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They already had an incentive to increase it at the max, because it's more money in their pocket. For this to be true, they would have to either (1) under pres
by ahepp 6y ago
They already had an incentive to increase it at the max, because it's more money in their pocket.
For this to be true, they would have to either (1) under present conditions, not be raising the rent to maximize profit or (2) under the scenario, raise the rent past maximum profit
Neither of those seem likely to me.
- WalterBright 6y ago> They already had an incentive to increase it at the max, because it's more money in their pocket. They'll set it based on supply & demand. But caps increase the business risk to the landlord, and therefore increases the price as risk always translates to an increased price.
- tomatocracy 6y agoLandlords in a free market will usually act to maximise longer term profit not rent. Increasing rent in the short term by too much (even if the resultant rent is below market) only to see a tenant leaving soon afterwards can be a net loss due to void periods and the costs of finding a new tenant etc. Eventually the gap to market rent may grow to the point where the risk is worth it and then an increase makes sense. In the presence of a cap this strategy becomes riskier so it forces landlords to think about a shorter term horizon. There's also a signalling effect of the cap which may mean tenant reactions to an increase at the cap are different.