“Housing justice” activists often claim that landlords rake in the “big bucks.” Such claims usually drop the context, citing a few impressive statistics and ignoring other relevant information. As an example, a recent article on City Watch details the amount of rent collected in several California cities:
In 2019, Zillow recently reported, Los Angeles renters paid landlords a whopping $39.1 billion. In San Francisco and San Diego, renters shelled out $16.4 billion and $10.3 billion, respectively, to landlords. It’s no wonder that California’s housing affordability and homelessness crises haven’t improved.
Certainly, that’s a lot of money being paid for rental housing. But that doesn’t mean that all of that money winds up in the pockets of landlords. Quite the contrary and I can speak from personal experience.
I have owned rental properties for nearly twelve years. The rents for the seven properties I currently own average about $1,250 a month. Those who drop the context might claim that I make over $100,000 from these properties. It is true that the properties generate $100,000 in revenue, but revenue isn’t profit. That revenue is used to pay numerous expenses and only a small percentage is left as profit.
For example, insurance costs $125 per month, the mortgage expense is $450, accounting and similar expenses add another $50 a month. Repairs and maintenance expenses can vary wildly, but average about $250 a month over a year. And then property taxes must be paid, and these average $150 per month. All of these expenses come to $1,025 per month, leaving a profit of only $225. And that profit exists only if there isn’t an extraordinary repair expense. Clearly, there is much more to the picture than just the amount of rent paid.
Further, if a tenant moves out, painting and cleaning can easily cost $1,500—about seven months worth of profits. While housing advocates cry that the “rent is too damn high,” landlords can say that the cost of owning rental property is too damn high.
If housing advocates want to complain about someone raking in the big bucks from real estate, perhaps they should look at the government. On average, each year I pay as much or more in property taxes as I make in profits. And I must pay the property taxes even if the house sits vacant for months and generates no revenue. The government gets its money whether I have any income or not.
To truly understand the economics of rental properties, housing advocates would have to consider the full context. But an honest consideration all of the relevant facts would not support their political agenda. And so, they simply ignore inconvenient facts.