Not necessarily true. Sure , the landlord knows more about the apartment but you know more about yourself as a tenant. Landlord takes a huge risk in terms of allowing someone rent, especially given protections afforded to that individual. Most experienced landlord will cite tenant selection as very important and a huge risk. One tenant that refuses to pay rent or damages property can wipe out the return of 9 other units.

> This gives them stronger negotiating power.

I have more options as to where to move. The landlord owns a very expensive illiquid property. He can't just sell it tomorrow but I could easily choose another rental.

> Another is cost of change. It's much more expensive for me in time and money to move than it is for a landlord turn over a new unit.

Its very expensive to fill a rental. A landlord usually needs at least a month to find another tenant. That's a month of foregone rent

> That means a landlord can extract money well above a true market rate.

Market rate is the rate the landlord can get. If a transaction happens at that rate, that's the market rate.

> A third is of interest. Individuals and the community have a interest in healthy social bonds, while absentee lords mainly want to extract cash.

Not sure what "absentee lords mainly want to extract cash" means. Yes, most landlords manage properties as an investment. Landlords also have an interest in the community as they own equity in that community that would appreciate if the neighborhood gets nicer. I don't see your point.

At worst, the landlord loses money. At worst, the tenant is on the streets. Emotionally, finding a new tenant is business (maslow level.. 4?). Emotionally, finding a new home touches on your core safety and wellbeing (maslow level 2). Switching tenants means a new contract and new risk to lose money. Switching neighbourhoods means losing your neighbours, your area, any ties you have there, and having to build it all anew.

And since we're talking about areas where rent control is necessary, a landlord can quite easily find another tenant and a tenant has a hard time finding another house. But as you can see above that's just a "bonus".

Economic analyses tend to discount emotional factors, by their very nature. Make no mistake about it: landlords have a massive advantage in any negotiation with a tenant.

This isn't a very strong argument because it applies to, eg, purchasing food at a supermarket. Worst case for a supermarket; wasted produce. Worst case for consumers; literal death. Yet the supermarkets are generally famous for being very low margin and cut-throat competitive. A tenant is only forced to move neighborhoods if the market is rising in lockstep; individual landlords can't force anything.

Moving neighborhoods due to financial stresses would be completely miserable. But unfortunately reality is unfair and if people want to live the way they like they also have to make a measurable contribution to the economy. If they are relying on the charity of other people, or the state, then they will have to put up with real inconvenience. If other people are bearing the cost, other people get to make the decisions.

On the other hand, if there’s a better deal on a different apartment, (1) it probably won’t be available; (2) even if it’s available, it probably won’t really be cheaper after accounting for the huge direct and indirect costs of moving; and (3) even if it’s really cheaper, people will still rightly be reluctant to upend their life to take advantage of it. It’s not “charity” when you’re paying through the nose for something that you don’t have a realistic choice about.

Now I'm not against charity as a concept, but we have a century or so of economic experience on this matter. If charity becomes compulsory, first people make stupid decisions and then the vulnerable have to live with the consequences of those decisions.

Being born gives everyone a right to dignity but it certainly does not give anyone a right to choose that someone else sets them up in a house and area of their preference. If somebody wants control of their own life, they are going to need to earn enough to either buy their own house, learn to build their own house or pay market rates for rent. It would be nice if there was a better way; but all the alternatives that are tried turn out worse than being honest about the economics of the situation up front.

> I’m pretty sure you lost track of your own analogy there. If there are better deals at a different supermarket, people will just go there...

If there are better deals in a rental market, people absolutely will go there. There are substantial costs of the order of a few hundred dollars to hire removalists, that isn't cheap but people aren't going to be so overwhelmed with emotion that they can't move a few blocks over for a $3,000 a year improvement in rents.

> It’s not “charity” when you’re paying through the nose for something that you don’t have a realistic choice about.

I've lived in 4 different communities in my life. I don't accept that moving somewhere with a lower cost of living is so terrible that people need to be protected from it - I can do it, it isn't bad. Somebody who can't afford to live in a neighborhood should be encouraged to move somewhere cheaper, and the idea that landlords should be protecting them from that outcome is a great way to set up a housing shortage. If they want to be part of a community then they should find a job that lets them rent in that community at the market rate.

> thanks in part to food safety regulations

You misunderstand; starvation from not being able to afford food. The point is that a vendor of a product can't unilaterally deny anyone access to market rates for that product because the competition will step in and undercut that vendor.

At worst, the landlord loses the money they were relying on to pay the mortgage on the property. Not every landlord owns hundreds of properties and can eat the cost of one sitting idle. Or worse, the cost of major damage to one by a bad tenant.

I'm biased. I have rented and owned. In both cases, it was what was right for me at the time. When I rented, I was happy to pay the money to my landlord in exchange for living in their property. Admittedly, I've had nothing but good landlords (with the exception of one), but I'm a very good tenant in exchange.

If a month of foregone rent was such a huge burden to landlords then it wouldn't be so common for them to keep their properties vacant.

Just recently, Los Angeles lawmakers have proposed a vacancy tax on the 111,000 vacant homes in the area.[1]

[1] - https://www.latimes.com/local/lanow/la-me-ln-vacant-housing-...

Landlords estimate a vacancy rate and keep that amount in reserves. However, they all earn more money if it's not vacant. It's almost never the case that they can make more money by keeping the rent high and units vacant.

Also, is they are using a property management company (which surprisingly many do), then turnovers are likely more expensive for the landlord than the tenant's cost to move - they usually charge 50% of one month's rent to find a new tenant for you.

If they're too optimistic in that vacancy rate, they will lose money.

For anyone thinking landlords have all the power, hang out on real estate forums. After all expenses (including vacancy), most RE investors target $100-200/month per unit. Now often, over several years, if rents shoot up in the city, they'll make good money from the increased rent. But they don't rely on that - their usual hope is the property's value will go up so they can sell it one day. The landlords who make huge piles of money are outliers. The vast majority of landlords do not make anything close to a SV SW developer and are not aiming to (of course, though, whatever they do make is almost "free", which makes the difference to them).

The top skill for a landlord is to estimate costs. At $100-200/unit, if they underestimate a lot, they are out of business. Surprisingly, most do not carry vandalism insurance. So if a disgruntled tenant trashes a place, they could easily lose the property. If they do not reserve money for evictions, they could easily lose the property.

That is the very definition of an outlier. Most landlords (easily over 90%) don't even have a 100 units. In fact, most landlords have a target number of units they need to "retire", and that number is usually less than 100.

Hypothetically, if 1 company managed 1,000 units and 1,000 people managed 1 unit then that outlier owns 50% of the market while representing 0.1% of the land lords.

Also, keep in mind that on the flip side, landlords likely view tenants the same way - looking at aggregates and not individuals: "Yes, lots of people can't afford the rent, but as long as I can get enough to make a profit, who cares about the rest?"

Unless they can hold out until property values rise and they can sell for a profit.

Sure, if they've got piles of cash sitting around to pay for the loan, insurance and real estate taxes.

Here's another tidbit people don't understand. If the property has more than 4 units, the value of the property is determined almost entirely by the revenue it generates.[1][2] The bank who will provide the loan to the buyer will look at those numbers, and the buyer will look at those numbers. In particular, what people will not look at are the comps (the value of nearby properties). So a "Let's lose money until the property values go up" strategy won't work there.

[1] https://theresabradleybanta.com/value-a-multi-unit-property/ [2] https://www.biggerpockets.com/blog/2016-07-06-multifamily-re...

actually, that's pretty straightforwardly "income-based valuation", and it's logical because having more than 4 units means the property is primarily a business and not primarily a residence. businesses are valued by the income (i.e., profits) they generate. the sales comparison method (employing "comps") is primarily used with residences because the more accurate income-based valuation isn't available to residences, as non-income-generating assets. (the third valuation method is cost approach, which is used as a primary method of valuation in markets with low turnover/few comps, and in many tax assessment jurisdictions).

Do you have any data on how long properties are vacant? And if they’re vacant, are they vacant for a reason like renovations or construction?

Every landlord I’ve ever had has wanted to rent their place quickly. They hate missing a month.

This would have required me to take a huge loss on the property, which I would have had to pay out of pocket, to the tune of tens of thousands of dollars, which I did not have. I would have preferred to never rent at all.

If you can't raise rents, you'd be less likely to react to lower market rents. So prices stay sticky on the way down. Even if the laws are not in place now, there is a risk of them being in place in the near future and you'll be stuck at below market rents.

Also if you can't remove tenants then you'd be more selective and naturally that would increase vacancy rates.

A high vacancy rate doesn't prove that its not expensive to fill a rental. In fact higher vacancy rates means losing a tenant is even greater than if there were low vacancy rates. That means that an empty apartment is going to stay on the market even longer. And most landlords have some debt arrangement, are paying interest, taxes and insurance in addition to forgoing rental income.

Yes, but obviously people care most about the communities that they actually live in. "Absentee lords mainly want to extract cash" probably means that, as you say, a landlords interest in their community is related to their investment and the opportunity for the value to rise. People that actually live there have other interests, as the landlord does with the location they actually live. Someone renting out a room in their house or half of a duplex isn't absentee, and would have many non-profit interests in the local community. A landlord that lived a few hours away probably would not.

It is not necessarily easy to move. It can mean a longer or harder commute. It can mean changing which school your children go to (which can be a hardship for them). It can mean losing a connection to some social circle or religious organization (yes, this matters to some people). Trying to stay in the same neighborhood can mean dealing with the same management company, thanks to local governments giving developers effective monopolies over entire neighborhoods.

Landlords do not need to sell their property in order to enter a new market; they can use one property as collateral to take out a loan for another. That is more or less how real estate developers operate.

"Its very expensive to fill a rental. A landlord usually needs at least a month to find another tenant. That's a month of foregone rent"

In the NYC region every landlord I have dealt with has included a clause in the contract requiring 60 days notice before moving out, and reserve the right to bring potential new tenants into my apartment to show it off before I even leave (while I am still paying rent and living in the unit). It is also more expensive than one month's rent to move, at least in my experience in this area, and landlords are notorious for keeping security deposits as payment for "repairs" to their units.

"Landlords also have an interest in the community as they own equity in that community that would appreciate if the neighborhood gets nicer"

I have yet to see any landlord voluntarily do anything to improve a community. In every case where a property owner has done something to improve a neighborhood, it has been because they were forced in some way by the local government. When neighborhoods decline in ways that threaten their profits, landlords seem to just demand that the government step in rather than taking any action themselves.

"I don't see your point."

It is not hard to understand. Landlords, especially larger management companies with many large properties, have built-in advantages over their tenants that are not corrected by market forces.

There are two possibilities here. One is that the maximum rent control rate is above the market rate of housing cost increases, in which case those rent control laws do nothing. This is better than most other rent control, but still no better than no rent control. The other option is that it isn't, and then the rent control laws do something bad, i.e. reduce the incentive to build more housing to fight the expanding market rate rents, and screw new renters a lot to benefit older renters a little. There is still no circumstance where they cause good.

Also, since which possibility happens isn't known ahead of time, they reduce the incentive to build housing today by landlords who expect rents to increase by a lot in the future, even if they turn out to be wrong.

Moreover, the relative value of investing in old vs. new apartments is not particularly relevant, because what really matters is the value of investing in building new housing as compared with all other alternative investments, including real estate in other cities or stocks or anything else. And the prospect of rent control at any point in the future lowers the net present value of those investments by the corresponding amount, causing reduced investment in building new housing.

Worse, if the old buildings have rent control and the new ones don't, the tenants will prefer a rent controlled apartment, driving rents up in the old buildings and down in the new buildings (because, unlike investors, tenants do specifically need housing in that city so the relative difference matters), which both increases rents on existing buildings and reducing the incentive to build new buildings.

Rent would only be cheaper in "rent-controlled" properties during periods of extreme growth in market rents. The primary issue in such cases is not "mis-matched" tenants (if anything, reducing churn should increase effective supply). While it would provide less incentive for retirees to move out of the city , it also limits the degree to which the impoverished are forced to leave the city. Once the period of extreme growth passes, all rents will stabilize back at the market price.

So yes, this can lead to slightly higher market rents for new tenants during periods of extreme growth, but it does this because fewer people are forced out of the city.

> And the prospect of rent control at any point in the future lowers the net present value of those investments by the corresponding amount, causing reduced investment in building new housing.

You think you can predict accurately which cities will have rent-control laws 15 years from now? While I can see how current or near-term rent control can affect a properties value, the incredibly marginal effects of this 15 years out is complete washed out by the much larger unknowns that affect the value of the property 15 years from now. One could has plausibly even argue that seeing a law like Oregon's being passed reduces the chance of seeing more draconian rent control laws introduced, which should INCREASE the attractiveness of investing in rentals in Oregon.

> Worse, if the old buildings have rent control and the new ones don't, the tenants will prefer a rent controlled apartment, driving rents up in the old buildings and down in the new buildings (because, unlike investors, tenants do specifically need housing in that city so the relative difference matters), which both increases rents on existing buildings and reducing the incentive to build new buildings.

>Worse, if the old buildings have rent control and the new ones don't, the tenants will prefer a rent controlled apartment, driving rents up in the old buildings and down in the new buildings (because, unlike investors, tenants do specifically need housing in that city so the relative difference matters), which both increases rents on existing buildings and reducing the incentive to build new buildings.

This is completely wrong and confused.

Somehow you have created a situation where in your mind where:

1) the tenants expects to pay less rent (over the next X years) on OLD buildings

somehow implies

2) the investor expects to be paid less rent (over the next X years)on NEW buildings.

Obviously, one of those expectations must be wrong which means your argument is invalid.

If you do see lower initial rents on newer buildings, you only see them offered to the degree that landlords expect to make up the difference in the following years.

If you do see higher initial rents on older buildings, you only see them paid to the degree that renters expect to make up the difference in the following years.

As an example, One of the major problems for developers in building both housing and office space is how cyclical the markets are. When prices are spiking, developers rush to build. This can lead to gluts, causing big price crashes later on as they try to pay their mortgages.

It's perfectly possible that smoothing out the spikes of short-term price increases results in a more stable, predictable market. That would not only mean it'd be better for tenants, but it'd be better for landlords in that they are more confident they'll have good ROI over time. Risk mitigation can be very valuable in long-term investments.

And of course there are many more possible complex interactions. E.g., if lower turnover means richer social connection and better neighborhoods, then renters might be willing to pay more over the long term, keeping landlord property values up. Or more stable prices mean that people are less likely to, say, vote to expropriate large landholdings and shift to the sort of socialized housing we see in other countries.

So no, I don't think there are two possibilities here.

This is one of those theoretical arguments that sounds good but have no empirical foundation at all.

If it was true the gigantic Walmart could completely dick me around when buying socks and toilet paper. In reality prices are very competitive.

It also completely ignores that fact that most landlords are small operations, and often the tenants are richer than their landlords.

In a landlord situation, their cost of goods is so small that they can afford to sit on an empty apartment while prospective renters need to put a roof over their family or business.

People are aware of this, and purposely choose products that are 80% as good for 20% of the cost. Other people shop at Whole Foods and Apple. None of them is ripping you off. They all provide options that you knowingly and willfully choose over your other options.

> And if Target/Amazon/Dollar General weren’t around, there’s no reason they wouldn’t increase prices and pad their margins.

The comparison to landlords being that if one of them had a monopoly on local housing they could charge really high prices. But that seems pretty fantastical considering that a local housing monopoly hasn't happened basically anywhere and would presumably yield antitrust scrutiny besides.

> In a landlord situation, their cost of goods is so small that they can afford to sit on an empty apartment while prospective renters need to put a roof over their family or business.

The cost of goods is the cost to buy housing (and the opportunity cost of the interest you could have had on that money), plus that of maintaining the property. If that is so cheap then why is anybody renting?

I'm not a landlord, but I did consider getting into it once, and studied how the system works. And a number of my friends are landlords (including one who quit his job because the passive income is enough).

No - probably over 95% of landlords do no have a small cost. Almost everyone is paying a mortgage/loan on that property. The exceptions are old people whose house was paid off and they just want free money. Those people almost always charge low rent, BTW - they just want some extra cash. The standard tactic is to buy properties on a loan, and try to get $100-200/month profit per house/unit. So if the apartment costs $1500/month in rent, assume their monthly cost to the bank (principle + interest) is about $700-800. Then add in the insurance and real estate fees. The remaining money goes to long term costs (repairs, vacancy, etc). Then they keep about $100-200.

If the apartment sits empty, they're still on the hook for close to $1000/month in taxes, insurance and loan payments.

Over time, if the property appreciates significantly, the plan is to sell the property, and use the gain in appreciation to buy a larger apartment complex, where they are down to $100-200/month again, but because the place has, say, double the number of apartments, their overall gain is double. Lather, rinse, and repeat. They only stop once they are making enough to live on in the lifestyle they want - which could be anywhere from 30-60 units.

They are almost always in debt, and vacancies are almost always very expensive.

A lot of the anti-landlord comments are similar to anti-employer comments, where it's always a given that employers have large piles of money and they can afford X, whether X is higher wages, better equipment, etc. Once you step into the "other" role, you'll find your assumptions were wrong.

Of course, if the state/city needs to pass laws to help with housing, so be it. Let's not just blindly assume that most landlords can absorb it.

You have the choice of a hundred units. And its their responsibility to fight with each other to make you choose one of them. Thats what keeps them honest and gives you bargaining power.

If you switch TP vendors, that's not a big deal for either Walmart or you, so yes, prices are competitive. But if you switch housing, you are switching 100% of your housing, which will be ~30% of your total budget. I've had 13 landlords, and not one of them has had only one unit. And small-time landlords tend to have other work, so regardless, it's a much smaller deal to them to have a tenant move.

> It also completely ignores that fact that most landlords are small operations, and often the tenants are richer than their landlords.

I look forward to your citations on both points.

I'm sure the average landlord doesn't own more than, say, 10 units. But in major markets there are a small number of large rental companies, so I suspect the average unit is not owned by a small landlord.

I'm entirely skeptical about your claim that tenants are "often" richer than landlords, but would be happy to be corrected with data.

Landlords do dick around with prices on small business owners, and Walmart has the scale to not get dicked around with. This is just another thing that helps them to be exceptionally competitive in pricing their goods.

The GP was talking about real estate and it doesn't have much to do with how competitive socks and toilet paper are.

There are many retiree types that are renting out their in-law suite or have an extra rental property and definitely cannot afford bad tenant behavior.

They are probably in a worse negotiation position compared to a squatting bad tenant in those cases and very much care about their neighborhood, probably more than the renter.

---

OTOH, rent control doesn't matter too much if the max percentage cap is high enough and tenants can't squat in eviction court for months as they destroy the old person's inlaw suite and their home.

You're comparing the wrong things. Negotiating power ultimately only comes from having other options. I could choose other apartments or the landlord could choose other tenants. The balance obviously depends on the individual market, but I think it's much closer to parity.

> It's much more expensive for me in time and money to move than it is for a landlord turn over a new unit.

I'm not so sure about this, either. It's a pain for landlords to move new tenants in, too. Most would prefer to keep good tenants around as long as possible.

If the landlord has only the one unit, doing so is probably a risky, undesirable option. Probably not so if they have 100 units, though.

The market rate IS what the landlord extracts from it, which is what the market, you, is willing to pay.

https://equilibriabook.com/an-equilibrium-of-no-free-energy/

> What about houses? Millions of residential houses change hands every year, and they cost more than stock shares. If we expect the stock market to be well-priced, shouldn’t we expect the same of houses?

> The answer is “no,” because you can’t short-sell a house. Sure, there are some ways to bet against aggregate housing markets, like shorting real estate investment trusts or home manufacturers. But in the end, hedge fund managers can’t make a synthetic financial instrument that behaves just like the house on 6702 West St. and sell it into the same housing market frequented by consumers like you. Which is why you might do very well to think for yourself about whether the price seems sensible to you before buying a house: because you might know better than the market price, even as a non-specialist relying only on publicly available information.

In this case, since the GP is referring to rent increases, the only members of the market are you and the landlord, and the landlord can leverage the large burden of moving to increase rent to a higher price than one that would be competitive on the broader market.

If you were a perfect rational decisionmaker you could perhaps have priced this risk in at the start and said "$1000/month is too expensive because I know the landlord will increase it 25% as soon as I finish unpacking". But in practice, people budget according to the price they're advertised.

But that's not true. The landlord can increase the price of the rent, knowing that, as some point, you'll leave, because you, the buyer, consider it too high. The market around you, other possible renters, may not, and so the price the landlord sets will still be the market price.

Now, the landlord knows you're a good customer: no pets, no parties, always clean. He has an incentive to keep you as such: you're predictable, no unforeseen costs, and knowing that, there may not be many possible renters willing to pay more, according to his estimations, and so it keeps the price stable (+CPI). That's still the market price.

I can't understand why in HN, out of all places, people dismiss the superiority of a fully decentralized, uncoordinated, resilient information distribution system (free market prices), in favor of a centralized, brittle, obscure, arbitrary ruled one.

Last time I moved I spent maybe 60 hours looking and another couple hundred hours packing, cleaning, moving, and unpacking. Call it 250 hours, plus all sorts of stress and hassle. There were also a variety of expenses involved, plus having to have two deposits in play at once.

I am definitely willing to pay more than $0 to avoid that hassle. Landlords can take advantage of that in lease renewal negotiations.

As to having this discussion here, yes, HN has plenty of free-market fundamentalists. But it also has plenty of people who see markets as a tool for optimization. Like any tool they have necessary preconditions and failure modes. You can't design the market for housing like you do the market for candy bars and expect it to work just as well. You need the right tool for the job.

As an example, I live in one of the US's few competitive ISP markets. I pay $40/month for gigabit fiber, no limits. Comcast, which is often a monopoly or a duopoly, charges $90-140/month [1] for gigabit service, and they have assorted restrictions that I don't have to deal with, like data caps and limited upload speeds.

So what's the true market price for full gigabit? The person you're responding to, bassman9000 would apparently say it's $140, because tautologically that's what people pay. I'd say it's much lower.

Further evidence to support my position is that when you measure actual speeds delivered on gigabit, many of the ISPs are local providers, not the big nationals. [2] Customer satisfaction with my ISP is hugely higher than Comcast as well [3], with Comcast's Net Promoter Score actually being negative. [4]

Those are not signs of a competitive market, and if the market isn't competitive, I think it's a 101-level mistake to say that the price people pay is the true market price.

[1] https://www.cnet.com/news/comcast-offering-1-gigabit-per-sec...

[2] https://www.vice.com/en_us/article/7xgne9/locally-run-isps-o...

[3] https://www.sonic.com/care

[4] https://npsbenchmarks.com/blog/best-internet-service-provide...