> why would they do anything to lower rents?

Why does anyone? To capture market from people who don’t.

JPMorgan can squeeze as much profit as possible AND lower rents.

Companies will extract as much profit as possible. But this isn’t always a bad thing as it can be quite profitable to service customers in a mutually beneficial way.

That doesn't mean they'll lower rents. Far better to have X% empty than lower rents X% for any value X.

I don’t think so. For an individual corporation that owns 4000 houses empty houses are really bad. Perhaps in the short term, they’ll try to hold a price, but will start discounting and adjusting down as homes stay empty.

This is pretty simple supply and demand and if you increase the supply, then prices will drop.

Total revenue remains constant as long as X=X. Without an increase in total revenue, there is no reason to incur the costs of renting out a unit.

So, if I have 4,000 units and I let 100 stay empty to raise rents 8%, I win.

Why not raise rents 8% and rent out all 4,000.

Rents aren’t chosen arbitrarily by the landlord. They can’t set to whatever they like, else they’d increase 100%.

This is different is a single landlord has a monopoly or there’s a cartel. But in a typical city there might be 500k units for rent. So if a landlord raises rent by 8% on their 4,000 units, then people will likely choose other units that didn’t go up.

Not to be dismissive, but this is basic econ101 and any intro text will have lots of examples and evidence of these principles at work.

Why would these two X's be the same? Lowering rent by X% doesn't mean you get X% more renters.

It's a trivial lower bound.

I mean, you could write it as "better to have X% units empty instead of lowering rents by Y%, given Y >= X + Z, where Z is positive number determined by several factors" if you like

My point is that that's not the choice they're faced with. If they lower the rent for an unit just a bit below market rate for an equivalent unit, shouldn't we expect all of their units to sell? In other words, isn't Z usually negative?

> If they lower the rent for an unit just a bit below market rate for an equivalent unit, shouldn't we expect all of their units to sell?

No, clearly not. Housing isn't a commodity and moving is a pain. If I offered you $10/month in a rent reduction (or off the mortgage if you own) to move across the street to an identical home, would you? How about saving $10/month in return for increasing your commute by 10 minutes a day?

Obviously, both of those become worth it at some level of savings. And decreasing rent by 0.05% to double the units occupied is worth it (probably). But there's a huge overlap in the middle where it's not clear what the effects will be, and that's where the real world is.

It's not a question of whether someone who is already settled would up and move at the drop of a hat, but whether someone who is already in the market for an apartment would choose to rent a cheaper equivalent unit.

It's definitely true that things are more complicated in the real world, but that fact doesn't have-wave us into "Z is non-negative" territory.

If Z is negative, it's certainly not worth taking the deal. My point was it wasn't worth JPM taking the deal for positive Zs (up to some value). If Z is zero or negative, it obviously isn't worth taking the deal.

That is, not only is Y=X a bad deal, but Y=X+Z is a bad deal for a good deal of positive Zs. Up to Zmax which is a positive value. For all values of Z < Zmax (including negative Zs) it's bad for JPM

> JP morgan is going to sqeeze as much profit as possible, why would they do anything to lower rents?

Thankfully everyone else who is currently in the rental business is NOT donig this already?

Speaking of naive, you fail to understand JPM will have to compete with the existing landlords or their units will remain empty.

The demand for housing outstrips supply. There will be no competition.

Then building new homes means that people who were previously homeless now get to rent. At exorbitant prices, yes, but most would say that is better than homelessness.

There already is. Look around and you won't see any 1 BRs listed for 1M/month rent.

Landlords might not want to maximize income by lowering rents since they might have to write down their property values and thus prefer "temporary" vacancies.

They'll lower rents in order to maximize profit. Number of units goes up, demand stays constant, the price will need to come down or they're stuck with empty units that generate negative profit.

Demand is not remaining constant. And it currently outstrips supply.

Demand would still be lower than if JP didn't build the houses.

That may be higher than today, but it is lower than an alternate future where we ban building houses.

When demand is greater than supply, then the limited supply goes to the highest bidder. Nothing wrong with that.

JP Morgan is building more housing though, which is always a good thing because it increases supply. Governments need to ensure that building more housing remains an accessible and profitable venture.

They won’t do it out of altruism, if the market forces them to lower rents, they will have to do that.

Everyone in this thread is acting as though anyone building new houses is Sauron and that any action will make house prices and rents always go up.

I think the problem is they'll have a highly concentrated group of units and can essentially price fix them. They won't be competing with themselves. And landlords love to raise prices when others do under the guise of "market rate". If you have a captive audience (e.g., surrounding a college), there's nothing renters can do about it other than move farther away.

Being single-family homes complicates the issue, too. We're not talking about high-density units, so the growing housing supply is fairly constrained. I don't see it being enough competition to lead to a pricing war. Meanwhile, it's taking away land that could have been used for home ownership, which will likely raise the value of other single-family homes in the area, movin home ownership even further out of reach for many.

I get that not everyone wants to own a home, but it's nice to have the option. If you're laying down roots, you can lock in a fixed-rate mortgage and have an asset. When renting from a megalandlord you're subject to the whims of quarterly earnings and your one year lease might not afford much protection. I think you're also discounting the cost and hassle of having to move when JP Morgan raises prices above the competition. It's very unlikely people will exit en masse, causing the landlord to adjust the rental price back down.

You might be fine with all of that, but ridiculing people because they're uneasy with the situation is not helping the discussion at all.

"This is the most naive take. Walmart is going to sqeeze as much profit as possible, why would they do anything to lower the price of consumer goods?"

milk and bread fluctuate between 2 and 4 dollars and have since I can remember.

housing never goes down. rent has steadily increased from 800 for a 3 bd in my area to 1500 in 6 years. (rural Utah).

this isn't apples and oranges comparison. rental markets aren't the same as consumer markets.

The point being lowering prices can sometimes maximize revenue.

And sure housing goes down, check out prices after 2008. Condos in Miami could be bought for $30,000. They couldn't give them away.