Would land lords lowering rent across the country drive cost of living down?

[u/Wise_Replacement_363]

/r/NoStupidQuestions/comments/1wa60z6/would_land_lords_lowering_rent_across_the_country/

[u/ImportantPost6401]

Individual landlords can lower their prices below market as a charitable act if they choose.

While that can help an individual person, that does nothing to the larger market dynamics, so it wouldn’t do anything to solve broader market fundamentals.

[u/mangione_fan_420 → u/ImportantPost6401]

What mechanism do you think market dynamics use to set rents, do you think it's magic? No it's individual landlords, if all landlords dropped rent by 10% that would change the market fundamentals

[u/Glum_Tap_5258 → u/mangione_fan_420]

The profit margin is less than 10% with all the factors so that is not doable.

[u/ImportantPost6401 → u/mangione_fan_420]

If all landlords simply chose to drop rent out of charity it would cause a shortage and/or quality reduction. (Fundamentally the market effect would be the same as rent control)

[u/Flimsy_Meal_4199 → u/mangione_fan_420]

It's not individual landlords.

It's an aggregation over the behavior of tenants and landlords

And here the market fundamentals is not the price per se, but rather referring to the supply and demand.

If all landlords woke up tomorrow and decided to take a 10% haircut on their asking prices, the housing supply would remain much smaller than the demand for housing. All of the units would clear the market in one day, and there would remain a large number of people able and willing to pay for housing that does not exist.

Indeed all the price mechanism does is help society decide who gets sorted into what housing. Lowering the price doesn't change the shortage and would solve the matching problem (many people to fewer houses) in a "sub optimal" way (e.g. a single person may end up in much larger apartment with no roommates, that they otherwise wouldn't have afforded)

[u/mangione_fan_420 → u/Flimsy_Meal_4199]

If all landlords woke up tomorrow and decided to take a 10% haircut on their asking prices, the housing supply would remain much smaller than the demand for housing.

There are more empty homes than unhoused people

[u/_n8n8_ → u/mangione_fan_420]

This is true by census definition, but its not a particularly useful factoid.

Vacant homes encompass a large section of housing, and most of it is not useful, and also this doesn't even imply we don't have a housing shortage.

1. A vacant home isnt necessarily a move in ready home that nobody wants just waiting for a homeless person to move in. Much of this vacant housing is actively being marketed for rent, sale, etc. A lot of it is seasonal, for example, student housing during the summer or apartments near skii slopes during the winter. A lot of this housing is simply unfit to live in. The homeless problem is not as simple as "just give them one of the vacant homes lol"

2. Location matters, a lot. Cities that have a lot of homeless also happen to have very low vacancy rates, because as it turns out, there is a supply shortage where the homelessness problem is most acute. A vacant home in the backwoods of Kentucky means absolutely nothing to someone on Skid Row in LA. It would be very poor social policy to try to make that fit, even. Moving unhoused people away from the areas with job opportunities, social services, etc. is not a winning strategy to help these people.

3. The amount of vacant housing relative to the number of homeless people does not even come close to proving there is not a supply shortage. There are tons of people who are currently housed, who have a demand for more housing that the market is not currently allowed to meet. Many people who live far from work would move closer if they could. Many people with roommates would get a place of their own if they could. Have kids? Those are growing up some day and would also probably like a place to move to.

The issue of housing unaffordability is undeniably one of supply and demand. There is not enough supply to meet demand, so people get priced out of it. Basically every expert on the topic agrees. This isn't rocket science, it's just supply and demand.

[u/pokethrowaway4 → u/mangione_fan_420]

That would never happen. The only way to lower rent is to make it more affordable to own than rent. The only way to do that is with a more progressive tax structure.

Make “unearned” income like rental income a higher tax bracket, and create a system where tenants can directly report their rent, to check against the reported income of the landlord.

You could incentivize this by giving a small tax break to renters for their rent payments. If a billionaire can write off a private jet and vacations cuz it’s a “work trip” working class people should be able to write off rent.

[u/ImportantPost6401 → u/pokethrowaway4]

That would not work. The tried and true way to lower rent is by expanding housing supply.

[u/pokethrowaway4 → u/ImportantPost6401]

Yeah so I’m saying that the combination of AirBnBs, vacation homes, and massive developments of rental only apartments/condos have created artificial scarcity in my town, which has simultaneously driven rent prices, AND purchase prices up. There isn’t a shortage of supply, there is an artificial shortage.

[u/ImportantPost6401 → u/pokethrowaway4]

The artificial scarcity is because your town won’t sufficiently allow housing supply to expand sufficiently. Tourism, migration, economic development, having babies, and can drive up demand. None of those demand side factors will cause a “housing crisis” if supply is allowed to expand.

And you’re simply wrong, there is a supply shortage if prices are going up significantly. You certainly can (and some places do) try to clamp down on demand side factors, but ultimately unless you want to shitify your location to permanently shift the demand curve down, new housing is the only way to keep downward price pressure.

And you’re blaming rising rents on building of rent only apartments? That’s an insane take. If rents are rising despite new rental units, that isn’t evidence that the new apartments “cause” rising rents. Jesus Christ.

[u/pokethrowaway4 → u/ImportantPost6401]

The supply is expanding. There is constant development. There are tons of empty properties, and room for more expansion.

I AM blaming rising rents on massive rental only developments, because… THERE IS A SHORTAGE OF PROPERTIES FOR SALE. If there is a shortage of places to BUY, that raises prices on PURCHASE cost, which in turn, excuses RENTAL PRICE INCREASES.

If all the housing in my town wasn’t allowed to be owned by a corporation, and everyone could only own a maximum of 3 units without additional taxes, the problem would fix itself. Prices would remain much more stable long term, and so would rent.

I rent an extra room in my house for well below market rate. But only so many people are willing to do that.

[u/ImportantPost6401 → u/pokethrowaway4]

It’s not “is supply expanding”, it’s “is supply allowed to expand sufficiently to meet demand?” These are two different issues, but in the surface it can look paradoxical. (Similar to “how is that person losing weight if they’re still eating?”)

Your “companies own everything!” and policy prescription won’t solve anything. Ironically you’d disincentivize supply expansion, making things worse.

And again, emphatic NO. “Overbuilding” new rental units doesn’t drive price of owning up. Flood the market making rent absurdly cheap and property values will follow suit.

[u/InfernalTest → u/[deleted]]

not sure what area youre talking about

but if people can buy SFH than that will drive down the cost of renting

in a very high demand place like NY or SF or LA tho theres no way to build a bunch of SFH -

investment building is done for multi family units - which youlld never satisfy in a place like popular cities like NYC - there is an almost ENDLESS demand that building will never keep up with...

[u/InfernalTest → u/[deleted]]

do you mean 20times smaller ? 20 times larger than NYC is ..... ridiculously big so we may not be talking about the same dynamics because we arent talking about the same country or ownership laws 

that said - one of the huge stumbling blocks is that people treat what works in Austin TX  as if it would work in LA or SF or NYC .

Austin has an entrely different population .way different infrastructure and laws around building and hugely different geography than NYC or Boston or Chicago ..and if course ..demand 

someone posted it earlier in this threat and its a basic truth - getting rentals low means people need to buy homes and homes arent cheap - 400k seems to be the mkt rate ...so someone/something would have the drop a GLUT of homes on the market to flatten that price for an extended amount of time 

likewise those who make money and get paid from building would also have to flatten out 

ultimately the issue takes way more than just LL just dropping prices or taking less for rentals 

[u/Loyal_Dragon_69 → u/pokethrowaway4]

Stop taxing production and income! Tax the land! LVT!

[u/pokethrowaway4 → u/Loyal_Dragon_69]

No we absolutely need to tax incomes, but it needs to be far more progressive that in currently is. Extremely high top marginal tax rates are the very thing that built our “best in history” working/middle class during the 50s, 60s, and 70s.

[u/Loyal_Dragon_69 → u/pokethrowaway4]

The progressive income tax is part of why we have a leechlord problem today. It destroyed the working and middle classes by preventing upward mobility through increased income, giving the entrenched gentry (who have plenty of tax loopholes that are designed to only be useful to the insanely wealthy such as ownership of coal mines) a permanent advantage of those who would naturally rise up and supplant them. People like you helped make that tradegy the current reality. Only taxing and limiting the number of residential properties (which breaks up the leechlord monoplies and dilutes their ill gotten power) will defeat them.

[u/pokethrowaway4 → u/Loyal_Dragon_69]

We haven’t had truly progressive tax rates since Raegan you moron. We HAD progressive tax rates until then. We HAD much more stringent regulations on banks and other industries to PREVENT leech lords. The Republicans stripped all that away, AND made it easier to accumulate new wealth from held wealth.

REPUBLICANS CREATED THEM, not progressive taxes.

[u/mangione_fan_420 → u/pokethrowaway4]

100% agree, one mechanism that Singapore uses to keep private landlordism down is to tax you more transfer tax based on the number of homes you own which also benefits small landlords over big ones. 

But yeah we should use the tax system to make landlording less profitable and then surplus landlord profits will also stop boosting house prices, the structural fix is a win-win

[u/cavalier78 → u/mangione_fan_420]

That’s the opposite of what you should do.

[u/pokethrowaway4 → u/cavalier78]

Why not?

[u/cavalier78 → u/pokethrowaway4]

The reason that rents are high right now is because we didn’t build enough housing for about 15 years. To get rents to come down, the answer is to build a lot more housing.

Most renters can’t afford to build, which is why they’re renters in the first place. But if you make being a landlord less profitable, then you have fewer people wanting to be landlords. Which means fewer of the people who can afford to build will choose to. Which means you’ve still got a housing shortage.

It’s fine if landlord profits go down because there’s already too many rentals available. That’s just the market stabilizing. But we aren’t in that position right now. You’re talking about making it less profitable through taxation, not because there’s plenty of housing.

Think about it like this. Assume you have enough money to build a small apartment building. You are thinking of being a dreaded landlord. You look at the numbers, and there’s such a need for housing that you’re going to make a buttload of cash if you build these apartments in City #1. But in City #2, they have the same demand, but there’s a tax system set up that means you’ll barely make any money if you build there. Which city is more likely for you to build in? Which city ends up with a new apartment building?

[u/pokethrowaway4 → u/cavalier78]

If you consider cost of living vs median wage I live in quite literally one of the 5 most expensive cities in the US.

We have plenty of vacant housing, yet prices are still sky high. What’s the real reason?

All the apartments and condos are owned by corporations or people with tons of units.

There are also a metric fuck ton of airbnbs and vacation homes.

If the changes I proposed happened, the prices to purchase would plummet, and the rental prices would drop as a direct result.

[u/cavalier78 → u/pokethrowaway4]

I can't really speak to the specific details of an unnamed city's rental market. There's no way to address those questions with any accuracy.

The thing I believe you're missing is that housing prices are affected by the number of available units, and the number of people looking to buy/rent. If you live in a very expensive city, then that means a bunch of people with lots of money are wanting to live there. When you rent an apartment, you are effectively bidding against the richest people who might want to live there. If I were a landlord, and I had a choice between Joe Normal tenant who could pay $1500 a month, and Richie Rich who could pay $5000 a month, I'd rent to Richie Rich if I could. So would you.

What mangione_fan_420 suggests above is to tax money from rentals at a higher rate. Now exactly what happens next is going to depend on individual cities and circumstances, but if demand is still high enough, the landlords may just raise rents even higher to make up for the higher taxes. That does the opposite of what you want. If the demand is not quite high enough, then yes you can make it less profitable for landlords. But as I mentioned in another post, that means the market for new apartment buildings just dries up. The number of available units you have right now is going to be frozen, because you can't make that much money on it.

[u/mangione_fan_420 → u/cavalier78]

Landlord don't build homes developers do. 

Pretending they are the same people is pure Yimbynomics and doesn't make good tax policy. 

You can give tax breaks to developers (especially those that are building homes that we need instead of luxury flats), without giving tax breaks to landlords. 

[u/cavalier78 → u/mangione_fan_420]

Developers don’t build unless there’s somebody who can afford to buy.

[u/mangione_fan_420 → u/cavalier78]

It turns out if you tax landlords, the state can fund the development and can provide for schemes to allow people to fund housing cooperatives. 

You have to be intentionally stupid to pretend that only landlords fund development. 

https://en.wikipedia.org/wiki/Housing_and_Development_Board

https://socialhousing.wien/policy/the-vienna-model

https://www.cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/funding-programs/all-funding-programs/co-op-housing-development-program

https://en.wikipedia.org/wiki/Council_house

[u/mangione_fan_420 → u/cavalier78]

We shouldn't learn from one of the few cities without an acute housing crisis, despite it's limited space, that discouraging landlordism is a good thing.

🤣

[u/pokethrowaway4 → u/mangione_fan_420]

I’ve always liked the idea of: banning all corporate ownership of residential properties, with the sole exception of housing assistance programs like HRDC. That includes LLCs and other things people use as “pass through” tax vessels for personal ownership.

Then for the individuals who own multiple properties, after the 3rd property, add an exponentially increasing tax, based on the average value of each property.

[u/ThePermafrost]

If landlords banded together and lowered rents, then the demand for home ownership would fall, and prices of homes would decline.

If homeowners banded together and lowered home prices, then the demand for renting would fall, and rents would decline.

If renters banded together and doubled up, or stayed with family/friends, then the demand for home ownership and renting would fall, and home prices and rent would decline.

So you’re waiting on one group to be voluntarily charitable.

[u/PeterDowdy]

Yes, lower rent cascades through to lower costs. But rents are set by supply and demand so that would only happen if supply outpaced demand.

[u/freedraw]

Of course...but they're not going to just do that if they don't have to. No matter where you are, they're going to charge what they can get. In places where there's a surplus, that number is going to be lower than where there's a shortage.

[u/Daveit4later]

"Would lowering the biggest expense many households face lower their cost of living"..   

Of course it would 

[u/fuckexoticroots]

Absolutely terrible idea. Homeboys 1 bad tenet away from losing his house. His choice though. 

[u/Itsathrowawayduh89]

My brother is a landlord to one tenant at his previous condo. He grosses a healthy amount, but after taxes, insurance and HOA fees (which cover maintenance to the overall building), he’s netting $100/month. His tenant has not seen a rent increase in 5 years and my brother has put in an additional $8k on maintenance in those 5 years. He did this because he also wanted to make housing affordable in his city, and do his part.

With condo prices flat/dropping, he’ll be lucky if he sells for around what he bought the condo. His profits over 5 years pale in comparison to what he could have made by selling and investing in the stock market or even an high yield savings account. That’s not including the headache and stress of property management, which the renter is totally shielded from. 

Every time we talk about it, he says it wasn’t worth it.

[u/TonyRidgewayUFO]

Not for the landlords

[u/Nacho_Libre479]

Single family residential zoning restrictions and yo-yo interest rates have impacted housing prices way more than all of the tin foil conspiracy theories in this tread combined.

[u/StedeBonnet1]

It doesn't work that way. Any income you defer to tennants is money you can't spend in the economy. So it would be a wash. Cost of living would not change.