Comment by goodcanadian | Hacker News Reader

Comment by goodcanadian | Hacker News Reader

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Because it's an inelastic good, people have to pay or be homeless, so they'll pay up to how much they make.

Housing demand is more elastic than many people suppose. As you indirectly point out, people will generally take the best housing they can afford. If they can only afford a shared apartment or living with their parents, that is what they will do. If they can afford their own apartment, they will do that. If they can afford a mansion with a swimming pool, many will do that. People will sometimes move away from high priced areas and toward lower priced areas if they can manage it. To a certain extent, therefore, demand will increase and decrease relative to supply. So, back to my original thesis, if you want cheaper or better housing, build more of it. Ideally, you do this in places where it is in demand though I acknowledge it may be difficult in the highest demand areas. Alternatively, build rapid transit to increase the effective availability of housing (increase the reasonable commuting distance).

What you quoted is about people taking the only housing they can afford. Keep in mind low income households are 44% of the US. 44% of the country can only afford the cheapest rent. When half of the country has a flat limit, it restricts rent prices, which is why in most of the US there are two grades of rent: 1) cheap rent, which isn't great or 2) slightly more expensive rent where you get seemingly double for it, eg your commute is reduced by an hour, you get all of these amenities like heating and AC, you get way more square feet and so on. For most of the country the difference is around $200 a month.

I know there are wealthier areas like out here in the SF/Bay Area, where there is much more of a gradient due to the average person making six digits. Keep in mind if the bay area was its own country it would be the second wealthiest country in the world, so yes the US has exceptions, but lower income rent is still capped to their income.

If you think housing is elastic either you misunderstand the word or you can always prove it by living out of your car. In comparison, eating out is elastic, despite it being food. You can easily prove it by cooking at home. Maybe you're saying living in an expensive place is elastic so the free market works? Yes, this is true for the upper half of the country. For the lower half it is absolutely inelastic. A tv is elastic, because you can easily prove it by not owning one. Utilities, eating cheap food at home, and housing are inelastic. Try living without power.

On the contrary. Housing demand is elastic. Three people can share a single apartment or they can each have their own. The latter takes three times as many apartments as the former. The strategy people choose will depend strongly on what they can afford. The tighter the supply is, the higher the price, the more people you will find living in each unit.

The reason the price is capped by the lowest income is precisely because demand is elastic, if the landlords raised prices any, they would find themselves without tenants. The prospective tenants might move back in with their parents, for example (and yes, some of them might just end up homeless). There is insufficient demand at a higher price level.

Utilities, eating cheap food at home, and housing are inelastic. Try living without power.

Sure, living without power sucks, but above a bare minimum, the amount that is used is highly elastic. If I am having trouble paying the bill, I will absolutely keep use to a minimum.

Elastic means you can go without it. Can you go without housing?

Well, yes, but that is not what elastic means. Elastic means not fixed. The demand for housing can vary quite a lot even for a fixed population, so it is quite elastic. Demand for food on the other hand is much less elastic, but even there, I wouldn't call it completely fixed as people can change what they eat even if they can't drastically change the number of calories they consume.

What you're talking about is price elasticity, which is not the same thing. Here, I'll paste in a definition of inelastic:

Inelastic is an economic term referring to the static quantity of a good or service when its price changes. Inelastic means that when the price goes up, consumers’ buying habits stay about the same, and when the price goes down, consumers’ buying habits also remain unchanged.

Yes, I am using the same definition that you quoted. I will try one more time:

What happens when an adult child moves back in with their parents? They have "gone without" one unit of housing.

What happens when three friends move in together? They have collectively "gone without two" of the three units of housing that they would have otherwise have occupied.

Conversely, what happens when my wife kicks me out because I spend too much time on Hacker News? I am now looking for new housing.

In each case, the number of people remains fixed, but the demand for housing has changed. Price will definitely affect what strategy people adopt: whether to live alone or share with friends or whether to live in a cramped apartment or in a 3 bedroom house.

To first approximation, everyone needs a place to live,* but there is more elasticity in the amount housing each individual consumes than is commonly believed.

*I have known several people who have deliberately gone without housing entirely for a time in order to save money.

Another way to think about inelastic is it is relative, not absolute.

Textbooks, teachers, and professors, love to use gas as an example of an inelastic product when teaching the topic. However, if gas hit $100 a gallon you better believe people would be driving less.

Yes, gasoline is interesting because demand does seem quite inelastic, especially over short periods of time. If prices remain high for extended periods, you sometimes hear of people changing to more fuel efficient vehicles, but I don't think I've ever heard of people changing their driving behaviour in response to gas prices. I find it particularly interesting because it is one I naively feel like should be more elastic than it is.

This was a thing in recent years..

In the 90s it was normal for truck drivers to literally drive 100mph in some parts of the country (No, I'm not making this up. A few states even had no speed limit on their freeway and semis would drive even faster.), but once gas prices rised during the bush administration most companies capped their driver's speed to 62mph to increase mpg.

During this time when gas prices shot up people stopped traveling for vacations as much. Ride share programs popped up at this time too. This was the time I got my first remote job, but that may be a coincidence.

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