"why don't landlords just lower rent?"
google won't let me leave a reply to this comment on a youtube video (link is not an endorsement) because it thinks I'm running a scam or something, so I decided I would write a blog post about it where google can't quietly hide it. (google is fine with comments like "virtually every homeless person I know is an addict", though. go figure.)
I'd honestly like to understand why owners would rather have their apartments sit empty than simply lower the rent. what's that about? ⛓️
there are 23 million units of multifamily housing in the United States, and as of last January, 770,000 Americans experiencing homelessness1. you could house all of the unhoused people in the US one to an apartment with about 3.5% of the national housing stock; unhoused people have families too, so in practice you could probably house them all with 1-2% of the total housing stock. the long run average multifamily vacancy rate in the US is 5%, and right now it's at 5.3%.
as you've already noticed, this is an absurd problem to exist. unfortunately, it's a problem that market control of housing is not equipped to solve. there are two main issues standing in the way, plus a pet theory I think is borne out by the way the market behaved during the heart of the pandemic:
absent market controls, there is no cost incentive to a multifamily housing operator to reduce the vacancy rate, at all. their property tax remains the same, since it's a tax on some fraction of the value of their building and the land it stands on. if anything, the cost of running a building goes up as more people live in it; living in a building creates wear and tear on the plumbing, electrical system, walls and floor, etc., which the operator has to pay to repair. some politicians in some localities have proposed taxes on vacant units in order to make up for this2, and I'm all in favor of that.
if a building is already operating reasonably close to full occupancy, any meaningful cut to rent is likely to cost the building operator more than it earns them in additional rent. the absolute most the average building operator could cut rent right now and expect any return on investment at all is 5.3% — which at an average nationwide rent of $1,748 amounts to about $93 a month — and it's not clear that there are 5.3% more tenants who could afford $1,650 a month than can currently afford $1,750. indeed, advice to operators of multifamily housing which you can find by googling for a couple minutes says that an "ideal" vacancy rate is about 3-5%, which suggests that people in the business of multifamily housing have run the numbers and have a pretty good suspicion that it's not worth chasing that last 3-5%.
directly cutting rent primes customers entering the rental market to think that rent can go down at all instead of increasing forever, which makes them less desperate to lock in good prices during momentary lulls in price increases. I don't know how much firm evidence exists about this, but during the pandemic, when nearly 15% of the country became unemployed, the average rent didn't go down at all nationwide — it went up, and the annual rate of increase only slowed from about 3%/year to about 1.5%/year. locally, in the apartments I walked past on a regular basis, there were barely any advertised rent cuts — but there were plenty of one-time incentives to sign a new lease. alongside smaller incentives like waiving pet rent, free parking, and DoorDash gift cards, some apartment buildings were giving away one, two, or even three free months of rent on a 12-month lease term. this amounts to an effective 8-25% rent decrease over the first year (which suggests a similar level of desperation to fill vacancies), but doesn't get reflected in the sticker price, doesn't get renewed in future years, and doesn't have to be extended as a courtesy to suckers who already signed a lease.
<soapbox moment>
you can make similar arguments that the market won't start building new apartment buildings that compromise their ability to ensure a healthy return on investment, and I would make those arguments.
we still have a shortage of rental housing, and multifamily housing operators openly complain that it is not profitable to build new buildings in their calls for housing deregulation. cities mostly get developers to build more new construction by offering them tax cuts and exemptions from zoning laws so they can make bigger buildings, and this isn't a new idea; New York City has been doing it since 1987, and it still has a shortage of affordable housing.
counterintuitively, I think we should take the complaint that building new apartments isn't profitable at face value; housing operators' job is to turn $1 into $1.05 as quickly as possible and split the extra five cents with the people who gave it to them, and presumably they're pretty good at it because they're still getting paid handsomely to do it. at this point, maybe our impulse shouldn't be to excuse them from more of the responsibilities which we're supposed to be applying equally to everyone, in a vain hope that they'll accidentally build way too many buildings and send rent through the floor against their own self-interest and the careful research and planning they do 40 hours a week.
maybe it should be to find a way we can provide everyone shelter without it having to be profitable.
</soapbox moment>
anyway, I hope this helped explain some things! sorry I couldn't leave this as a normal youtube comment, but in my defense I did try three four separate times.
(postscript: I tried to post a link to this blog post in a youtube comment, and that comment got deleted too. great stuff.)
this is up about 30% from 2020, after it had been constant or slowly declining basically continuously since HUD started tracking the statistic in 2006, and it's been continuing to increase every year even as "life returns to normal" "after" the pandemic. fat lot of good the Blue Wave did us.↩
as well as, especially in areas which have lots of tourism, the number of whole houses that stand empty because they're waiting for some rich person to come visit on vacation for a couple weeks a year, which is even more disgusting.↩