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> but anybody can buy an empty lot or single-family home and build a multi-unit building there instead Anybody can buy and build? Yeah... only if they have the

by Rury 2y ago

> but anybody can buy an empty lot or single-family home and build a multi-unit building there instead Anybody can buy and build? Yeah... only if they have the funds for it! That's what you're ignoring: running out of funds isn't just a possibility for the monopoly landlord, it's possible for new entrants to the market, as well as the construction companies. The new entrants and construction companies are facing that risk, just as the monopoly landlord is. For example, a new entrant to the market may have to go into debt to fund his bid or construction in order to compete with the landlord. The monopoly landlord on the other hand, might not have debt and instead has large capital reserves. Depending on the circumstances, it is even possible for the new entrant needing to rent ABOVE what the monopoly landlord already does to just to break even on costs that the monopoly landlord doesn't have (e.g. because of debt, and/or they overbid for the risk in the market, higher land costs, and other reasons). If done in a market where there is already more supply than renters, it would be a very risky venture for the new entrant. And again, it's also entirely possible that there are 0 bidders showing up to compete with the monopoly landlord (due to shear lack of other participants willing to step in to compete). In which case, the monopoly landlord doesn't have just a monopoly on rents, but bids, and the construction companies would have tough time running the monopoly landlord out of business, no matter how much they build. > It costs them $200,000 to build something the monopoly landlord has to buy from them for a million dollars, or someone else will buy it from them for $999,999 which then happens again and again and destroys the monopoly Look... we can make a bunch of "what if" scenarios, but the scenario you made doesn't necessarily have to be the case (nor any of my examples). But, you had inquired about: >> You cannot realistically build enough so that the rents decrease. >I'm curious what makes you think this. All I need is one possible example to demonstrate how that can be.

AnthonyMouse 2y ago
> Anybody can buy and build? Yeah... only if they have the funds for it! The construction costs are much lower than property values, so construction would be highly profitable. Every wealthy person in the world would be lining up to invest in a hundred construction companies because they would be yielding a 400% year-over-year return until the monopoly is broken. > All I need is one possible example to demonstrate how that can be. You need a real example, not a contrived one. "What if the emperor of the world declared that rents have to stay high?" Then you don't have a market anymore and we're no longer talking about what happens in markets at all.
- Rury 2y ago
  >The construction costs are much lower than property values, so construction would be highly profitable You have purchase property to construct something on. So high property values works against your own argument. > You need a real example, not a contrived one No I don't, as I did not make the original argument you inquired on. That poster needs a real example, I however, only need to entertain how that possibly could be.
  - AnthonyMouse 2y ago
    > You have purchase property to construct something on. So high property values works against your own argument. The basis of construction is that you're converting fewer units into more, on the same piece of property. If a single-family home is a million dollars then you can buy one for a million dollars, build a 50-unit condo tower on the lot at a cost of $180,000/unit, apportion the original million dollars across 50 new units so the cost per unit is $20,000, and you're creating new units at a cost of $200,000/unit while selling into a market where a unit goes for a million dollars. > I however, only need to entertain how that possibly could be. But that's only interesting if it's something that might plausibly happen in practice. You can make anything possibly happen given an arbitrary set of unrealistic constraints.
    - Rury 2y ago
      Again, we can make up a bunch of made up scenario's, but you seem to want to ignore your own questions, which suggests you're not arguing in good faith. Let's revisit this question of yours: >Suppose you built twice as many housing units as you had residents. Rents wouldn't decrease? Why not? I gave you an example of how that would not happen: in an uncompetitive market such as a monopoly, additional supply doesn't impact price if it is simply hoarded. Now we could argue whether that's realistically to happen or not, but I see not why that is relevant to your question.
      - AnthonyMouse 2y ago
        > in an uncompetitive market such as a monopoly, additional supply doesn't impact price if it is simply hoarded. Let's consider whether this can even possibly happen. In order for a monopolist to own all the housing, there would have to be somebody with that much money. The largest wealth fund in the world is China's, with a total value of around $2.75 trillion US dollars. This is the entire fund across all asset classes. Jeff Bezos with his paltry $200 billion can't even hold a candle to it. By contrast, the total value of US housing is north of $47 trillion dollars. So if you were to double the amount of housing in the US, no one in the entire world exists who could afford to buy all of it. Even the entire government of China isn't within an order of magnitude of it.

by Rury 2y ago

AnthonyMouse 2y ago

> Anybody can buy and build? Yeah... only if they have the funds for it! The construction costs are much lower than property values, so construction would be highly profitable. Every wealthy person in the world would be lining up to invest in a hundred construction companies because they would be yielding a 400% year-over-year return until the monopoly is broken. > All I need is one possible example to demonstrate how that can be. You need a real example, not a contrived one. "What if the emperor of the world declared that rents have to stay high?" Then you don't have a market anymore and we're no longer talking about what happens in markets at all.

Rury 2y ago
>The construction costs are much lower than property values, so construction would be highly profitable You have purchase property to construct something on. So high property values works against your own argument. > You need a real example, not a contrived one No I don't, as I did not make the original argument you inquired on. That poster needs a real example, I however, only need to entertain how that possibly could be.
- AnthonyMouse 2y ago
  > You have purchase property to construct something on. So high property values works against your own argument. The basis of construction is that you're converting fewer units into more, on the same piece of property. If a single-family home is a million dollars then you can buy one for a million dollars, build a 50-unit condo tower on the lot at a cost of $180,000/unit, apportion the original million dollars across 50 new units so the cost per unit is $20,000, and you're creating new units at a cost of $200,000/unit while selling into a market where a unit goes for a million dollars. > I however, only need to entertain how that possibly could be. But that's only interesting if it's something that might plausibly happen in practice. You can make anything possibly happen given an arbitrary set of unrealistic constraints.
  - Rury 2y ago
    Again, we can make up a bunch of made up scenario's, but you seem to want to ignore your own questions, which suggests you're not arguing in good faith. Let's revisit this question of yours: >Suppose you built twice as many housing units as you had residents. Rents wouldn't decrease? Why not? I gave you an example of how that would not happen: in an uncompetitive market such as a monopoly, additional supply doesn't impact price if it is simply hoarded. Now we could argue whether that's realistically to happen or not, but I see not why that is relevant to your question.
    - AnthonyMouse 2y ago
      > in an uncompetitive market such as a monopoly, additional supply doesn't impact price if it is simply hoarded. Let's consider whether this can even possibly happen. In order for a monopolist to own all the housing, there would have to be somebody with that much money. The largest wealth fund in the world is China's, with a total value of around $2.75 trillion US dollars. This is the entire fund across all asset classes. Jeff Bezos with his paltry $200 billion can't even hold a candle to it. By contrast, the total value of US housing is north of $47 trillion dollars. So if you were to double the amount of housing in the US, no one in the entire world exists who could afford to buy all of it. Even the entire government of China isn't within an order of magnitude of it.