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Ok here we go again nobody is allowed to make any money and everything is unfair and capitalism is bad and so on. In practice if an apartment makes money by wa
by gist 10y ago
Ok here we go again nobody is allowed to make any money and everything is unfair and capitalism is bad and so on.
In practice if an apartment makes money by way of this "kickback" it also offsets the rent that they have to charge the tenants of that building. Similar to airlines, assuming that if one charge is reduced or eliminated it won't show up in another area (baggage fees) or in the case of a building reduced maintenance or services doesn't take into account how real businesses operate. There is nothing wrong with a business making money and in fact a business that is profitable is also good for it's customers. A business that loses money is not. The "peanut gallery" (people who write blog posts and comment on this but don't actually even own their own business) aren't in a good position to know all the ins and outs.
That said, sure some businesses rip people off (if you want to call it that) but don't assume that is the default case.
Edit: Perhaps this attorney (at Harvard no less) could write an article about the 'legal tax' on society as a result of lack of competition in the legal market. The cost to consumers for that (since it's passed along in product costs) is almost certainly way greater than whatever the 'vig' is for higher priced cable television or internet service.
- Gracana 10y agoThere's no incentive for that profit to be passed on as reduced rates for the tenants.
- ikeboy 10y agoCompetition.
- pavel_lishin 10y agoOnly a factor if there is a significant number of vacant properties that need to be filled with people, which is not the case in places like SF and NYC.
- ikeboy 10y agoThen why don't landlords raise the price until there are? Seems inefficient.
- jbooth 10y ago1) They already are 2) If you're going Econ 101 on this, ever heard of elasticity or switching costs?
- ikeboy 10y ago1. Then why isn't there competition yet? This points towards a more complex model being needed. 2. I mentioned stickiness in https://news.ycombinator.com/item?id=11989391 https://news.ycombinator.com/item?id=11989391. But it makes the analysis more complicated, and the comments I was responding to were not at that level. Remember, I started by responding to a comment saying "There's no incentive for that profit to be passed on as reduced rates for the tenants.", which is a simplistic model.
- jbooth 10y agohttps://en.wikipedia.org/wiki/Spherical_cow https://en.wikipedia.org/wiki/Spherical_cow
- ikeboy 10y agoI'm not saying the simple model is correct, I'm saying that you need a model which accounts for the things the simple model has. You can account for more things, and I did, but without doing that you aren't justified in complaining.
- gist 10y agoWell if that is the case then the price they could charge would be infinite and they would simply keep raising it. Even in a competitive market, specifically the ones you have mentioned, the rent charged is based on supply and demand and the competition. If not what prevents them from doubling the rent?
- makomk 10y agoCompetition is based mostly on the headline rental rate, excluding tricks like this.
- ikeboy 10y agoThat's not enough to change anything. If everyone can get $X from kickbacks, then one person can afford to reduce their headline rate by $Y<$X, thus outperforming others until they reduce their price to the same equilibrium except $X of costs are now implicit. You need some more complex notion of stickiness differing between imputed and sticker costs as I mentioned downthread for this to be harmful.
- mrep 10y agoI almost entirely agree with you, but you have to tailor your writing to the people you're talking too. The HN audience mainly understands technology, not economics. The real problem is that the landlords are exploiting the cost of information. It's costly for new tenants to educate themselves and factor in the costs of potential ISP/TV in addition to rent. Landlords are exploiting that cost to profit for themselves. Is it nearly as big as a problem as everyone here is making it out to be? No. It's like 50-100$ a month compare to 1000-4000$ a month rent for most people. That's 1/80 to 1/10 the cost of the rent.