Everyone knows that "the rent is too damn high" in rich coastal cities like New York and San Francisco. And these days most people recognize that regulatory supply constraints — NIMBY activists and snob zoning rules — are a huge part of the problem. But the finance blog Sober Look makes the point that over the past year a rental housing squeeze has descended on huge swaths of the country where the economic and legal framework is very different. This is going to be a huge financial challenge for lots of people, but it also presents a real business opportunity.
It looks like there's money to be made rehabbing or building homes in all kinds of unfashionable Midwestern markets.
Homeownership has tumbled since the Great Crash:
Consequently, the rental vacancy rate hasn't been this low in 20 years:
This isn't just a question of a handful of overheated markets. Wisconsin hasn't seen a vacancy rate this low since 1994:
Michigan hasn't been this low since 1993:
The pessimistic view of this, offered by Nick Timiraos of the Wall Street Journal, is that "Last decade’s housing crisis could give way to a new one in which many families lack the incomes or savings needed to buy homes, creating a surge of renters and a shortage of affordable housing."
But while this dystopian scenario may arise in zoned-out coastal metropolises, there's no reason it should come to pass nationwide. For Michigan, Wisconsin, Ohio, and other low-vacancy areas that are far from built out, these trends simply mean there's a brand new small business opportunity on the horizon: building new houses or rehabbing old ones and operating them as rentals.