We are in the property management business, and it is useful for people to understand how rent is determined.
The maximum rent is determined by "the market" based on what the market will bear and when rents are out of balance with incomes, it is strong indicator that permitting by the local government entity has led to a shortage of housing.
When you have a shortage of housing, who should get it. First come, first serve. The person willing to pay the most. Aunt Suzie's best friend's daughter?
All of these things actually play a role in who gets housing, who has to commute an hour each way.
Of all the landlords, in our experience, the small investors offer the "best rent" deals to renters. So, squeezing them out of the market ultimately raises average rents since they don't have the sophisticated pricing models big investors have. They are simply looking for "enough" of a return to justify their investment.
We fit in this group and our target rate of return is 5%. Most young people we rent to would be better off investing in stock index fund over the long term than housing. Tying up their money in a house, when they can invest through work in an IRA with a 50% employer match is no contest. And unlike a house, they can invest incrementally, instead of dropping $700-800k in a house. But to do that someone has to offer them a house to rent.
Older investors feel safer owning real estate. They are not searching for the best return, just a good return with low long-term risk. Below is link showing the returns on housing vs stocks since 1975.
https://th.bing.com/th/id/R.1d8ce1a484e6d928fb7774fffd21ab3b?rik=JiY7ULJ33LFT7Q&riu=http%3a%2f%2fproinvestmentcoach.com%2fwp-content%2fuploads%2f2017%2f05%2freal-estate-vs-stocks.png&ehk=5mZq8zLHLzi96qLlztEiQzu1%2fdUT27C45rqGaImVnJE%3d&risl=&pid=ImgRaw&r=0
Before advocating squeezing out small investors, be aware you are effectively advocating for higher rents and less compassion. During Covid we forgave rent and over the years we have raised rents slower than the market demands mostly to cover rising costs. That is how small investors tend to price things.
I think the real travesty is the failure of zoning and permitting government departments in municipal governments to take steps to make more affordable housing available to buy or rent.
Finally, I never quite figure out how you think young people out of college have the money to tie up in house or why they would want to, given how mobile careers are these days. Having someone provide good housing is a bargain.
Interesting the housing recession of 2008 was largely driven on the premise that it would help poor people build wealth, it did not end well.
