And, while supply is still constraining, landlords can get away with that. But the closer supply gets to being "not constraining", the less ability they have to do that. But, as long as supply is constrained, that will happen no matter what. While a new expensive development can be a trigger, in the absense of that trigger, someone else will realize that they can just raise prices and the market will bear it, so something else will serve as the trigger. The only way to break out of it is build enough that the power to do this goes away. Unfortunately, that is, in many of the most supply constrained areas, a huge, daunting task that will probably take years of dramatically increased development.
I own a farm which has two houses on it. I didn't decide to get in the landlord business, I got into it because the person I bought my farm from built a house for his retired mom. He rented out two units out in it after she passed away and so do I.
I am not always thinking "how do I maximize the value of my rental property?" instead it is something that comes to my mind because some kind of event happened. For instance I had a tenant who for some perverse reason didn't want to pay his well-below-market rate (because I hadn't been raising it all this time) and as a result of that we all found out what a great deal he was getting -- only after we got a lawyer involved did this guy realize he's about to paying a lot more to a slumlord for a much worse place.
There are a lot of people renting a granny flat or half a duplex or otherwise are not economically maximizing who are very much affected when they see prices advertised that are close to twice what they are renting at. Those people are side-by-side on the market with people who are using software to absolutely maximize what they can charge.
But as you point out, for market forces to overcome pataphysical forces (maybe what Thiel calls mimetic?) it will take a big change in conditions.
In Ithaca, NY we are building huge amounts of both market rate and affordable housing, enough that the skylines of downtown and Collegetown are completely transformed but it hasn't make a dent in the homeless colony despite a strong effort to get people into shelters and into housing and they are still saying it is the most expensive small city in the US, but for all I know we could be building much more.
