Wednesday, August 10, 2011

Inflation Might Lower The Damn (Real) Rent

I don't have a precise economic model in the back of head driving this assertion, but inflation could reduce the number of people who were underwater in nominal terms (which matters when borrowing constraints are binding), putting more supply on the market, and landlords who can easily set their rents above their debt servicing costs might be less likely to raise rents, particularly for long term 'good tenants' who they have an incentive to keep around.

In any case, inflation would certainly good for the large numbers of people who have fixed-rate debt.