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You write as if markets are a zero sum game, however they are most certainly not.

You say the poor tenant will transfer wealth to the wealthy landlord as if the tenant is losing. However -- they are both gaining.

Say the rent is $1000.

Obviously, the property usage right is worth to the landlord less than $1000, otherwise he would've just used the property himself. He gains.

The property usage right is worth more than $1000 to the tenant, otherwise he would've just kept the money. He gains.

Both people gain. Both people get richer. Both people ended up with more than they had prior to the transaction.

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Housing markets are a zero-sum game if you refuse to build more housing when demand exceeds supply

If ten families want houses and there are only nine on the market, one family will go without whether you have auctions, price caps, land taxes, means testing, subsidies, or any other economic intervention, because nine is less than ten

And when demand exceeds supply by enough, the prices go up until they reach a point where it becomes non-unprofitable and then people stop "refusing" to build more housing.

And who is refusing to build more housing? I will personally arrange for as much housing as you like in any neighborhood in any city in California. Oh, for the price that you desire? OK, nope, sorry doesn't work that way.

The transaction itself, however, is not zero sum.

Houses get built, maybe just not in the favorite places. People get roommates. Sure housing is more inflexible than some products, but not a whole lot.

> Houses get built, maybe just not in the favorite places.

So 9 out of 10 families get to live in a commutable distance to where they work, or 2 families get to live in half the appropriate space. Not good for the economy, not good for the families, very good for landlords.

Whether or not housing is naturally flexible, CA's government has done pretty darn well making it inflexible. See rents vs. inflation.

Every dollar of rent above costs for construction and necessary administration is a monetary redistribution from the renting class to property owners. CA doesn't lack land, and it doesn't lack the ability to pour concrete into earthquake-safe cubes with plumbing; the difficulty in construction and resulting high rents is the result of intentional obstruction and regulatory capture by the benefiting property owners.

Pretty sure it's not the landlords and wealthier classes that are making CA's government into a giant tarpit. They'd love to see less and smaller government.

Over-regulation is only a part of the cost. The biggest part is the demand. But don't worry, whenever people figure out that silicon valley jobs can easily be relocated, to basically anywhere, that will all work itself out.

> Pretty sure it's not the landlords and wealthier classes that are making CA's government into a giant tarpit. They'd love to see less and smaller government.

They, like anyone else, want to see a government act in their interest. Sometimes that means less government, sometimes it means more. Democrats want more government in healthcare, Republicans want more government in immigration; it is about what they want not how they get it.

And yes it will sort itself out, much like Detroit has worked itself out after the auto boom. It is just sad seeing myopic governance[0] lead CA towards that future.

[0]"Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

Straw man.

Please elaborate: which man is made of straw?

Has California real estate valuations and rents not exceeded inflation for the past decade+? In economic equilibrium should rents not equal amortized construction costs? Have increasing rents not impacted commuting distances and housing availability for the renting class worker? Would these impactions not hurt the economy as a whole? Or do you disagree that regulatory barriers to building housing benefit those who own existing housing?

> In economic equilibrium should rents not equal amortized construction costs?

No.

I mean, even with the kind of generic-market idealized assumptions (such an unlimited competition) that never really apply to real estate anyhwere, rent would equal the amortized cost of providing the rental property, including land acquisition, construction, maintenance, etc.

I agree that my earlier argument is simplistic in its presentation, (here I would treat 'construction costs' as to build and operate an apartment, amortized over lifetime and apartments in a building -- I understand I could have phrased that better but terseness is necessary lest every comment devolve into an essay) but is still correct in its assessment: CA rents are far in excess of any reasonable economic equilibrium, per 'amortized cost of providing the rental property, including land acquisition, construction, maintenance, etc.' Given in particular that in CA (the bay area and SF too) land is in surplus[0].

[0]Regulatory-allowed access to said land, on the other hand, is less permissive.

> CA rents are far in excess of any reasonable economic equilibrium, per 'amortized cost of providing the rental property, including land acquisition, construction, maintenance, etc.'

Really? Show the numbers. I was under the impression that the Bay Area had a very high land ownership premium, that is, that land acquisition costs are very high compared to rents.

Plus, real prices are usually out of line with economic equilibria in dynamic markets, the equilibrium is the price that a market would achieve if it was in a steady state with no changes for an infinite period. A sustained market distortion raises the equilibrium, it doesn't maintain prices above the equilibrium. Prices above (or below) equilibrium are so are do to frictional forces which cause prices to adjust toward equilibrium at a limited rate. So, I'm not sure why you are harping on equilibrium, it seems to be the wrong issue for what you seem to be concerned about.

> Given in particular that in CA (the bay area and SF too) land is in surplus[0].

Even if that was true, regulatory permitted access largely effects rent through land acquisition costs, not independently of it, so it would explain why both land acquisition costs and rents were higher than they would otherwise be, but not why rents are higher than they would be expected to be given costs to landlords including land acquisition costs.

>Even if that was true, regulatory permitted access largely effects rent through land acquisition costs, not independently of it, so it would explain why both land acquisition costs and rents were higher than they would otherwise be, but not why rents are higher than they would be expected to be given costs to landlords including land acquisition costs.

>>reasonable economic equilibrium

Sorry for the delayed reply:

Please see >reasonable in the above, there is nothing economically reasonable about the CA market distortion. Rents are higher than they would expected to be given costs not unjustifiably burdened by regulatory permitting. Which would be the (or at least a) reasonable standard for determining what rents should be at equilibrium which provides a basis for what rents should be in the real world and clearly indicates that rents in the real world are excessively high and not economically justified. I don't see where I've been unclear about this.

Notably including opportunity cost.

The transaction isn’t even close to this.

Imagine the case of a working class family that has lived in CA for generations. The elderly grandmother owns a home because she bought it in the 1950s when things were not so broken. She has two grown children, each with families. One family lives in her house with her, because that’s all they can afford, but that’s okay because they want to stay close to home.

The other family rents a home nearby, because by the time whey were adults, hosing was out of reach.

In California, the only thing stopping rent increase is people’s ability to pay. In San Francisco, a 3bd apartment costs at least $4500/mo, and the median price is more like 8-10k per month.

That is because there are so very few available, and there are enough two income bankers and tech worker households who make enough to justify that rent that the market has no room for anyone else.

We go back to the working class family example, assuming the adults are gainfully employed and each making $60k/year. All they want is to continue living in the town they grew up in, where they have friends and decent jobs and their elderly parent to stay near. They pay $4000/mo, which is near the low end of market rate for a 3bd home for their family of 4, and also about half their after-tax income.

Now this UBI program (or any other change) happens, and a lot more income is suddenly flowing nearby. Anyone who for any reason finds themselves needing a new apartment has a little more money available, and so they can inch up just a bit in the market. But because demand so radically dwarfs supply, this means rents just tick up about 10% in short order.

So back to that family, the landlord notices the market has moved, and he raises the rent 10%. The landlord gains $400/mo. The tenants gain nothing except the “privelege” of non-eviction.

They now have to decide to pay more just to stay in place, or to try and downgrade to a worse apartment to keep costs in check. And if they do downgrade, they’re just displacing someone else who is farther down the economic ladder.

You described a free market scenario, which works on a whiteboard.

In the real world, California property owners have a monopoly on a fixed supply of housing, and nobody gets to participate in the California economy without a place to sleep at night. Thus any increase in productivity locally just goes to the property owners in short order, as they are enabled by the policies they’ve long fought for to extract their rental tax up to the ability of each person to pay. They use this unilateral power to extract all the gains.

Your last paragraph beautifully sums up a point I try to make constantly on a local facebook community group Im a member of. It's chock full of people that celebrate the fact their house is worth 10X what they bought it for 20 years ago, and then out of the other side of their mouth bemoan that housing is so expensive that their kids cant afford to live there.

Housing can either be a good investment, or remain affordable, both can not simultaneously happen.

Hmm... I'm not sure you understand how a free market works or what a monopoly is. Or "fixed supply". But you're quite correct that anything like UBI won't help make housing more affordable. However, it doesn't make anyone else any better off either. It just devalues the dollar a little. Why not cap rents and raise the minimum wage too while we're at it doing absolutely nothing to help.

> So back to that family, the landlord notices the market has moved, and he raises the rent 10%. The landlord gains $400/mo. The tenants gain nothing except the “privelege” of non-eviction.

It seems like that "privilege" is worth to the tenant than the money, even after the increase. Otherwise they would have moved. Therefore, it is not a zero sum game.

I wrote a long answer to your post but a shorter one is this: the housing market in California is absolutely a zero sum game due to policies that essentially hold the supply as fixed.

There is only one Mona Lisa. A voluntary transaction where one party buys it from another is not zero sum, both parties gain.

I think zero-sum was meant from a perspective of a fixed-resource being divvied up among more and more people. In that case each person gets a smaller and smaller theoretical share. Any exchange is locally fair but globally everybody is becoming worse and worse off. This is especially true if you disconnect the concept of living in your own home from the investment opportunity. I doubt many people are going "Sorry honey, we cannot afford a house now or probably ever, but hey that's fair because if we could afford it with so little money we'd be getting access to an unreasonably good performing investment and that wouldn't be fair to others." I think most (reasonable) renters would settle for significantly worse performing housing market in exchange for cheaper housing so that they could transition from renting to owning.

And what about the taxpayers? They lose. I'm not necessarily opposed to wealth transfers in principle, but they absolutely are a zero sum game.

Do you have anything I can read that explains why this must be true? I dont have a natural intuition that this has to be the case, nor one that its definitely false either though.

I've always wondered if you just took billions from the richest Californians and gave that money to the poorest Californians if the people that had their money taken would actually be better of in the long run.

If you increase the amount and velocity of money going through the economy could it not be possible that the rich that had their wealth transferred actually end up better off? I suppose it would largely depend on where the taken capitol had been invested and or if it was just sitting in low yield savings accounts.

I was talking about the voluntary transaction part, not the taxing part, which is not voluntary in any way.

Housing is an essential. You can’t just go homeless without significant consequences. That’s not “voluntary”. Just moving somewhere else is not always viable.

To prove an extreme case, if I point a gun at you and say “$1k or I shoot”, you’re likely to pay. You gained not dying, but are you richer? Or did I merely use my power to impose an urgent need on you that you needed to pay for?

Redistribution is zero-sum by definition.

It's worth modeling it as negative, because administration consumes non-trivial amounts of it, and in practice, often quite significant amounts of it.

Part of the UBI idea is to reduce that overhead, though I'm at a loss as to how to ensure it stays low. The same politicians that turn our current system into a haphazard mess of special carveouts and regulations will still be in power and will have all the motivations (if not more) to add more carveouts and regulations to the new UBI.

Create a new pot of money, and watch the vultures descend. Everybody's going to want to grab a piece.

Yes, I was not talking about the UBI part, but the voluntary transaction part.

> You write as if markets are a zero sum game, however they are most certainly not.

People who say this are only ever looking at the node level, not the network level. Sure, new wealth is added to the network, but at a miniscule trickle compared to the everyday activities of the economic network.

"Wealth is not zero sum" essentially, if taken to its logical conclusion, means "everyone can be a billionaire!" No, they cannot.

I have supplied a very specific example demonstrating this.

"Not a zero sum game" means "both parties profit". That profit may not be money, therefore does not imply anything about billionaires.

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