3 ms·

Rents are set by only two things: 1) the tenant markets’ ability to pay and 2) competition with other landlords. If every single landlord knows with certainty

Rents are set by only two things: 1) the tenant markets’ ability to pay and 2) competition with other landlords. If every single landlord knows with certainty (2) that every single tenant in their market has increased their ability to pay (1) by $1000/mo, then every landlord independently will come to the conclusion that they can raise rents by $1000/mo. They know the tenants are able to sustain it, and they know other landlords know the same thing.

bee_rider 3y ago
The landlords will still be in competition, anyone who breaks with the conventional wisdom will have an easier time getting tenants. It would probably raise prices, but the laws of supply and demand don’t just go away.
- ethanbond 3y ago
  Huge amounts of the demand just moves $x up the price curve, but that doesn’t suddenly conjure supply into existence, so you have the same demand willing to pay higher prices across the same supply: that’s just higher prices. In HCOL areas the vast majority of rent prices stem from land rent, and that supply is not just less elastic than demand, it’s totally fixed. Most insidiously: the demand that will move most aggressively up the price curve is lower income people seeking better lower/middle income housing. So those prices will move the fastest.
  - bee_rider 3y ago
    You are making a lot of predictions from basic principles and very simple models, I’d be amazed if the market was really that simple.
    - ethanbond 3y ago
      It really is that simple. Here's an analogous example of minimum wage increases: https://www.sciencedirect.com/science/article/abs/pii/S0094119021001030 https://www.sciencedirect.com/science/article/abs/pii/S00941... Evictions went down for 3 months, then rose again back to their prior level after as rents increased.
pixel8account 3y ago
Can you link to some study that confirms it? This sounds far too simplistic to be true, especially for something as complex and unpredictable as the economy.
- ethanbond 3y ago
  It’s a special case of this: https://en.wikipedia.org/wiki/Henry_George_theorem?wprov=sfti1# https://en.wikipedia.org/wiki/Henry_George_theorem?wprov=sft... This says public investment will just increase aggregate land rents to at least the cost of that investment. UBI is effectively a gigantic “public investment” that is everywhere. It’ll get baked into land rents, which will then propagate into actual rents.

bee_rider 3y ago

The landlords will still be in competition, anyone who breaks with the conventional wisdom will have an easier time getting tenants. It would probably raise prices, but the laws of supply and demand don’t just go away.

ethanbond 3y ago
Huge amounts of the demand just moves $x up the price curve, but that doesn’t suddenly conjure supply into existence, so you have the same demand willing to pay higher prices across the same supply: that’s just higher prices. In HCOL areas the vast majority of rent prices stem from land rent, and that supply is not just less elastic than demand, it’s totally fixed. Most insidiously: the demand that will move most aggressively up the price curve is lower income people seeking better lower/middle income housing. So those prices will move the fastest.
- bee_rider 3y ago
  You are making a lot of predictions from basic principles and very simple models, I’d be amazed if the market was really that simple.
  - ethanbond 3y ago
    It really is that simple. Here's an analogous example of minimum wage increases: https://www.sciencedirect.com/science/article/abs/pii/S0094119021001030 https://www.sciencedirect.com/science/article/abs/pii/S00941... Evictions went down for 3 months, then rose again back to their prior level after as rents increased.

pixel8account 3y ago

Can you link to some study that confirms it? This sounds far too simplistic to be true, especially for something as complex and unpredictable as the economy.

ethanbond 3y ago
It’s a special case of this: https://en.wikipedia.org/wiki/Henry_George_theorem?wprov=sfti1# https://en.wikipedia.org/wiki/Henry_George_theorem?wprov=sft... This says public investment will just increase aggregate land rents to at least the cost of that investment. UBI is effectively a gigantic “public investment” that is everywhere. It’ll get baked into land rents, which will then propagate into actual rents.