Investor · Athens, GA · Member since 2015 · 205 posts · 66 votes
Where I invest (college town) there is higher demand for rentals.
Other than the obvious laws of supply and demand, what other economic forces put pressure on rent prices, both up and down?
Thanks for any insight you can share.
In some cities like Los Angeles , NYC and San Francisco government imposed rent controls affect rental prices . Besides that I agree it's going to be simple supply and demand .
Supply and demand still drives market rents, even (and arguably especially) in rent controlled areas. What typically happens in rent controlled areas is those restrictions end up restricting the supply of available rental housing, which ironically drives market rents up even further ... not to imply that it is illegal, but it is kind of a kin to outlawing drugs doesn't stop drugs from being bought or sold, but it does drive the market value of those drugs up. Market supply and demand always drives pricing.
Nederland, TX · Member since 2016 · 109 posts · 92 votes
9y
@Brad E. I would argue that there is no other economic force in play other than supply and demand which drives rental prices but that is a topic for a different thread. It will all boil down to supply and demand whether that is supply and demand in housing or supply and demand in the work force. In my area I find that the high demand for high paying short term (1-4 year) transient jobs from multiple large companies in different industries holds the rental mark in the range of 1.3% - 2.2%. That is the rent runs 1.3-2.2% of the purchase price.
Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
9y
Im my experience, demand is driven by one core factor, jobs. People go to college for jobs, people move to cities for jobs, and move out if jobs dry up. The more jobs, the higher wages, the higher the demand, because people want jobs.
There is also another side to the coin, you could see this in the housing collapse, once the market flushed out the owner who could not float a property in bad times, you seen the market hit a bottom as people just refused to sell or rent it for anything less, they would close the door and just keep it empty vs taking less. Banks and many others who could afford to do this, did that. Thus a floor in the market was born, even with the lack of demand you just where not going to get a lower price.
Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
9y
In some cities like Los Angeles , NYC and San Francisco government imposed rent controls affect rental prices . Besides that I agree it's going to be simple supply and demand .
Another thing is there is the luxury market versus non luxury market . Although I'm not sure this would be considered an economic force .
Los Angeles, CA · Member since 2016 · 156 posts · 113 votes
9y
To piggyback off @Joseph M.'s comment, yes Rent Control affect rental prices by forcing prices to stay down which acts as an incentive for rent control tenants to stay in a rental for a longer period of time compared to the average renter who might eventually purchase a home. Some will argue that rent control restrictions reduce inventory on the market which then also restricts supply.
Another issue with Los Angeles is their extremely restrictive building regulations so when the city already has a supply shortage, LA is counter-productively discouraging additional apartment building by making it difficult to build and also very expensive to build. This is why most units that are being built in Los Angeles are luxury apartments, which also increases rent averages.
Software Developer · Vidor, TX · Member since 2015 · 922 posts · 639 votes
9y
Economic opportunity. Don't have a strong workforce in need of housing? Then you don't have a housing market, much less a rental market. At least not a very good one. There should also be a distinction between different colleges. The economic impact of College Station and its desirability is very much different than that of Lamar University.
Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
9y
Justin Fox It's the same law of supply and demand.
Rent control and law supply/demand are the only factors in my opinion. 98% of the time, there's always those exception, ie an owner of a house that rents 100k/mo will not be affected by any event, they won't drop prices because noone is renting. A 1/1 apartment in ND during the oil boom rents 1200/mo, now 400/mo.
Investor · Houston, TX · Member since 2017 · 83 posts · 42 votes
9y
@Justin Fox College Station is a bit of a different ballgame in my opinion. I don't know any other towns that quite rely so heavily on the student population. Everything entailed in the conversation above (jobs) go hand in hand with the influx of students - which is never ending (albeit semi-seasonal).
In fact, the growth plans of A&M are ambitious, and I think it's going to be a very hot rental market. I read that it plans on being the largest school in the US. This will mean a regular abundance of readily made tenants (supported by mom & dad of course).
I think there is a lot of sustainability in the CS & Bryan markets and hopefully once I am further along in my Real Estate & Investor career, I will seriously look at buying Mult-family in the area to utilise as student accommodation.
Investor · College Station, TX · Member since 2015 · 18 posts · 8 votes
9y
@Joe Davis The market up here currently is pretty stagnate when it comes to rentals. There has been plethora of large student housing complexes built around and south of the university that has flooded the market. As the university expands and Rellis gets finished up the market will even back out; I foresee that being a few years out. Coming the next couple weeks I can foresee multiple property be put on the market due to vacancy.
Also with this petition. If passed could change a lot of things
In some cities like Los Angeles , NYC and San Francisco government imposed rent controls affect rental prices . Besides that I agree it's going to be simple supply and demand .
Supply and demand still drives market rents, even (and arguably especially) in rent controlled areas. What typically happens in rent controlled areas is those restrictions end up restricting the supply of available rental housing, which ironically drives market rents up even further ... not to imply that it is illegal, but it is kind of a kin to outlawing drugs doesn't stop drugs from being bought or sold, but it does drive the market value of those drugs up. Market supply and demand always drives pricing.