2 ms·

Why wouldn't it be enough? There's a very strong prior (base assumption) that prices in a liquid market (like most housing) are determined by supply and demand.

by pas 6y ago

Why wouldn't it be enough? There's a very strong prior (base assumption) that prices in a liquid market (like most housing) are determined by supply and demand. The FDA has papers about how above 5-7 suppliers for a given drug the price radically drops (eg. the market becomes efficient due to competition), the same thing works for ISPs and other providers, why would it be different for housing? Also, if the things you mention don't happen, that means there's no need for the rent control, since supply and demand are in balance and prices are stable (or they follow some larger trend, like inflation).

sudosysgen 6y ago
Because rent has a tendency to always increase, as supply is necessarily limited. Even the very highest density cities like Hong Kong have extraordinarily high rents. The reality is that the demand for housing is inelastic. We as a society don't want people to move out from city to city constantly, so we strongly inelastic demand. Empirically, rent increases 6-7% every year on average. According to the statistics in the article, to counteract this, supply would have to increase 60%/year on top of the current rate, every year. This is impossible. Thus, market solutions are not enough. This bears out in the real world, where all big cities that are affordable have a combination of sane zoning, rent control, and public housing, whereas simply increasing supply does not work, with HK as an example.
- kapuasuite 6y ago
  > Because rent has a tendency to always increase, as supply is necessarily limited. Even the very highest density cities like Hong Kong have extraordinarily high rents. Hong Kong tightly controls land - only something like 25% is developed. As for rent always increasing, we’ve seen rents fall in major cities during the last year as demand plummeted relative to supply. We need to build more housing - rent control, as in a hard price ceiling, tends to disincentivize doing that, while also tending to decrease the quality of existing housing if rents are set too low.
- pas 6y ago
  Because urbanization AND population growth drives demand and supply has a tendency to always lag behind. HK has high rents because ... wait for it ... they are not building enough new housing. Why? Because most of the land is government owned, more than half of the population lives in public housing, and the HK version of "US employers pay healthcare insurance" is basically HK employers pay housing subsidy. Note, I'm not saying HK should just abolish rent control in the next five minutes and things will be fine. No, HK has many grave problems. (Of course starting with them being oppressed by the CCP.) Nor am I saying they should pave over the bay and start building. I'm simply saying that the HK market is in a pathological state. (Constrained supply, public stock is constant over the last ~2 decade, etc.)

by pas 6y ago

sudosysgen 6y ago

Because rent has a tendency to always increase, as supply is necessarily limited. Even the very highest density cities like Hong Kong have extraordinarily high rents. The reality is that the demand for housing is inelastic. We as a society don't want people to move out from city to city constantly, so we strongly inelastic demand. Empirically, rent increases 6-7% every year on average. According to the statistics in the article, to counteract this, supply would have to increase 60%/year on top of the current rate, every year. This is impossible. Thus, market solutions are not enough. This bears out in the real world, where all big cities that are affordable have a combination of sane zoning, rent control, and public housing, whereas simply increasing supply does not work, with HK as an example.

kapuasuite 6y ago
> Because rent has a tendency to always increase, as supply is necessarily limited. Even the very highest density cities like Hong Kong have extraordinarily high rents. Hong Kong tightly controls land - only something like 25% is developed. As for rent always increasing, we’ve seen rents fall in major cities during the last year as demand plummeted relative to supply. We need to build more housing - rent control, as in a hard price ceiling, tends to disincentivize doing that, while also tending to decrease the quality of existing housing if rents are set too low.
pas 6y ago
Because urbanization AND population growth drives demand and supply has a tendency to always lag behind. HK has high rents because ... wait for it ... they are not building enough new housing. Why? Because most of the land is government owned, more than half of the population lives in public housing, and the HK version of "US employers pay healthcare insurance" is basically HK employers pay housing subsidy. Note, I'm not saying HK should just abolish rent control in the next five minutes and things will be fine. No, HK has many grave problems. (Of course starting with them being oppressed by the CCP.) Nor am I saying they should pave over the bay and start building. I'm simply saying that the HK market is in a pathological state. (Constrained supply, public stock is constant over the last ~2 decade, etc.)