: Why would a competing building owner not think "aha, Mr Bad-Business-Brain overcharges his tenants so If I undercut him I'll get his tenants and the money too!"?
Erm..well, I'm a bit ropey on my rent theory, but IIRC it goes: Rent is extracted by demand exceeding supply, the base value being the cost of avaerage utilisation of the rented property (the cheapest, least 'productive' house).
Thus if the running costs of keeping a person in a house are £20 a week (repairs, mortgage, etc.) then all rents will begin at £20, for a more productive (i.e. more bedroomed) house, this will remain the same, thus extra tenants can be crammed in, to make more money for the landlord. on top of this, if there is any shortfall in the market (and short term contracts and empty houses pretty much ensure this is so) surplus value can be added a la supply and demand (relative rent I beleive its known as).
Thus a landlord will only go so low as the average cost, and will probably not go below market price...