In any city with a high price-to-rent ratio, rent isn't really a factor in prices. Investors are buying homes in those places because it's really hard to make m

In any city with a high price-to-rent ratio, rent isn't really a factor in prices. Investors are buying homes in those places because it's really hard to make more of them, just like gold and high-end art. The price is determined by what other rich people will pay for them to hold as a speculative asset, just like gold and art. Collecting rent is possible, but it makes an illiquid asset even less liquid: many home buyers want to live in the home they buy, which is hard when there's an active lease. This does not happen in cities where it's easy to build more homes in desirable areas. They have lower price-to-rent ratios because prices are determined by the value of the rental income stream. We can make it easy to build more homes in every city by repealing laws that push lower income families out of desirable places—that's what density restrictions were invented to do.