4 ms·

Right, like I wrote, it's probably jacking rents up some. But empty units are empty units and too many of them means you need to lower prices or you are losing

by davidw 3y ago

Right, like I wrote, it's probably jacking rents up some. But empty units are empty units and too many of them means you need to lower prices or you are losing out on money because you don't make anything from empty homes. And whatever effects this has (I'm curious to see what comes out off the lawsuit), you're just not going to be able to say "wow, look at how much landlords in San Francisco are making.... gosh, I want to double my rents!" if you're in a place without a tightly constrained housing supply.

objektif 3y ago
I think you are really not understanding the issue. Unless you have crazy supply of apartments this software can have dramatic effect on prices. You are vastly underestimating the impact of this price fixing. Example from my own building: we have an apartment that has been sitting idle since last 6+ months. Price of it has been going up!!!
- jslaby 3y ago
  I think this type of service may be used elsewhere as well. There was a video of Ford dealer with massive stock of trucks, but still charging the dealer markup. I really hope they(congress) are looking into this in all aspects as it really does skirt the spirit of anti-competitive laws.
- davidw 3y ago
  > I think you are really not understanding the issue. Yeah, I'm the one that goes to city council meetings and hearings and reads book after book, and talks with the state economists here in Oregon and I don't understand it? It doesn't take "a crazy supply" of apartments to create competition. It's why apartments cost less in Las Vegas than Los Angeles - there are more to go around relative to the demand.
katbyte 3y ago
the problem is they are making more money by having a few units empty while renting the rest at higher rents. the landlord is making more money, people are being squeezed for all they got, and less people have homes. this is a huge drag on the economy and adversely affects every single person in a region except the rent seeking landlords. Even if you own it is a negative as your CoL is going to go up as stores need to charge more to pay employees more so they can afford homes.
- chucksta 3y ago
  So someone has to step up and be squeezed for all they've got so people have homes? Who is going to volunteer for that?
  - text0404 3y ago
    landlords should prioritize filling units. if they insist on squeezing people for rent while leaving inventory unfilled, they should be squeezed by regulations.
    - chucksta 3y ago
      Theoretically that works for current landlords - what happens in a year or two when there are now no new rentals on the market because there are no new landlords because who would take that deal?
    - ethbr1 3y ago
      Isn't this what Vancouver did, by levying additional taxes on vacant units? (In that case, for absent buyers parking money, but same effect)
- zbrozek 3y ago
  It's surely a drag, but I think we don't know how big of a drag it is. My expectation is that it's small. What are the overall vacancy rates? Single digit percent? If yes, then it's not a big impact.
  - unclebucknasty 3y ago
    >What are the overall vacancy rates? I don't believe that's the only measure of economic drag. For instance if, having no choice, people are spending a higher percentage of their income on rent, then it leaves less to spend on other economically stimulative activity, like frequenting a local coffee shop, buying clothes, etc.
    - 3y ago
Jochim 3y ago
> But empty units are empty units and too many of them means you need to lower prices or you are losing out on money because you don't make anything from empty homes. If the mortgage is covered by extortionate rents on your other properties then historically the empty unit is appreciating in value. Renters are in a position where they have no shelter if they don't acquiesce. Landlords have a multitude of options that make it easier for them to horde empty homes.
- pwg 3y ago
  > If the mortgage is covered by extortionate rents on your other properties then historically the empty unit is appreciating in value. That appreciation is happening whether the unit is rented or empty. The scenario the landlord sees for a given unit is (assuming zero mortgage costs just to make the math simpler [1]): Empty unit: $0 in rent + $Y in value appreciation Rented unit: $X in rent (X>0) + $Y in value appreciation (where Y is fixed between the two scenarios because both cover the same rental unit). For the landlord, $X + $Y is greater than $0 + $Y. The landlord's greatest total income is when all units are rented, as then all units are returning $X+$Y. [1] including mortgage and tax costs adds two subtractions to the formulas above, which will result in a real net loss for an empty unit, as the mortgage and taxes must be paid, irrespective of the rented status of the unit.
  - Jochim 3y ago
    You're assuming a single property and a rational Landlord. Imagine the Landlord owns 10 properties and sets the rent to $2k/mo on all of them with 1 property remaining empty. Maybe that last property could be rented out at $1.7k/mo but from the landlords perspective that puts downward pressure on the rents of his other properties. If one of the landlord's existing tenants moves into the cheaper property it's even worse. He loses $300/mo and now has to consider reducing the rent on an additional property. Should he find a new tenant at $1700/mo, he still feels like he's losing because he believes the rent should be higher. From the landlord's perspective, it's better to squeeze if he has sufficient cash flow. Especially given the belief that lowering the rent will negatively impact the value of the property. While you're correct that mortgage and tax are fixed costs that need to be met, you haven't considered that landlords have multiple options to offset those costs. When interest is low they'll use equity release and interest only mortgages.
EricMausler 3y ago
Jumping in to say I think it's important to try to control the incentives around how many empty units are "too many" empty units. Having a tenant comes with cost and risk. Why charge 1200 for 100 apartments when you can charge 3500 for 34 apartments? Maybe even 3000 is still just as profitable Every extra 100 you charge an existing tenant is pure profit, while reducing price to take on more tenants means more maintenance costs, managing staff costs, etc. In an economic vacuum this may work itself out, but IF there is a widening wage gap where the you have 30 tenants who can afford up to 4500 a month and you have to drop the price, and then the next 50 potential tenants can only afford up to 1800.. there is financial incentive to squeeze more and more out of the 30 year after year rather than try to accommodate all 80. Hopefully I'm painting the picture properly

by davidw 3y ago

objektif 3y ago

I think you are really not understanding the issue. Unless you have crazy supply of apartments this software can have dramatic effect on prices. You are vastly underestimating the impact of this price fixing. Example from my own building: we have an apartment that has been sitting idle since last 6+ months. Price of it has been going up!!!

jslaby 3y ago
I think this type of service may be used elsewhere as well. There was a video of Ford dealer with massive stock of trucks, but still charging the dealer markup. I really hope they(congress) are looking into this in all aspects as it really does skirt the spirit of anti-competitive laws.
davidw 3y ago
> I think you are really not understanding the issue. Yeah, I'm the one that goes to city council meetings and hearings and reads book after book, and talks with the state economists here in Oregon and I don't understand it? It doesn't take "a crazy supply" of apartments to create competition. It's why apartments cost less in Las Vegas than Los Angeles - there are more to go around relative to the demand.

katbyte 3y ago

the problem is they are making more money by having a few units empty while renting the rest at higher rents. the landlord is making more money, people are being squeezed for all they got, and less people have homes. this is a huge drag on the economy and adversely affects every single person in a region except the rent seeking landlords. Even if you own it is a negative as your CoL is going to go up as stores need to charge more to pay employees more so they can afford homes.

chucksta 3y ago
So someone has to step up and be squeezed for all they've got so people have homes? Who is going to volunteer for that?
- text0404 3y ago
  landlords should prioritize filling units. if they insist on squeezing people for rent while leaving inventory unfilled, they should be squeezed by regulations.
  - chucksta 3y ago
    Theoretically that works for current landlords - what happens in a year or two when there are now no new rentals on the market because there are no new landlords because who would take that deal?
  - ethbr1 3y ago
    Isn't this what Vancouver did, by levying additional taxes on vacant units? (In that case, for absent buyers parking money, but same effect)
zbrozek 3y ago
It's surely a drag, but I think we don't know how big of a drag it is. My expectation is that it's small. What are the overall vacancy rates? Single digit percent? If yes, then it's not a big impact.
- unclebucknasty 3y ago
  >What are the overall vacancy rates? I don't believe that's the only measure of economic drag. For instance if, having no choice, people are spending a higher percentage of their income on rent, then it leaves less to spend on other economically stimulative activity, like frequenting a local coffee shop, buying clothes, etc.
  - 3y ago

Jochim 3y ago

> But empty units are empty units and too many of them means you need to lower prices or you are losing out on money because you don't make anything from empty homes. If the mortgage is covered by extortionate rents on your other properties then historically the empty unit is appreciating in value. Renters are in a position where they have no shelter if they don't acquiesce. Landlords have a multitude of options that make it easier for them to horde empty homes.

pwg 3y ago
> If the mortgage is covered by extortionate rents on your other properties then historically the empty unit is appreciating in value. That appreciation is happening whether the unit is rented or empty. The scenario the landlord sees for a given unit is (assuming zero mortgage costs just to make the math simpler [1]): Empty unit: $0 in rent + $Y in value appreciation Rented unit: $X in rent (X>0) + $Y in value appreciation (where Y is fixed between the two scenarios because both cover the same rental unit). For the landlord, $X + $Y is greater than $0 + $Y. The landlord's greatest total income is when all units are rented, as then all units are returning $X+$Y. [1] including mortgage and tax costs adds two subtractions to the formulas above, which will result in a real net loss for an empty unit, as the mortgage and taxes must be paid, irrespective of the rented status of the unit.
- Jochim 3y ago
  You're assuming a single property and a rational Landlord. Imagine the Landlord owns 10 properties and sets the rent to $2k/mo on all of them with 1 property remaining empty. Maybe that last property could be rented out at $1.7k/mo but from the landlords perspective that puts downward pressure on the rents of his other properties. If one of the landlord's existing tenants moves into the cheaper property it's even worse. He loses $300/mo and now has to consider reducing the rent on an additional property. Should he find a new tenant at $1700/mo, he still feels like he's losing because he believes the rent should be higher. From the landlord's perspective, it's better to squeeze if he has sufficient cash flow. Especially given the belief that lowering the rent will negatively impact the value of the property. While you're correct that mortgage and tax are fixed costs that need to be met, you haven't considered that landlords have multiple options to offset those costs. When interest is low they'll use equity release and interest only mortgages.

EricMausler 3y ago

Jumping in to say I think it's important to try to control the incentives around how many empty units are "too many" empty units. Having a tenant comes with cost and risk. Why charge 1200 for 100 apartments when you can charge 3500 for 34 apartments? Maybe even 3000 is still just as profitable Every extra 100 you charge an existing tenant is pure profit, while reducing price to take on more tenants means more maintenance costs, managing staff costs, etc. In an economic vacuum this may work itself out, but IF there is a widening wage gap where the you have 30 tenants who can afford up to 4500 a month and you have to drop the price, and then the next 50 potential tenants can only afford up to 1800.. there is financial incentive to squeeze more and more out of the 30 year after year rather than try to accommodate all 80. Hopefully I'm painting the picture properly