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0 pointsmikeyouse3y ago0 comments

Nah, rents aren't determined by owners' costs (except at the margin where property owners are debating whether to 'stay in the game') - they're determined by bog standard supply/demand and usually set to the maximum rate the market will bear.

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nrmitchi3y ago

This assumption (which is largely correct) gets thrown out the window when the entire tranche of supply is hit with a cost increase all at the same time (and every participant knows it).

The point of this "margin" you mention gets rather deterministically and uniformily raised across the board.

nomel3y ago

> Nah, rents aren't determined by owners' costs

I don't understand this. The owners have pay mortgage, taxes, insurance, and repairs. How can it be decoupled? The landlords I know would have to sell if they lost their renters, or if the rental income fell below a certain amount.

arrosenberg3y ago

If the market cost of renting a unit drops below the landlords' cost to maintain the unit, the renter doesn't go "oh well, that's a shame, I guess I will pay the higher amount."

The landlord either eats the loss or gets out of the game. Since vacancy is the worst possible outcome for a landlord, they can't just hold their units off the market to get the price they want.

nomel3y ago

I see. The dynamics are much more complicated than I, naively, thought.

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nrmitchi3y ago

This assumption (which is largely correct) gets thrown out the window when the entire tranche of supply is hit with a cost increase all at the same time (and every participant knows it).

The point of this "margin" you mention gets rather deterministically and uniformily raised across the board.

nomel3y ago

> Nah, rents aren't determined by owners' costs

arrosenberg3y ago

If the market cost of renting a unit drops below the landlords' cost to maintain the unit, the renter doesn't go "oh well, that's a shame, I guess I will pay the higher amount."

The landlord either eats the loss or gets out of the game. Since vacancy is the worst possible outcome for a landlord, they can't just hold their units off the market to get the price they want.

nomel3y ago

I see. The dynamics are much more complicated than I, naively, thought.

1 more reply

j / k navigate · click thread line to collapse