[breischl]

Your thesis seems to be that landlords have massive pricing power that allows them to exploit people by raising prices. But in most (not all) places it seems like that shouldn't be the case...

- There are many landlords in an area, ranging from large to mom-and-pop's with one unit (ie, lots of competition) - There's virtually no barrier to entry - Information is freely available via Craigslist, Zillow, Padmapper, etc - Switching costs are reasonably low (yeah, it's a pain to move, but it can usually be done for about a month's rent, or cheaper if you do more work yourself) - There are substitutes readily available, such as renting in a nearby area, larger/smaller/better/worse units, buying a house/condo, moving in with friends/relatives, etc

About all landlords have going for them is that it's a moderately illiquid market (due to year leases), and units are not completely fungible. So this all looks to me like it should be a reasonably efficient market, with landlords having little ability to push prices away from the supply/demand balance. And indeed that what's I remember from renting, and what I've seen from being on the landlord side.

How exactly is it that you think landlords can ignore all of the above and charge unfair rents?

(Note, all of the above only applies for markets that are large enough. If you live in a market with only 3 landlords, then welcome to the oligopoly and prepare to get screwed.)

[pixl97]

>There's virtually no barrier to entry

Wouldn't having the upfront capital to buy another house be the first barrier to entry? Buying a second house these days is much more difficult than say 10 years ago.

>How exactly is it that you think landlords can ignore all of the above and charge unfair rents?

Because if you don't have a down payment you can't get a loan to buy a house. So you rent, but you are also competing for a rent house from the other 1.2 million Americans that lost there in 2008 and are not likely to be able to buy a one since then. This pushes the balance of ownership to the rentor, they can now build up large down payments for second, third, or more houses that the people with higher rents can no longer save to reach. Renting farther away or worse units isn't necessarily a reduction in costs, for example driving farther is, in fact, not free in time or gas.

>Information is freely available via

To both parties. Which means, and has been happening that one landlord decided to go up in price and the others followed because that person was successful in doing so. Most renters will stay where they are even if prices go up because moving has large physical, monetary, and opportunity costs. Even if 50% of the rent is what would be considered cheap it will remain at 100% capacity and rarely show up on the market.

[breischl]

Buying a property does take some capital, but large amounts of financing are much more easily available for property than for nearly anything else. There's also lots of tricks like getting a near-zero-down FHA loan, live there for a couple years, then move and turn it into a rental. Anyway, all that is looking at the individual person. If landlords were actually getting outsized returns, you would see outfits with tons of money going into it. There has been some of that, but not a ton, and that has the effect of increasing supply and reducing returns.

>>but you are also competing for a rent house from the other 1.2 million Americans that lost there in 2008

You seem to be assuming that those houses they lost were bulldozed or something. The amount of vacant housing increased by the exact same amount. Those houses were available for other people to buy (perhaps instead of renting) or to increase the stock of rental housing.

>>one landlord decided to go up in price and the others followed because that person was successful in doing so.

If there's sufficient demand for everyone to raise prices, then it was underpriced before, or demand has increased, or supply has decreased. In any case, that's just how markets work - it's not the Evil Cabal of Price Fixing Landlords.

>>Most renters will stay where they are even if prices go up because moving has large physical, monetary, and opportunity costs.

There's some inertia there, certainly. But it's not at all difficult to shop around and see if your new rent is out of line, so it's hard for landlords to get too far beyond the market.

Also, contrary to what tenants seem to think, smart landlords don't casually kick tenants out. Turnovers are expensive (vacancy, repairs, cleaning), time consuming, and risky (the new tenant could be worse than the old one). Tenants that pay on time, don't wreck the house, and don't piss off the neighbors are like gold. Smart landlords only raise rents on good tenants when they're pretty far below market. Of course, bad tenants are a whole different story.