Comment by ProfessorLayton 7 hours ago
The explanation is that there isn't enough housing to meet demand. That's it. Until there is, prices will keep going up even when building more units.
Landlords wouldn't be buying up a ton of units and renting them out at a profit if there was a glut of inventory, because it would be a terrible investment.
The market will dictate lower prices if there's excess inventory. If landlords are hoarding units and keeping them empty instead of lowering rental prices, that indicates a lack of available inventory.
That's not how repricing works.
If a landlord is unable to rent a unit at a desired price, because the rental market has moved lower, then they have two options.
They can decrease the price.
Or they can not offer the unit for rent (or continue listing it at the higher price).
The second option's cost to landlords is largely defined by accounting/tax rules, in regards to how painful the vacancy will be to them.
Thus, vacancy can be made more or less painful by changing accounting/tax rules.
> The second option's cost to landlords is largely defined by accounting/tax rules
The cost is having empty properties, which require insurance, maintenance costs, property taxes, likely mortgages of their own to pay, all of which cost money and which are by far the biggest costs to letting things sit unused.
And the fact in this case is there simply isn’t all these mythical properties sitting unused; simply look at current housing and rental stats.
I'm not talking about repricing specifically? I'm talking about how differently the housing market would behave if there was enough housing to go around.
Landlords have a 3rd option: They can sell the unit, because their unit no longer commands high prices due to housing supply meeting demand, and their capital is best used elsewhere.
If they are underwater and cannot sell above break-even, their bank will eventually do it for them.
This meme has got to go: there is little if any evidence to suggest that markets are functioning either in the specific case of housing in high COL areas in the United States or frankly most times anyone trots out the Milton Friedman trope on HN.
Markets fail, they get captured, they get distorted by accounting treatments, they generate cartels. They get technologically disrupted by new forms of cartel pricing that blow past existing regulations(e.g. TFA).
Capitalism sounds dope, I hope I live to see it. But the idea that supply and demand in the Econ 101 formulation is anything to do with the lot of say a person renting a flat in 2024 is silly and borders on insulting.
Capitalism sounds dope, I hope I live to see it. But the idea that supply and demand in the Econ 101 formulation is anything to do with the lot of say a person renting a flat in 2024 is silly and borders on insulting.
It's really unclear to me why you think this is the case. The median cost of a house in the Chicagoland suburb I live in is north of $470k, and that's not because of technological disruption or cartel pricing, but rather because we've outlawed anything but single-family housing on lots, something we did deliberately back in 1923 and 1947 with the express purpose of preserving and increasing home values for people who lived there at the time and keeping Black families out.
"Markets" didn't "fail" or "get captured" and no hedge fund engineered this situation; people who lived here voted for this outcome.
Or, accounting and tax law makes it less painful to keep units vacant than reprice them at lower rents.
Which is a thing we could change via something like Vancouver's vacancy tax.
Make it more in landlords' interest to reprice units lower, if the market has excess inventory.