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High rents are being caused by investors, which is why plenty of stock is sitting vacant. When the developer or PE purchaser financed the building they did so b

High rents are being caused by investors, which is why plenty of stock is sitting vacant. When the developer or PE purchaser financed the building they did so based on an estimate of what the building can generate in revenue. If average rent drops to 70% of what the estimate had, then the loan goes completely underwater. However, if the landlord simply refuses to rent those units at the market rate, they can pretend that the forecast value is still legit since they don't have a market signal indicating otherwise. When the loan comes due, they can maintain this fiction and roll over to another loan. Thus rent stays high despite market forces - the landlord can't afford to rent it at the actual market price or they won't be able to roll the loan over when it pops and they are forced to bankruptcy. We have to unwind the low-interest financial ponzi schemes the Fed has propped up since 2007, otherwise there is a huge incentive not to fix the problem. Maintaining high interest for another 4 years will probably be enough to force the issue, since most commercial RE loans are pretty short.

hackerlight 2y ago
> High rents are being caused by investors, which is why plenty of stock is sitting vacant. Vacancies are a contributing factor, but why think it's the primary one, compared to a lack of housing? Rents are going up everywhere in the West, even in places where vacancy rates are decreasing such as Ireland. How can vacancy rates decrease while rents skyrocket?
- arrosenberg 2y ago
  How should I know, provide some data to support that claim. Could be more people are cohabitating to meet the higher rents. Roommates are still better than homelessness, after all. There is a ton of evidence for financial shenanigans and only modest evidence of actual shortage. As with most things these days, its a problem is distribution and ownership model, not supply.
  - hackerlight 2y ago
    Net migration in Ireland is 2x the number of new dwellings. Similar thing going on in Canada, Australia and UK. Even if I believed you that there wasn't a shortage 3 years ago, there has to be a shortage now by the most elementary logic (pigeon hole principle). This combines with the trend towards increased urbanization, creating a relative shortage near major cities where the jobs are located, which, no coincidence, is also where there's the rental crisis. But you then point to vacancies as the explanation. Yet vacancy rate changes are inversely correlated to rent changes in some places. This proves that vacancies do not explain the increase in rents we've observed. What other reason can you offer to justify the connection between investors and rent, other than the vague "financial shenanigans"?
    - arrosenberg 2y ago
      > Even if I believed you that there wasn't a shortage 3 years ago, there has to be a shortage now by the most elementary logic Or you could provide data. I don't live in Ireland, did they have a surplus before? > So you have not offered any explanation. I explained exactly how the scheme works, as well as providing the possible explanation of higher cohabitation rates. That's certainly what is happening in Southern California where I am actually familiar with the market. Based on a cursory Google search, it looks like Ireland is having some of the same... https://dublininquirer.com/2022/11/02/increase-in-landlords-using-vacancy-or-lack-of-tenancy-loophole-to-charge-higher-rents/ https://dublininquirer.com/2022/11/02/increase-in-landlords-... > But it had “further potential to secure full market rent levels” subject to tapping into an exemption from the rules around rent increases, with one of the options being “through vacancies”, the advert said. If a property has been vacant for two years – or a year for a protected structure – then a landlord within a rent pressure zone can legally raise the rent by more than the rent-increase cap. I'm not going to spend any more time on this. The evidence is pretty clear that landlords are playing games to drive up the rental market. There is no question that shifting demand patterns and decades of failure to deliver new housing are part of the equation as well, but those issues are solvable. The intractible problem of a landlord class are much more threatening and difficult to solve.
      - hackerlight 2y ago

hackerlight 2y ago

> High rents are being caused by investors, which is why plenty of stock is sitting vacant. Vacancies are a contributing factor, but why think it's the primary one, compared to a lack of housing? Rents are going up everywhere in the West, even in places where vacancy rates are decreasing such as Ireland. How can vacancy rates decrease while rents skyrocket?

arrosenberg 2y ago
How should I know, provide some data to support that claim. Could be more people are cohabitating to meet the higher rents. Roommates are still better than homelessness, after all. There is a ton of evidence for financial shenanigans and only modest evidence of actual shortage. As with most things these days, its a problem is distribution and ownership model, not supply.
- hackerlight 2y ago
  Net migration in Ireland is 2x the number of new dwellings. Similar thing going on in Canada, Australia and UK. Even if I believed you that there wasn't a shortage 3 years ago, there has to be a shortage now by the most elementary logic (pigeon hole principle). This combines with the trend towards increased urbanization, creating a relative shortage near major cities where the jobs are located, which, no coincidence, is also where there's the rental crisis. But you then point to vacancies as the explanation. Yet vacancy rate changes are inversely correlated to rent changes in some places. This proves that vacancies do not explain the increase in rents we've observed. What other reason can you offer to justify the connection between investors and rent, other than the vague "financial shenanigans"?
  - arrosenberg 2y ago
    > Even if I believed you that there wasn't a shortage 3 years ago, there has to be a shortage now by the most elementary logic Or you could provide data. I don't live in Ireland, did they have a surplus before? > So you have not offered any explanation. I explained exactly how the scheme works, as well as providing the possible explanation of higher cohabitation rates. That's certainly what is happening in Southern California where I am actually familiar with the market. Based on a cursory Google search, it looks like Ireland is having some of the same... https://dublininquirer.com/2022/11/02/increase-in-landlords-using-vacancy-or-lack-of-tenancy-loophole-to-charge-higher-rents/ https://dublininquirer.com/2022/11/02/increase-in-landlords-... > But it had “further potential to secure full market rent levels” subject to tapping into an exemption from the rules around rent increases, with one of the options being “through vacancies”, the advert said. If a property has been vacant for two years – or a year for a protected structure – then a landlord within a rent pressure zone can legally raise the rent by more than the rent-increase cap. I'm not going to spend any more time on this. The evidence is pretty clear that landlords are playing games to drive up the rental market. There is no question that shifting demand patterns and decades of failure to deliver new housing are part of the equation as well, but those issues are solvable. The intractible problem of a landlord class are much more threatening and difficult to solve.
    - hackerlight 2y ago