Which is invisible: rental housing version

I recently took a job as an instructor at the University of Western Carolina. I currently live in Syracuse, New York, for this position I have to break my lease and move to North Carolina. When I told my landlord about my new job and what it meant for our contract, he told me that he was willing to waive the fine for breaking the lease if I left sooner rather than later. The rental market in Syracuse is incredibly hot, and he can earn more rent by re-renting my apartment than staying. I initially planned to stay in New York in the summer and took a month off from my lease. But the deal he offered me would save me about $ 4,000 in rent and utilities. He won, I won and I took the contract.

While discussing the matter with some friends, one friend replied, “What a dirty landlord.” This rocked my heels back. How dirty was the landlord? It seemed like a win-win: I was released from a deal I no longer valued and saved about 4k. He was similarly freed from a contract that would no longer be valuable and would be able to earn higher rents. I told my friend to tell the details, and my friend said, “She’s dirty because now she can rent at an inflated price.” My friend did not see a win-win situation. My friend has seen victory and defeat. I won. The zamindar has won. Future tenants did not.

Is it an accurate assessment? Here we have to look at both as seen And Which is invisible. It’s easy to see: I save money. Landlords charge higher rents. Future tenants pay me more than I do now. Is by what See, It looks like a win-win-defeat. But what Unseen Throw that argument in his head. The apartment is now available sooner than my lease. The number of rental units in Syracuse has increased slightly. That means market rent is low Decreased Where would I go if I didn’t vacate? Yes, landlords are charging higher rents than a year ago, but that is an irrelevant comparison. The relevant comparison is what it would be if I did Was not If I did not vacate, they would have to compete with other tenants for less apartment, which would result in higher rent (if they could get an apartment at all). Future tenants are also a winner here. When we look at both the seen and the unseen, the situation becomes win-win.

A quick note on prices: The rental and housing market is very hot right now (and a recent study found that almost half of the price increases are due to working from home). I talked to my landlord in the morning, and by that afternoon he already had a potential tenant. One could argue that these future tenants are still a “loser” because they have to deal with rising prices. But this claim is based on a misconception of market value: no one has promised that you will be happy with the market price. All price theories tell us that higher relative prices signal a price increase for a marginal unit. They send signals that there is an opportunity to redistribute resources. In this case, the high market rent in Syracuse indicates to the landlord that his property is becoming more valuable. This indicates that my property rights in the apartment are not as valuable to me as before.

Additionally, market rental signals to future tenants that they see the value of this apartment better or somewhere else. This signal coordinates our activity: the landlord gets more rent, I get rid of a lost contract and the tenant gets an apartment. He can argue about the rental price (like I know when I’m going to sign a lease in North Carolina), but he still wins.

PS, Here’s another lesson: talk to people. You never know what the chances might be.


John Murphy received his PhD in economics from George Mason University and is an instructor at the University of Western Carolina.

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