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If you're counting "short term tenants" in the demand, it seems really dishonest not to count the properties that serve them in the supply. If we're talking ab
by Zarel 11y ago
If you're counting "short term tenants" in the demand, it seems really dishonest not to count the properties that serve them in the supply.
If we're talking about the supply and demand of all housing, supply has not changed because because using properties to service short-term tenants is still keeping it in the supply, and demand has not changed because you're conflating demand with transaction quantity.
In other words, when Airbnb allows the supply of short-term rental properties to increase, this decreases equilibrium price and increases transaction quantity of short-term rentals, but demand itself isn't affected. The number of people who _want_ to visit San Francisco at any given price point hasn't changed, it's just the number of people _able_ to visit that's changed.
Really, all that's going on here is that Airbnb has lowered the barrier of entry to short-term rentals, allowing landlords to more easily address market inefficiencies created by rent control.
Not that rent control is wrong, but it does work against market forces, and markets tend to route around regulations that work against market forces, in the form of black markets, or scalpers, or whatever. Your enemy really isn't individuals or companies so much as market forces themselves, and while sometimes it's necessary to fight them, honestly, it'd be easier just to legalize building denser housing. Unlike Airbnb, that's what's _really_ restricting the supply.
- roel_v 11y ago"and demand has not changed because you're conflating demand with transaction quantity" What? Of course it increases demand in the market that is traditionally served by houses in residential neighborhoods. 'Real estate' is not one market, there are several, divided by zoning regulations. When the people that used to stay in hotels now are looking to occupy places in houses where they didn't used to be able to stay, the demand for stays in those places has gone up. Furthermore, demand is also increased (demand for the amount of nights) because visitors can stay cheaper (per night) so some stay longer. I.e. more demand.
- Zarel 11y agoI think you're still conflating demand with transaction volume. Let me put it this way: > Furthermore, demand is also increased (demand for the amount of nights) because visitors can stay cheaper (per night) so some stay longer. I.e. more demand. Demand is a curve. Visitors saying longer because they can stay cheaper just changes what part of the curve you're on, it doesn't change the curve itself. In other words: the demand was always there, that visitor would always have stayed longer if they could stay cheaper. The only difference is whether or not they have that option, which is a difference in supply, not demand.
- roel_v 11y agoDemand does go up, because people who earlier couldn't compete for the good we're talking about now can. There are x locations each night to sleep that are zoned for residential purposes, some more attractive than others. This is the supply. There are y people competing for those; y is roughly equal to the amount of people who have their primary residence there. Now y' people who are not primary residents start to compete for those places. Result: demand is y + y'. X remains constant (in the short term). Result: P goes up. The 'cheaper' meant compared to the prices of another market, i.e. the hotel market. This is a cumulative effect, on top of the first-order effect of those consumers being let into the market in the first place.