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This is a classic example of real option valuation[1]. As others have pointed out, holding out could mean that the owner could charge more later on. The right,
by iakh 9y ago
This is a classic example of real option valuation[1]. As others have pointed out, holding out could mean that the owner could charge more later on. The right, but not the obligation, to lease or sell the property has an intrinsic value which can be modeled using different option pricing methods. So long as the value of the option is greater than the current leasing options, then the owner should keep the property vacant.
[1] https://en.wikipedia.org/wiki/Real_options_valuation https://en.wikipedia.org/wiki/Real_options_valuation
- JDiculous 9y agoIt seems that landlords aren't paying enough in property tax if they'd prefer to keep the property vacant than rent it out. Sounds like we need to raise property taxes, implement some kind of vacant property tax, or introduce a land value tax.