4 ms·
This isn’t predicted by classical economics. This is the result of the housing supply being artificially constrained by zoning laws. If developers could build a
by fbonetti 8y ago
This isn’t predicted by classical economics. This is the result of the housing supply being artificially constrained by zoning laws. If developers could build a 40-story high rise next to a single family home, housing would be dirt cheap. On top of this, rent control further disincentives developers from constructing new properties.
AirBnB and Uber aren’t “bypassing the market”, they’re bypassing local laws and ordinances. The reason why AirBnB is cheaper than hotels and Uber is cheaper than taxis is because they don’t incur the cost of regulatory compliance. Real estate would also be cheaper if developers didn’t have to comply with zoning regulations.
- nostrademons 8y agoStill predicted by classical economics. Zoning laws change the elasticity of supply. Housing in a completely free market should have relatively high elasticity; if the price is too high, build more! Zoning laws artificially constrain the supply and so create a monopoly/oligopoly situation, which is what allows owners to charge economic rents beyond the marginal cost of producing more housing. Similarly, the local sublet/taxi regulations that AirBnB/Uber bypass artificially constrain supply, allowing owners of properties or taxi medallions to charge economic rents. Bypass them and you get a competitive market, where owners of houses & cars can charge only the marginal cost of use (and instead, AirBnB and Uber get to charge monopoly rents).
- fbonetti 8y agoI think we’re saying the same thing. Your original comment made it sound like high real estate prices is just a fact of life.