> Rents are set by what the market will bear, not by what it costs the landlord to own the property.
If landlords cannot make a reasonable rate of return, they will not enter the market, and existing ones will exit. This will reduce the supply, and then the rents will rise.
And are they going to take their existing houses and beam them up to the Starship Enterprise? Or are they going to let them rot empty, while paying those same taxes and maintenance on them?
... Or do you think they will let them out for whatever they can get?
Houses aren't a soccer ball, you can't pack them up and leave if you don't like the playing field.
It's weird how whenever houses are the topic of discussion, people seem to think that economics should only work in one direction.
For existing buildings, landlords who lose money on them will stop doing maintenance and repairs, and they'll eventually become slums or will be abandoned. Look what happened to Detroit.
> For existing buildings, landlords who lose money on them will stop doing maintenance and repairs, and they'll eventually become slums or will be abandoned.
Ah, so because expenses temporarily exceed revenue on your million-dollar investment, you'll just let it rot down to zero?
What happened in Detroit was a collapse in demand of housing, caused by a collapse in employment. That collapse and reduction in the tax base lead to a death spiral, as a city's infrastructure costs are fixed - which pushed further marginal demand out.
You know what didn't happen in Detroit? A housing collapse because of a 20-cent-per-thousand-dollar property tax levy.
No town can survive a collapse in employment. The coastal cities with 11 job openings for 10 people who are fighting over 9 apartments aren't suffering from that problem, and it's ridiculous to point at Detroit as a comparison.
And if you think a 3% tax increase for landlords is 'massive', how would you describe the 20-40% increase in rents? If the poor landlords shouldn't be subjected to such a horrific thing, shouldn't the tenants be protected from ballooning rents?
Logically this would increase ownership rates (since the landlords exiting the market will over-supply houses, lowering the price), which will remove pressure from the renting market, lowering the price.
Landlords leaving the market sell to people who previously had to rent and can now own their own house. Since many landlords leave at once, people can buy houses cheaply. Where is the problem in my logic?
Housing investors still either live in the house themselves or rent it out to people who live in them. Getting rid of them won't change the price. The price is driven by the supply and the people who want to live there (demand).
If landlords cannot make a reasonable rate of return, they will not enter the market, and existing ones will exit. This will reduce the supply, and then the rents will rise.