New BiggerPockets Article: Why Tenants Should Be Treated as Clients
And how it relates to the threat facing real estate investors today
This is an excerpt from an article originally published on BiggerPockets.com
When I first started investing in real estate around 2006 (yeah, I know, not a great time to start), the biggest dangers to the industry were things like interest rate hikes, too much competition for properties, and of course, a looming, real estate-driven financial crisis.
After the dust settled, the biggest problem by far was obtaining financing, as every bank was shell-shocked. As the market clawed back but new construction lagged behind, finding quality properties to purchase in an overcrowded market became the biggest challenge. Then, the COVID-19 pandemic hit and exacerbated that problem dramatically (although, helpfully, it sent real estate prices through the roof).
Now, however, our industry is dealing with a new problem we haven’t faced in a long time: politics.
The Political Threats to the Housing Industry
During her campaign, Kamala Harris proposed a law that would strip investors with over 50 single-family homes of the mortgage interest deduction or the ability to offset income taxes through depreciation. While such a law won’t pass under a Trump administration, it most certainly might at a later date when the pendulum swings back to the Democratic side.
States and municipalities throughout the country have passed numerous anti-landlord laws, amongst which are some that bring back the failed policy of rent control. They have also passed laws prohibiting landlords from discriminating on source of income (24 states and about 150 localities have done so, as of this writing), and Minneapolis went so far as to all but ban the use of credit checks in tenant screening.
Many other such laws have been passed or proposed. And let us not forget about the eviction moratorium during the pandemic.
Not all of this is bad, of course. We should recognize that landlords have greater leverage in negotiations with tenants. After all, we write the lease. There should also be some governmental protections for tenants against bad landlords. But the trajectory right now is going way too far in the tenants’ direction, and the rhetoric coming from many activists is even worse.
While you can brush aside loud minorities like the various Maoists yelling to “hang landlords,” there are other, more serious challenges coming our way. One group called People’s Action wants to “decommodify” housing. It proposes “taxing the appreciation of privately owned homes.” How much of the appreciation would be taxed? All of it, of course.
Many more organizations are making advocating for tenants their primary mission. The Urban League has been around for a long time, but many others have started, such as Partners for Dignity (formerly NESRI), which wants to “advance models that ensure community control over the use of land and other natural resources and are not reliant on private profits,” or The Eviction Lab at Princeton University that investigates the (overblown) “eviction crisis” in the United States.
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