Landlords have a lot of power, even in Scandinavia where we highly regulate the renter-landlord “relationship”.
One example of how the regulation isn’t really working as well as intended is in average renting prices. Which despite there being 10.000 empty apartments in my city isn’t coming down. (10.000 is a lot in Denmark). The sister company of my place of work is a landlord, and part of the reason they don’t lower rental prices is because it’s hard to increase it later. So for a period of years it’s better for them to “bet” on the market changing enough to solve our empty apartment challenge. It looked bleak for a couple of years, but thanks to things turning around the strategy has worked out.
You can’t protect the rental market from this sort of thing unless you start limiting how many houses private equity are allowed to build and own. Which isn’t something cities are really interested in currently. It used to be such that co-ownership rental-groups or whatever you call “beboerforeninger” in English, if there is even an English term for it. But they are basically non-profit landlords which are owned collectively by every renter. Anyway it used to be that these organisations could compete with private landlords because private landlords were smaller. They have no chance of competing with the kind of deals we can cut a city now, or the speed at which we can buyout and replace old buildings. Simply because we, and companies like us, represent a literal fuckton of money. This is made worse by international investors, but it’s not exclusively caused by them. Our sister company has 0 foreign capital, and we’re still capable of competing with international capital on an equal level. Leaving almost no room for the non-profit organisations and absolutely no room for small investors on any serious level.
I don’t know about the US, but here in Denmark there is almost zero chance of it changing. There just won’t be enough political interest in it. In fact there is a huge political interest against it. Both from the cities themselves, but also for basically every home owner in our country. Because our high rental prices keep the housing market high as well, as people give up a lot sooner than we do. As seen with how the housing market is now again increasing here in Denmark after a period of almost dying. It’s not just because no cheap rentals became available, but it’s part of it.
That problem you describe is mainly created by low interest rates. In the past with low interest rates it cost them nothing to keep them empty and at the same time the prices of the property appreciated.
Today, with a bit higher interest rates, it becomes more expensive to hold the property empty and the prices do not appreciate or at least not as fast. However, I believe we have not yet seen the effect of these interest rate increases as the landlords typically have long-term fixed borrowing costs which do not need to be renewed until a few years for most of them so unless the interest rates continue to stay at current levels or higher for many years this situation will maybe not improve.
> part of the reason they don’t lower rental prices is because it’s hard to increase it later
At least in the US this happens due to rent control rules. When the landlord knows that once they lock in a renter they won't be able to raise prices much for an undetermined amount of time (what if the renter decides to stay there for 30 years!), they have an incentive to make the starting rent as high as possible.
If they knew they can raise prices when needed, they could afford to lower prices in a downturn knowing they can raise later.
> At least in the US this happens due to rent control rules.
No way, the vast majority of the US has no rent control at all. Landlords can already raise prices whenever they want, it's always been legal. Despite this, most choose to put in 10% to 40% increase, every single year, anyway. - https://www.michiganpublic.org/economy/2023-03-22/as-housing...
> If they knew they can raise prices when needed, they could afford to lower prices in a downturn knowing they can raise later.
The only time a landlord will lower prices, is if a downturn is so severe that the Federal Government prevents landlords from accessing credit to wait out that downturn, and the landlord risks having to actually sell the property. (Which after 2008, it seems unlikely that the Feds would ever let the market correct again)
> Landlords can already raise prices whenever they want
Not sure how to interpret this response. I said "due to rent control rules". So this applies when rent control rules are in place and landlords cannot raise rents more than rent control allows. If you are in a place that doesn't have rent control, well then it doesn't apply.
> most choose to put in 10% to 40% increase, every single year
I suggest you do the math on this one to see if it possible.
Let's take the middle of your range, 25%. If a landlord raised rents 25% "every single year", a $2K rent would be $15k in just ten years. So, no, no landlord is doing that.
> Federal Government prevents landlords from accessing credit to wait out that downturn
Tell me more about this program where the government gives landlords credit to wait out the downturn? Not familiar with it.
I'm curious what is the exact definition of an empty apartment here. Because whenever I see similar figures from Finland, "empty" invariably means "nobody has registered this as their primary address".
At least a couple of percent of apartments are always "empty", because there is often a gap between tenants. Many people have second homes, but those are technically "empty". Airbnbs are "empty". And so on.
It’s our industry association numbers so it can pretty much be described as “this apartment has nobody paying rent for it”. We call it “tomgang” which directly translates to “emptywalk” but I think the English word is vacancy.
I’m not sure how many apartments would be considered “empty” by official numbers but probably something similar.
> part of the reason they don’t lower rental prices is because it’s hard to increase it later
This is a text book example of the problem with rental price controls. The law benefits current renters, but fucks over future/potential renters (because landlords are unwilling to take the risk of renting out a property unless the situation is ideal). Eventually the harm of the law outweighs the benefit.
It’s not so much about risk as it’s about balancing the books. With equity money involved the way you build these buildings is with a combination of private investor money, your own company money and bank loans. The way you balance the budgets is on potential profits, and that requires a certain amount of expected rent. If you lower the rent, you also change the budget forecasting. You can do it, but you can also not do it and bet on things changing before it becomes more expensive to not having lowered the rent. Which is like 5-7 years for most projects. There are a few high risk projects and they tend to go bankrupt, but with property it’s usually not necessary to take on much risk because it’s one of those commodities people will always pay for… like electricity or water.
It’s much more complicated than that of course, but that’s the general essence of it.
The harm of the laws by no way outweighs the benefits. We would absolutely tear tenants asunder without those laws. They are, however, outdated. Probably because they were created long before private equity funds basically took over every major city. The “easy” fix would be to tax apartments which are kept empty, but again, there isn’t much of a political interest in this because the housing market sort of relies on the high rent.
One example of how the regulation isn’t really working as well as intended is in average renting prices. Which despite there being 10.000 empty apartments in my city isn’t coming down. (10.000 is a lot in Denmark). The sister company of my place of work is a landlord, and part of the reason they don’t lower rental prices is because it’s hard to increase it later. So for a period of years it’s better for them to “bet” on the market changing enough to solve our empty apartment challenge. It looked bleak for a couple of years, but thanks to things turning around the strategy has worked out.
You can’t protect the rental market from this sort of thing unless you start limiting how many houses private equity are allowed to build and own. Which isn’t something cities are really interested in currently. It used to be such that co-ownership rental-groups or whatever you call “beboerforeninger” in English, if there is even an English term for it. But they are basically non-profit landlords which are owned collectively by every renter. Anyway it used to be that these organisations could compete with private landlords because private landlords were smaller. They have no chance of competing with the kind of deals we can cut a city now, or the speed at which we can buyout and replace old buildings. Simply because we, and companies like us, represent a literal fuckton of money. This is made worse by international investors, but it’s not exclusively caused by them. Our sister company has 0 foreign capital, and we’re still capable of competing with international capital on an equal level. Leaving almost no room for the non-profit organisations and absolutely no room for small investors on any serious level.
I don’t know about the US, but here in Denmark there is almost zero chance of it changing. There just won’t be enough political interest in it. In fact there is a huge political interest against it. Both from the cities themselves, but also for basically every home owner in our country. Because our high rental prices keep the housing market high as well, as people give up a lot sooner than we do. As seen with how the housing market is now again increasing here in Denmark after a period of almost dying. It’s not just because no cheap rentals became available, but it’s part of it.