Wednesday, February 2, 2011

Silence from Landlords on Rental Rate Increases

A recent story in the Bellingham Herald indicated a low rental vacancy rate in this area and suggested that, consequently, rental rates may rise as much as $50 per month. You can click here to read the story.

The shortage overall does not mean that vacancy rates in the county are equally low. Vacancies tend to be lesser in number in areas of high demand, such as close to Western Washington University (WWU) where we know who will bear the burden of higher rents - the students. So the prediction is that rents will rise in these areas not because of rising costs but because there is less competition. Hiking rates in the absence of competition is call greed.

Not surprisingly, I have not heard a flood of protest from the landlords or their associations about rental rate increases in this instance. We did hear from the landlords at the time they learned that they might have to pay the staggering sum of $3 per month, if a licensing and inspection program were to be created in Bellingham. They cried faux crocodile tears in loco parentis for the poor tenants who would have to bear the burden of the pass through of a potential $3/month fee even though there would be no obligation to pass the fee in the first place.

I have posited before in this blog that the landlords have needed no excuse in the past 30-40 years to increase rental rates in this city at the times it suited them. (Complicit in this was WWU and the city. WWU because it built no housing on campus for decades and the city because it allowed the huge influx of essentially migrant tenants without taking any steps to protect the neighborhoods or control the rental housing stock.) To wit: the $525 per month for the filthy dump described in my blog entry of 18 January (click here to read that) and the $1330 per month for the hovel on Grant St. that burned out the student renters last month (click here and here to refresh your memory on that event).

So I call upon the landlords to be true to their concern about rising rental rates due to licensing fees and to suppress the urge to raise rents for the simple reason that they can.


Michael Lilliquist said...

Dick, I think you have brought a great deal of intelligence to this conversation, but I have to question the way you've described the economics in this post.

You write "So the prediction is that rents will rise in these areas not because of rising costs but because there is less competition. Hiking rates in the absence of competition is call greed."

Rising costs stem not from increased competition among landlords (competitions usually refers to sellers), but increased demand by renters, which is not strictly speaking "competition"). Increased competition generally drives the price down.

What we see here is a more or less captive market, or rather a sub-market based on location and low income. The student rental demand is relatively inelastic (students must have housing) and the supply of rentals is limited (only so many places near school). This inelastic emand allows landlords to charge higher rents.

Looked at this way, higher rents aren't just "greed." They are the epxression of inelastic demand on a limited supply.

All this would be regretable but acceptable, were it the case that all rental houses are safe and compliant with all pertinent regulations.

-Michael Lilliquist

Zonemaven said...

Your points on my description of the rental market are understood and appreciated. I am no economist or market expert but I do know a rip-off when I see it – and I see one here. Renters who have few choices are at the mercy of the landlords. Perhaps I could have been more precise in my description, as you have been.

In any event, the question of “what the market may bear” type increases needs to be posed to the landlords who have previously cried about licensing fees and their effects on rental rates.