5 ms·

How do you control what other landlords do? Why won't any undercut you by $200 and get your tenants?

kbelder 8mo ago
In a normal market, they would. But housing is highly regulated with artificial shortages, so that pricing is very distorted.
- estearum 8mo ago
  Regulation is not what suppresses production, but the actual profit margins. It's extremely hard to make money building housing because the cost of land and labor are so high. These costs are high because we now live in an advanced economy where land can do much more valuable things than "be housing", and laborers can do much more productive things than "build housing."
  - cogman10 8mo ago
    Yup. Development companies contract when the housing market contracts. They aren't building houses for the fun of it, they are building them because they believe the 100 houses they build in a hot market will ultimately pay back the land purchase rights. They will never build so many houses as to decrease the cost of a home. I actually got my home from a developer right after the housing bubble. They confided in me that they were giving away these homes pretty much at cost and that they had to fire a huge portion of their staff because the market was just crap at the time. Really, the only way to actually achieve lower housing prices is through the state ownership and build out. The state could also spend a premium on building homes that it sells at a loss or rents at lower rates. But that will be pretty unpopular with the general public.
    - estearum 8mo ago
      Yep — or aggressive subsidization of the inputs of housing production, or some other cost management of an input (such as a high LVT that discourages speculation and withholding of valuable land from use)
  - joe_the_user 8mo ago
    I disagree. Zoning, building permits, inflated utility hook-up charges, etc is what restricts me from buying a one-acre parcel and putting in 30 snug cabins.
    - estearum 8mo ago
      Sure, but if zoning etc didn't prevent you from doing that, the price of the land would just be far higher. High enough again to make it hardly profitable (if you're lucky) to do what you're allowed to do on that land. There are entire businesses that just buy lots, change their zoning, then sell them. It's all priced in.
      - joe_the_user 8mo ago
        You are confusing marginal price (or profit-equalization) theory with numerical limits on the level of housing unit production. If people were allowed to build as they wished, they'd build a lot of housing, much of the housing crisis would subside and then the profitability of building house would equalize with the profitability of other uses. But stable point would give a lot more people housing. It's like... Taxation or similar things can reduce X use of resource Y. Remove taxation and eventually X use isn't any more profitable than other uses but a tautology of markets/economics, not an argument the taxation isn't limit the production involved in X use.
        estearum 8mo ago
        > If people were allowed to build as they wished, they'd build a lot of housing You seem to be under the impression that building housing isn't already a nearly-unprofitable venture. There's no room to for "them to build a lot of housing" – builders are already pulling back on more construction because we have too much. Not "too much" as in everyone is amply housed, but "too much" to be able to do it profitably despite the fact that we still have a shortage. Cost of inputs is the problem, full stop.
estimator7292 8mo ago
Because tenants are not scarce. If you cut your prices, you lose $200/mo forever. If you simply follow the maximum market price and wait, someone will fill your room eventually and you have them locked into a higher rate forever. Competition doesn't work for necessities. Someone will rent your room at any price because it's necessary for survival. One of the major crises of our time is the fact that there are more people who need housing than there are rooms to rent to them. Why don't landlords undercut one another? They literally don't have to. The only outcome is less profit. You'll find a tenant eventually, at any price. Getting tenants in rooms a few months earlier at the cost of lower rent means you make less money, and are less competitive as a business.
- PaulDavisThe1st 8mo ago
  Everything you've written here presupposes a housing shortage. Fixing the housing shortage is a central tenet of progressive policies (regardless of whether or not they may ever actually accomplish this).
  - estearum 8mo ago
    Housing will always fall short of demand. Nobody, progressive or not, is actually willing to sustain an oversupply of housing.
    - PaulDavisThe1st 8mo ago
      This just isn't true across the time and space of human cultures and civilizations. There are plenty of places, even in the USA within the last 50 years, that have had a housing surplus. The current problems have tended to arise when desirable work is geographically limited which then leads to a much larger housing shortage in those areas despite the presence of sufficient housing across a broader territory.
      - estearum 8mo ago
        > There are plenty of places, even in the USA within the last 50 years, that have had a housing surplus. Yes, bad places at bad times. Can you name good ones?
davyAdewoyin 8mo ago
It doesn't matter, because land is scarce resource
- gruez 8mo ago
  Land might be scarce in the technical sense, but not in the practical sense. Housing is only expensive because people want to live in superstar cities, which in turn is because that's where all the jobs are. If UBI eliminates the imperative to live in superstar cities, that makes scarcity a non-issue.
  - estearum 8mo ago
    Just need UBI, unlike all other forms of marginal increases in income, to spur people to move away from cities rather than towards them.
  - randerson 8mo ago
    I can work from anywhere, but I like to live in a superstar city because I find it boring living in the suburbs. I want to be near my friends, near the live events, near the buzzing restaurants and art galleries and clothing stores where I can walk around and touch things. There will always be a concentration of people in cities for these reasons.
    - gruez 8mo ago
      >There will always be a concentration of people in cities for these reasons. That's fine. Not everyone has to move. As long as the marginal city dweller would rather have cheaper housing than "buzzing restaurants and art galleries", there will be downward pressure on housing prices.
      - phil21 8mo ago
        All this would do is raise prices in the marginally cheaper places to live, in order of desirability. Sure it might reduce some prices in the core "superstar" cities, but not by a whole lot - since by definition those receiving a net-benefit from UBI are going to make less than average. Especially for a HCoL city. Sure a few folks will drop out of the highly competitive professional job market to go homestead somewhere. They will be a rounding error, since they have already expressed revealed preference that "bare minimum lifestyle" is not enough. Someone capable of holding down a $350k/yr white collar job is already qualified to go make $70k/yr remotely in some random city anywhere in the US they want to live but they choose not to. As we've seen with COVID remote work, the desirable "cheap" places to live will very rapidly have price appreciation because they are starting from such a low floor to begin with. A $300/mo increase in some 30,000 population city in the midwest is a lot more material to the market than a $300/mo decrease for a $3k/mo apartment in a top 10 city core. It also ignores the folks who want to live in the superstar cities but cannot currently afford to. If UBI is high enough to really matter, there will simply be a reshuffling. I'd expect upper-end to perhaps go down (largely due to increased taxes and thus less disposable income for the high earning group), but the lower-end to be raised eating up basically all the UBI surplus. Also this totally ignores the third and fourth (and more!) order effects. If people are less incentivized to work, and work carries a much higher tax load (as it must for UBI to be worth even considering) - pay for high-end jobs must increase since working is going to have less net-benefit for an individual who now has a choice to totally drop out of the workforce and have others pay for everything. Who knows? Maybe prices actually increase in those superstar cities as they become even more winner-take-all environments?

In a normal market, they would. But housing is highly regulated with artificial shortages, so that pricing is very distorted.

estearum 8mo ago
Regulation is not what suppresses production, but the actual profit margins. It's extremely hard to make money building housing because the cost of land and labor are so high. These costs are high because we now live in an advanced economy where land can do much more valuable things than "be housing", and laborers can do much more productive things than "build housing."
- cogman10 8mo ago
  Yup. Development companies contract when the housing market contracts. They aren't building houses for the fun of it, they are building them because they believe the 100 houses they build in a hot market will ultimately pay back the land purchase rights. They will never build so many houses as to decrease the cost of a home. I actually got my home from a developer right after the housing bubble. They confided in me that they were giving away these homes pretty much at cost and that they had to fire a huge portion of their staff because the market was just crap at the time. Really, the only way to actually achieve lower housing prices is through the state ownership and build out. The state could also spend a premium on building homes that it sells at a loss or rents at lower rates. But that will be pretty unpopular with the general public.
  - estearum 8mo ago
    Yep — or aggressive subsidization of the inputs of housing production, or some other cost management of an input (such as a high LVT that discourages speculation and withholding of valuable land from use)
- joe_the_user 8mo ago
  I disagree. Zoning, building permits, inflated utility hook-up charges, etc is what restricts me from buying a one-acre parcel and putting in 30 snug cabins.
  - estearum 8mo ago
    Sure, but if zoning etc didn't prevent you from doing that, the price of the land would just be far higher. High enough again to make it hardly profitable (if you're lucky) to do what you're allowed to do on that land. There are entire businesses that just buy lots, change their zoning, then sell them. It's all priced in.
    - joe_the_user 8mo ago
      You are confusing marginal price (or profit-equalization) theory with numerical limits on the level of housing unit production. If people were allowed to build as they wished, they'd build a lot of housing, much of the housing crisis would subside and then the profitability of building house would equalize with the profitability of other uses. But stable point would give a lot more people housing. It's like... Taxation or similar things can reduce X use of resource Y. Remove taxation and eventually X use isn't any more profitable than other uses but a tautology of markets/economics, not an argument the taxation isn't limit the production involved in X use.
      - estearum 8mo ago
        > If people were allowed to build as they wished, they'd build a lot of housing You seem to be under the impression that building housing isn't already a nearly-unprofitable venture. There's no room to for "them to build a lot of housing" – builders are already pulling back on more construction because we have too much. Not "too much" as in everyone is amply housed, but "too much" to be able to do it profitably despite the fact that we still have a shortage. Cost of inputs is the problem, full stop.

estimator7292 8mo ago

Because tenants are not scarce. If you cut your prices, you lose $200/mo forever. If you simply follow the maximum market price and wait, someone will fill your room eventually and you have them locked into a higher rate forever. Competition doesn't work for necessities. Someone will rent your room at any price because it's necessary for survival. One of the major crises of our time is the fact that there are more people who need housing than there are rooms to rent to them. Why don't landlords undercut one another? They literally don't have to. The only outcome is less profit. You'll find a tenant eventually, at any price. Getting tenants in rooms a few months earlier at the cost of lower rent means you make less money, and are less competitive as a business.

PaulDavisThe1st 8mo ago
Everything you've written here presupposes a housing shortage. Fixing the housing shortage is a central tenet of progressive policies (regardless of whether or not they may ever actually accomplish this).
- estearum 8mo ago
  Housing will always fall short of demand. Nobody, progressive or not, is actually willing to sustain an oversupply of housing.
  - PaulDavisThe1st 8mo ago
    This just isn't true across the time and space of human cultures and civilizations. There are plenty of places, even in the USA within the last 50 years, that have had a housing surplus. The current problems have tended to arise when desirable work is geographically limited which then leads to a much larger housing shortage in those areas despite the presence of sufficient housing across a broader territory.
    - estearum 8mo ago
      > There are plenty of places, even in the USA within the last 50 years, that have had a housing surplus. Yes, bad places at bad times. Can you name good ones?

davyAdewoyin 8mo ago

It doesn't matter, because land is scarce resource

gruez 8mo ago
Land might be scarce in the technical sense, but not in the practical sense. Housing is only expensive because people want to live in superstar cities, which in turn is because that's where all the jobs are. If UBI eliminates the imperative to live in superstar cities, that makes scarcity a non-issue.
- estearum 8mo ago
  Just need UBI, unlike all other forms of marginal increases in income, to spur people to move away from cities rather than towards them.
- randerson 8mo ago
  I can work from anywhere, but I like to live in a superstar city because I find it boring living in the suburbs. I want to be near my friends, near the live events, near the buzzing restaurants and art galleries and clothing stores where I can walk around and touch things. There will always be a concentration of people in cities for these reasons.
  - gruez 8mo ago
    >There will always be a concentration of people in cities for these reasons. That's fine. Not everyone has to move. As long as the marginal city dweller would rather have cheaper housing than "buzzing restaurants and art galleries", there will be downward pressure on housing prices.
    - phil21 8mo ago
      All this would do is raise prices in the marginally cheaper places to live, in order of desirability. Sure it might reduce some prices in the core "superstar" cities, but not by a whole lot - since by definition those receiving a net-benefit from UBI are going to make less than average. Especially for a HCoL city. Sure a few folks will drop out of the highly competitive professional job market to go homestead somewhere. They will be a rounding error, since they have already expressed revealed preference that "bare minimum lifestyle" is not enough. Someone capable of holding down a $350k/yr white collar job is already qualified to go make $70k/yr remotely in some random city anywhere in the US they want to live but they choose not to. As we've seen with COVID remote work, the desirable "cheap" places to live will very rapidly have price appreciation because they are starting from such a low floor to begin with. A $300/mo increase in some 30,000 population city in the midwest is a lot more material to the market than a $300/mo decrease for a $3k/mo apartment in a top 10 city core. It also ignores the folks who want to live in the superstar cities but cannot currently afford to. If UBI is high enough to really matter, there will simply be a reshuffling. I'd expect upper-end to perhaps go down (largely due to increased taxes and thus less disposable income for the high earning group), but the lower-end to be raised eating up basically all the UBI surplus. Also this totally ignores the third and fourth (and more!) order effects. If people are less incentivized to work, and work carries a much higher tax load (as it must for UBI to be worth even considering) - pay for high-end jobs must increase since working is going to have less net-benefit for an individual who now has a choice to totally drop out of the workforce and have others pay for everything. Who knows? Maybe prices actually increase in those superstar cities as they become even more winner-take-all environments?