On Other Blogs

Early On Other Blogs Today: You Think Rents Are Rising Now? Just Wait.

An early On Other Blogs, courtesy of apartment analysts Dupre+Scott.

By Erica C. Barnett April 4, 2014

I don't know why no one clued me in earlier to apartment analyst Mike Scott's very funny and very informative video series on Dupre+Scott's website, but now that I know about it, I'm making up for lost time.

Here's a recent video in which Scott goes in depth about a disjunction I mentioned in a recent post on the apartment rental market: Costs (for landlords) are rising significantly faster than rents, meaning that in future years, in Scott's words, "rents are going to have to climb ... 30 percent faster than they have been climbing" since 2000.

The main reason? Taxes and utility costs. Between 2000 and 2013, real-estate taxes have risen 6.7 percent a year (last year, it was nearly 10 percent), and utility costs have risen 5 percent, for an average tax-utility cost increase of 5.9 percent a year. At the same time, revenues have only increased 3.7 percent. At this rate, Scott says, within 44 years, "taxes and utilities alone will cost more than all operating expenses. ... Clearly, that's just not even possible, so clearly, something has to give."

Put more realistically, Scott says that "taxes and utilities [will] outstrip all collected revenue in about 80 years." The upshot is that "if we can't rein in these cost increases, the rent increases that we've seen since 2000 are just a drop in the bucket compared to what they're going to have to be in the future." 

Check out the whole four-minute video (with slides!) here

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