Rent is a function of supply and demand, not a landlord's costs, otherwise we would expect changes in e.g. mortgage interest costs to be passed on to, but in practice we don't see this effect. We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?

Taxes can be passed on when the tax induces a change in supply. Conventional property taxes are partially passed through because the component of the tax that falls on the building. Tax buildings, get less buildings.

Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.

Landlord costs affect supply in the long term, so you will see changes, just not necessarily immediately over a one year period, but definitely over a 5-10 year period.

> We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?

If costs are uniform for each landlord (they have to pay for), it limits the amount of money they can invest in new capacity, and you will see the effects over a decade. If one landlord has cost advantage over another, then they will of course probably just take the extra money as extra profit.

> Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.

They provide friction with what can be done with the land, because the cost of owning the land has to be paid. If it is just a land tax, however, you can game it by building as much as possible on it so the landowners who can't build as much as you can subsidize your usage (long term, you either have to build as much as you can on your land, or sell the land to someone who can).

> Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.

Taxes may not affect the amount of land that physically exists, but they absolutely can and do affect the amount of land available for rent as opposed to other income-generating use cases.

On top of that, a tax that applies equivalently to all of the land available to the rental market in a given area will simply push prices upwards across the board, which is likely to just be absorbed by renters given the usually low price elasticity of demand for housing.

A transaction can occur if the price is >= the seller's cost, and <= the value to the buyer. If it's at the minimum, the seller must pass on the tax or not trade, at the maximum (down to the max minus the tax) , the seller can't pass on (all of) the tax and still trade. We observe that landlords make profit, so we are not at the minimum. Are we at the maximum?

I think there are cases where we are in between for significant periods of time. Consider a positive shock to wages. Can landlords put up prices overnight? I don't think so, unless the landlords all co-ordinate to do so, prices will be sticky as there are always some properties in the market, so it's difficult to be the first to increase rent. Unlike a purchase, a landlord who waits for a buyer at the right price is forgoing income during the void. So the market price can be a Schelling Point.

A tax increase, however, happens at the same time to all landlords. All of them would prefer to pass it on, and they know that so they can assume all other landlords will try to pass it on. If the rent is currently below the maximum possible, they will succeed.

How long it takes prices to adjust I don't know. It is an empirical question, but I don't know what data would answer it. But it seems like it took decades for landlords to capture the two-income surplus after it became common for women to have a career.

> We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages.

Why would they as long as they find a renter? The market always charges the marginal cost.

I do acknowledge that rent is a function of supply and demand in the big picture, at least. I don't think the whole foundation of economics is wrong.

Demand for apartments will be constant. Supply of apartments will be constant.

But I think what's going on here is that we are way off the equilibrium point. The supply of good places to rent is far outpaced by demand for them, at most price points, and especially so where all the value is (on the coast). So, this means if you're a landlord and you know you'll owe another $1200 tax to Sacramento this year, you should be very confident that if you raise rent by $100 a month, even if an individual tenant would rather move than pay it, someone who can afford $100 more exists and will almost certainly fill that vacancy promptly. It may represent a slight step down in what their buying power would buy. Like, they may have rented a $3000 apartment before, and they'll now rent what used to be a $2900 apartment from you for $3000.

> Rent is a function of supply and demand, not a landlord's costs,

Do you really believe that landlords will subsidize tenants for a long time?

More to the point, if landlords are losing money, why would anyone build rental housing? Instead, why wouldn't they take housing off the market?

> otherwise we would expect changes in e.g. mortgage interest costs to be passed on

These aren't a universal cost. When rates change, some landlords' costs go up. But some don't. That lets the latter set the marginal price.

If everyone's costs go up the same amount, it's collusion without communication. In an inelastic market like San Francisco's, you'd expect prices to rise.

If I own £100K worth of land, and the government announces a 1% annual land tax, it's likely the value of my land will fall by about ~25-33% overnight.

If you think that's morally unobjectionable, fine, but I'd love to know what happens when all the landowners who own rural land that doesn't have a profitable development path attached to it can't pay their tax bills. Have the state seize it all?

Or do they just claim it's of negligible value and avoid the tax?

Most mortgages are fixed interest. So it makes since that today's rate change doesn't impact a renter cost in the near future. Probably not until the next time the property is sold.

> Rent is a function of supply and demand

Is there really a market dynamic in rent pricing anymore? I thought that algorithmic collusion had eliminated the need for landlords to compete on price.

Landlord costs drives supply at a given price point so your initial premise is flawed.

This is a prime example of short term thinking, often espoused by politicians.

Landlord costs impact supply.

Profitability of renting effects supply. Reducing the profitability of renting reduces supply which, as you noted, increases price.

> we would expect changes in e.g. mortgage interest costs to be passed on to

This absolutely happens in the UK where variable interest rates affect more people.

> When landlords' costs drop, do they drop the rent in response?

The price of everything is pretty much a ratchet. They never go down again absent some kind of competitive pressure.