Posts Tagged ‘rent’

The future supply of rental houses will decline

The below-equilibrium price will discourage entrepreneurs from constructing new rental housing units, and private investment will flow elsewhere. In the city of Berkeley, rental units available to students at the University of California dropped by 31 percent in the first five years after the city adopted rent controls in 1978.4In Boston and some of its suburbs, housing and apartment construction rose dramatically following the repeal of rent controls in the late 1990s. Similar results were observed in Santa Monica, California, following removal of rent controls.


Exposure at time of default

The actual exposure is likely to vary over the term of the loan. In the case of mortgages the principal outstanding falls over time. Continued drawdowns on loans for project financing or real estate will result in the principal increasing over time. Where the exposure is a credit facility it is likely that the customer in financial distress will draw down to the maximum allowed under the terms of the facility before defaulting on any other loans. Derivative and other transactions may also result in the bank having an outstanding exposure and these will need to be taken into account.


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