> It's supply and demand after all. Yeah but you are forgetting about the elasticity of the housing market. Simplistic supply and demand doesn't capture that,

> It's supply and demand after all. Yeah but you are forgetting about the elasticity of the housing market. Simplistic supply and demand doesn't capture that, if 1/5 is putting houses out for $1,000 and it will take years to build new supply then the $1,000 becomes a new target, the other 4/5 won't be sitting on their hands and renting out at $950 if they think they could get $1,000 (or more) if they wait. Some more desperate ones not wanting to lose money right now might but slowly the prices will increase, and there are tons of big landlords that don't care about losing a few months rent if it means they might earn more in the end of a >48 months period, so the $1000 unit can stay out in the market for 2-3 months longer than the $950 and still make up the difference after >60 months. The cities where this happen are usually more attractive so the difference is never just $50, it will be $100, $200, the larger the difference between current price vs asking price the less time it takes for this to pay off (e.g.: a unit is on the market for $1,500 while another is out for $1,200, the one at $1,500 can stay a full 8 months unoccupied and still make more money than renting it out for $1,200 over the same 48 months [40 months * 1500 - 48 * 1200]). Due to the inelasticity some of those waiting while asking for higher rent will drive the supply down and push others to increase their prices, until it reaches a new price point where the ones waiting consider worth to rent out. The 4/5 getting rented first is never a given, they will adapt to what the market is offering, if they see houses set at $1,000 being rented out they will increase their prices because the market is accepting that price, why would they rent for lower and lose on money? If supply tries to catch up with demand by building more units why would they rent it for lower than what the market is currently paying? Why would they build enough new units that would push the prices down if they can sit for a little longer and drip feed units in the market at current prices? It's inelastic, you can't ship some 1000 new housing units onto a place like mass produced goods. Supply and demand can be helpful to think about it but it's not simple supply and demand. > 1/5 is hardly a problem. The 4/5 will get rented first. The 1/5 might lower the price eventually or risk not getting rented at all. This would only happen if there's enough housing units to accommodate a growing population, which in attractive cities is almost never the case. Building more can help but again, developers also don't want to push the prices of new units down so they won't sell as many units as they can and lower prices. It's what happens in London, for example.