[laughing_man]

Usually when you're renting you're not in a detached dwelling, which is more expensive. On a per-unit basis, it's a lot cheaper for the landlord to maintain your unit than it is for you to maintain a separate house.

Renting a house just makes no sense, IMO, unless you have a family and you know you're going to be moving soon.

Also, rents don't increase just because you have extra money. People take the cost of living into account when they decide where to live, so there's a natural cap on what people will pay for rent if they can commute.

[skew-aberration]

Where I live, people do indeed rent houses in large numbers. This is typically not because they wouldn't prefer to buy - it is because they can't afford to. This would describe such a large number of people globally that I'm shocked you aren't aware of this.

'Rents don't increase just because you have extra money'. Could you elaborate? Also, I said if everyone has more money, rent increases

[laughing_man]

Absent government interference, rent is based on supply and demand. Why would you spend extra on a place even if you had the money?

[skew-aberration]

While this is true, you're not actually contradicting what I'm saying. In economics, supply/demand is a curve (not a scalar quantity). If everybody's wage increases, then the demand does go up (the tail of the curve goes up).

But this is pointless abstraction really. If a magic fairy started putting 100 USD in the pocket of every renter each week, what do you think would happen to rent? Would the landowners be obliged to sell them land/houses at the current market rate? Or could the landowners simply refuse to sell and instead ask for higher rents?

As another thought experiment, imagine a law passes so that every renter is forced to eat soylent green and can't get a wasteful car loan or a netflix subscription. Every renter is now 100 USD a week better off (against their will). What happens to rents? Have the supply or demand curves changed?

[laughing_man]

I don't think that fairy's $100 would have any effect on rents. People would save it or use it to buy consumer junk.

Landlords don't set the market price for rents. They can refuse all they want but if nobody will rent the place for what they're asking, they'll have to lower the price. If the supply hasn't changed, and the demand hasn't change, the price won't change.

[skew-aberration]

In both of my examples, demand has increased, per the definition used in economics. Demand is not 'the number of people who want to live in this area', it is more like 'the number of people who will rent a house in this area at a given price', it is a function/curve and not a single number - the demand at a price of last week's rent + $100 has just skyrocketed.

Let's assume all 100M renters in the US put their fairy money in the S&P 500, and then one landlord raises the rent. The family moves down the street. Now other local landlords follow - some people leave town, move in with family, etc, but others now agree to pay up. Next every single landlord asks for $100/week more - after all, their tenants can afford to pay. What happens? What is stopping them?

Why are rents high in Silicon Valley? Because you can earn a lot there. If you could earn $100/week more without working, why wouldn't rents go up? What about $10000/week? The market rates are not set by landlords but they are set by the earning capacity of the tenants.

[laughing_man]

Just because there's more money available doesn't mean people are willing to spend more on a particular item. There are always substitute goods -- in the SF Bay area you can commute from the East Bay, for example.

Beyond that, rents can reach a point were people are not willing to take jobs in a given area, which will relieve the pressure. I just don't think your contention giving everyone more money necessarily means they'll spend it all on rent. Why do you assume people don't already have money they could spend on rent if the wanted to?

[skeptic_ai]

You can’t compare buy house with rent a flat. You need to compare same property style/type. Otherwise you just lying you yourself.

My friend said: I can rent this 3 bed room for 6k. But if I buy a 1 bed I need to pay 2k. So it’s 3 times cheaper to buy.

[laughing_man]

Lying to myself in what way?

If you read up a bit you'll see I'm talking about single people, for whom that is the normal progression, at least, here in the US. You rent an apartment and save your money until you can buy a house. In the US the vast majority of houses have at least three bedrooms, which is two more than you need as a single person, but if you buy something smaller you'll have trouble selling it. So you buy the three bedroom place, you fill one room with junk and make the other into a guest bedroom.

The point was you're better off staying in the apartment, financially speaking, if you take the extra money that would have gone to a house payment and invest it.