Why I'm Actually Fine with the Blueprint For a Renters Bill of Rights

As a landlord in Oregon, the White House Blueprint For A Renters Bill Of Rights ↗ caught my attention.

My General Philosophy

I tend to favor rules that promote personal freedom coupled with personal responsibility. I believe that provides the best environment for people to thrive. But guardrails are also necessary, especially for the neediest in society. I also think affordable housing is an issue, especially for the most impoverished.

Despite how much I agree - and am already implementing - with the blueprint, I also think the root cause of housing issues isn't directly related to housing (I'll share what is at the end). So despite this new blueprint's well-meaning, I don't think anything focused solely on housing will have the intended consequences.

The Blueprint's Impact on Our Operations

Putting aside my general philosophy, evaluating its impact on our management operations is still good. Let's dive in.

The goal is to provide "access to safe, quality, accessible, and affordable housing" with "clear and fair leases."

I love both of these goals. I think they're both vital. That's why I thoroughly clean, and repair units before someone moves in. Now, do I rehab them to be brand new inside? No, but they're clean, in good condition, and available for anyone who meets my criteria.

Clear Leases

I also think having clear and fair leases is a great goal. I use the same standard lease as all other professional landlords in Oregon, but they're not as straightforward as I would like. To overcome this, I made a video that goes through the lease and explains it. That way, when my new residents sign it, they know what they're signing. This is especially important in the age of DocuSign, which scrolls straight to the signature parts.

I think leases are complicated because of all the nuanced tenant-landlord laws. I haven't gone deep enough into this new blueprint, but it would be great if it simplified the contractual relationship. I'd probably still make a video because I want everyone to know what they're signing.

Affordable Housing Costs

Around half of renters spend more than 30% of their income on rent and utilities ↗. All of my residents are in the second half. I've run "experiments" to see what people can afford. I did it mainly because I'd have people begging to rent one of my places, and to be accommodating, I'd let them. Here's what I learned:

If someone spends 50% of their income on rent, they'll fall behind within the first six months. They can't also pay for cars, food, clothes, phones, entertainment, etc. It requires too strict budgeting. Every tenant left with a significant outstanding bill. Did I pursue or evict them? No. But I'd explain that my place was probably not the right fit for their budget. "We tried, but it's not working."

What about 40%? This was an interesting one because it's right on the edge. As long as life was perfect, they paid on time. They could even handle one small emergency. But when the car broke, and the cat had to go to the vet (true story), they were late.

They'd catch up mid-month. But things would be super tight for the next few months.

And then something else would happen...

It's just not enough of a buffer in the budget. And it takes a tremendous amount of discipline to say, "I like this place, so I'm going to sacrifice some living expenses on my already smaller budget to afford it." It's more discipline than I have, at least.

One resident in this situation always kept the unit's temperature in the upper 70s with a cable package and smartphone (in 2010, before everyone had one). I lived on the other side of the duplex, and his utilities were double mine (and I didn't have a TV). I'll admit that I struggled to sympathize when he said he would be late on his rent. I know that's not every tenant, but my point is that it takes an almost unachievable amount of discipline to live below your means when your income isn't super high.

30% of income on housing seems to be about right in my experience. It's enough to spend and save.

I Also Hate Evictions

I evicted one person. I was new and didn't know any better. I haven't evicted anyone since then.

My secret: I don't read landlord books. Instead, I read Christian parenting books ↗. The best approach is to realize each resident is a fellow human made in God's image. They're just as valuable (and broken) as you are. Once you care for someone, you want what's best for them. That includes treating them how you want to be treated by setting clear & fair boundaries.

By the way, parenting books also work for friends and co-workers because they teach you how to interact with everyone in a caring manner.

So, whenever I have an issue, I honestly talk with them. I explain why their behavior is a problem and reiterate my expectations. When I terminate a contract, it's for 30 days (same as the blueprint's proposal) because I would want enough time to find a new place. I'm regularly shocked as I collect their keys when they thank me for being patient and fair.

I typically lose ~$500 in the process, but it's the right thing to do.

Oh, and I rarely ever charge a late fee. I mean, they're already struggling financially. Why pile on?

Rent Caps Don't Help

In 2019 Oregon introduced rent caps. I sat in multiple meetings where fellow landlords and property managers fretted over it.

Me? I'm neutral, but I've always been slow to increase existing tenants' rent. The cost of a turnover is so high I don't want to rock the boat that much. Plus, I underwrote the purchase using a lower rent anyways, so I'm still making my expected return (8% cash-on-cash on average).

Plus, the last few years proved, statically, that rent caps don't work. The average rent increased by 46% in 2022 ↗, above the national average. Wait, how does that work? Let me explain:

When rent caps started, construction projects slowed down, reducing inventory. So, when I have a rental posted, I get at least 10 applicants within the first 4 hours. It's kind of crazy. When supply is that much greater than demand, I can almost set my price to anything I want. Apparently, 46% higher, on average (probably more, since that statistic includes people who didn't move).

And anyone who doesn't move gets the maximum rent increase. What are they going to do? Move? If they can find a vacancy (they can't), they'll pay waaay more than the rent increase.

I'm not saying it's right (I didn't increase any of mine by 46%), but that's what's happening. Rent caps made the housing situation worst, not better. It's a perfect example of unintended consequences. Lawmakers assumed a static housing market, but it's dynamic.

I suppose lawmakers could create a law that caps rent increases between tenants. That sounds like an enforcement nightmare, but more importantly, that dramatically reduces everyone's incentive to repair and improve a rental.

In the book Evicted ↗, Matthew Desmond advocates significantly increasing HUD's budget. That way, more people can get financial help (a rent subsidy), and investors are still incentivized to build and improve their units. I, obviously, like the way that sounds, but there's an almost certainty that rents will skyrocket the same way college tuition has.

The Root Problem

In the end, the root of the problem isn't housing affordability; it's a symptom. When you try to stop the symptom, it often creates side effects.

The problem is a lack of caring for each other:

Jesus answered, "The most important is, 'Hear, O Israel: The Lord our God, the Lord is one. And you shall love the Lord your God with all your heart and with all your soul and with all your mind and with all your strength.' The second is this: 'You shall love your neighbor as yourself.' There is no other commandment greater than these." Mark 12:29-31 ↗

Not only is our society turning away from God (and a shared definition of right and wrong), but we're turning away from each other. We're trying to maximize our own lives at the expense of others. Sadly, it results in less for everyone. Until our hearts are changed, blueprints like these are an ineffective bandaid. Instead, lawmakers should focus on rules that foster community.

More immediately, in my initial reading of the blueprint, I'm OK with it. The goals are great, and I'm already doing much of what they want. Bring it on. Besides, we'll see lots of properties become available as less caring operators fail to meet the new expectations and want out.

Those of us who are willing to care for others while making a reasonable return will do great and be able to bless many people.