Untenable Tenant Anger – Econlib

Today, I would like to revisit a theme I previously explored: the peculiar ways economics can evoke unexpected reactions. In my earlier analysis, I expressed my appreciation for the necessity of payment for goods and services—even for essentials I might be in dire need of. This time, I want to discuss a recent article that recounts a so-called act of “revenge” taken by an individual against his former landlord, and why I believe this anger is fundamentally misplaced.

If you’re intrigued, the full story can be found here. The individual recounts how, back in the ’90s, he and his wife were renting an apartment from a real estate agent. As they approached the end of their lease, they had a house purchase lined up, but the timing was off. So, he approached the landlord about extending their lease on a month-to-month basis for a couple of extra months while they finalized their home purchase. As he describes it,

A year later, we found a house to buy. We weren’t quite ready to move in, though, so I called the landlord and said we needed two extra months in the apartment. He agreed and told me he’d send over an addendum to the lease for those two months. Know what that addendum contained? A 50 percent increase in rent! I lost my mind. I called him up and asked him how he could double our rent. It wasn’t fair!

Here we already see an issue with numerical accuracy—was it a 50 percent increase in rent, or a doubling, which would equate to a 100 percent increase? Based on the subsequent details, I suspect it was a 50 percent hike rather than a complete doubling. He later mentions an increase of $500 per month, which suggests a more likely scenario of an increase from $1,000 to $1,500, rather than from $500 to $1,000. Regardless, let’s move on and examine why the situation that so outraged him is, in fact, rather commonplace.

Over the years, I’ve rented multiple apartments, and the predicament that this gentleman found so outrageous is simply part of the rental landscape. When my wife and I relocated to Minnesota, we encountered a similar situation: the lease offered various lengths, with corresponding price adjustments. Opting for a shorter lease—say, nine months—came with a steep rent, while committing to a longer lease—like eighteen months—yielded a much lower monthly payment. Renewing for a new long-term lease usually resulted in a modest rent increase, whereas switching to a month-to-month arrangement meant a considerably higher rate. This pattern has been consistent in every rental scenario I’ve experienced.

Short-term arrangements almost always come with a premium. Imagine owning an apartment building; it’s logical to prefer tenants who commit long-term, minimizing turnover and the associated costs and uncertainties. The latter scenario often results in higher transaction costs and vacancies, which landlords understandably wish to avoid. A six-month lease is less appealing than a two-year lease, as the latter guarantees income stability for a longer duration. Thus, it’s reasonable for landlords to charge more for short-term leases and month-to-month extensions, reflecting the market dynamics.

Interestingly, the disgruntled renter himself unintentionally acknowledges this fact in his narrative. In his frustration, he explored options for vacating at the end of his lease and finding temporary living arrangements until his new house was ready. However, he discovered that doing so would be prohibitively expensive. The hike in rent for his short-term extension was not an arbitrary increase; it accurately reflected the market rate for that rental type, ultimately saving him the hassle and cost of two separate moves within two months.

Furthermore, he expressed indignation over a $300 deduction from his security deposit for cleaning, despite claiming he left the apartment in immaculate condition. The truth of this assertion hinges on whether his perception of cleanliness aligns with reality—many individuals confidently believe they have performed exceptionally well in tasks, only to find their results fall short of expectations.

The final source of his outrage stemmed from seeing the apartment re-listed after his departure, noticing that the new long-term tenants were not subjected to the same rent he endured for his short-term arrangement:

We found the classified ad, and he didn’t list the new rent at $500 more. He listed it for just $100 more than we were originally paying. For a while, no one leased it. And when they finally did, it was for only $75 more a month than we were paying.

However, this new listing reflected the rate for a long-term lease, not the inflated cost of a month-to-month arrangement. During our own month-to-month extension while in Minnesota, we experienced a similar spike in rent. Yet, I never felt compelled to check what the apartment was listed for after our departure. Had I done so, I wouldn’t have expected the new tenant to pay the same rate we faced as short-term renters.

Unlike this gentleman, I chose to move forward without dwelling on grievances. He, on the other hand, allowed himself to be consumed by anger and resentment, which culminated in an act of sabotage against his former landlord’s real estate deal, costing the landlord $25,000.

As we reflect on this situation, I leave it to you, dear reader, to consider which response—my pragmatic acceptance or his festering grievance—might be the healthier and more rational approach.