Arizona tenants seek to take advantage of rising rent prices through ‘rental arbitrage’

By Judy J. Beasley Last updated Dec 22, 2022

PHOENIX (3TV/CBS 5) –Kathleen Wardrip, 75, is like many Phoenix-area renters, struggling to find affordable housing. “It’s been very frustrating, to the point where you want to cry and tear your hair out,” Wardrip said. “I do not know where to go.”

And things don’t get any easier. Real estate experts say a unique business practice called “rental arbitrage” is driving some tenants out of the market.

Eric Atencio is the Regional Manager of Valley King Properties. According to Atencio, a growing number of people and businesses are asking to sign long-term leases for a house or apartment, with the desire to turn around and list that property as a short-term rental. “Their thought process is that on a short-term rental they can earn more on a daily rate, and that will far exceed what they are going to spend on the monthly rate, based on short-term rental prices. “, said Atencio.

“Rental Arbitrage” allows investors to avoid spending a lot of money to buy a property, opting instead to sign a one-year lease on a place that they can still rent out on a daily or weekly basis,” said Atencio said.

Kate Bauer is co-founder of the community advocacy group Neighbors Not Nightmares. She said the biggest problem with people turning their long-term rentals into short-term rentals is that it reduces the number of properties that desperate renters can move into permanently. “If you have someone fighting for these units for business reasons, to make a profit, it saves a family from needing them,” Bauser said. “It makes things much more difficult.”

Most apartment complexes and landlords do not allow tenants to sublet their units, so their approval is required. Some tenants will try to re-let their units without their landlord’s knowledge, but this could expose tenants to a host of legal issues. If anyone thinks a neighbor is illegally re-renting a house or apartment, they can call and report it to the owner of that property.