3 ms·

If there was scope to increase rents, then why were they not increased already?

teddyh 5y ago
I’m guessing that it’s because it’s harder to move, let alone find a new place to live, during a pandemic and lockdown. Landlords suddenly found themselves having a customer base which are all isolated and locked down at home.
WalterBright 5y ago
Increasing the landlord's costs always causes rent increases. It's basic supply and demand. If demand is the same, but supply shrinks because of higher costs, then the equilibrium price rises.
- heurisko 5y ago
  That didn't really answer the question, however. For the rent to increase, implies that the landlord was previously leaving money on the table. Why would they do this? I don't think rising costs to the landlord always results in rent increases. Rents are constrained to an extent by the average salary of the area. If you incur more costs, but the average salary of your area doesn't rise, and you increase rent prices, you run the risk of void tenancies.
  - twelve40 5y ago
    That's not really how it works though. We've been renting out in a lower-cost area in CA since 2018 and in the first two years the average Zillow and Craigslist rental listing went from $1200 to $1800. Why? There was no visible gentrification, that neighborhood really didn't change. Most of the tenants are in construction labor and management, truck driving, nursing. etc. Their salaries surely did not go up by 50%, but the going rate for the rentals somehow did.
  - WalterBright 5y ago
    > Why would they do this? Because if they did, another landlord would undercut them. But with all the landlords facing rising costs, another landlord cannot afford to undercut. Hence the rents all rise. This is how supply&demand curves work. Over the last few years, Seattle has added many various laws that are costly to landlords to comply with. This corresponds with a decline in affordable housing. I'm pretty sure the Seattle Council is well aware of this connection. But as the number of renters far exceeds the number of landlords, they know where the votes are, and they sell the fiction to the renters that the landlords will pay.
- BirdieNZ 5y ago
  That's not how it actually works in practice. Landlords are able to charge tenants as much rent as the tenant can afford, so tenant income increases are what causes rent increases. Supply and demand don't "work" the same when there is a monopoly of a necessary good. Consider the scenario where there is no more water in the world. All that is left is in a well in your back yard. You can charge whatever you want for the water, because people need it. The limit is what they can spend, because the demand is essentially infinite. Now, if you had to purchase a more expensive pump to extract water from your well, would you charge more for your water? No, because you can already charge as much as you want. I haven't seen the data for other countries, but in New Zealand, you can look at trends of rent vs house price and they are not correlated anywhere near the way rent and income is correlated. Supply and demand do still exist and affect rent, but when supply is low for housing, landlord cost increases have no effect on rent.

I’m guessing that it’s because it’s harder to move, let alone find a new place to live, during a pandemic and lockdown. Landlords suddenly found themselves having a customer base which are all isolated and locked down at home.

WalterBright 5y ago

Increasing the landlord's costs always causes rent increases. It's basic supply and demand. If demand is the same, but supply shrinks because of higher costs, then the equilibrium price rises.

heurisko 5y ago
That didn't really answer the question, however. For the rent to increase, implies that the landlord was previously leaving money on the table. Why would they do this? I don't think rising costs to the landlord always results in rent increases. Rents are constrained to an extent by the average salary of the area. If you incur more costs, but the average salary of your area doesn't rise, and you increase rent prices, you run the risk of void tenancies.
- twelve40 5y ago
  That's not really how it works though. We've been renting out in a lower-cost area in CA since 2018 and in the first two years the average Zillow and Craigslist rental listing went from $1200 to $1800. Why? There was no visible gentrification, that neighborhood really didn't change. Most of the tenants are in construction labor and management, truck driving, nursing. etc. Their salaries surely did not go up by 50%, but the going rate for the rentals somehow did.
- WalterBright 5y ago
  > Why would they do this? Because if they did, another landlord would undercut them. But with all the landlords facing rising costs, another landlord cannot afford to undercut. Hence the rents all rise. This is how supply&demand curves work. Over the last few years, Seattle has added many various laws that are costly to landlords to comply with. This corresponds with a decline in affordable housing. I'm pretty sure the Seattle Council is well aware of this connection. But as the number of renters far exceeds the number of landlords, they know where the votes are, and they sell the fiction to the renters that the landlords will pay.
BirdieNZ 5y ago
That's not how it actually works in practice. Landlords are able to charge tenants as much rent as the tenant can afford, so tenant income increases are what causes rent increases. Supply and demand don't "work" the same when there is a monopoly of a necessary good. Consider the scenario where there is no more water in the world. All that is left is in a well in your back yard. You can charge whatever you want for the water, because people need it. The limit is what they can spend, because the demand is essentially infinite. Now, if you had to purchase a more expensive pump to extract water from your well, would you charge more for your water? No, because you can already charge as much as you want. I haven't seen the data for other countries, but in New Zealand, you can look at trends of rent vs house price and they are not correlated anywhere near the way rent and income is correlated. Supply and demand do still exist and affect rent, but when supply is low for housing, landlord cost increases have no effect on rent.