4 ms·

How do the 10,000 landlords collude to not rent out their apartments? In Sydney it is way more free-market like. Rents tanked during covid and rocketed after (r

How do the 10,000 landlords collude to not rent out their apartments? In Sydney it is way more free-market like. Rents tanked during covid and rocketed after (relative to their covid low). I feel like there are 2 types of owner. Ones that rent them out, and one's that don't. Not ones that rent them out, then let them be empty when rents threaten to fall.

PartiallyTyped 3y ago
You don't need 10k landlords, you need property management firms which all happen to use the same software which effectively creates a cartel even though it is not a coordinated one [1]. [1] https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...
- simmerup 3y ago
  Didn’t a similar thing happen with car prices on auto trader?
- refurb 3y ago
  Software doesn't mean that landlord's are still at the whim of market forces. If rent goes down but the software says to charge more, then the unit stays empty.
  - PartiallyTyped 3y ago
    As you can read in other comments in this thread; that is preferable as there is higher potential even though said gains may never be realised.
    - refurb 3y ago
      Meh.. while corporate landlord's may be more willing to leave a place empty, it doesn't take long for that to be a losing proposition. With the exception of a few US cities with rent control so strict you practically can't increase rent by more than a very small amount (San Francisco), most cities, even those with rent control allow for single digit percentage increases that can allow you to adjust rent over a relatively short period. If you refuse to drop rent by 5%, all it takes is 1 month of an empty unit to exceed the loss from taking a 5% lower rent for one and a half years. Add on top that nobody can predict the future including when rents will go back up, leaving units empty is a terrible financial decision. That said, it places with ridiculous rent control where evicting a tenant is almost impossible except the most extreme circumstances, I could see where it makes more sense, especially if a landlord is looking to sell as empty units are worth a substantial amount more than occupied units.
- busterarm 3y ago
  They don't even need this software, they just need their mortgages underwritten by the same small handful of banks. The banks aren't willing to put the write downs on their balance sheets. They can lose money for years due to vacancy but those losses only matter when everyone realizes the rating on that bundle of mortgages isn't AAA. Lowering the rent would force them to reprice the asset right now.
lobochrome 3y ago
The parent is arguing against corporate landlords who own 10000 units, albeit a bit ramblingly. Parent's theory is that due to renter protection laws, which make it hard to evict a renter and raise the rent, large institutional landlords prefer to leave an apartment empty for a couple of years and then rent it out at a lower rent. There is some truth to that theory. The solution should thus be state-funded competition for apartments, driving institutionals out of the low/mid end of the market. This doesn't necessarily mean the state needs to build themselves. There could be proper tax/investment incentive regimes. But designing and managing those is difficult. My theory is that such enterprises managed by political institutions fail because short feedback loops are antithetical to their operation. The policy is set for 3-4 years and then executed no matter what.
- mythhabit 3y ago
  I believe that there is merit to the theory. If you bought a house 5-7 years ago, the interest and taxes is half of what it cost to rent a smaller house in the same neighbourhood. The high rent is not driven by demand, nor by cost. It's for profit or pretty numbers that mean higher sales value. There is already a form of renting companies that is supported by law, preventing this. They are called "Almenyttig boliger" and is required to be a non-profit company. They are more akin to what americans know as a credit union, just for housing instead of financial activities. About a quarter of all homes are of this kind. Still we have seen investment conglomerates buy large properties and "renovate" them and then raising the rent significantly. I say renovate in quotes, because it's the bare minimum to live up to the law allowing them to raise the rent. The raise is always significantly higher than the value of the renovation, to the point where the politicians had to make new laws trying to get it to stop.
- devjab 3y ago
  We have some laws that enforce that at least part of a rental complex is meant to be for the general public, but you can legally set the rent higher than the welfare payment people receive when they are out of jobs. The laws are from the 70ies, and they worked well until about the 00’s, but these days they might as well not be there. > institutional landlords prefer to leave an apartment empty for a couple of years and then rent it out at a lower rent. Not exactly. They don’t plan on ever lowering the rent. They’ll even let you live rent free for 3 months if you move into some of the apartments no strings attached. The point is to keep the prospect earnings as high as possible, because that’s what they’re selling to investors. There is more than enough income from other areas to cover for the empty rentals. Ideally you don’t want that, but for some projects it’s even tied directly into the project loans, meaning it would actually be more expensive to rent out apartments at lower rates than having them sit empty. > state-funded competition for apartments The state is too busy selling off it’s real estate and land to make that happen. I don’t necessarily disagree with you, but as long as people keep voting for politicians who are also our investors, well… I wouldn’t hold my breath.

PartiallyTyped 3y ago

You don't need 10k landlords, you need property management firms which all happen to use the same software which effectively creates a cartel even though it is not a coordinated one [1]. [1] https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...

simmerup 3y ago
Didn’t a similar thing happen with car prices on auto trader?
refurb 3y ago
Software doesn't mean that landlord's are still at the whim of market forces. If rent goes down but the software says to charge more, then the unit stays empty.
- PartiallyTyped 3y ago
  As you can read in other comments in this thread; that is preferable as there is higher potential even though said gains may never be realised.
  - refurb 3y ago
    Meh.. while corporate landlord's may be more willing to leave a place empty, it doesn't take long for that to be a losing proposition. With the exception of a few US cities with rent control so strict you practically can't increase rent by more than a very small amount (San Francisco), most cities, even those with rent control allow for single digit percentage increases that can allow you to adjust rent over a relatively short period. If you refuse to drop rent by 5%, all it takes is 1 month of an empty unit to exceed the loss from taking a 5% lower rent for one and a half years. Add on top that nobody can predict the future including when rents will go back up, leaving units empty is a terrible financial decision. That said, it places with ridiculous rent control where evicting a tenant is almost impossible except the most extreme circumstances, I could see where it makes more sense, especially if a landlord is looking to sell as empty units are worth a substantial amount more than occupied units.
busterarm 3y ago
They don't even need this software, they just need their mortgages underwritten by the same small handful of banks. The banks aren't willing to put the write downs on their balance sheets. They can lose money for years due to vacancy but those losses only matter when everyone realizes the rating on that bundle of mortgages isn't AAA. Lowering the rent would force them to reprice the asset right now.

lobochrome 3y ago

The parent is arguing against corporate landlords who own 10000 units, albeit a bit ramblingly. Parent's theory is that due to renter protection laws, which make it hard to evict a renter and raise the rent, large institutional landlords prefer to leave an apartment empty for a couple of years and then rent it out at a lower rent. There is some truth to that theory. The solution should thus be state-funded competition for apartments, driving institutionals out of the low/mid end of the market. This doesn't necessarily mean the state needs to build themselves. There could be proper tax/investment incentive regimes. But designing and managing those is difficult. My theory is that such enterprises managed by political institutions fail because short feedback loops are antithetical to their operation. The policy is set for 3-4 years and then executed no matter what.

mythhabit 3y ago
I believe that there is merit to the theory. If you bought a house 5-7 years ago, the interest and taxes is half of what it cost to rent a smaller house in the same neighbourhood. The high rent is not driven by demand, nor by cost. It's for profit or pretty numbers that mean higher sales value. There is already a form of renting companies that is supported by law, preventing this. They are called "Almenyttig boliger" and is required to be a non-profit company. They are more akin to what americans know as a credit union, just for housing instead of financial activities. About a quarter of all homes are of this kind. Still we have seen investment conglomerates buy large properties and "renovate" them and then raising the rent significantly. I say renovate in quotes, because it's the bare minimum to live up to the law allowing them to raise the rent. The raise is always significantly higher than the value of the renovation, to the point where the politicians had to make new laws trying to get it to stop.
devjab 3y ago
We have some laws that enforce that at least part of a rental complex is meant to be for the general public, but you can legally set the rent higher than the welfare payment people receive when they are out of jobs. The laws are from the 70ies, and they worked well until about the 00’s, but these days they might as well not be there. > institutional landlords prefer to leave an apartment empty for a couple of years and then rent it out at a lower rent. Not exactly. They don’t plan on ever lowering the rent. They’ll even let you live rent free for 3 months if you move into some of the apartments no strings attached. The point is to keep the prospect earnings as high as possible, because that’s what they’re selling to investors. There is more than enough income from other areas to cover for the empty rentals. Ideally you don’t want that, but for some projects it’s even tied directly into the project loans, meaning it would actually be more expensive to rent out apartments at lower rates than having them sit empty. > state-funded competition for apartments The state is too busy selling off it’s real estate and land to make that happen. I don’t necessarily disagree with you, but as long as people keep voting for politicians who are also our investors, well… I wouldn’t hold my breath.