do you not agree that housing demand in nyc/sf is highly inelastic then? the rest kinda follows from that. or are you arguing that the supply itself is even more inelastic than the demand?
I think part of the problem with this example is that $2k is just not very much money compared to rental income in those areas. I agree, it is hard to imagine landlords dropping out of a market where they can rent a studio for $2500+/month over a one-time $2000 expense. I argue it would still happen at the margins, but it might result in a market rent increase that is below the noise floor.
still, it is a mistake to assume that all HCOL landlords are making money hand over fist. places with high rents tend to also have high price-to-rent ratios. landlords with recently purchased, mortgaged properties might not be making much profit, even with sky-high rents. if a lot of landlords are in this situation, the supply could be surprisingly elastic.
>do you not agree that housing demand in nyc/sf is highly inelastic then? the rest kinda follows from that. or are you arguing that the supply itself is even more inelastic than the demand?
Relatively inelastic, but not as inelastic as supply. There are people who would gladly move to NYC tomorrow if rents were cheaper and vice versa.
>I think part of the problem with this example is that $2k is just not very much money compared to rental income in those areas. I agree, it is hard to imagine landlords dropping out of a market where they can rent a studio for $2500+/month over a one-time $2000 expense.
Ergo why the incidence falls squarely on the landlord.
This also explains why they bitch the most about things like property tax hikes and building regs while renters do not care. A double whammy of it hits their net profit and hits the value of their property because it reduces the profit it can generate.
>still, it is a mistake to assume that all HCOL landlords are making money hand over fist.
Right. If they're not it's because they're leveraged in which case there is even LESS reason to suppose that they would be the cause of a drop in supply because instead of not making as much as they could by not renting their apartment out, they'll be LOSING money hand over fist.
I do agree that property prices will likely bake in the cost of having to install aircon or having to abide by rent control regulations. It might be the proverbial "last" straw for some who might sell up but that won't reduce supply because they'll sell it on to somebody else who will rent it out (or live in it).
I also believe that what say may be right in, say, rural Alabama where rent control might well disincentivize the construction of new housing where land is not at a premium. But, NYC is a different kettle of fish.
I think part of the problem with this example is that $2k is just not very much money compared to rental income in those areas. I agree, it is hard to imagine landlords dropping out of a market where they can rent a studio for $2500+/month over a one-time $2000 expense. I argue it would still happen at the margins, but it might result in a market rent increase that is below the noise floor.
still, it is a mistake to assume that all HCOL landlords are making money hand over fist. places with high rents tend to also have high price-to-rent ratios. landlords with recently purchased, mortgaged properties might not be making much profit, even with sky-high rents. if a lot of landlords are in this situation, the supply could be surprisingly elastic.