5 ms·

Raising prices = Demand > Supply. You can either try to curb the demand (by e.g. creating incentives for companies to build offices elsewhere, move government b

by vtail 7y ago

Raising prices = Demand > Supply. You can either try to curb the demand (by e.g. creating incentives for companies to build offices elsewhere, move government bureaucracy somewhere else, etc.) or improve the supply by facilitating new construction, which in most places on earth is limited by, again, local government restrictions. edits: grammar

sdegutis 7y ago
What's wrong with legally limiting artificial price hikes to prevent people from abusing Demand > Supply for the sake of their greed? [Edit] To clarify, they seem to be "artificial" price hikes because they don't in any way necessary to cover costs. People realize they can charge more and get more money, so they simply do. That's inherently avaricious and unethical. Sure, maybe prices work themselves out, so that price goes down when supply goes up, but this seems to only be because suppliers can no longer get away with a higher price, because their competition is now selling it at a lower price. So I think it's far more ethical for a government to limit those kind of price hikes, which mainly just hurt the consumer, than to allow these abuses to continue in the name of "freedom".
- piker 7y ago
  What's "artificial" about the price increases?
- ThomPete 7y ago
  So basically creating an artificial demand stop is the solution to creating the "artificial" price increase?
  - jacquesm 7y ago
    The simplistic version of demand based economics do not take into account speculators who buy rental properties and do not rent them out to reduce supply and to help increase the price of the properties they are flipping.
    - ThomPete 7y ago
      Doesn't change that both are artificial.
- rwj 7y ago
  Are you asking in the short term or the long term?
- coryrc 7y ago
  Paul Krugman tries to help you understand: https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-affair.html https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent...
- ziziyO 7y ago
  Why is greed so bad here? The problem isn’t greed it’s the demand in the face of the lack of supply. Make other places more attractive or increase the supply available in this location.
  - wander_homer 7y ago
    > Why is greed so bad here? The problem isn’t greed it’s the demand in the face of the lack of supply. Greed is bad in this situation because you can make more money of luxury apartments than those suitable for people who are somewhere between the poverty line and upper middle class. Hence new apartments in major cities tend to be more and more expensive to satisfy the demand of wealthier people. Greed is also bad when existing apartments are made much more expensive, thereby forcing senior citizens who have been living there for decades and who are barely able to afford the rent to basically leave town, family and friends.
    - mamon 7y ago
      Upper middle class are usually not homeless, right now they occupy some pool of apartments in cities anyway. By building more luxury apartments you encourage them to move, thus leaving their old apartment behind, either by putting it on sale, or renting it out. Think of this like a domino effect: those earning $10M per year buy luxury residence, leaving their old house for those earning $1M, who in turn leave their own houses to those earning $500K, who leave their apartments for those earning $200k, and so on, and so on. In the end everybody benefits from new housing being built, even if it's only luxury housing. Also, increasing supply keeps prices down, thus decreasing profitability of buying houses as investment, causing larger share of apartments to be bought by people who actually plan to live in them. EDIT: yes, this effect might not work as described if is limited to just one city, because there might be a lot of people wanting to move from elswhere. Or more precisely: it will work, eventually, but it would require much more housing to be built to meet the demand.
      - kaybe 7y ago
        I don't think they're going to move that easily. Rent has been going so much it is eating a larger income share than before for many of them too. So what that leaves you with is disproportionate increase of demand and prices for smaller cheaper units.
- andys627 7y ago
  The market works this out "automatically" when supply is greater than demand. If there are too many dwelling units then landlords will compete with eachother for tenants by lowering prices relative to eachother.
  - q3k 7y ago
    In the meantime while we wait for this to happen, people will keep getting evicted due to rising rent. How long do we wait? When can we expect results?
- vtail 7y ago
  You are using emotionally charged words ("artificial", "abuse", "greed"), which makes a bit hard to have a constructive argument, but let me try :). One way to think about prices is as a signal. When greedy landlords raise prices, they send two signals: (1) To other landlords and wanna-be-landlords, saying it's an attractive market which would justify new construction or cleaning up your spare bedroom and putting it on the market, both increasing supply, and (2) to current and future renters, making it more economical for them to move elsewhere and thus save on their rent, thus reducing demand.
  - rolltiide 7y ago
    remember, gentrification is typically used as a pejorative good point in that it undermines constructive argument
  - sdegutis 7y ago
    I just edited the comment to clarify what I meant by those words. And they should be used because they are accurate in this context. Although I did convert "greed" to "avarice" in my clarification since I think it's more accurate here.
- gumby 7y ago
  Doesn't that discourage people from building more housing, which is what would actually bring the price down?
supercall 7y ago
You're assuming the high prices are a result of high demand. Speculators and other bad actors are also driving up prices.
- jstanley 7y ago
  Speculators drive up prices by buying. They are "demand" as well.
- pulse7 7y ago
  Speculators are "fake demand".
- cco 7y ago
  I would imagine, but obviously can't speak for the parent poster, that if you suggested limiting speculation they could agree on a sensible implementation of that policy. I have not met anybody so far who thinks wealthy foreigners should be able to use real estate to launder money, store value, hide wealth, or otherwise not use real estate for what it is meant for, that is to say as places for people to live, play, or work.
  - jodrellblank 7y ago
    Since all that does happen, what relevance is it to say you haven't met anyone who supports it? Do you consider yourself the kind of person who should have met such people? Do you move in those circles? Do you meet a disproportionately large amount of people, or people at high levels who influence policy?
- JanSt 7y ago
  The thing is, that there is no real "pure" speculation without the demand. In Berlin only 1.7% of housing is empty, of which 41% is because of ongoing modernisation, 31% because of renter currently changing and 12% because of mold or other damages. So only approx. 0.27% of housing is empty in hope of higher prices or because of other reasons. [1] The demand is real. No living space is created by this policy. Much will not be build because of it. [1] https://www.morgenpost.de/berlin/article214572349/Nur-1-7-Prozent-der-Berliner-Wohnungen-stehen-leer.html https://www.morgenpost.de/berlin/article214572349/Nur-1-7-Pr...
tmalsburg2 7y ago
But how well has this worked in comparable cities like London or Paris where only wealthy people can afford to live?
- vtail 7y ago
  And only really wealthy people can afford to stay in a 5-star luxury hotel. The underlying mechanisms are the same: when demand for a resource is greater than supply, you can either artificially limited the demand by some controlling body, or let the market bring them into equilibrium through pricing signals.
  - tmalsburg2 7y ago
    By electing a socialist government the people of Berlin have indicated that they don't want their city to become a five star hotel. Simply letting the market take control is therefore not an option.
- mixmastamyk 7y ago
  I understand it worked in Vancouver where it was tried. I've not heard news that London or Paris has tried.
fpoling 7y ago
The problem is that market reaction can be too slow. In such case introducing new rules can be good as they destabilize the slow status quo and makes things to move in the desired direction quicker. Berlin government hopes that by restricting rent in older buildings it will push the market to build quicker.
quakenul 7y ago
When things go bad government should intervene to protect people. These steps are always going to be extraordinary, because the situation is extraordinary, but it is the very role of government to apply necessary fixes without false pride for any economic or governmental models. Of course, questions as to how one ended up in a bad situation have to be asked. Underlying issues should be fixed. But when things get out of hand, when extraordinary action is deemed necessary to adjust for an untenable situation, it is not only right but paramount to take action. As is with all issues, people will disagree with any specific course of action. By all means, vote to that effect.
- WkndTriathlete 7y ago
  > But when things get out of hand, when extraordinary action is deemed necessary to adjust for an untenable situation, it is not only right but paramount to take them. That rationale is also how wars get started. Not that I disagree with you, per se: lethal "cures" and excessive pollution were killing people in the early 20th century in the US and government intervention was required. But the Korean and Vietnam wars were also the result of people thinking that the spread of communism was also untenable.
  - quakenul 7y ago
    Nope. Just like physics is exactly not how an atom bomb got dropped -- in an extremely important distinction between physics and atom bomb dropping -- there is a very important distinction between government intervention and going to war. In a complicated world things will correlate. I hope this neither makes a generalised case against physics nor government intervention.
rchaud 7y ago
How do you know that these supply building and incentive programs are not part of the plan? Such programs take years to materialize and show impact. I would imagine that's why they voted on a 5-year freeze.
mrzool 7y ago
> Raising prices = Demand > Supply That’s a simplistic view of the problem (simplistic as in introductory-economics-textbook-simplistic), and you have no idea what you’re talking about. Demand is obviously a factor (duh), but the main reason for the terrible, pathologic inflation of the real estate prices in Berlin is called speculation, together with government incompetence and, in some cases, blatant corruption. This rent cap is an emergency measure meant to stop evictions and give people around here a break. Of course it’s not going to solve the problem in the long run. No one is expecting that.
- JanSt 7y ago
  Can you elaborate on what you define as speculation and how it increases prices?
peterwwillis 7y ago
So we just need to magically create more housing and make it cheaper, or magically prevent people from wanting to live there. I'm not aware of either of these things happening in any modern city. (well, the latter happens whenever the local economy tanks)
Vinnl 7y ago
Hmm, this description made me wonder: wouldn't this measure reduce demand from investors looking to buy houses to rent out? In other words: if the bottleneck for new housing isn't that nobody's buying them, then this would at least lower the prices for people looking to buy a house to live in?

by vtail 7y ago

sdegutis 7y ago

What's wrong with legally limiting artificial price hikes to prevent people from abusing Demand > Supply for the sake of their greed? [Edit] To clarify, they seem to be "artificial" price hikes because they don't in any way necessary to cover costs. People realize they can charge more and get more money, so they simply do. That's inherently avaricious and unethical. Sure, maybe prices work themselves out, so that price goes down when supply goes up, but this seems to only be because suppliers can no longer get away with a higher price, because their competition is now selling it at a lower price. So I think it's far more ethical for a government to limit those kind of price hikes, which mainly just hurt the consumer, than to allow these abuses to continue in the name of "freedom".

piker 7y ago
What's "artificial" about the price increases?
ThomPete 7y ago
So basically creating an artificial demand stop is the solution to creating the "artificial" price increase?
- jacquesm 7y ago
  The simplistic version of demand based economics do not take into account speculators who buy rental properties and do not rent them out to reduce supply and to help increase the price of the properties they are flipping.
  - ThomPete 7y ago
    Doesn't change that both are artificial.
rwj 7y ago
Are you asking in the short term or the long term?
coryrc 7y ago
Paul Krugman tries to help you understand: https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-affair.html https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent...
ziziyO 7y ago
Why is greed so bad here? The problem isn’t greed it’s the demand in the face of the lack of supply. Make other places more attractive or increase the supply available in this location.
- wander_homer 7y ago
  > Why is greed so bad here? The problem isn’t greed it’s the demand in the face of the lack of supply. Greed is bad in this situation because you can make more money of luxury apartments than those suitable for people who are somewhere between the poverty line and upper middle class. Hence new apartments in major cities tend to be more and more expensive to satisfy the demand of wealthier people. Greed is also bad when existing apartments are made much more expensive, thereby forcing senior citizens who have been living there for decades and who are barely able to afford the rent to basically leave town, family and friends.
  - mamon 7y ago
    Upper middle class are usually not homeless, right now they occupy some pool of apartments in cities anyway. By building more luxury apartments you encourage them to move, thus leaving their old apartment behind, either by putting it on sale, or renting it out. Think of this like a domino effect: those earning $10M per year buy luxury residence, leaving their old house for those earning $1M, who in turn leave their own houses to those earning $500K, who leave their apartments for those earning $200k, and so on, and so on. In the end everybody benefits from new housing being built, even if it's only luxury housing. Also, increasing supply keeps prices down, thus decreasing profitability of buying houses as investment, causing larger share of apartments to be bought by people who actually plan to live in them. EDIT: yes, this effect might not work as described if is limited to just one city, because there might be a lot of people wanting to move from elswhere. Or more precisely: it will work, eventually, but it would require much more housing to be built to meet the demand.
    - kaybe 7y ago
      I don't think they're going to move that easily. Rent has been going so much it is eating a larger income share than before for many of them too. So what that leaves you with is disproportionate increase of demand and prices for smaller cheaper units.
andys627 7y ago
The market works this out "automatically" when supply is greater than demand. If there are too many dwelling units then landlords will compete with eachother for tenants by lowering prices relative to eachother.
- q3k 7y ago
  In the meantime while we wait for this to happen, people will keep getting evicted due to rising rent. How long do we wait? When can we expect results?
vtail 7y ago
You are using emotionally charged words ("artificial", "abuse", "greed"), which makes a bit hard to have a constructive argument, but let me try :). One way to think about prices is as a signal. When greedy landlords raise prices, they send two signals: (1) To other landlords and wanna-be-landlords, saying it's an attractive market which would justify new construction or cleaning up your spare bedroom and putting it on the market, both increasing supply, and (2) to current and future renters, making it more economical for them to move elsewhere and thus save on their rent, thus reducing demand.
- rolltiide 7y ago
  remember, gentrification is typically used as a pejorative good point in that it undermines constructive argument
- sdegutis 7y ago
  I just edited the comment to clarify what I meant by those words. And they should be used because they are accurate in this context. Although I did convert "greed" to "avarice" in my clarification since I think it's more accurate here.
gumby 7y ago
Doesn't that discourage people from building more housing, which is what would actually bring the price down?

supercall 7y ago

You're assuming the high prices are a result of high demand. Speculators and other bad actors are also driving up prices.

jstanley 7y ago
Speculators drive up prices by buying. They are "demand" as well.
pulse7 7y ago
Speculators are "fake demand".
cco 7y ago
I would imagine, but obviously can't speak for the parent poster, that if you suggested limiting speculation they could agree on a sensible implementation of that policy. I have not met anybody so far who thinks wealthy foreigners should be able to use real estate to launder money, store value, hide wealth, or otherwise not use real estate for what it is meant for, that is to say as places for people to live, play, or work.
- jodrellblank 7y ago
  Since all that does happen, what relevance is it to say you haven't met anyone who supports it? Do you consider yourself the kind of person who should have met such people? Do you move in those circles? Do you meet a disproportionately large amount of people, or people at high levels who influence policy?
JanSt 7y ago
The thing is, that there is no real "pure" speculation without the demand. In Berlin only 1.7% of housing is empty, of which 41% is because of ongoing modernisation, 31% because of renter currently changing and 12% because of mold or other damages. So only approx. 0.27% of housing is empty in hope of higher prices or because of other reasons. [1] The demand is real. No living space is created by this policy. Much will not be build because of it. [1] https://www.morgenpost.de/berlin/article214572349/Nur-1-7-Prozent-der-Berliner-Wohnungen-stehen-leer.html https://www.morgenpost.de/berlin/article214572349/Nur-1-7-Pr...

tmalsburg2 7y ago

But how well has this worked in comparable cities like London or Paris where only wealthy people can afford to live?

vtail 7y ago
And only really wealthy people can afford to stay in a 5-star luxury hotel. The underlying mechanisms are the same: when demand for a resource is greater than supply, you can either artificially limited the demand by some controlling body, or let the market bring them into equilibrium through pricing signals.
- tmalsburg2 7y ago
  By electing a socialist government the people of Berlin have indicated that they don't want their city to become a five star hotel. Simply letting the market take control is therefore not an option.
mixmastamyk 7y ago
I understand it worked in Vancouver where it was tried. I've not heard news that London or Paris has tried.

fpoling 7y ago

The problem is that market reaction can be too slow. In such case introducing new rules can be good as they destabilize the slow status quo and makes things to move in the desired direction quicker. Berlin government hopes that by restricting rent in older buildings it will push the market to build quicker.

quakenul 7y ago

When things go bad government should intervene to protect people. These steps are always going to be extraordinary, because the situation is extraordinary, but it is the very role of government to apply necessary fixes without false pride for any economic or governmental models. Of course, questions as to how one ended up in a bad situation have to be asked. Underlying issues should be fixed. But when things get out of hand, when extraordinary action is deemed necessary to adjust for an untenable situation, it is not only right but paramount to take action. As is with all issues, people will disagree with any specific course of action. By all means, vote to that effect.

WkndTriathlete 7y ago
> But when things get out of hand, when extraordinary action is deemed necessary to adjust for an untenable situation, it is not only right but paramount to take them. That rationale is also how wars get started. Not that I disagree with you, per se: lethal "cures" and excessive pollution were killing people in the early 20th century in the US and government intervention was required. But the Korean and Vietnam wars were also the result of people thinking that the spread of communism was also untenable.
- quakenul 7y ago
  Nope. Just like physics is exactly not how an atom bomb got dropped -- in an extremely important distinction between physics and atom bomb dropping -- there is a very important distinction between government intervention and going to war. In a complicated world things will correlate. I hope this neither makes a generalised case against physics nor government intervention.

rchaud 7y ago

How do you know that these supply building and incentive programs are not part of the plan? Such programs take years to materialize and show impact. I would imagine that's why they voted on a 5-year freeze.

mrzool 7y ago

> Raising prices = Demand > Supply That’s a simplistic view of the problem (simplistic as in introductory-economics-textbook-simplistic), and you have no idea what you’re talking about. Demand is obviously a factor (duh), but the main reason for the terrible, pathologic inflation of the real estate prices in Berlin is called speculation, together with government incompetence and, in some cases, blatant corruption. This rent cap is an emergency measure meant to stop evictions and give people around here a break. Of course it’s not going to solve the problem in the long run. No one is expecting that.

JanSt 7y ago
Can you elaborate on what you define as speculation and how it increases prices?

peterwwillis 7y ago

So we just need to magically create more housing and make it cheaper, or magically prevent people from wanting to live there. I'm not aware of either of these things happening in any modern city. (well, the latter happens whenever the local economy tanks)

Vinnl 7y ago

Hmm, this description made me wonder: wouldn't this measure reduce demand from investors looking to buy houses to rent out? In other words: if the bottleneck for new housing isn't that nobody's buying them, then this would at least lower the prices for people looking to buy a house to live in?