> 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 They are, however, outdated.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.
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.