You need competition, which means you need developers to add more housing units, which means you need to change the regulations that prevent that from happening.
Problems in real-estate are almost always government created IMHO and not "capitalism".
Problems in real-estate are almost always government created IMHO and not "capitalism".
The government enforces capitalism laws (rather than socialist or chartalist) so how do you distinguish?
It requires power to prevent voluntary transactions and that comes in lots of flavors.
My point is you are distinguishing between government and capitalism - capitalism is an attribute of the government and power structure. The people with capital are the ones preventing the transactions (to their own benefit of course).
I don't think that is a common formulation of the idea of "capitalism".
They can't really though, at least not anytime soon -- the cycle itself gives the cartel more capital. If they buy units as they come onto the market, they hold the equity in those units, which they can instantly mortgage out to get more capital, which they can spend on more units, which they can instantly mortgage out to get more capital. This is especially true when interest rates are low, (the lower rates are, the cheaper this cycle is to continue -- at interest rates below the real inflation rate, they effectively get given free money to do this)
And yes, it exposes them to the risk that eventually this bubble could pop, but it could take many years (decades even?) before that happens.
If competition is unrestricted, cartels are unstable structures. It only takes one member unwilling to join cartel to ruin them. That's why drug cartels are killing each other and smaller competitors.
There are exceptions, but that's where antitrust laws come in.
It only takes one member in an enviroment protected from all other actions of the cartel to ruin them.
If all economic actors only interacted in the marketplace itself, then, yes, cartels are unstable. But businesses are not spherical cows in a vacuum.
In practice, cartels can exert all sorts of forces to insulate themselves. While most don't go to the extreme of drug cartels which you should note are quite adept at maintaining their stability, they can still to plenty without resorting to violence. Off the top of my head:
* Economies of scale, barriers of entry, and other Econ 101 stuff that privilege large entrenched actors over upstarts.
* Threatening to stop giving contracts to builders if they work with the competitor.
* Threat of social sanctions since many of the people who run these businesses all know each other and play together. Pretty awkward to break up a cartel at 10am and then go to your regularly scheduled golf game with its owners at 4pm.
* Buying smaller competitors outright before they defect.
All of those already exist without cartels.
> Threatening to stop giving contracts to builders if they work with the competitor
This assumes that pool of builders is somehow limited, but if that's the case, builders have leverage. How exactly do you see this conversation going?
- If you work for our competitor, we won't give you any contracts!
- But he can just hire other builders.
- He can't, you're the only builders in the area.
- Oh. Well then, how about we go work for both you and your competitor, and you have to pay us more. What are you going to do, we're the only builders in the area.
> Threat of social sanctions since many of the people who run these businesses all know each other and play together
There's potentially billions of dollars to chase, but what's stopping you is that this will piss of your golf buddies. Right.
> Buying smaller competitors outright before they defect
You can't just assume you can buy any company. Why don't drug cartels just "buy" each other? Surely it's preferable to non-stop murdering.
Well, sure, but in an environment with a cartel, they will privilege the cartel over other actors in the system.
> This assumes that pool of builders is somehow limited
And it is. It's limited to the builders who operate within the geographic area the cartel operates in.
In general, you're just dismissing these very practical criticisms with more "idealized market theory" that only works when it doesn't have to take real frictions into account, or by just saying what boils down to "nuh-uh".
But who buys the government?
[1] https://livebaltimore.com/neighborhoods/madison-eastend/
https://www.zillow.com/homedetails/2011-E-Lafayette-Ave-Balt...
I see some 'houses' in the area that you're looking at for $130k, built in WWII and likely have heating bills high enough to bankrupt the wealthy unless the place is ripped apart and modern insulation is put in.
Large back tax bill, lack of city services (e.g. if live in Springwells, good luck getting a reasonable response time from Detroit PD if you're being burgled) and an unsafe transit situation are the most common ones I can think of.
The houses are cheap for a reason. Its not as though Detroit is filled with provincial oafs that don't know what they're selling.