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Landlords in supply-constrained cities are able to charge the maximum rent their tenants can afford; and increase in landlord costs is thus not able to be passe

Landlords in supply-constrained cities are able to charge the maximum rent their tenants can afford; and increase in landlord costs is thus not able to be passed onto the tenant, because if the tenant could bear more they would already be charged that much. This is in aggregate, of course; individual landlords may charge less than what individual tenants can bear but across the rental market, landlords extract monopoly rents already. That's why you will find rents increase proportionately to incomes, not landlord costs. This is highly apparent in New Zealand, where mortgages are not fixed rates for more than 5 years; interest rate changes have little to no impact on rents, but supply and tenant incomes do.

RhysU 4y ago
People can and will downgrade to absorb costs. > ...individual landlords may charge less than what individual tenants can bear... I lived in a supply-constrained city once and my landlord, a nationwide public company, could have charged me significantly more without prompting me to move. I am one individual though and you called out that exception. However, had I been priced out of the unit in which I lived I would have found a smaller and/or less desirable unit at lower cost. Rental units vary in size and quality. The existence of individuals who can pay more and the non-fungibilty of rental stock makes me suspect that such taxes will simply be passed on.
- BirdieNZ 4y ago
  The theory sounds good, but in practice we can see that rents stay quite stable as a ratio of income, and not as a ratio of interest rates, or house prices, or anything else that would be a landlord cost. Check out the rent to income ratio in your own municipality and compare to, say, rent-to-interest rate, or rent-to-property-price. Landlord costs only get passed down when there is significant room to increase rents in the tenants income and there is insufficient supply to handle the number of potential tenants.
  - RhysU 4y ago
    Thank you for the discussion. I appreciate the well-made points.

RhysU 4y ago

People can and will downgrade to absorb costs. > ...individual landlords may charge less than what individual tenants can bear... I lived in a supply-constrained city once and my landlord, a nationwide public company, could have charged me significantly more without prompting me to move. I am one individual though and you called out that exception. However, had I been priced out of the unit in which I lived I would have found a smaller and/or less desirable unit at lower cost. Rental units vary in size and quality. The existence of individuals who can pay more and the non-fungibilty of rental stock makes me suspect that such taxes will simply be passed on.

BirdieNZ 4y ago
The theory sounds good, but in practice we can see that rents stay quite stable as a ratio of income, and not as a ratio of interest rates, or house prices, or anything else that would be a landlord cost. Check out the rent to income ratio in your own municipality and compare to, say, rent-to-interest rate, or rent-to-property-price. Landlord costs only get passed down when there is significant room to increase rents in the tenants income and there is insufficient supply to handle the number of potential tenants.
- RhysU 4y ago
  Thank you for the discussion. I appreciate the well-made points.