In Desperate Economy, Renters Lose, Landlords Get Windfall

If you're planning a move in 2009, it may be best to wait. Recent economical challenges have become a cash cow for many greedy landlords and apartment management firms who are seeing the new influx of potential renters as a reason to gouge the already struggling economy. Potential renters are seeing the price of renting go up in many markets due to the fact that those who are losing their homes in foreclosure have no choice but to rent. A recent chat with a friend who rents out homes was a real eye opener.

"You can get more now than ever. It used to be a three bedroom got you about six hundred fifty and now you can ask even $1000 in some areas or even more." Said an anonymous property owner. "This is our year."

But what about the fixed-income folks who already rent and are living check to check? When asked about how their price increases could affect the economy and those struggling, my friend was very blunt, noting that the housing market is supply and demand. Inflated rent prices are his right, and if he can get someone to pay it, he is going to charge as much as possible. This is bad news for many low-income families.

Areas with fewer jobs are less likely to have price gouging in the rental market. Some rental costs are going down in places the factories are closing. But many landlords are still raking in the spoils of a ruined economy. Landlords can take advantage of the foreclosures because the people who are suddenly finding themselves without a place to live are often desperate. "They may have pets or need extra rooms. I don't have three bedrooms or more available for long. It seems like there is a shortage of three bedroom rentals available. They can't get credit to get into another house, so they rent to hold onto their jobs and the schools their kids go to."

With the extra money he has been receiving from rent increases, another landlord in our area has been purchasing foreclosed homes and harvesting anything sell able, leaving behind a hollowed-out eyesore he offers rent-to own.

The homes are stripped of their wiring, plumbing, and often the siding if it is made of metal. All appliances are sold as scrap. The empty shell of a house from which he occasionally sells the flooring and trim, is then offered rent-to own at 11-14% to anyone willing to rehab it. What the new owner does not understand is that the contract is not filed with the county, leaving the rent-to-own lessee as just a glorified renter without rights. If he decided to change terms or the lessee struggled with payment, the landlord suddenly has a new home full of new wiring and plumbing to strip out and sell. In the mean time, neighborhoods suffer the eyesores he leaves behind.

"The market should become more stable in the next couple of years," explained my friend. "I guess the pond will be fished out by then." Until then, we can expect bloated rent payments, a secondary sting from the housing crisis. "Good thing for me, the government didn't bail out the lenders like they said they would. Otherwise, we'd be struggling right now."

My grandfather who flips houses has seen an increase in the interest in his properties with no-bank financing. He does not remove anything from houses and tries to keep them at a fair price. For him, the housing market hasn't changed much. "I have a lot more to do though," he quipped. "I even got to hire folks who were hurting for a job."

So what will the banks do with all of the foreclosed homes? One can speculate that rental management firms will become a mainstay in many communities. Banks renting homes can offer a challenge to the gouging landlords, since they pose as true competition. But currently, many homes are sitting empty and falling into disrepair. The banks may eventually discount these homes and sell them off on auction, and the likely buyers are . . . the landlords who are already cashing in on the economic tragedy that has befallen our country.