Comment by efaref | Hacker News Reader

Comment by efaref | Hacker News Reader

Parent Full thread

> Landlords are not charities, they always charge the maximum that renters can pay, irrespective of the landlords' own costs.

This is simply not true in the same way that consumers are not always rational and always pay the exact correct price.

Landlords regularly charge less than full market rate, for example when they have a good tenant, as the costs of a new tenancy and the risk of a void are higher than the incremental marginal rent (once taxed at the landlord's marginal rate) is worth to that landlord. Unlike what most people seem to assume, being a landlord is not a zero-labour job. Things that require additional labour on the part of the landlord have to be worth it.

The thing that changes this calculation is an increase in costs. You are right that landlords are not charities, so they will generally avoid a loss. The primary costs for most landlords are mortgage interest and taxes. Increase the taxes and some of these landlords will now be underwater and will increase prices towards highest market rate as a result.

Yes, landlords have and rental markets are not securatized commodity markets. There's always some noise.

The point is that the price is determined by supply and demand, primarily. Speculative market responses at the margins if the transition is analyzing the noise. Besides the point.

The much bigger issue at transition, is that landlords are going to be underwater across the board. The whole point here is a permanent transition from high land prices to near-zero land prices.

Landlords avoid raising prices to good tenants not for emotional reasons, but because a vacant apartment earns no rent, and getting a tenant that lives in the unit only for 6 months and then you need to spend two months without rent looking for a new tenant is a worse situation in terms of revenue than a stable tenant that pays every month. It is purely an economic decision that takes search costs into account and falls into the rubric "charging the most the market can bear".

You are just adding complications but not really changing the argument. We can also talk about hotels versus longer term rentals versus residential rent. Why does a hotel charge more per night than a residential rental? Because hotels have much higher vacancy rates, in order to have a unit available. A good hotel strives to be 3/4 full at any time. That would bankrupt most landlords of residential housing, where vacancy rates are 5-7%, not 20-30%.

As the rent goes up above the average rent for your area, so does the cost and time of finding someone willing to pay that rent, and in this way, there is an optimal rent that maximizes your revenue that may not be the highest rent paid but is the highest revenue received over time. That is why good, stable tenants often pay less.

Yes, said more directly, tenants are not commodities. Some tenants will destroy their unit. Others will require more maintenance requests, move out sooner or will pay rents later. Those differing qualities yield different prices. They have differing qualities, just as items at the grocery store do. You will pay more for a higher quality item, if you desire that quality.

Thus there is no single rental price, merely an initial unknown quality rental price, that as a tenant gets to know the quality of the landlord, and the landlord gets to know the tenant, will resolve to a price that is different for every combination. There will be a distribution according to all of these factors.

These are market rents. LVT will not change them.

Reply on news.ycombinator.com