With all the talk about higher rents, inflation, rent control, evictions and the like, people need to better understand how rents are actually determined in the real real estate world.
Rents are determined by decisions made every day by hundreds of thousands of landlords, big and small, who try to fill their apartments. Landlords look at rents charged by their competitors, read the news about higher rents and housing costs, and pay ever-increasing real estate taxes and water, gas and electric bills. They are shocked at enormous hikes in tax reassessments. They have to deal with the costs of repairing roofs and tuckpointing their buildings’ facades. They must replace boilers, hot water heaters and air conditioners and pay for other operating expenses.
With this flood of information and circumstances, landlords make sheer guesses as to what rent amounts to charge to cover operating costs and mortgage expense and still make a profit. If rental prospects do not come knocking, they usually resort to lowering their rents, negotiating with fewer prospects or giving a month or two in rent concessions to secure a lease. This process is being carried out every day by landlords, on a hunch and a hope.
