This is a byproduct of 10-15 years of low rates - in the 1-2% area. Corporations could borrow in the money market for that 1-2%. They then purchase residences of all kinds - even build. This is houses, apartments, condo-style or not. In this tight rental market they then rented them out in several ways - short AirBNB type, weekly/monthly/annually - there are steady demands at all levels. The shorter times at higher rents ---annually = lower. They hire rental managers - often existing ones that do this. All of these models earn in the 10-20% area (some even more). Cities have long sucked $$ from hotels that do this with hotel taxes. Cities hate them, hotels hate them, people who need to find a place to live hate them. They can operate in a stealth mode - who knows who rents this flat/suite or that. Rental agents screen out the bad tenants who would draw too many flies = city inspectors who have tried to outlaw/tax these.
Cities could make these subject to commercial real estate taxes, like a small variety store. (in Toronto if a flat pays residential real estate taxes - a store of the same size pays about $4000 business taxes).
This would require a large and intrusive city regulatory structure because there are 20 times as many assorted flats compared to businesses, so that ratio of inspectors would be needed as a lot of door knocking would be needed. There would also be a huge degree of evasion as well as missed tenants at home = even more inspectors? This can be corrected with huge fines to coerce people as well as finance inspectors. There could also be leaker rewards?
This is the root cause of the housing cost increases. There are many vacant places, since these units earn well at 50% vacancy rates, even as Joe +wife +kids are forced out of cities by this mechanism.
Building more houses will help, higher rates also curb the profits made and people exit the business. The best way is to make it illegal in some way - yet we need rental apartment houses? Getting rid of the sub renter market will help with units run as AirBNB places at assorted tenures...
If you are new to this site, I recommend starting with the introduction. It explains a little about the theory and how I developed it.
The theory is then explained in three parts. It takes about 30 minutes to cover the whole theory, and is written very simply, so that anyone can understand. No advanced economics of the theory is needed.
