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> Then, they find out they can't rent at those prices, they still are hesitant to drop prices and just offer 3-4 months of 'free rent' instead. This one is eas
by pmiller2 6y ago
> Then, they find out they can't rent at those prices, they still are hesitant to drop prices and just offer 3-4 months of 'free rent' instead.
This one is easy to explain. Commercial real estate (which includes apartment buildings with 5+ units) is valued strictly by the amount of income it can produce, i.e. what the monthly rents are. If you drop the rent from X to 0.67X, you've basically cut your property value by 1/3. If you give a rebate of 4 months free rent, the effect on the property value is basically 0.
- Scipio_Afri 6y agoThis also inflates “market rate” and justifies higher prices for rent as well as government subsidized housing (which is just reduced rent because part of the rent is paid for from the market rate). By paying for “free months” themselves the rent prices never go down in the area and the market never corrects itself, leaving prices to either stay the same or rise always.