4 ms·

In major tech hubs, find the median salary of a single worker (eg seattle $100k). Divide by four ($25k), that’s roughly the cost of a one bedroom apartment (~$2

In major tech hubs, find the median salary of a single worker (eg seattle $100k). Divide by four ($25k), that’s roughly the cost of a one bedroom apartment (~$2k/month). Adjust for neighborhood and amenities. They know their market. They know the max price they can set and fill easily. https://www.seattletimes.com/seattle-news/data/seattle-median-household-income-hits-110000-census-data-shows/ https://www.seattletimes.com/seattle-news/data/seattle-media... https://www.zillow.com/rental-manager/market-trends/seattle-wa/ https://www.zillow.com/rental-manager/market-trends/seattle-...

ISL 4y ago
I don't think people think about rental pricing from first principles. In general, they look around, see what everyone else is charging, maybe nudge it up a bit, and charge that. If they don't get any tenants, they lower the rate until someone leases the apartment.
- haswell 4y ago
  I don’t think it’s necessary to be aware of those principles to participate in them.
- vineyardmike 4y ago
  Small landlords may do that… but how does “everyone else” price? If you set price to low, you’re leaving money on the table, price too high and you won’t find a tenant. Price high (but not too high), it may take longer to find a tenant (more lost rent), price low and you’ll get lower income tenants (who will be more likely to miss rent, because they’re less likely to be non-salary workers). The rents will “naturally” trend to a rate that is affordable but budget-filling of the desirable demographic -in a big city that’s well paid office workers who move a lot.
rlpb 4y ago
Landlords and homeowners compete between themselves for real estate near where jobs are, since there's a limited supply. This causes the market price to purchase a property to adjust to the cost of capital that is equivalent to the value gained by living there. This has a natural upper bound. The market rent is the cost of capital to purchase a property plus some margin to account for the cost of doing business. For example, if moving to an area will increase my salary by X, there's little point in me moving there if my rent will go up by more than X. The same goes for my mortgage payment. Even if I had the cash and could buy mortgage-free, it wouldn't be worth it because I could make more by investing the cash somewhere else. If UBI is indeed universal and you'll get it regardless of where you live, then the value of "living there" will go down proportionally, because the value of living elsewhere will go up, relatively speaking. Another way of looking at this is that demand to living in expensive areas will go down because it'll be (proportionally) less necessary to live where the jobs are.
- RestlessMind 4y ago
  > demand to living in expensive areas will go down because it'll be (proportionally) less necessary to live where the jobs are. Expensive areas are expensive not only because of jobs but for many other reasons, mainly related to entertainment. Even with UBI, NYC will remain far more attractive than middle America because of a better {dating, restaurants, bars, museums, ...} scene.
Manuel_D 4y ago
Yet in Redmond, which has a median income almost 40% higher than Seattle [1], apartments are cheaper. There's no price-fixing by landlords based on incomes, it's supply and demand. There's less desire to live in Redmond, so an equally sized unit is cheaper despite higher incomes. 1. https://www.google.com/search?q=seattle+median+income&rlz=1C5CHFA_enUS923US923&oq=seattle+median+income&aqs=chrome.0.0i131i433i512j0i433i512j0i512l3j0i22i30l5.3382j0j7&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=seattle+median+income&rlz=1C... https://www.google.com/search?q=redmond+wa+median+income&rlz=1C5CHFA_enUS923US923&oq=redmon+wa+mediaun+in&aqs=chrome.1.69i57j0i13i512j0i22i30j0i390l3.3838j0j7&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=redmond+wa+median+income&rlz...
- vineyardmike 4y ago
  > There's no price-fixing by landlords based on incomes, it's supply and demand. Sorta yea. Realistically traditional Econ 101 concepts don’t always apply to housing. Supply is limited and can’t be increased as much as demand because building housing is quite hard and conversely demand is capped at the household income of people who will live there (eg Medina vs Renton are entirely different markets). Generally, people pay ~25% of their household income on housing (once they leave being low-income). Therefore prices will trend to that value for the given demographics. Because people can out bid each other on purchasing or landlords will charge higher rent prices knowing someone will pay it. Redmond is wealthier than seattle (as a rich suburb), and I bet the median cost-to-acquire-housing in Redmond is greater than seattle even if the cost of a “750sqft 1br with parking” is cheaper. Being a family town with a good school, people probably want multi bedroom housing, and probably want a yard etc. So people who will live alone with a one bedroom is different from most of Redmond.

ISL 4y ago

I don't think people think about rental pricing from first principles. In general, they look around, see what everyone else is charging, maybe nudge it up a bit, and charge that. If they don't get any tenants, they lower the rate until someone leases the apartment.

haswell 4y ago
I don’t think it’s necessary to be aware of those principles to participate in them.
vineyardmike 4y ago
Small landlords may do that… but how does “everyone else” price? If you set price to low, you’re leaving money on the table, price too high and you won’t find a tenant. Price high (but not too high), it may take longer to find a tenant (more lost rent), price low and you’ll get lower income tenants (who will be more likely to miss rent, because they’re less likely to be non-salary workers). The rents will “naturally” trend to a rate that is affordable but budget-filling of the desirable demographic -in a big city that’s well paid office workers who move a lot.

rlpb 4y ago

Landlords and homeowners compete between themselves for real estate near where jobs are, since there's a limited supply. This causes the market price to purchase a property to adjust to the cost of capital that is equivalent to the value gained by living there. This has a natural upper bound. The market rent is the cost of capital to purchase a property plus some margin to account for the cost of doing business. For example, if moving to an area will increase my salary by X, there's little point in me moving there if my rent will go up by more than X. The same goes for my mortgage payment. Even if I had the cash and could buy mortgage-free, it wouldn't be worth it because I could make more by investing the cash somewhere else. If UBI is indeed universal and you'll get it regardless of where you live, then the value of "living there" will go down proportionally, because the value of living elsewhere will go up, relatively speaking. Another way of looking at this is that demand to living in expensive areas will go down because it'll be (proportionally) less necessary to live where the jobs are.

RestlessMind 4y ago
> demand to living in expensive areas will go down because it'll be (proportionally) less necessary to live where the jobs are. Expensive areas are expensive not only because of jobs but for many other reasons, mainly related to entertainment. Even with UBI, NYC will remain far more attractive than middle America because of a better {dating, restaurants, bars, museums, ...} scene.

Manuel_D 4y ago

Yet in Redmond, which has a median income almost 40% higher than Seattle [1], apartments are cheaper. There's no price-fixing by landlords based on incomes, it's supply and demand. There's less desire to live in Redmond, so an equally sized unit is cheaper despite higher incomes. 1. https://www.google.com/search?q=seattle+median+income&rlz=1C5CHFA_enUS923US923&oq=seattle+median+income&aqs=chrome.0.0i131i433i512j0i433i512j0i512l3j0i22i30l5.3382j0j7&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=seattle+median+income&rlz=1C... https://www.google.com/search?q=redmond+wa+median+income&rlz=1C5CHFA_enUS923US923&oq=redmon+wa+mediaun+in&aqs=chrome.1.69i57j0i13i512j0i22i30j0i390l3.3838j0j7&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=redmond+wa+median+income&rlz...

vineyardmike 4y ago
> There's no price-fixing by landlords based on incomes, it's supply and demand. Sorta yea. Realistically traditional Econ 101 concepts don’t always apply to housing. Supply is limited and can’t be increased as much as demand because building housing is quite hard and conversely demand is capped at the household income of people who will live there (eg Medina vs Renton are entirely different markets). Generally, people pay ~25% of their household income on housing (once they leave being low-income). Therefore prices will trend to that value for the given demographics. Because people can out bid each other on purchasing or landlords will charge higher rent prices knowing someone will pay it. Redmond is wealthier than seattle (as a rich suburb), and I bet the median cost-to-acquire-housing in Redmond is greater than seattle even if the cost of a “750sqft 1br with parking” is cheaper. Being a family town with a good school, people probably want multi bedroom housing, and probably want a yard etc. So people who will live alone with a one bedroom is different from most of Redmond.