Occupancy is important, but price per square is more important. What will make the most money in the long run? Having a unit sit vacant an extra 2 months at a higher price might be more profitable than "completing the transaction" at a low point in the market.

> Having a unit sit vacant an extra 2 months at a higher price might be more profitable [...]

You can only be certain this strategy works when you know the competition is doing the same. If you have a formal arrangement to coordinate pricing with competitors, you are deep in collusion territory.

that is a very easy price to calculate, and if you've done the calculation, you've noticed that landlords are not being realistic about things.

at this point, a lot of them are not adjusting rent down because it will reflect on their property value, which is an additional hidden variable in the equation.

It should not be profitable to keep property empty. It is a drain on society.

>It is a drain on society.

This does not factor into any calculation about housing prices, unfortunately, and will likely never be factored in until there's a literal revolution (highly unlikely).

Just like pollution, the homeless are either ignored or bulldozed out of sight and out of mind.

Here is a fun factor. A property's value is largely driven by how much rent it can bring in and its loan is based on that value. If rent goes down enough it could effect the value and ultimately the loan which is premised on its value. Nobody wants to be the bank with a 5M loan on a 4M property. In fact normally they don't want to loan more than 70% of the value of the property.

https://www.c-loans.com/loan-to-value-ratio-for-commercial-l...

> Having a unit sit vacant an extra 2 months at a higher price might be more profitable than "completing the transaction" at a low point in the market.

Yes. And it is also amoral. There is a limited supply of housing. Holding it vacant is restricting access to one of the very most critical human needs there is. It might look better on the balance sheet but it is worse for humanity. Thus, the need for regulation and legislation that prevents this sort of thing.

> In this real estate pricing collusion, the software encouraged landlords to keep their units empty rather than reduce price as needed to achieve capacity.

Did it? Or did ZIRP?

People aren't going to set around losing money if central banks aren't guaranteeing your asset price (on leverage) is going up about 4x your interest rate.

So the problem is not that they keep the prices high, but that the cost of not making a deal is neglible.

So the correct action would be to introduce cost for keeping units unrented. Personally I'd go with probabilistic approach and just penalize owning large amount of property because the more you have the higher chance is you are letting some of it go unrented. And property ownership is way easier to check than determining if some property is occupied or not.

> So the correct action would be to introduce cost for keeping units unrented.

There's already a cost of keeping them unrented - the loss of rental revenue.

If you've ever tried to sell a house and had it sit vacant for months when trying to find a buyer, you'd find out about that cost.

> There's already a cost of keeping them unrented - the loss of rental revenue.

Right. And observing the market shows us that this cost is too low.

Why would I ever sell an empty unit if it appreciates in value faster than it costs me to keep it? Provided that I have no better opportunity to use that capital, which must often be the case.

If you need capital it's another story. But even in case of a single home, the fact that you can sit on it for months instead of lowering the sale price means it's to cheap to keep it if you don't need it.

There is also the fact that having some vacant unit across a large portfolio reduces profit and the tax bill on the units that are being rented out.

If they’re doing it to maximize their long-run profits, that will tend to maximize their long-run income taxes due as well.