Re:San Francisco, Silicon Valley rents plunge amid downturn
by gpm on Tuesday June 02, 2020 @12:21AM
(#23387413)
> 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.
Re:San Francisco, Silicon Valley rents plunge amid downturn
by holdenk on Monday June 01, 2020 @07:07PM
(#23385151)
Except in places like San Francisco with rent-controlled housing.
Re:San Francisco, Silicon Valley rents plunge amid downturn
by dan-robertson on Monday June 01, 2020 @07:16PM
(#23385214)
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.
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.