7 ms·

It is government policy. Specifically, it is restrictive zoning. Landlords do not get to set prices to whatever they want, they set prices to what the market wi

by carom 3y ago

It is government policy. Specifically, it is restrictive zoning. Landlords do not get to set prices to whatever they want, they set prices to what the market will pay. If rent has gone up faster than inflation it just means that demand has increased or supply has decreased in that time. You can build apartments for ~$250 per sqft. The issue is that local governments make it really hard to build more apartments. If you disagree I implore you to go get a construction loan, build some housing, and rent it out.

Draiken 3y ago
Isn't that what lobbying is all about? You effectively have companies paying politicians to keep these zoning laws that keep the rents as high as possible. Profit above all else. Arguments that boil down to "government policy" can basically be translated to "big companies policies". Whether it's through illegal or legal bribing (lobbying), it's what we see after decades of influence.
- ushtaritk421 3y ago
  It’s big companies but it’s also (mostly?) the nice retired insurance agents and school teachers who like their quiet neighborhood and the fact that the house they bought 30 years ago can be sold for 4x its inflation-adjusted purchase price when they’re ready.
  - Draiken 3y ago
    100% agreed. Our individualism and own greed are also a great contributing factor. After-all we ultimately elect those politicians and also have to profit similar to a company (hopefully not at all costs though).
  - jjav 3y ago
    > It’s big companies but it’s also (mostly?) the nice retired insurance agents and school teachers Those retired agents and teachers have exactly zero influence on local and state politicians. Those big companies who host fund raising dinners at the CEOs mansions and contribute millions? Yes, a lot of influence. To the point where we've seen plenty legislative bills which turn out to be just cut & paste from what some corporate sponsor wrote.
    - AnthonyMouse 3y ago
      You're talking about national politics or state-level politics in big states like California. The mayor of a random town with 50,000 people is not getting a million dollars donated to their campaign by anybody. It is actually the local voters who decide who governs the town. But when residency in the town requires you to own a house, the existing residents vote for people who make housing prices go up.
      - jjav 3y ago
        > But when residency in the town requires you to own a house There is no such place in the USA. Residency means you live there, which you can do also by renting a place. Then you get to vote on all local elections.
        AnthonyMouse 3y ago
        There are plenty of places where to a first approximation the houses are all owner-occupied rather than offered for rent.
fzeroracer 3y ago
>If rent has gone up faster than inflation it just means that demand has increased or supply has decreased in that time. Not quite. Landlords have the ability to fake demand in order to raise prices. One of the ways they do so is by leaving units intentionally empty (as they've done in NYC), which artificially restrains supply and allows them to raise prices on the units they own much higher than they'd normally be if they were releasing all units to the public. They can do this because these large apartment units are all owned by a small number of companies.
- AnthonyMouse 3y ago
  How is that going to make them money? They would have to withdraw enough units to raise the market price across an entire city -- and forego the rent on all of those. That kind of thing only makes sense if the city is imposing some kind of rent control or similar so they can't rent them out for the market rate and start getting weird incentives for rich people accounting chicanery.
  - fzeroracer 3y ago
    It makes them money because if you pay attention, apartment prices almost never fall nowadays. They always gradually go up. In a market where supply is constantly being added to meet demand, you would expect costs to go down in cities where people are leaving. For example, NYC's population has remained relatively static or even gone down, but the rent prices sharply go up, far more than inflation. Keep in mind the majority of the value is in the property too, not the amount made from rent. They can effectively sit on the property and still grow value, then withhold apartments in order to either force legislative changes or force rent to go up. The loss of value from leaving those apartments empty is less than the gain in value from being able to raise rent, which results in perverse incentives.
    - AnthonyMouse 3y ago
      > In a market where supply is constantly being added to meet demand, you would expect costs to go down in cities where people are leaving. Sufficient supply is not being added to meet demand -- that's why prices keep going up. > For example, NYC's population has remained relatively static or even gone down, but the rent prices sharply go up, far more than inflation. NYC's population grows by about 0.3% every year: https://www.macrotrends.net/cities/23083/new-york-city/population https://www.macrotrends.net/cities/23083/new-york-city/popul... COVID was an outlier for the obvious reason, during which it dropped by <0.1%/year, and is already back up to the high water mark. Meanwhile the city has added less than that amount of net housing with the obvious result. The housing market is also in a very weird state right now, because the fed raised interest rates, which long-term lowers housing prices by making it harder to borrow for a mortgage. But because the lesson people took from 2008 was to get a fixed-rate mortgage, now most existing owners have below-market mortgage rates and can't move without taking out a new mortgage at the higher rate, so they stay put, which means there is no inventory on the market and anyone trying to buy has to be desperate enough to outbid anyone else for the scarce inventory. But that can't last forever because eventually people will either be forced to move for any of the usual reasons or will have paid off enough of their existing mortgage for this to be less relevant -- or interest rates will go back down. Which, counter-intuitively, could actually lower housing prices by increasing inventory, especially because by then there would be pent-up demand for sellers to be able to move. There is also some uncertainty in the stock market -- it had pretty much been on a bull run since right after the crash in 2008 until COVID but post-COVID has been a rollercoaster -- so you have a lot of investors looking to diversify and buying up real estate. Which they might be stupid to do because housing prices are crazy -- look at this graph and realize that 2007 was a massive housing bubble: https://fred.stlouisfed.org/graph/?g=kYEb https://fred.stlouisfed.org/graph/?g=kYEb > Keep in mind the majority of the value is in the property too, not the amount made from rent. They still get that whether they rent it out or not. It's like saying well, I could get a 9% return from this investment, but if I refuse to rent it out then I'd still get a 5% return, so let me do that and set the rest of this money on fire for no personal benefit. > then withhold apartments in order to either force legislative changes or force rent to go up. But this is the part that makes no sense. To be profitable, you not renting out a subset of your units would have to make the rents on the other units (i.e. rents city-wide) go up by more than the entire amount of the rent on the units you withheld. How are they going to do that? The largest real estate investor in NYC owns far less than 1% of the real estate. For that to make sense would require some enormous disadvantage to actually renting out those units, like rent control or laws that make it hard to evict destructive or non-paying tenants. Because that would make renting the units a significant risk to your investment, since a buyer wouldn't pay full price for a building full of tenants paying below-market rent or trashing the building who can't be removed. But then the cause of the rent-increasing behavior is the inept laws that increase the cost of providing rental units by so much that it's not even profitable to do it when they're already built, and the solution is to remove the laws creating the perverse incentives. Self-serving politicians like to take offense when investors respond in predictable ways to toxic laws, but umbrage doesn't lower the rent.

by carom 3y ago

Draiken 3y ago

Isn't that what lobbying is all about? You effectively have companies paying politicians to keep these zoning laws that keep the rents as high as possible. Profit above all else. Arguments that boil down to "government policy" can basically be translated to "big companies policies". Whether it's through illegal or legal bribing (lobbying), it's what we see after decades of influence.

ushtaritk421 3y ago
It’s big companies but it’s also (mostly?) the nice retired insurance agents and school teachers who like their quiet neighborhood and the fact that the house they bought 30 years ago can be sold for 4x its inflation-adjusted purchase price when they’re ready.
- Draiken 3y ago
  100% agreed. Our individualism and own greed are also a great contributing factor. After-all we ultimately elect those politicians and also have to profit similar to a company (hopefully not at all costs though).
- jjav 3y ago
  > It’s big companies but it’s also (mostly?) the nice retired insurance agents and school teachers Those retired agents and teachers have exactly zero influence on local and state politicians. Those big companies who host fund raising dinners at the CEOs mansions and contribute millions? Yes, a lot of influence. To the point where we've seen plenty legislative bills which turn out to be just cut & paste from what some corporate sponsor wrote.
  - AnthonyMouse 3y ago
    You're talking about national politics or state-level politics in big states like California. The mayor of a random town with 50,000 people is not getting a million dollars donated to their campaign by anybody. It is actually the local voters who decide who governs the town. But when residency in the town requires you to own a house, the existing residents vote for people who make housing prices go up.
    - jjav 3y ago
      > But when residency in the town requires you to own a house There is no such place in the USA. Residency means you live there, which you can do also by renting a place. Then you get to vote on all local elections.
      - AnthonyMouse 3y ago
        There are plenty of places where to a first approximation the houses are all owner-occupied rather than offered for rent.

fzeroracer 3y ago

>If rent has gone up faster than inflation it just means that demand has increased or supply has decreased in that time. Not quite. Landlords have the ability to fake demand in order to raise prices. One of the ways they do so is by leaving units intentionally empty (as they've done in NYC), which artificially restrains supply and allows them to raise prices on the units they own much higher than they'd normally be if they were releasing all units to the public. They can do this because these large apartment units are all owned by a small number of companies.

AnthonyMouse 3y ago
How is that going to make them money? They would have to withdraw enough units to raise the market price across an entire city -- and forego the rent on all of those. That kind of thing only makes sense if the city is imposing some kind of rent control or similar so they can't rent them out for the market rate and start getting weird incentives for rich people accounting chicanery.
- fzeroracer 3y ago
  It makes them money because if you pay attention, apartment prices almost never fall nowadays. They always gradually go up. In a market where supply is constantly being added to meet demand, you would expect costs to go down in cities where people are leaving. For example, NYC's population has remained relatively static or even gone down, but the rent prices sharply go up, far more than inflation. Keep in mind the majority of the value is in the property too, not the amount made from rent. They can effectively sit on the property and still grow value, then withhold apartments in order to either force legislative changes or force rent to go up. The loss of value from leaving those apartments empty is less than the gain in value from being able to raise rent, which results in perverse incentives.
  - AnthonyMouse 3y ago
    > In a market where supply is constantly being added to meet demand, you would expect costs to go down in cities where people are leaving. Sufficient supply is not being added to meet demand -- that's why prices keep going up. > For example, NYC's population has remained relatively static or even gone down, but the rent prices sharply go up, far more than inflation. NYC's population grows by about 0.3% every year: https://www.macrotrends.net/cities/23083/new-york-city/population https://www.macrotrends.net/cities/23083/new-york-city/popul... COVID was an outlier for the obvious reason, during which it dropped by <0.1%/year, and is already back up to the high water mark. Meanwhile the city has added less than that amount of net housing with the obvious result. The housing market is also in a very weird state right now, because the fed raised interest rates, which long-term lowers housing prices by making it harder to borrow for a mortgage. But because the lesson people took from 2008 was to get a fixed-rate mortgage, now most existing owners have below-market mortgage rates and can't move without taking out a new mortgage at the higher rate, so they stay put, which means there is no inventory on the market and anyone trying to buy has to be desperate enough to outbid anyone else for the scarce inventory. But that can't last forever because eventually people will either be forced to move for any of the usual reasons or will have paid off enough of their existing mortgage for this to be less relevant -- or interest rates will go back down. Which, counter-intuitively, could actually lower housing prices by increasing inventory, especially because by then there would be pent-up demand for sellers to be able to move. There is also some uncertainty in the stock market -- it had pretty much been on a bull run since right after the crash in 2008 until COVID but post-COVID has been a rollercoaster -- so you have a lot of investors looking to diversify and buying up real estate. Which they might be stupid to do because housing prices are crazy -- look at this graph and realize that 2007 was a massive housing bubble: https://fred.stlouisfed.org/graph/?g=kYEb https://fred.stlouisfed.org/graph/?g=kYEb > Keep in mind the majority of the value is in the property too, not the amount made from rent. They still get that whether they rent it out or not. It's like saying well, I could get a 9% return from this investment, but if I refuse to rent it out then I'd still get a 5% return, so let me do that and set the rest of this money on fire for no personal benefit. > then withhold apartments in order to either force legislative changes or force rent to go up. But this is the part that makes no sense. To be profitable, you not renting out a subset of your units would have to make the rents on the other units (i.e. rents city-wide) go up by more than the entire amount of the rent on the units you withheld. How are they going to do that? The largest real estate investor in NYC owns far less than 1% of the real estate. For that to make sense would require some enormous disadvantage to actually renting out those units, like rent control or laws that make it hard to evict destructive or non-paying tenants. Because that would make renting the units a significant risk to your investment, since a buyer wouldn't pay full price for a building full of tenants paying below-market rent or trashing the building who can't be removed. But then the cause of the rent-increasing behavior is the inept laws that increase the cost of providing rental units by so much that it's not even profitable to do it when they're already built, and the solution is to remove the laws creating the perverse incentives. Self-serving politicians like to take offense when investors respond in predictable ways to toxic laws, but umbrage doesn't lower the rent.