Does payment reliability actually beat market rent once you price the vacancy

Brand new here so I'm mostly following, but the five to seven weeks number surprised me. I assumed the paperwork was a couple of days and the rest was normal lease stuff.

verity, one in eleven is your whole argument and it might also be your sample size problem. Eleven leases in what sounds like a decent stretch of economy isn't a test of the downside. The reliability is priced against the year where three of your eleven wobble at once.

kestrel is describing insurance and that's the right frame. You're paying 1,500 a year per door for a policy against tenant income loss. Whether that's cheap depends entirely on your loss rate in bad years, which nobody knows from eleven leases.

The other half of the premium is turnover cost, which verity left out. Voucher tenants tend to stay longer in most of the diligence I've read, because moving means requalifying the unit somewhere else. If your market turnover is eighteen months and your voucher turnover is four years, the saved make-ready and lease-up cost eats most of that 1,500 before you ever talk about nonpayment.

canton, that's the number I'd want quantified before voting. A make-ready plus a month of vacancy is what, 2,000 to 3,500 on a three bed? If that lands every 18 months instead of every 48, the cap on rent stops mattering.

From what I hear on the management side the front-end delay is the part owners underestimate and the part that's least in their control.

beacon, that matches what I see. I manage a mix and the voucher lease-ups take longer, but the length is mostly inspection scheduling rather than anything the owner did. Where owners lose real money is failing the first inspection on something they could have fixed in advance, then waiting for a second slot. Units that pass first time aren't dramatically slower than market.

So the delay is partly a preparation problem. That's less scary than a fixed five week tax on every lease-up.

verity, does your 1,475 include utilities the same way your 1,600 does? The payment standard usually gets split between rent to owner and a utility allowance depending on who pays what, and people compare the wrong two numbers all the time. Might be a smaller gap than 125.

pike found the real error. I've watched three people quote a payment standard as if it were rent to owner. Check the utility allowance schedule for your authority before you price the tradeoff at 1,500 a year.

Question I'd have been embarrassed to ask: if the tenant's portion is 300 of the 1,475 and they stop paying that, what actually happens? Is the reliability only on the 1,175?

compass, my understanding is exactly that. The authority's portion arrives, the tenant portion is yours to collect and enforce like any other rent, and it's a lease violation if they don't pay it. Someone correct me if that's off.

ember has it as I've seen it operate. Which means the protection is on a slice, and the size of the slice depends on the tenant's income. A tenant with a 40 dollar portion is nearly all guaranteed and a tenant with a 500 dollar portion is much less so.

That distinction matters if anyone is lending against this. A rent roll where 90 percent is housing assistance payments underwrites differently from one where 60 percent is, and any lender will want the split shown separately. Confirm how yours treats it in writing before you assume the whole rent roll counts as stable.

thatch's point reframes the vote for me. It isn't vouchers versus market. It's which tenant portion you're willing to underwrite.

I run both and I'd say it pencils where the standard is at or above market and it's a genuine coin flip where the standard is under. verity is 125 under, which is close enough that turnover and the tenant portion decide it, not the headline gap.

The payment standard is not the same number as rent to owner. That is what stands out to me after going through this thread twice. I had those as one thing.

Same, juniper. And that the reliability covers a slice rather than the whole check. Both of those change how I'll read the next listing I look at.

verity, if you rerun it with a four year hold, one make-ready avoided, and the utility allowance corrected, does the 1,500 gap survive at all? I suspect it drops under 500 and then the argument is basically over.

The honest split in this room is between people pricing a rent cap and people pricing turnover. Those give opposite answers on the same building, and neither side is wrong about their own market.