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If the free market were one entity that could coordinate and say "nobody build more housing, let's squeeze as much money from what we have already", sure, that

If the free market were one entity that could coordinate and say "nobody build more housing, let's squeeze as much money from what we have already", sure, that would be pretty profitable. But if there are enough participants in the marketplace (which depends on the barriers to entry to homebuilding, like regulatory capture, knowledge, capital, and permits) one will want to undercut the others and build houses marginally cheaper than the competition until their marginal profit is zero. Having everyone agree not to build houses and keep prices high is like the "nobody snitch" outcome of a prisoner's dilemma: it's not a stable state/Nash equilibrium. At least this is what I heard in Econ 101, I'm sure I'm missing much nuance here.

ABCLAW 4y ago
>At least this is what I heard in Econ 101 Yeah, and you probably also learned a laundry list of caveats which lead to the principle you're describing being non-applicable. Real estate is not a fully commodifiable good because it is non-fungible. A house in the middle of a city is not the same thing as a house 2 hours out of the city core. There is a limited amount of under-developed land to repurpose, and a limited amount of construction crews and machinery available at any given time to perform the work in question, so building production does not scale linearly with capital investment. Construction has ALWAYS prioritized high-margin upscale dense construction where possible - if you own a block of rundown downtown shacks, you put a tower on it the moment you can. This isn't the issue - no one's complaining about Canadian Real Estate's ability to build a Class 1 commercial building or a high-end condominium complex. Toronto has been literally the number one city by crane count by a MASSIVE margin for years. The issue is how we can get widespread construction of low margin projects, Low-rise residential complexes, affordable housing, etc.
- milkey_mouse 4y ago
  Why does a giant condo building have to be high-end? Wouldn't that be the most efficient way to house people even if they weren't focused on profit?
  - ABCLAW 4y ago
    >Why does a giant condo building have to be high-end? Because the margins are higher and you can't put up infinite towers. >if they weren't focused on profit They are.
- deleted 4y ago
  [deleted]

ABCLAW 4y ago

>At least this is what I heard in Econ 101 Yeah, and you probably also learned a laundry list of caveats which lead to the principle you're describing being non-applicable. Real estate is not a fully commodifiable good because it is non-fungible. A house in the middle of a city is not the same thing as a house 2 hours out of the city core. There is a limited amount of under-developed land to repurpose, and a limited amount of construction crews and machinery available at any given time to perform the work in question, so building production does not scale linearly with capital investment. Construction has ALWAYS prioritized high-margin upscale dense construction where possible - if you own a block of rundown downtown shacks, you put a tower on it the moment you can. This isn't the issue - no one's complaining about Canadian Real Estate's ability to build a Class 1 commercial building or a high-end condominium complex. Toronto has been literally the number one city by crane count by a MASSIVE margin for years. The issue is how we can get widespread construction of low margin projects, Low-rise residential complexes, affordable housing, etc.

milkey_mouse 4y ago
Why does a giant condo building have to be high-end? Wouldn't that be the most efficient way to house people even if they weren't focused on profit?
- ABCLAW 4y ago
  >Why does a giant condo building have to be high-end? Because the margins are higher and you can't put up infinite towers. >if they weren't focused on profit They are.
deleted 4y ago
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