014 - 18:01 | 4328529 akak
akak's picture

Good luck finding a woman that svelte and comely in a trailer park!

Mon, 01/13/2014 - 18:05 | 4328537 ZerOhead
ZerOhead's picture

You haven't seen her toothless smile yet...

Mon, 01/13/2014 - 18:12 | 4328560 resurger
resurger's picture


Mon, 01/13/2014 - 18:14 | 4328571 Sudden Debt
Sudden Debt's picture

oh! A proffesional cocksucker!

Mon, 01/13/2014 - 20:32 | 4329023 TheMerryPrankster
TheMerryPrankster's picture

Are you saying she's a banker or a politician?

Mon, 01/13/2014 - 18:57 | 4328693 bonderøven-farm ass
bonderøven-farm ass's picture

Working girl.  Future looks bright.....

Mon, 01/13/2014 - 18:07 | 4328547 pods
pods's picture

That is what all the beer is for!

And remember, drinking rum before 10 am doesn't make you an alcoholic, it makes you a pirate!


Mon, 01/13/2014 - 18:10 | 4328556 The Gooch
The Gooch's picture

Martinis before 10 makes you a CONgressman.

Mon, 01/13/2014 - 18:30 | 4328613 NotApplicable
NotApplicable's picture

While chugging vodka all day makes you a judge.

Mon, 01/13/2014 - 18:08 | 4328552 Miffed Microbio...
Miffed Microbiologist's picture

Somewhat comely in a relative way. Those fake boobs look like melons on a wall. If youre going to do fake, at least make an effort to appear real. I've considered tattooing " my eyes are up here" with an arrow indicator for Mr M. who does seem to relish my natural 36D rack.


Mon, 01/13/2014 - 18:41 | 4328642 zipit
zipit's picture

Enjoy 'em while they last ('cause they are gonna become a saggy, deflated, mess with nipples sooner than you can say, "How come my guy doesn't want to play with them anymore?").

Mon, 01/13/2014 - 18:43 | 4328650 Harbanger
Harbanger's picture

You're a woman, so you probably know from experience that most guys that are into big boobs are lousy lovers and have mommie issues.

Mon, 01/13/2014 - 18:48 | 4328663 zipit
zipit's picture

How do you know that?  Oh, sorry :)

Mon, 01/13/2014 - 18:53 | 4328677 Harbanger
Harbanger's picture

I Love women.

Mon, 01/13/2014 - 19:15 | 4328745 Miffed Microbio...
Miffed Microbiologist's picture

Absolutely. I'm pretty well proportioned but on a long enough timeline gravity gets us all eventually. I plan to age gracefully and enjoy what I have while I have it. This is true in all things. ;-)


Mon, 01/13/2014 - 19:38 | 4328838 akak
akak's picture

Well, if you're anything like my grandmother, you can look forward to having a second "lap" when you sit down on which to rest your plate while eating on the couch.  At least there's that!

Mon, 01/13/2014 - 19:49 | 4328889 Harbanger
Harbanger's picture

In their old age, I saw nothing sexy about my grandparents, but there was a bond between them and sense of fulfillment in their eyes that I can only dream of.

Mon, 01/13/2014 - 19:51 | 4328901 Miffed Microbio...
Miffed Microbiologist's picture

Oh dear, that image is most disturbing! I guess I can toss them over each shoulder cross your heart style. Maybe I will add some furs and make a new fashion statement. Sorry PETA.

Of course, the way this world is going, I'm not sure of the assurance of our existence that far in the future.


Mon, 01/13/2014 - 20:22 | 4328995 cynicalskeptic
cynicalskeptic's picture

Gravity can work to your advantage.  Big boobs still look prety good whatever your age when you're flat on your back.....

Mon, 01/13/2014 - 18:47 | 4328659 zipit
zipit's picture

Just wait for her shift to end at strip club... then you can find her back at the trailer park.

Mon, 01/13/2014 - 20:20 | 4328987 FredFlintstone
FredFlintstone's picture

Sounds like you have searched high and low.

Mon, 01/13/2014 - 18:57 | 4328692 Rising Sun
Rising Sun's picture

I think I can see beef's not....wait is!!!!  It is beef curtains!!!!

Mon, 01/13/2014 - 19:02 | 4328711 wisehiney
wisehiney's picture
A cockroach’s last word to a man who wanted to kill it “Go ahead and kill me, you coward. You are just jealous that I make your wife scream more than you do when I climb her!”.
Tue, 01/14/2014 - 15:10 | 4331250 PTR
PTR's picture

How fitting.  The image is from COD: MODERN WARFARE 3 "TRAILER PARK" MAP.  So you'll have your armed thugs as well.

Mon, 01/13/2014 - 18:05 | 4328538 Peter Pan
Peter Pan's picture

I am not by any means trying to side with the Blackstones of this world, but does anyone know to what extent rent increases have been driven by property tax increases?

It is however a general theme in other countries as well, where the cost to buy or rent the lower end of the market moves much faster than just about any other segment. This of course is the result of people being increaingly priced out of the market.

Mon, 01/13/2014 - 19:21 | 4328763 CrashisOptimistic
CrashisOptimistic's picture

I actually doubt some of this story.

If you read it carefully, most of it is quoted as rent as a % of income.  You can get those graphs by collapsing income.  You don't have to see rent increases for that.


Tue, 01/14/2014 - 02:18 | 4329895 401K of Dooom
401K of Dooom's picture

Watch the milleage increases.  and make sure you fight the annual apparaisals as the towns will increase your property wether or not you can afford it!

Mon, 01/13/2014 - 18:07 | 4328550 yogibear
yogibear's picture

Blackball, I mean Blackstone purchased all those foreclosed properties to rent out and squeeze out the income out of Americans.

Mon, 01/13/2014 - 18:12 | 4328558 Smegley Wanxalot
Smegley Wanxalot's picture

Why rent, when you can buy with zero down and then not pay, get foreclosed on but live in there and squat for years?

Mon, 01/13/2014 - 20:27 | 4329010 cynicalskeptic
cynicalskeptic's picture

You USED to be able to do that.  But NOW...... you can't get a mortgae even with 20% down and a near perfect credit score.  Low interest mortgage rates are meaningless when no bank is willing to lend.    

My house is worth 4 times what I paid for it - even after the crash.  Looking to refi the remaining 1/3 of the total on what was left of a 15 year mortgage I was turned down.  

Higher income, way higher equity proportion, damn good credit score..... WTF?  

They were more than willing to take the application fees but then look for ANY excuse not to write the mortgage.  Screw 'em.  We paid it off early and changed banks.  Up yours JPM.

Mon, 01/13/2014 - 18:13 | 4328561 Yardfarmer
Yardfarmer's picture

"Another very important development is in the housing industry, where it seems nothing new was learned by the major collapse in 2008-09. Blackrock has been buying a large number of distressed single family homes. It has sold a $500 million IOU that is secured not by the homes but merely by the rents on 3,200 of the homes it has purchased. Really, it’s a bad joke, because to quote Yogi Berra, “It’s déjà vu all over again!” The $500 million is being split into tranches where you can own AAA rated paper that pays a mere 1.3% per year down to the “F” portion, which pays a pitifully low 3.8% as long as all the renters meet all their payments. Amazing!"

Mon, 01/13/2014 - 18:25 | 4328603 yogibear
yogibear's picture

Blackball will just rinse and repeat.

Mon, 01/13/2014 - 18:32 | 4328618 NotApplicable
NotApplicable's picture

Say what you will, but hey, it beats workin'.

Mon, 01/13/2014 - 18:13 | 4328564 Sudden Debt
Sudden Debt's picture

I know young people who make 1600 euro's net and rent a appartment of 1100 a month.
They could rent a smaller one... but image... it's the iPhone generation.
And for the rest they stop living. If you tell them "let's go for lunch" they turn white because that's 30 euro's they don't have.

There's appartments that rent for 600 a month also. A bit smaller and not in the city. Drive 10 minutes to the countryside and you can rent a villa for 1100 a month.

It's prestige. Lazyness. Addicts of comfort.

Comfort turns people on weak plantlike creatures.

Mon, 01/13/2014 - 18:20 | 4328584 Handful of Dust
Handful of Dust's picture

Rent Control and Eminent Domain are on the menu but Wall Street is fighting them fiercely. Bu tthing that can happen is to not pay your rent for several months and let them throw you out. Courts are backlogged and don't worry about finding another place. There are too-many-to-count rentals out there; the market is flooded with them.

Mon, 01/13/2014 - 18:21 | 4328591 Spungo
Spungo's picture

We noticed that poor people are often overweight, so we decided to make that impossible.

Mon, 01/13/2014 - 18:25 | 4328602 q99x2
q99x2's picture

More landlord heads for the dumpsters.

Mon, 01/13/2014 - 18:31 | 4328615 Peter Pan
Peter Pan's picture

Actually there would be more landlord assess than heads in dumpsters if foreclosed homes were all released on the market and ZIRP policy was abandoned by the FED.

Mon, 01/13/2014 - 18:33 | 4328622 NoWayJose
NoWayJose's picture

Let us not misplace the blame on Blackstone - it sits squarely on the Fed, who have destroyed all 'safe' investments that 'savers', pension funds, and even hedge funds had available to them.  Blackstone should be applauded for taking advantage of nearly free Fed money being given to them in order to make investments -- and at least they are investing in a tangible asset (i.e. housing) instead of chasing stocks.  Of course, this does nothing to help the economy, or to help renters, or to help employment -- but hey, the Fed's response is that the renters would probably be that they should have bought stocks with the other half of their income...

Mon, 01/13/2014 - 18:43 | 4328649 zipit
zipit's picture

What percentage of income spent on rent constitutes slavery?  We gotta be getting pretty close, especially considering that modern slaves/Americans also need to pay for food, clothes, gas, healthcare, and other necessities (is porn a necessaity?).

Mon, 01/13/2014 - 19:01 | 4328709 20834A
20834A's picture

Sharecroppers who work the massas land for a pittance and have a hovel to live in. Then they have to buy their goods from the massas store.

Mon, 01/13/2014 - 20:36 | 4329038 cynicalskeptic
cynicalskeptic's picture

BUT in places like NYC you have rent regulations holding rents DOWN, courts bending over backwards in favor of tenants (just TRY and evict one for nonpayment of rent or other causes), people hold onto cheap apartments while  living elsewhere and government pays for poor - and lousy - tenants who destroy things.  Got to live the people who dump trash out windows instead of walking it to the basement (a regular when we lived in the Bronx).  One family was renting a HOUSE and hadn't EVER paid rent on it (this was back in the late 80's).   Had a section 8 tenant in an apartment in my parents old house - NO damage deposit.  Spent two weeks cleaning the place and repainting (her kid painted two rooms BLACK).  Pain in the ass tenant - never again for Section 8.

So.......  you have to be NUTS to be a landlord in some markets.  Know people who have a small apartment building - ONE bad tenant can push you into serious losses while in the best of tiems you're not going to make much.

Tue, 01/14/2014 - 03:16 | 4329960 the0ther
the0ther's picture

Let's hear how you'd fix the problem then. Smart guy.

Tue, 01/14/2014 - 04:47 | 4330055 kurt
kurt's picture


Public executions


Tue, 01/14/2014 - 09:10 | 4330235 tarsubil
tarsubil's picture

Are those options or are you proposing to forgive and condemn at the same time?

Mon, 01/13/2014 - 18:55 | 4328684 SweetDoug
SweetDoug's picture





I'd love to see a chart of the average income versus rent as a historical metric. I'd bet that it would diverge significantly from the average.



Mon, 01/13/2014 - 19:29 | 4328797 teolawki
teolawki's picture

Easy fix for that. Just start calling cardboard gingerbread and the U.S. the Enchanted Forest.

Mon, 01/13/2014 - 20:01 | 4328940 eddiebe
eddiebe's picture

This is the kind of stuff revolutions are made from

Mon, 01/13/2014 - 20:37 | 4329033 TheMeatTrapper
TheMeatTrapper's picture

We either eat, or we pay rent.

Learn To Trap Food

I get paid to catch my food. Any man willing to work, can eat. Urban, suburban or rural. Food is plentiful. 

How Trapping for Food is Different than Fur Trapping

Mon, 01/13/2014 - 20:38 | 4329042 cynicalskeptic
cynicalskeptic's picture

roadkill...... see deer dead by the side of the road even in the Bronx

Mon, 01/13/2014 - 20:36 | 4329036 Bangin7GramRocks
Bangin7GramRocks's picture

Won't happen because much of the population, even some poor people, blame the renters because of some fucked up ideology.

Mon, 01/13/2014 - 21:02 | 4329112 roadhazard
roadhazard's picture

The Blackstone that stole Xmas.

Mon, 01/13/2014 - 22:22 | 4329309 rosiescenario
rosiescenario's picture

Actually this is a brilliant solution to several problems: if Americans can no longer eat due to high rents, then the obesity problem will go away and and Obamacare will become economically workable, not to mention that the unemployed will fade away, too.

Mon, 01/13/2014 - 22:54 | 4329415 ThirdCoastSurfer
ThirdCoastSurfer's picture

One of the most disturbing trends I followed in 2006 was that of the private REITs. It was common to find these non-public REITs with 30 to 1 leverage against their purchases: which were mostly nursing homes, land and student housing. If the collapse had not occurred when it did, I wonder what would have become of the cost to reside in a nursing home given the feeding frenzy that was in effect between the various interests as they jockeyed for position to own as many of these facilities as possible.  

You don't hear much, and you can find even less, of the activities of these non-public REITs now in 2014, but clearly, one of the misallocated resources of easy money has to be a replacement of leverage for lending (-best term I can come up with for now). Where a $1 million investment could be secured with about $33,500 in equity at a 5.5% repayment rate, now, that same investment amount is likely backed by $200,000 of equity at 3.7%. What is not considered however is that since $200,000 of tier 1 or tier 2 assets back that loan, I wonder if there is anything to prevent that equity amount from being applied as collateral against another property, as in a 2nd lien? 


Tue, 01/14/2014 - 03:28 | 4329993 RECISION
RECISION's picture

Rent is structured to always be more than half of your income.

That is the whole point of rent.

And why it is called a "Rent-Trap".

The only surprise, is that anyone is surprised.

Tue, 01/14/2014 - 09:25 | 4330259 d edwards
d edwards's picture

And what did the banks do with all the foreclosed houses? They were snatched up for cheap and turned into rentals!

Fri, 01/17/2014 - 01:41 | 4340152 margaretB
margaretB's picture

Most “rent-or-buy” comparison articles one sees are not practical, leave out numerous hidden costs of getting houses, and are usually outright real estate market propaganda, if not out and out lies. However, at least one, oddly enough from a real estate business, has been introduced that's this side of honest. 

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