Except that's literally not all there is to it, that's just one component of the problem. It turns out housing is just a tiny bit more complicated than your first day of Econ 101. The half dozen empty skyscrapers lots of us pass by each day seem to indicate that.
"High Rent is just supply and demand" is the new "I could rebuild that whole app in one weekend".
Which components influence the problem here without ending up only being an influencer on the supply or the demand?
> It turns out housing is just a tiny bit more complicated than your first day of Econ 101. The half dozen empty skyscrapers lots of us pass by each day seem to indicate that.
I do not see where your example indicates that. In this case, an owner is not required to make his property, even if vacant, available on the market. That affects the supply in the market. That still comes down to basic supply and demand.
If all the relevant components "just" affect supply and demand then it's useless to analyze supply and demand. Take a step back and analyze those components.
From a practical perspective, I'm not sure further analysis is necessary either. Price, as determined by basic supply and demand principles, is a useful signalling mechanism even without understanding the underlying reasons.
In fact, understanding that it's all about supply and demand is a critical step for tackling this issue and allowing new supply. I see far more resistance to new housing from people who don't understand econ 101 than from those who do.
Though this is a basic neoclassical assumption, it is definitely not true for any of the markets that have seen the most extreme price inflation. "The fat cats" have limited supply in those markets, not by the old-fashioned oligopolist technique of buying all available land, but by the more modern and more corrupt technique of dictating their favored regulations to the local politicians and regulators whose elections and appointments they have bankrolled.
While it doesn't escape supply and demand, I'd note that most markets, especially those in the realm of international trade and money flows, are administered by governments and adulterated by politics.
Neither supply nor demand are objectively or scientifically measurable.
They're psychological and political positions, and both are reliably manipulated in all kinds of outrageous ways.
Most of the time the pricing signals you get from a market haven't just been filtered through these processes, they've been defined by them.
Now please explain how the decision to block proposed housing units near my office is not responsible for the prohibitively high cost of the units that did get through.
Prices are set by the relative leverage and political power of various competing groups, subject to local variations.
The usual rule is that investors and speculators have more power than developers, developers have more power than landlords, and landlords have more power than entry-level house buyers. Existing house buyers sometimes have local power which is more or less on the same level as landlords, with local variations.
Local planning laws and special interests can distort this relationship in various ways, but they can't change the fundamentals.
Two things can:
One is a change in government policy towards building housing to increase access and lower costs - which is unlikely, because investors and speculators tend to own policy. Even though asset inflation and boom/bust churn is a huge drain on the economy, effective national house building programs rarely happen, and when they do they tend to be literally low-rent, not middle class.
The other is a macro-level slump, which can take out the top level - but almost always at the cost of losses in leverage and power all the way down the chain, some of which lead to debt and/or homelessness.
Show me some examples of cities with high prices due to high speculator/developer/landlord power, that don't also have population growth and restrictive zoning.
And how does your theory explain the apparently enormous power of speculators, developers, and landlords in San Francisco, where they are subject to draconian legal restrictions?
How do you explain the apparently nonexistent power of speculators, developers, and landlords in a low-rent city like Milwaukee, where tenants' rights are minimal and developers can build pretty much whatever and wherever they want?
>investors and speculators tend to own policy
Are you suggesting that investors and speculators are secretly funding "grassroots" opposition to the developer ventures they also fund? Because the people who show up to planning meetings to speak against development at least present themselves as existing residents and tenants concerned about crowding, shadow, and gentrification.
>One is a change in government policy towards building housing to increase access and lower costs
So you agree that prices are kept high by government policy to not build housing.
Then how is what I said "not how it works"?
"We can fix this problem with simple government regulations" is also up there.
Policy-market mismatch is partially due to low participation in local politics, and partially due to high-income neighborhoods influencing local politics to keep their area low-density (raising their property value and the surrounding area's rent).
http://www.seattletimes.com/seattle-news/data/seattle-densit...
Ok, so it is no Manila or Shanghai, but it is denser than low regulation "build baby build" Houston Texas.
A lot of the low density places in Seattle are places that wouldn't support density very well anyways (i.e. hills); places that you don't see density at even in mega dense Hong Kong.
That's not to say new residential construction isn't hard in SF - though there have been huge increases in high density construction in just the last few years.
You say that as if it's ridiculous, but that is literally happening in many cities right now, word-for-word exactly as you described.
"OK, how about this. Buy up the municipal water supply and offer it at twice the going rate. See how easy it is to get people to pay the water bill" -- it turns out everyone who can possibly pay, will still pay. Because water, like housing, is a basic human necessity.
It's just that people don't want to for some reason (e.g. regulation), if it had been pure capitalism, I'm fairly certain someone would've built more houses by now.
People are willing to pay increasingly high amounts of rent because they see value in occupying that space. Perhaps because the area provides high paying jobs that, even after having to pay those costs, more than justifies the expense. Whatever their reason, they have evaluated all their options and have determined that this place is to their greatest benefit. When people stop seeing value, they will stop spending.
At the same time, as rents go higher and higher, the incentive to provide more rental properties increases. Maybe not yet, but at some point it becomes too much to ignore. Hypothetically, if the going rate for were $1M/month, I'm sure there would be many people would would be quite happy to vacate their houses to let you fill them that would not be so happy at the current rate. As the saying goes, everyone has a price. Maybe government would also improve zoning after a certain threshold, allowing new dwellings to come onto the market. A declining population would be something for government to stand up and take notice of. There's no indication that anything needs to be done when growth keeps on climbing.
People need a place to live, but I'm not convinced shelter is universally out of reach. Look out into small towns and rural areas and it is a whole different world of pricing. Yeah, maybe you will have to take a $20k/year job instead of a $150k/year job, but if you are hypothetically spending $130k/year more on rent to have that $150k/year job, your income is going to be the same in either place (ignoring the differences in other costs, including taxes, for ease of discussion). If you are paying less than $130k/year in rent in our hypothetical situation, it is easy to see where the money is coming from. Why shouldn't they pour it into housing?
Something doesn't add up in your analysis.
You can make anyone do anything you want if you can bend their perception of reality - They are completely ignorant and powerless.
If you're holding someone at gunpoint, at least they have the power to beg for mercy.
I'll give you a million dollars tomorrow - I promise.
See what I mean?
How's that forcing me to do anything?
Is there any place in your worldview for people different than you?
This might boggle your mind, but I voluntarily choose to live in big cities even though my work is 100% remote. I could live in a super cheap rural area, but instead I choose to live here in NYC specifically because I think it's much higher quality of life here.
Your comment seems incredibly self-centered. Not everyone considers large houses and empty spaces to be the epitome of "quality life."