You are spot on. I spoke to a developer who said the rent figure they give to the bank on unrented properties determines the value of those properties AND the amount they can borrow for future properties. As long as their holding costs are less than the loss of rents, it's beneficial to not rent at all.
Also rents are lowest when an owner has no mortgage, so the money they get is just a nice bonus (think empty nesters with a room to let). That's rare these days as everyone is mortgaged and refinanced to the hilt.