Sounds like for things that are inelastic, we should find ways (on both sides) to maintain a buffer if we want to have stable systems.
The problem is that the cost savings of moving is so great that it was cheaper to pay to break the lease than it would be to stay. We saw the reverse of this before: when landlords were paying people $8,000 to move early because rent inflation meant they could charge much more than that to the next tenant.
SF is an outlier because of the income disparity, relatively low housing density, and unique climate & economic opportunity available there.
What's the law on this? I've read that the landlord is required to make a good faith effort to replace you, but if they can't (or if they can't recoup the costs), you are on the hook.
So if the cost is 32% lower and the landlord can only find a tenant willing to pay that much, it seems like you are responsible for the 32% for the remaining months of the lease - which is no better than if you just hadn't moved. And that's not even including the fact that the place might be on the market for months.
Most leases in SF do not have buyout clauses of this form I believe.
I know more than a few people from SF who were paid to break their leases. More churn means more "market adjustments" for rent prices, and market adjustment historically favored landlords.
Buyout clauses are not symmetric and are uncommon in SF.
In the context you described, both the tenant and the landlord have incentives: the landlord wants to pay you to break the lease so they can charge higher prices, the tenant might want to accept the money. The landlord doesn't have to have any clause in the lease whatsoever to make this offer because you aren't obligated to accept it.
On the other hand, in the current market the landlord has no incentive to accept an offer that is less than what they feel like they will lose by you leaving. Since the market has collapsed, they'll lose quite a bit.
I don't see the math adding up to making money by breaking out of the lease in SF - unless the prices fall considerably more.
Right, which is why it makes sense that landlords would allow tenants to break leases for a fee. The landlord gets two/three months of rent from the current tenant, plus they have a waiting list of people and will have the unit moved into within a few days paying higher rent.
So the benefits to the landlord is more money. They get to legally double-charge for rent and raise rent prices on an accelerated schedule at the cost of one or two days of lost occupancy.
The only time this doesn't benefit the landlords is when rent prices collapse. But considering SF rent prices have been inflating at a double digit annual clip for a decade or more now, I doubt any landlord considered a drop in rent prices to be possible.
Here's the difference: the landlord can already choose release you from your lease if you pay a fee, there doesn't have to be a clause about that.
Adding a clause to the lease forces the landlord to let you leave if you pay the money, which in situations like this can hurt the landlord quite a bit.
So there's really no upside and only a downside. The only time you'd need to include a clause like that is to make the lease more attractive, which in SF until recently has not been necessary.
Your understanding is correct, at least in general. If the tenant moves out and stops paying rent, the landlord has a claim for breach of contract. The landlord, however, must try to mitigate his damages by renting the property to someone else. The breaching tenant will be liable for vacancy costs as well as costs of finding a new tenant. If fair market value has gone down and the landlord can’t find a new tenant at the old rate, then the breaching tenant will be liable for the difference in the remainder of the lease term.
There may be statutory exceptions that allow a tenant to break a lease without liability in some circumstances. They’re things like military service, domestic violence, unsafe property, or landlord harassment. See this article for more info for California: https://www.nolo.com/legal-encyclopedia/tenants-right-break-...
imo, it's best for cities not to try to influence the price of housing in the first place. but if you really want to bring down prices in a tight market, the best solution is to make it easier to build new (and especially denser) stuff. many cities could achieve this "simply" by relaxing zoning restrictions, but if necessary, they could go so far as to subsidize high-density developments. in the much more rare case that prices are collapsing, a city could be more aggressive in condemning dangerous structures.
Dropping property prices shouldn't even be an issue for owners. Property value and thereby property taxes should also go down. As long as they can cover that, then they can continue to own the property. Except in reality everyone is actually leveraged against their property and don't own outright. In which case, sounds like their leveraged risk failed and losing the property is supposed to be the outcome of that. And the new buyer can get it at a cheaper and more maintainable price.
I want to be clear that I'm discussing business owners of commercial property -- including residential rentals. Obviously the above is less desirable when we're talking about real people becoming homeless. But no one is going homeless if a business loses a leveraged property to another buyer.
I'm sure there are some subtleties I'm missing, but this has always struck me as a little odd. why do we subsidize agricultural production and then turn around and also pay farmers not to use fields to stop the price from falling too low?
also a price collapse isn't necessarily cataclysmic for someone with a mortgage. as long as they can keep making the monthly payments, nothing immediately changes. it's only a problem if you need to sell or if the prices never recover.
Basically, you don’t want to pay 1$ to farmers per ton of corn just to lower the price of a ton of corn by 1$. The goal is to hand that dollar to the farmers not the general public.
Farm fields need to be left fallow every four years or so to replenish the soil
https://en.m.wikipedia.org/wiki/Fallow
>Fallow is a farming technique in which arable land is left without sowing for one or more vegetative cycles. The goal of fallowing is to allow the land to recover and store organic matter while retaining moisture and disrupting the lifecycles of pathogens by temporarily removing their hosts.
Fallow fields also tend to be good habitat for small mammals, which in turn draws in birds of prey and stuff and provides habitat for them.
These guys go a step further
They work with farmers and pay them to actually plant native grasses and nitrogen fixing cover crops for a couple years to allow natural habitat to develop.
As far as I remember, those farmers tend to have a couple fields they rotate every 4 years or so. Leaving one fallow with natural grasses while planting the others with crops.
Our generation is unique in the history of the world in the social and cultural chasm between the vast majority of first-world people and the agricultural systems that generate their food. Practically everything written off-the-top on agricultural sciences and practices by this generation by the average smart person on these sites, although it sounds simple and logical, is somewhere between naive and wrong. A hundred years ago this wasn’t true. It is now.
As analogies, it is not worth the off-topic thread to clarify things.
On actual practices, farmers have better things to do than correct posters on these sites. It’s harvest season for most of them, they have enough problems. Although bean prices are up, so many are smiling...
I think a good example of a highly elastic good is hamburgers. Is McDonalds raises burger prices by 300% there a ton of other options for consumers to switch to and sales will drop.
The problem we have then is that it's getting paid for by insurance, and we don't have a good mechanism to distinguish between essential things and merely new things. If somebody comes up with the cure for cancer, letting them soak the insurance companies for 20 years is a fair trade. If somebody comes up with a pill that does the same thing as the combination of two pills that had been standard practice previously, but can convince doctors to prescribe the new thing, letting them soak the insurance companies for 20 years is some kind of regulatory failure.
You'll notice that even over the counter non patented brand name drugs are more expensive than the generics - brand loyalty breeds inelasticity