In 2008 rents in the Bay Area just stayed flat for a few years except in the most expensive parts of SF. So in 2008 at least, those incentives were enough. This time may be different though, with a fundamental shift to work-from-anywhere for tech companies.

In 2009 rents dropped rapidly in Mountain View. I moved here in early '09 and my employer paid a realtor to show me around for a day. Told him my budget was $2000/month, and asked about a fairly swanky mostly-corporate-housing-but-a-few-individual-tenants complex. "Oh, that one's out of your price range", he said.

Ended up taking an apartment there for $1400/month six months later, and it stayed at that level for 3 years. (And then shot up rapidly afterwards - I left when it hit $2400/month 5 years later, and it's currently renting for $2900/month.) It had gone down so rapidly that its price was underneath the less-swanky complex a block down the street which normally rented for ~$300/month less and had itself cut rents from about $1800/month to $1450/month over those 6 months.

Rents are sticky - landlords try to avoid cutting if they don't have to. But when there's a choice between letting the apartments go vacant and servicing your debt payments, they have to cut, and if there's a shortage of tenants at that time (because everybody's left and gone home) the cuts can be pretty drastic.

Sorry I'm on mobile right now but the last time this came up I posted graphs showing the median rent in the bay area was flat from 2007 to ~2010. There were certainly some complexes cutting rent, but most renewals were flat and most renters are not moving every year.

I could believe that, but the question that most people are asking is not "What is the average rent that people who choose to stay in the Bay Area are paying?", it's "If I choose to move, can I get cheaper rent?" Certainly I saw that at the higher end of the market in 2009. (The low end of the market - where most people are, and hence the biggest contributor to the average - moved much less then, because there was much less room for it to move.)

I wonder if house prices will also behave similarly. Right now, the "mainstream" market (i.e. the house that working professionals can afford on income and mortgage without being independently wealthy) tops out at about $2.8M-$3M in Mountain View or Los Altos, but there are a lot of houses selling in the $4-6M range that presumably are being bought with stock options. Could perhaps see a collapse of the top end of the market down to the mainstream real estate market if the stock market collapses.

Averages of all rentals are going to be less indicative of reality due to the fact that low income, mid-income, and high income luxury rentals don't necessarily move in lockstep.

> No REIT drops rents; instead, they offer "$0 deposit", "no rent for the first 45 days", etc.

Is this true in markets where people can legally squat for months? Or as in Seattle where landlords are required to indiscriminately house the first qualified applicant? $0 deposit would make this very exploitable.

No, they charge you for the first month. Then the next N number of months or weeks are free. Source: I’ve twice gotten free rent, once rent controlled, one market rate.

And its the perfect time to build more housing. If those tricks dont exhaust, you can then apply pressure with additional supplies.

Given Housing is now primarily an investment rather than a home for everybody. I would guess most government would likely not pass such proposal.

What do you mean tricks exhaust? It's a loophole, so it will work until the laws are changed to close the loophole. It makes no different to the landlord or tenant if the base rent is dropped, or the effective rent is dropped (assuming everyone can do basic math)

"Tricks exhausted" means when the trick is no longer sufficient to keep apartments filled; when the only way to entice new renters is lower absolute rents.

No one is going to click on a $2000 apartment with six months free when the listings are full of $1500 apartments.

The trick is that they advertise it for $1500 and report up to the government it was $2000. That’s the point of the trick..

The primary reason for these tricks to keep the rents high. If a company offers 45 days free rent on one year lease with $2500 per month, that amounts to effective $2187.5 per month, 12.5 percent discount. During the renewal, the land lord will either keep $2500 per month or add another 3% on top of $2500. That's how these REIT companies have been doing. Even leasing agents won't help, as rents are determined by REIT algorithms.

Small mom and pop landlords play it differently. They will just rent you outright without these tricks.

The landlord is selling:

- A month (or year) of time in the apartment for cost $x.

- An option on purchasing more time for cost $y/time unit.

What these "tricks" do is make $x less than $y. That makes sense in the short term when you expect to be able demand higher rent/unit time in the future. When that expectation is no longer likely, it makes sense to lower $y to $x because other landlords will, and they will have less turnover (costs) and the same amount of income.

I don’t think that’s true. The landlord can cancel this “option” reasonably easily so it is quite different from selling a call.

I look at it like: the fair value for rent is x. The current rent is y > x. If the landlord nominally lowers the rent, they cannot raise it to as high a value next year, and they do not want to do this. Therefore they are incentivised to (effectively) give the tenant money along with the rent to decrease y without changing the nominal rent and giving up on the right to increase it.

> The landlord can cancel this “option” reasonably easily so it is quite different from selling a call.

Theoretically in a rent controlled market the landlord can't cancel the call option. In practice they might be able to by jumping through some (expensive) hoops, but it should be a reasonable approximation still.

I'm not quite sure what sf/Cali law looks like so I am just taking in generalities about rent controlled markets.

Except in places like San Francisco with rent-controlled housing.

That’s exactly the case I’m describing in the second paragraph. I don’t understand what this has to do with the “option” scenario claimed by the post I replied to.

It maybe looks like the landlord is selling a years rent for x and buying a put for the next years rent at y (and recursively options for the later years), but it isn’t really like a put either because it’s really a right-to-try-to-sell rather than a right-to-sell.