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