Hi Folks.  So as we are getting out of the Covid-19 shut downs, there are certain economic realities that many local city councils are having to deal with.  Because of the supply chain disruptions from Covid and the recent increase in inflation in building materials, the number of rental units in most major American cities remained well below the demand for those same units.

The rules of basic supply & demand are still in effect.  If there is more demand for a product (in this case rental units) than there is supply, then the price goes up (in this case rent).

The city leaders of major cities seem bewildered as to how to respond to this problem.  In many cities, (Seattle, and Los Angeles are clear examples here), city leaders are trying to respond with new laws designed to keep rental rates low, but unfortunately most of these laws will have the opposite effect.

History has shown that when you artificially alter the supply & demand economics, the effects are often the opposite of what was predicted.

Eviction moratoriums, rent controls, eliminating background checks on potential renters, eliminating credit checks on potential renters, preventing evictions during winters months, extending the notice period for rent increases, extending the notice period for termination of leases, landlord requirements for move out assistance for tenants, and mandatory mediation for rental disputes are some of the options that have either been reviewed or enacted by many major American cities.

Now on the face of it, each of these ideas seems like they might be a good idea when taken in the abstract.  In addition, nameless, faceless, big multi-national corporate landlords that own thousands of rental units in your community do not seem like sympathetic characters so honestly who cares if their planet gets a little harder, right?

The truth is that the huge corporate landlords are well equipped to handle these new changes to the rental economy.  The landlords that cannot handle these changes are the small Mom & Pop landlords who might own an extra house, or a big house with a few extra rooms and use that to supplement their income.

These Mom & Pop landlords form the backbone of home rentals in the United States, and because you are dealing with a normal person, they are often willing to lower the rent in exchange for good quality tenants who are less likely to default on the rent and require a costly eviction process.

On the other hand, the big corporation can handle a certain percentage of their units going empty because they have huge capital reserves, and therefore, they have no incentive to lower the rent.

For example, doing credit checks and/or criminal background checks on potential tenants has been a useful tool for many Mom & Pop landlords for years to ensure that they get quality tenants.  Of course, the argument has been made that these tools mean that some lower income people, or people who have been released from prison have a harder time finding a place to rent, so eliminating these tools has been recently gaining popularity.  In Seattle, any tenant who pledges to pay what you are offering the rental unit for must be granted access to the unit, but of course, this doesn't mean that the tenant will not default on the rental rate in the future.  When you couple that with an eviction moratorium (either outright, or during the winter months), a small landlord has to really make some hard choices about whether or not they are willing to rent out their unit.

Suddenly selling their home (probably to the big corporate landlord) starts looking very attractive.  This reduces the available supply of rental units and those darn Supply & Demand economics kick in and the price of rental units goes up again.

So, what does this mean for you?  You need to get out in front of this issue with your landlord.  If you are a good tenant, and plan to stay at your current address, make sure that you reach out to your landlord, and let them know that you like where you live and that you will work with your landlord to comply with the new mandates.  By doing this, you can help ensure that your landlord doesn't make a drastic decision that increases your rent, and makes your current situation unsustainable.  

For example, the City of Seattle just increased the notice period for rent increases to six months.  What this means is that small Mom & Pop landlords, who have no way of predicting the nature of the rental market in six months to a year have a hard choice to make.  If you have a (typical) one year lease, then the landlord would have to decide whether to increase rent before the halfway point in your lease.  Since they don't want to get caught flat footed, absent communication from you, they might consider a radical rental increase to hedge their bets in case of inflation.  That is bad for them and for you.  

We have been in a time where many people have not paid their rent due to the Covid eviction moratoriums, and those people will likely have to find a new place to live as soon as the economics of that system come home to roost.  But many other people have been excellent tenants, and they should get the benefit of that good rental history by keeping their rent low based upon good relations with their landlord.  Unfortunately, many city councils are forcing the hands of small landlords and this could really work against you if you do not find a common ground with a landlord that you plan to stay with.