The Rent Bubble: Coming to a Neighborhood Near You

Among the lesser-reported impacts of the Great Recession, during which time millions of Americans lost their homes to foreclosure, is the continuing surge in rental housing demand. Demand has inflated rental rates in already costly markets throughout the country. But rental price inflation is not just a problem hitting high cost of living regions in California and New York — it has hit 90 cities nationwide with no end in sight. Rental costs between 2011 and 2012, alone, increased 4 percent nationally, whereas rents in some markets during a broader period — between 2000 and 2012 — have inflated nearly 25 percent, a study by the Joint Center for Housing Studies of Harvard University reports.

High demand and short supply means one thing: higher prices. But housing isn’t merely a luxury people can forgo. Increased demand for rental housing post recession does not merely reflect the fact that mortgage lending standards are more stringent, but the reality that many Americans are still attempting to rebound from a downwardly mobile spiral. Just because rents are rising doesn’t mean renters are in a position to absorb the price hikes. To the extent rental property demand is an outgrowth of the economic meltdown and stagnant wages — in spite of job growth in more recent years — it would appear housing reform is a topic seriously overdue for national attention.

The Shape of Crisis to Come

Today’s landlord isn’t simply a kindly gray-haired lady looking to rent out a room or an apartment. Housing inflation is driven more so by investors who hold millions of dollars of assets within a given community, if not nationwide. If large-scale property owners could be compelled by state or federal legislation to peg year-to-year rent increases to some combination of inflation and the prevailing median annual incomes of community members occupying similar housing, it might be possible to boost economic gains in other segments of the economy.

Nationally, support for raising minimum wage has gathered momentum. But what if we’re having the wrong conversation? Raising the minimum wage, when inflation is purportedly stable and interest rates remain at record lows, is nonsensical — unless one considers a leading reason why minimum wage earners are sorely in need of a pay increase in the first place: to keep a roof over their heads. Talk of increasing minimum wage is controversial, in part, because critics fear increased labor costs may slow job growth or push consumer prices higher, nullifying any initial advantage raising the minimum wage may impart.

Slapping a bandage on a hemorrhage begs the question: Why not tackle the problem at its core — housing inflation? In the wake of the housing bubble bust, the Harvard study released in June 2014 finds that an unprecedented number of renters in major markets from Miami to Los Angeles are allocating in excess of 30 percent of their monthly pay toward rent, with rents at a 30-year high a Zillow report concludes. And it’s not just young adults who comprise the ranks of the rental class, either. Increasingly, renters consist of families and middle-aged adults, too. Devoting increasing amounts of one’s pay to the cost of housing is likely to continue as rents, much like health care, continue to outpace and out-inflate the broader economy. But it’s the ripple effects of housing inflation that ought to have Republicans and Democrats alike worried.

Robbing Peter to Pay Paul

The elephant in the living room that few journalists, economists and politicians are talking about is the emergence of price gouging in major rental markets. If nothing is done to reform high-risk housing markets, it is likely that other parts of the country, where costs of living are significantly lower, will follow in the steps of overpriced markets in Seattle, San Francisco and elsewhere. Ignoring this economically-destabilizing trend is not an option. As renters, not unlike the sub-prime home buyers who preceded them, place higher percentages of their incomes toward rent, fewer households can be expected to save for a rainy day and more Americans will underfund their retirements. This is a disaster of grave future proportions because families that do not have adequate savings are at greater risk of filing for bankruptcy, and may become dependents of — or proponents of — prolonged unemployment benefits, taxpayer-funded welfare programs and the like.

During the Great Recession, demand for social safety nets grew to such an extent that beltway Republicans advocated cutting benefits to reign in costs. (To cite an example popularized during the recession, one in seven American families were said to be eligible for food stamp benefits.) And yet cutting entitlements, just when they are needed most, is a cruel if not superficial fix. Instead, legislators at the state and federal level should look at the underlying reason why so many Americans are living paycheck to paycheck in the first place. One can, of course, cite the usual suspects — decades worth of outsourcing jobs alongside losses brought about by automation — but second only to health care, housing is a segment of consumer spending that poorly reflects income growth or inflation at large. If we want to put the economy back on solid footing, reconciling the disconnect between the rate of inflation, wage growth and housing costs must become a national priority — before the next economic downturn.

No longer do rental price trends lie in the hands of small-time landlords. Demand isn’t the sole explanation, either. If, however, there are 10,000 rental units in a given city that are owned by the same firm, and that firm should push the limits of what the market can bear, Mom ‘n Pop property owners are likely to follow suit if only because heavyweight competitors have set the tone. In much the same way the bank bailouts paradoxically generated even bigger too-big-to-fail banks, the Great Recession set the stage for investors to scoop up real estate assets throughout the U.S. at fire sale prices. And that scarcely bodes well for price diversity in the years to come.

Affordable Housing, a National Security Issue?

Rather than advocate for rent control in the traditional sense — that is, cost-control provisions aimed at low-income tenants — lawmakers should reign in the market-inflating practices of housing price trendsetters across the board — and, in particular, limit the ability of foreign real estate investors to heavily influence domestic real estate markets. This might be accomplished by pegging year-to-year rental rate increases to a combination of local inflation and median incomes in a given area for like housing. This is not to say that reform ought to be so draconian as to mandate outright rental rate caps. Large-scale private equity groups may continue to increase rental rates to reflect supply and demand — but in so doing perhaps those who routinely test the upper limits of the non-luxury rental market ought to incur a residency requirement, forgo tax incentives and/or pay a penalty that can be used by state and federal authorities to shore up the safety nets savings-poor Americans are apt to turn to in the event of crisis or an unplanned retirement.

Affordable housing is the missing ingredient in the health and stability of the broader economy. Assuming it were possible to craft effective reform, households would be in a better position to fund their own savings, lessening the likelihood that illness, recession or job loss will propel families into bankruptcy or thrust them into the unenviable ranks of taxpayer dependents. If a housing reform bill were to incentivize large-scale property management owners to reconcile rental prices to inflation and local income levels, we might see an end to nonsensical situations in which demand for rental units reaches all-time highs precisely when the economy hits all-time lows. Moreover, if such legislation were to target large-scale investment groups — and foreign residential property investors in particular — it might also compel them to scale back their holdings and thus diversify real estate markets in ways that will contribute to improved market competition.

Media coverage on the state of the housing in California and other “harbinger markets” throughout the country warn of more price hikes to come, with double-digit percentile gains slamming rental markets from Las Vegas, Nevada to Southern California’s outlying Inland Empire — well into 2016. The fact that home ownership is the lowest it has been since 1995 — even as renters in some markets are now spending 40 to 50 percent of their monthly pay on housing — speaks for itself: This is an unsustainable trend, with unsavory social and demographic ramifications. As rents increase relative to lackluster wage growth, nontraditional living arrangements, recession or no recession, will become commonplace. Census Bureau reports in the years to come, for example, may find more midlife adults pairing up with roommates not unlike their college-age counterparts a generation ago. Homeownership, increasingly, may become the domain of the wealthy and multigenerational cohabitants. All the while, fewer “marrying age” Americans may tie the knot and take the homeownership leap, for the same economic reasons that came to light during the recession. Taken together, these trends may transform the U.S. into a “rentership society” in which putting down fewer roots — a far cry from the American Dream — becomes the new normal.

Some readers may recall when non-matinee movie tickets could be had for substantially less than $10-$14. But when New York City residents began ponying up nearly double the national average a number of years ago, ticket prices nationwide began to follow suit. Rental price trends, similarly, vary by region and demand. And yet the more rent payers are willing to bear, the more it is likely to push up the cost of renting — and living — far outside the likes of New York and California. If we don’t like the shape of things to come, now is the time to place a national spotlight on housing reform. The bottom line? If we want to stabilize the economy, increasing minimum wage and loosening mortgage lending standards are far from the only answers. It’s time to stabilize rental markets, too. And not just for the benefit of low-income tenants, either. Housing is an inescapable expense. And we’re all on the hook.

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RESOURCES

The Coming Nightmare of Wall Street-Controlled Rental Markets | Alternet

There’s Only One Way Rents Will Go: Sky High | The Fiscal Times

Wall Street’s Hot New Financial Instrument: Your Rent Check | Mother Jones

There Will be No Real Recovery Without the Middle Class | Forbes

In Many Cities Rent is Rising Out of Reach of Middle Class | New York Times

The Rent Bubble is Going to Blow Up Across the Country | The Daily Beast

Rents are Rising but People aren’t Making any more Money | ThinkProgress

Wall Street’s Rental Home Gamble: How worried should we be? | Al Jazeera American

The Five Biggest Benefits of Owning Real Estate | The Joint Center for Housing Studies at Harvard University

Six Savvy Job Snagging Tips

Job hunting in a down economy can feel like running a marathon in the dark. How do you market yourself for optimal impact? What’s gimmicky vs. eye-catching? After completing the application and/or the interview, do you call or not?

The typical career-seeker guide emphasizes custom cover letters, asking a friend to help proofread your resume and networking both online and off to keep your word-of-mouth employment prospects fresh. But what should you do once you begin to receive those initial nibbles from a prospective employer or personnel agency?

In two words: Get savvy.

1) Phone Screenings. Phone screenings are both good and bad. Good news in the sense that you’ve risen to the top of the stack. Bad news in the sense that your application may land in the recycle bin before you’ve made face-to-face contact.

The solution? Take charge.

Ideally, when an employer or recruiter cold calls they should first ask: “Is this a good time to speak?”

Oftentimes, recruiters are in a mad dash to submit “their candidate” and the convenient catch may win out over the ideal match. Responding to a voicemail or email hours or days after the fact is in all likelihood time spent on a lost opportunity. The first thing you should do after posting your career profile online is to prepare for the inevitable phone call that comes at a bad time. Do you pounce or pass up?

First, do not hesitate to thank the caller. If first contact comes at a bad time, emphasize your eagerness to answer pre-employment questions at a time of his or her convenience. In this way you avoid the suggestion that you are inconvenienced. Do not volunteer details that can be construed as a lack of interest or an excuse. Stick to your objective, which is to agree on a mutually suitable time to talk. The objective early on should be to learn if the position is currently available or if you are being considered for a future project. The answer will provide a clue about the urgency of the opportunity as opposed to the likelihood that the recruiter or employer is simply seeking to round out their database.

2) Remote Screening vs. In-Person Interview. The go-nowhere interview unfolds when you spend a lengthy amount of time on the phone or in a video conference with a recruiter or prospective employer only to be left to wonder if a face-to-face interview will follow.

What to do? Prepare.

Look at a phone or Skype screening like a date. Your objective is to land a second date. You don’t want to play hard-to-get but you don’t want to give it all away, either. For instance, you may wish to set a 15-minute time limit on the conversation. After that predetermined amount of time lapses confirm your desire for an in-person interview. If the caller puts you off, allow a another 10 minutes to lapse — or the conversation to wrap up, whichever comes first — and make your case: “I feel there is no substitute for a face-to-face interview. Do you have the ability to set one up?”

In particular, don’t mince words when dealing with a recruitment agency.

It is vital not to get too far into an email exchange or telephone conversation without asking a key question: Has the firm or individual in question been authorized to recruit for the job in question? If a staffing agency does not represent the employer exclusively chances are you have been contacted by someone who is skimming career websites in much the same way you are, in which case you will have no special advantage — and perhaps a disadvantage — in working with a middleman. Staffing firms often go up against other agencies and candidates who are applying directly for a job that has already been made public. The one thing a recruiter doesn’t want is to submit you for a job that another agency, or you yourself, beat them to first. So don’t be shy. When contacted about a position for a “confidential client” seek to clarify whether you have already attempted to land that job by another name or another description elsewhere online. Use this opportunity to make a decision to work with an agency or to apply directly.

It is not uncommon after the initial screening to receive a vague answer about when you might be expected to learn whether you will progress to a face-to-face or second round of interviews. Proceed by A) clarifying who, what, when and where that next step may occur, B) asking whether the recruiter or HR representative has any concerns or questions that you might be able to address while you have their attention, and C) requesting permission to follow up at a specific time in the event you don’t hear from that individual first. Your objective is to obtain a name, title, email address and/or telephone number. Make good use of it!

3) The Fishing Expedition: Perhaps nothing is more unsettling than the feeling that your caller is more interested in using you to help better define their job description or salary range or, in the case of staffing agencies, to tap your references to build their own leads rather than to seriously consider you. Some unsolicited recruitment efforts pertain to jobs that do not yet exist and/or the vacancy remains unfilled week after week and month after month because the employer is in no hurry to fill the position.

Solution: Define your expectations.

As an applicant, be on the lookout for job ads that repeat all too frequently. The employer may be indecisive or job turnover is incredibly high, suggesting that the dynamics of the company or organization are in disarray. Determine how much or how little time you can afford to set aside for recruitment firms or employers who routinely advertise the same opening. This economy is what they call an “employer’s market”. There is no shortage of applicants. Qualified help is within reach for employers who are serious about hiring. To keep false hopes at bay and the time and expense of chasing dead-ends to a minimum, learn whether or not you are competing in the interview process for a position held by an internal candidate as opposed to a genuine vacancy. Similarly, if you are invited to undergo pre-interview aptitude testing, ask how many people you are competing against and how to properly prepare.

Safeguarding your morale is as an important consideration as any other. It’s important to discern between opportunities you lost to a more qualified competitor and opportunities that never were. One tip-off is the email or phone inquiry in which the foremost question pertains to your salary history or requirements. This is the employment equivalent of jumping in the sack on the first date. A reputable employer will not solicit your salary requirement as a means to low-ball someone else or to determine how much they will pay for the position. Think about it: If the employer has a very narrow budget for the position they have every opportunity to state as much up front. Most career websites offer hiring managers the option to specify the pay range, which if utilized will all but eliminate job seekers who wish to work for higher pay. In so doing, applicants can take some of the work out of the equation by screening themselves out. So ask yourself: Why should your employer withhold the pay range yet ask each and every applicant — before an interview of any kind — to divulge theirs? Unless your salary or hourly pay requirements are particularly inflexible, save the conversation for a later point in the hiring process. True, some employers will require a salary history up front — but you need not apply if it is too intimate for comfort. (There are plenty more who won’t ask up front.)

4) The Interview: Congratulations! You have their attention. Now it’s time to prove that you can deliver in a face-to-face interview. You know that you have to show up on time, dress appropriately, greet your interviewer(s) with a smile and a firm handshake and understand both the requirements of the job and the company itself.  But what else can you do to stand head-and-shoulders above the rest?

Solution: Strike a balance.

To strike a balance you have to keep two primary factors in mind: The personality of the interviewer vs. your own strengths and weaknesses. Do you tend to be outspoken, blunt or quick to wear your heart on your sleeve? With a little work, these traits can convey confidence and enthusiasm. Without that effort, these same traits can display impulsiveness or negativity. Conversely, do you tend toward introversion, preferring to take your time to warm up to new people and situations? This can convey maturity and professionalism on the one hand, or aloofness and passivity on the other. One way to approach this is to practice the technique of mirroring. Does your interviewer display speech, personality or body language characteristics that you can relate to? Find a way to relate and reflect commonalities. In this respect, an interview is very much like a date. Put your best foot forward and show genuine interest in the person to whom you are speaking. Most people are flattered by a good listener. If you can draw your interviewer out — talking about him or herself as opposed to a scripted list of questions — it’s a good sign. On the flip side, most people are off-put by a poor conversationalist. Contribute to the conversation but keep your side of it succinct, upbeat and politically correct.

5) Qualifications: If your interview is typical you will spend a good chunk of it being quizzed about relevant career history. The problem: These conversations can slip into the past tense. Don’t. Use active tense. A good resume will quantify your level of experience — beginner, intermediate, advanced, expert and/or the number of years you have accumulated in that skill. Depending on the skill of your interviewer, the interview may rehash or elaborate on your application. A successful interview will delve into specific ways in which you can tie the job description to your skills. Come prepared to share your strongest anecdotes and concise examples that follow the PAR format — Problem, Assessment, Response. But that’s not all you can do to increase the odds of being hired.

Solution: Become the interviewer.

The ultimate goal of any hiring decision is to recruit the right person for the job. Sometimes a lack of experience can be offset by an abundance of enthusiasm. In other cases, a lack of interpersonal skills can be overcome with an impressive set of intellectual accomplishments. But more often than not, applicants fall somewhere in the middle — a place where “average” may not leave much of an impression. Turn the odds in your favor by probing for details that go beyond the job description. Are you replacing someone? In so many words, find out what that person did to do your prospective job well — or not. Ask your prospective boss what type of employee he or she wants to interact with and how frequently. What type of corporate culture is at play? Is there a real-world example of someone in a similar role earning a pay raise or promotion? Will your supervisors be most concerned with chain-of-command, collaboration or independent thinkers and “self-starters”? 

The idea here is not to interrogate your interviewer(s). Rather, formulate a few key questions and weave them in and out of the interview at natural junctures in the conversation. Once you have gleaned a reasonable amount of information about what makes your interviewer tick, present yourself as a solution. Recap your sales pitch at the close of the interview in a three-point format. Reflect what you perceive to be the challenges and opportunities of the position and summarize, briefly but specifically, how your presence at the company can provide a pragmatic, interpersonal, innovative or profit-building solution. The bonus? While you are in the process of asking questions of your own you will appear less passive and more intelligently engaged in the conversation — and the job at hand. And while it may seem all too obvious, end your interview with a reminder that you enjoyed the conversation and would like to land the job!

6) Follow Up: You’ve been contacted by email and phone. You have competed the first round of interviews. What do you do next?

Solution: Don’t be a stranger.

It’s a fact: Some employers will intentionally ignore a promising prospective candidate, preferring instead to hire someone who shows persistence. This presents a challenge for the job seeker because there’s an equal but opposite camp: “Don’t call us, we’ll call you.” Here’s where a great deal of luck and some old-fashioned intuition come into play. If you feel you are a 10 out of 10 match for the job, be bold. If you feel the interview was only lukewarm or the job description a bit “over your head”, err on the side of caution. If the job description says “Do not call”, email instead. If the interview has already taken place, don’t leave without a business card and a clear idea what to expect. If you have already come as far as an in-person interview it is particularly important to ask for permission to follow up — and when best to do so — and then keep your word by doing just that. Immediately following your interview, meanwhile, mail a hand-written “thank you” note. The post-interview period is not the time to become overly creative/desperate (a stalker). Follow, instead, the KISS rule: Keep It Simple Stupid! Specifically, A) don’t try to sell yourself yet again in your correspondence; and B) don’t write anything that sounds overly scripted, generic or canned (impersonal). Do tell your interviewer(s) in your own words that you would be honored to work with him or her; C) put to use the same common sense about your post-interview communication as you did in your initial application: Don’t submit something you haven’t proofread, and if possible enlist the help of someone whom you trust for their strong English skills and their astute sense of objectivity.

Six savvy job hunting tips later, you are now equipped to meet the challenges of a tough job market. Go for it!

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RESOURCES

Final Cut: Words to Strike from Your Resume | FORBES