alt Hacker NewsYou haven't actually worked this example out. Try it. The wealthy buy the extra supply; they now compete with all the existing supply for tenants. What happens next?
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Depends on how many tenants there are: is is a buyers' or sellers' market?
A lot of the supply will become second or third homes for the affluent, or short term rentals, not residentially leased property.
That's already the case with a lot of properties in highly desirable locales whether high demand cities or holiday destinations.
Yeah, Neither you nor the parent have worked the forces out to describe what's happening now.
What's happening now is the wealth and the middle are buying houses and apartments not for rental income but for appreciation. This motive is what stands in the way of new home building in any given area. This is why rents rise beyond an area can sustain at all - rents are set to maintain the ostensible value of a property - selling an empty property is fine, even encouraged.
The situation is visible everywhere.
>What happens next?
We'd revert to the state that applied for most of human history: 99% of humans will be serfs renting from 1% hereditary landlords. We'll have shown the American mid-century home-owning middle-class phenomena to be an historical anomoly. Average living standards will plummet and equity barons will never have lived so well. Any short-term rental rate drops will quickly be erased by a combination of growing population and well-known market manipulation, in particular further wealth consolidation.
Mere millionaires think they are safe; they are not. We live in a world that has a ~10 OOM wealth scale; being at level 7 does very little to protect you from 8s 9s and 10s, just as 2s are powerless to 4s and above. To a 10 a 7 may as well be a New Dehli beggar.
They leave it empty (that actually happens a lot, especially with foreign investors) or convert it to their 100th AirBnB.
The total housing supply remains static - the number of owners goes down and the tenants increase, so the S/D curve for housing stays the same. Then the wealthy consolidate the supply into smaller, more powerful groups who drive up rents via monopolist and cartel behavior (eg RealPage).
Collusion using online management services to fix prices across a region.
I think Washington State is working on legislation around rental services due to this already being a problem in the Seattle area.
“Extra supply” is added to the portfolio containing housing they’ve already purchased. They own part of “existing supply” too.