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And you'd have been right a decade ago. Until then, sub-95% occupancy was a sign of property failure. Now, rents and rental properties have been so thoroughly captured and coordinated that large property management companies are able to profit at occupancy rates below even 80%. It was organized, aggressive, large-scale exploitation of historical "rules of thumb" of property pricing (not just rentals), laundered through software. The problem is circular. Artificially high rental prices drove many to buy houses, and median home price and availability in a given area generally determine rental prices. By using profits to capture multifamily dwellings and raising their prices to control their occupancy, valuations on surrounding residential properties (many owned by the same large, PE-backed commercial hard asset investors) could be raised beyond the traditional limits that a local market would bear. Like Broadcom, they raised rates to "fire" their least profitable customers. Property management companies that used rental price-fixing software flourished, and both existing home owners [1], and cities were loathe to complain. For home owners, this has been the closest they've ever gotten to a bailout in their lifetimes. For cities, tax revenues are higher than ever. Who amongst them would dare call it all a sham? [1] I originally wrote "who at worst were unaffected", but that's demonstrably untrue. We normally criticize it as "gentrification", but at least as far back as 2012, I noted investors in my area were buying up minority communities, flipping the houses into rentals to raise property values, buying the properties people could no longer afford the taxes on, and then renting them back to them at more than the cost of their original mortgages. |