In the U.S. there is no limit as long as you aren't a strong outlier relative to mean market rent. People in LA might pay like over half their income on rent, for example. For the working poor, they also typically can't finance a move to a cheaper apartment since they lack any savings, so they cram more people per bedroom or end up living in their car or on the street. It's a sad state of affairs and really hard for working people here. Sucked dry with nothing left to use to get out.

I think it would be hard to prove it one way or the other. There are a lot of variables that go into profit for landlords and property owners, and building one property affects the possible rent on other properties.

However, in a general sense, rent prices are affected by supply and demand, like most other things. Having a housing supply lower then the demand benefits landlords, as they can raise the price without making improvements, and they can more easily fill vacant units. If supply surpasses demand, then landlords are left with empty units they need to fill, and the prices go down.

Obviously, this can only go so far. At a certain point, prices can get so high that few renters can pay for it, or the math becomes more favorable to build more housing. However, the overall incentive structure is for property owners to keep housing supply low, to increase the value of existing properties with minimal investment.

>However, the overall incentive structure is for property owners to keep housing supply low, to increase the value of existing properties with minimal investment.

For single non commercial property owners. This would be news to the commercial real estate investors that keep trying to develop residential areas and apartment buildings. If you're in a city with high rents and land costs, see who is trying to build and who is trying to block. It's all public information.

This is actually a good environment for certain parties at play and this is why this status quo is upheld. The way this machine works in LA is that the city councilmember can unilaterally approve or dissaprove development in their district. Certain developers who can gain good favor with the councilmember can have their builds preferentially approved and red tape cut through for them. Commercial real estate investors then look to work with developers with a good relationship with city council.

This sort of setup helps everyone on the inside (the councilmembers, the developers, and the investors), but hurts those on the outside (renters, people hoping to buy one day, real estate companies who haven't yet bought into the machine). However, since those on the inside control the reigns of power, and those on the outside desperately try to work their way into the inside rather than break the system down and build up something more equitable, nothing changes.

Your analysis is correct. Let's add one more factor:

At one point the prices become so high that people actually start getting out of the cities. That's what started happening in my country although it's going to be at least a decade until the consequences are felt (since the influx of people is still bigger than those who leave). But it did start happening.

Maybe not, but pretty sure the wealth of an urban area is a superlinear function of density and size (super linear on both axes), so choices based on the marginal RoI to land barons will lead to suboptimal outcomes either way.