Foreclosure problems for renters

$54,120 for two wage earners doesn't sound like that much to me. That's $27,000 per person. That's a pretty paltry salary.

Absolutely right.

Topics like these always launch a string of comments based on the premise that The Law Is Whatever I Happen to Think It Is.

So let's start by establishing that, no, it isn't.

When a property is rented, a landlord actually transfers some of his or her property rights, including the right to current occupancy, to the tenant. The landlord retains future rights, which return to him or her at the termination of the rental period. That's why the landlord can require a security deposit or sue you for "waste" if you trash the apartment, because you are depriving the property owner of the right to possess the property in the same condition you got it in.

For these and other reasons, a regular sale of rental property is subject to existing leases. The landlord can't sell you something he doesn't have. Since he doesn't have the right to occupy the property during the lease term, neither do you when you buy it from him. You have to wait for the rental term to expire.

This really isn't much of a problem for buyers of investment multifamilies, since a property with good, existing tenants is more attractive than an empty shell with uncertain rental marketability.

There is an exception to every rule, however, and a bank taking property in foreclosure currently enjoys just such an exception. (Because they lobbied for it, of course.) A bank can evict tenants in good standing regardless of whether their rent is paid or not. Banks prefer this arrangement because, first, they'd rather not bother with being landlords; and second, as the current housing crisis shows, banks are not run by terribly bright people.

I think we've had quite enough of trashing valid contracts simply to benefit careless and incompetent lenders. Evicting good tenants brings all the community upheaval of foreclosures, but this time without any reckless borrowers to blame. Furthermore, banks will find it easier to unload these REOs with their rental income intact, despite their inability to grasp this simple fact.

Banks will bleat about this change, of course. Sheep bleat, too, and look how intelligent their decisions are.

Don’t be fooled by the statistics, you have to add at least $200-$300/month extra heating cost for a 2-bedroom apartment to be able to live here. In my opinion, the foreclosure issue here is insignificant compared to other areas. For example, our rent here is about the same as what we paid in Bay area/CA 2 years ago. The major difference is that the cost for utilities is much higher ($3000/y more). The higher-income renters (those who can afford $5000/m rent) may not want to become buyers regardless of the housing market.

The cost of housing has adjusted upward for the two-income family. This is why most singles in their 20's and 30's have roommates around here. You need a six figure income to buy a house, which excludes almost all singles under 40. Singles who *almost* make enough to buy a house have roommates in order to save for a down payment, and the rest have roommates because they can't afford not to.

Not sure I agree with the assertion that the supply is the same. I know at least two home owners who have decided to rent their properties instead of selling them in Newton and Grafton.

Marcus, as usual, makes good points.

But for most of us who are in a position to buy a house, and rent, a banks foreclosure on our rental wouldn't actually mean much. Yes, I'd have to move, and that would be moderately annoying, but as long as there was no chicanery, I shouldn't actually be out of pocket anything but the moving cost.

Yes this is annoying, but is it really a crisis?

As for why rents are so generally high around here, that's been fairly well covered in previous comment sections - Massachusetts laws favor the tenants to the extent that rents are forced up. Basic economics. Granted a course no one in the Massachusetts legislature seems to have taken.

Agree with Manu - I also would guess that supply is increasing. In outer Boston neighborhoods I have seen condos languishing and some being rented.

I think assigning the blame solely to the Landlord is demonizing. Hasn't the press clearly shown that there are often multiple culprits in this foreclosure debacle -- misleading real estate agents, mortgage brokers and bad loans to start? What about a multi-unit building where this or other tenants aren't paying the rent? What if the Landlord lost their job or had an unanticipated medical issue? Frankly, I expected better Rona, you usually do such a good job.

Dan E. is right that $54,120 per year for two wage earners is a paltry salary in the Boston area-which is why it's a shame that so many people don't get paid even that much! In Somerville, where I live, Census 2000 found the median familiy income was $51,243. Just to remind readers: that means that half the families in Somerville had less than $51,243 to live on. Sure, wages have increased since then, but they have not kept pace with inflation. So, to half the people in Somerville, that "paltry salary" does sound like a lot!

Marcus,

Are your comments about evicting tenants referring to "Amendment 3-- Miller/LaTourette" from the bill?

Is your interpretation of the bill that banks will no longer be able to evict tenants once a foreclosure occurs, or does the bill just allow states to make their own laws regarding this process?

I am not blaming landlords in this one. I am discussing the pressures on rent-tenants who have nothing to do with the foreclosure. I tried to separate the cause of the foreclosure -which has been talked to death. My focus is the affect on the tenant who did not cause problem, but may need to move as a result of it.

Good questions raised here: Is supply of rentals actually going down? What is median income and how widespread is the problem of people who cannot afford to rent here, much less buy? What is the ramification of legislation about tenant's rights in foreclosed properties?

Marcus,

Are your comments about evicting tenants referring to "Amendment 3-- Miller/LaTourette" from the bill?

Is your interpretation of the bill that banks will no longer be able to evict tenants once a foreclosure occurs, or does the bill just allow states to make their own laws regarding this process?

Bikes, my comments were not specifically addressed to that Amendment.

My understand is, that Amendment simply prevents nationally-chartered banks from claiming they are exempt from state foreclosure regulation through federal pre-emption.

Who said ANYTHING about two wage earners?! Apartment living isn't just for the married or the partnered! What about the single person who has to have a place to live? Where is she going to find a job that pays over $50K a year, then have to worry about said residence being sold out from under her?

Seriously, I don't know how Bostonians survive...any statistics on how many more homeless people there are in the Boston area?