The main reason why people who want to rent their home haven’t done it is because it involves a lot of headaches – and bad tenants and nonpayment of rent are just two of them. On the other side of the coin, 70% of tenants or would-be tenants believe that rent is very expensive in the US.
Q1 2021 hedge fund letters, conferences and more
Fixing the rental market
The data shows that initiatives are necessary to address the problems experienced by both landlords and tenants. But what measures will do the job? Let’s find out.
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Lack of Supply
The latest study published by the real estate portal Mansion Global shows there is a growing imbalance between supply and demand for rental housing in the U.S. This imbalance explains the great price increases in the rental market in almost every corner of the country. Because of this situation, this market is going through a turbulent time. The increase in demand and the contraction in supply explains the rent increases in recent years.
Solution: Public rental housing
The coronavirus pandemic and the worsening economy have created bigger problems for many families with housing expenses. But they’ve also given them a break, at least temporarily, in that rents have fallen, especially in the largest cities. This temporary respite should be seen as an opportunity to activate policies that provide responses to high rents for the medium and long term.
In terms of housing, half-measures won’t fix the problem. More, and more affordable, public housing is necessary, especially where the problems caused by the ongoing crises have aggravated the lives of families.
Fortunately, the U.S. stock of rental public housing is well above the European average. A long-term commitment is necessary in this area to provide a brake when private home prices trend upward. It’s obviously a costly measure that will require cooperation between the public and private sectors, but it will ensure access to rental housing and provide administrations with a permanent tool they can use to cool the market when necessary.
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Distrust among renters and owners
While it’s true that tenants typically suffer the consequences of a lack of supply, we must also focus on the reasons why this situation occurs. Finding a good tenant can be compared to fishing for a specific type of fish in an ocean. The task usually causes a lot of anxiety to the owner of a property. For 54% of owners, distrust of tenants is a difficulty when it comes to putting a property up for rent. It’s also why most landlords decide to leave this responsibility to a broker.
Solution: Incentives for leasing and renting
On this issue, we can work to provide the security that many owners now lack when they consider renting their properties. Situations such as delays or non-payment of rent can be reduced to a large extent with the help of technology.
An incentive system that ensures landlords get paid on time, dutiful tenants are rewarded, and delinquent tenants are punished by a low credit score is the need of the hour.
The all-women start-up Pinata is an example of this technology. The startup motivates its members to pay rent on time by offering exclusive rewards and experiences from premier brands while helping the members build their credit history. Homeowners can then review the credit scores of potential tenants for the same reason that lenders do: to determine how likely a tenant is to pay their rent in a timely manner.
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Bureaucracy causes high operational costs and wastes time
Imagine you want to rent a property. You have to choose the perfect house or apartment, in a convenient location that fits your budget, but when you think your problems are over, you discover that you still have a ton of paperwork to deal with!
You not only have to go to the real estate agency to sign the contract. You also need to visit the registry office to acknowledge the signature and take the contract back. Then you must convince your guarantor (or guarantors, depending on the case) to do the same thing.
The situation isn’t just bad for the renter. Because the process takes time, the house or apartment remains empty for a longer time and the owner loses the income that would otherwise have come from the rent. For real-estate companies, the hours and days lost because of waiting and bureaucracy represent a high operational cost.
Solution: Facilitate the signing of contracts
With a blockchain ID, parties can sign contracts related to property rentals using only a cellphone app, without having to go to the registry office to recognize the signatures of everyone involved. It's worth remembering that, according to the U.S. ESIGN Act in 2000, an electronic signature has the same legal validity as a paper signature!
Not only do the parties save time, but they also gain an additional layer of protection given by identity verification, since the property owner can be even more certain that the person who signed the rental contract is who they claim to be. In addition, as the information registered on the blockchain cannot be changed, landlords, tenants, and real estate agents can rest easy in the knowledge that the contract cannot be unduly modified or defrauded.
These are three measures that can help correct the rental market, which today is not working efficiently and leaves many aspiring tenants out in the cold.
