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Nope, just needs to be more building. New luxury apartments will make the old stock cheaper. The fight over the number of affordable units in every single new d

by ericd 4y ago

Nope, just needs to be more building. New luxury apartments will make the old stock cheaper. The fight over the number of affordable units in every single new development slows things down and exacerbates the affordability problem. Remove as many of the barriers to development as possible, and the problem will be solved.

anonymouskimmer 4y ago
> New How often are they new and how often are they "newly renovated"? As I got a downvote I'm going to edit this and say I used to pay a little over $800/month for a particular apartment. About 7 years later I looked back at the complex. It had been completely remodeled and the cheapest unit was over $1600/month. How often is this happening?
- HWR_14 4y ago
  If a foreign investor buys the unit sight-unseen either way, does it matter?
- ericd 4y ago
  From a market-level perspective, that's basically a no-op unless they're changing the number of units. They're increasing their own pricing power relative to others in the market, but most of that overall increase over the period you saw is probably due to the demand/supply imbalance growing for that whole market. The market clearing price of a place to live just increased by a lot. But I'm talking about new developments. If you ever go to city council meetings where development proposals for new high density housing developments are discussed, you'll see a small slice of the incredible hassle they currently go through. Everyone wants to have a say in what others do with their land, numerous rounds of revisions are frequently required, and that means it's incredibly expensive to shepherd one of these things through. Fundamentally, those units cannot be cheap if that's what it takes to build them.
Sebguer 4y ago
This ignores the possibility of housing stock consolidating, and price-fixing, which can keep rents artificially inflated by just keeping capacity off the markets. Example: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...
- ericd 4y ago
  I'm somewhat familiar with YieldStar and other dynamic rent-setting systems. I don't think it qualifies as price fixing, in that only a small percentage of the available stock uses it. If a large percentage used it, then maybe there'd be a case for it, since I'm guessing it uses advertised rents of nearby availabilities in addition to the in-building measures, so it'd be playing off of itself. But that wasn't the case when I left the industry, guessing it's still primarily big REITs that use it. It's pretty hard to get small landlords to use any tech at all, and they represent a huge portion of the market. If housing stock expanded a lot, landlords would lose the pricing power that YieldStar is taking advantage of. The lack of surplus housing in desirable areas is the root problem, and the difficulty of getting new high density housing projects approved and developed in those areas is at the core of that. The vacancy rate of rental housing nationwide has been dropping for years, and that includes a lot of places where people aren't clamoring to live.
  - yterdy 4y ago
    I see it as a form of a stand-alone complex. There are multiple companies engaging in this behavior, independently, but resulting in what resembles a concerted effort. However, for renters (and their representatives in government), the concern isn't so much that it's an accident of spookily aligned intent/incentives as it is that 1) it's clearly pushing up rents (beyond affordability), and 2) the companies engaging in it are aware that something they are doing is helping to drive these increases.[1] I'll also note that a falling occupancy rate is not mutually exclusive with the alleged practice of property managers warehousing inventory to prop up pricing. I also wonder how much the common practice of offering "new renter specials", rather than simply lowering rents to meet demand, contributes to ever-increasing "market rates." 1:https://web.archive.org/web/20220127071929/https://www.entrata.com/docs/spec_sheets/entrataPricing.pdf https://web.archive.org/web/20220127071929/https://www.entra...
lotsoweiners 4y ago
Not if the developers realize that they should tear down the old apartment and build a new one with “luxury” rents.
- lwansbrough 4y ago
  They can only do that as long as there is market demand. And there would be an increased demand in regular housing if you tore those down. Eventually (or immediately) the demand for regular homes would exceed the demand for luxury homes. Then it becomes a greater risk to build luxury homes vs. regular ones. So the developers choose the lower risk option..
runarberg 4y ago
It is a mistake to ignore the power imbalance between landlords and tenants, especially when the landlord is a business. Sure you can argue that the market is out of equilibrium which causes this inflation in rent, but to say that is the only reason is a blatant oversimplification. Rich landlords will keep overcharging for rent as long as they are able. And more buildings just gives them more opportunities to exploit more renters. That is unless the renters strike or the government enforces rent control.
- ericd 4y ago
  If developers build at a faster rate than new renters want to move in, the rent will decrease, because it will again become a competition between landlords to try to reduce their vacancy rate, for the same reason they're currently increasing rent - revenue maximization. Vacancies represent a lot of lost revenue. Please, don't agitate for more rent control, it's such a bad idea.
  - runarberg 4y ago
    Like I said, this ignores the power imbalance. A business has far less to loose by letting an apartment go vacant for a while, then a renter has by living on the street for even a week. This becomes even more true as the business has a larger portfolio and more assets to devalue. It is in the common interest of all landlords to keep the rent high, so if they are able to sink the cost of keeping an apartment vacant, they will do it if it means that that cost will be realized as profit in their non-vacant units. Tell me, why do you think rent control is a bad idea? For me it seems only bad if you are a landlord.

by ericd 4y ago

anonymouskimmer 4y ago

> New How often are they new and how often are they "newly renovated"? As I got a downvote I'm going to edit this and say I used to pay a little over $800/month for a particular apartment. About 7 years later I looked back at the complex. It had been completely remodeled and the cheapest unit was over $1600/month. How often is this happening?

HWR_14 4y ago
If a foreign investor buys the unit sight-unseen either way, does it matter?
ericd 4y ago
From a market-level perspective, that's basically a no-op unless they're changing the number of units. They're increasing their own pricing power relative to others in the market, but most of that overall increase over the period you saw is probably due to the demand/supply imbalance growing for that whole market. The market clearing price of a place to live just increased by a lot. But I'm talking about new developments. If you ever go to city council meetings where development proposals for new high density housing developments are discussed, you'll see a small slice of the incredible hassle they currently go through. Everyone wants to have a say in what others do with their land, numerous rounds of revisions are frequently required, and that means it's incredibly expensive to shepherd one of these things through. Fundamentally, those units cannot be cheap if that's what it takes to build them.

Sebguer 4y ago

This ignores the possibility of housing stock consolidating, and price-fixing, which can keep rents artificially inflated by just keeping capacity off the markets. Example: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...

ericd 4y ago
I'm somewhat familiar with YieldStar and other dynamic rent-setting systems. I don't think it qualifies as price fixing, in that only a small percentage of the available stock uses it. If a large percentage used it, then maybe there'd be a case for it, since I'm guessing it uses advertised rents of nearby availabilities in addition to the in-building measures, so it'd be playing off of itself. But that wasn't the case when I left the industry, guessing it's still primarily big REITs that use it. It's pretty hard to get small landlords to use any tech at all, and they represent a huge portion of the market. If housing stock expanded a lot, landlords would lose the pricing power that YieldStar is taking advantage of. The lack of surplus housing in desirable areas is the root problem, and the difficulty of getting new high density housing projects approved and developed in those areas is at the core of that. The vacancy rate of rental housing nationwide has been dropping for years, and that includes a lot of places where people aren't clamoring to live.
- yterdy 4y ago
  I see it as a form of a stand-alone complex. There are multiple companies engaging in this behavior, independently, but resulting in what resembles a concerted effort. However, for renters (and their representatives in government), the concern isn't so much that it's an accident of spookily aligned intent/incentives as it is that 1) it's clearly pushing up rents (beyond affordability), and 2) the companies engaging in it are aware that something they are doing is helping to drive these increases.[1] I'll also note that a falling occupancy rate is not mutually exclusive with the alleged practice of property managers warehousing inventory to prop up pricing. I also wonder how much the common practice of offering "new renter specials", rather than simply lowering rents to meet demand, contributes to ever-increasing "market rates." 1:https://web.archive.org/web/20220127071929/https://www.entrata.com/docs/spec_sheets/entrataPricing.pdf https://web.archive.org/web/20220127071929/https://www.entra...

lotsoweiners 4y ago

Not if the developers realize that they should tear down the old apartment and build a new one with “luxury” rents.

lwansbrough 4y ago
They can only do that as long as there is market demand. And there would be an increased demand in regular housing if you tore those down. Eventually (or immediately) the demand for regular homes would exceed the demand for luxury homes. Then it becomes a greater risk to build luxury homes vs. regular ones. So the developers choose the lower risk option..

runarberg 4y ago

It is a mistake to ignore the power imbalance between landlords and tenants, especially when the landlord is a business. Sure you can argue that the market is out of equilibrium which causes this inflation in rent, but to say that is the only reason is a blatant oversimplification. Rich landlords will keep overcharging for rent as long as they are able. And more buildings just gives them more opportunities to exploit more renters. That is unless the renters strike or the government enforces rent control.

ericd 4y ago
If developers build at a faster rate than new renters want to move in, the rent will decrease, because it will again become a competition between landlords to try to reduce their vacancy rate, for the same reason they're currently increasing rent - revenue maximization. Vacancies represent a lot of lost revenue. Please, don't agitate for more rent control, it's such a bad idea.
- runarberg 4y ago
  Like I said, this ignores the power imbalance. A business has far less to loose by letting an apartment go vacant for a while, then a renter has by living on the street for even a week. This becomes even more true as the business has a larger portfolio and more assets to devalue. It is in the common interest of all landlords to keep the rent high, so if they are able to sink the cost of keeping an apartment vacant, they will do it if it means that that cost will be realized as profit in their non-vacant units. Tell me, why do you think rent control is a bad idea? For me it seems only bad if you are a landlord.