They might try and they certainly would threaten but if they jack up rents and as a result can't get any tenants then they're in an even worse position than before as they have an LVT bill and no income to support it.
Without a restriction in supply or an increase in demand (neither of which would happen), rents can't go up.
It would cause a precipitous decline in property values and a lot of landlords (mostly amateurs) would scramble to sell up and get out of the landlording business as it became more like an actual business and less of a license to print money.
Why won't they get any tenants? Do people have somewhere else to stay? Will they leave the city altogether?
Indeed. Proponents seem to argue that most of that high rent paid by tenants will be captured by taxes and redistributed.
Proponents goal is to make "similar" improvements provide the same net profit across the country, even if the rent for it is $800 in Detroit and $4000 in Manhattan. The taxes would be $300 in Detroit and $3500 in Manhattan. Therefore a developer looking for $500/mo profit could just as easily build in Detroit as in Manhattan.
After the demand for housing was satisfied by supply rents would fall, and LVT would fall as well, such that landlords continue making $500/mo profit on each of those identical units.
At least, that seems to be the ideal situation presented by proponents as I understand it.
Thanks, I understand a little better now. I'm still not convinced that such a thing will be viable, though.
The end result is still going to be that people will be willing to pay more to live in Manhattan rather than Detroit ($4000 vs $800, for example), and thus the effective rent being charged is not going to change.
> After the demand for housing was satisfied by supply rents would fall, and LVT would fall as well, such that landlords continue making $500/mo profit on each of those identical units.
Maybe; I remain unconvinced that simply replacing low-density houses with high-density houses in the middle of (for example) Manhattan is going reach a point where supply:demand ratio is the same as Detroit.
It would be interesting to see how this plays out, so I'm quite happy for this to happen :-)
But that doesn't mean that the maximum rent (whatever the market can bear) will remain the same if all landlords had their costs go up by the same amount at the same time. It could fall as landlords get out of the renting business because the costs are above what the market will bear, but I think that it is equally likely that landlords will first raise the rents to try to stay in business.
What makes an area expensive to rent/buy in is not "greedy landlords", it's primarily the fact that the demand is high. Any solution that doesn't involve matching the demand to the supply is bound to fail in the long term.
Land may be a scarce resource, but that's only in select places. It might be better to spend the effort making the undesirable places more desirable than by knocking down existing buildings and replacing them with high-density buildings.
A non-CBD area that has high-speed internet, quick+cheap public transport to the CBD, electricty and clean water supplies should be fairly desirable to live in. Those who want an address in the middle of the city shouldn't expect to pay the same as those who are prepared to travel to the middle of the city.
I don't think that building more housing units in the middle of the city is going to solve the problem of expensive housing in the middle of the city. The middle of the city is always going to be expensive.