Is there an actual issue? I've seen compelling arguments that places that banned the practice of algorithmic rent setting did not see any appreciable drop in rents. I'm almost convinced the problem is entirely supply side.
Is there an actual issue? I've seen compelling arguments that places that banned the practice of algorithmic rent setting did not see any appreciable drop in rents. I'm almost convinced the problem is entirely supply side.
The problem is political, landlords run every level of government and use that power to artificially limit housing supply.
There's more housing than people. What's artificially limited is salaries. Higher salaries would mean massive benefits for workers and businesses. And catastrophe for non workers and real estate.
I’m struggling to see how real estate would be catastrophically harmed by higher salaries. Could you help me see the line between those two points?
Naively, if I knew everyone’s salaries were about to double, I’d hope to be holding a fair amount of real estate going into that doubling.
Higher salaries = everything which is produced by working becomes more expensive. That is not a problem for people who work for a living, because they have higher salaries and can afford it. But it is a problem for those who do not work, because they'll might have to sell their surplus real estate to afford cost of living.
But mainly it is that you would need to remove or decrease benefits for those who do not work in order to have room for higher salaries. That is not a problem for the unemployed because higher salaries means that the only people without work are those who do not want to work. But it is a big problem for those who do not want to work and for example would like to live off their real estate.
The gut reaction to higher salaries is that people would have more money to purchase real estate or pay rent, but I think the downwards effects for real estate are much stronger. And the evidence is that in every country which has seen a period of high salaries for workers, real estate has been cheap during that period for workers to buy.
> And the evidence is that in every country which has seen a period of high salaries for workers, real estate has been cheap during that period for workers to buy.
Real question. Do we have evidence of this from anything except developing economies pulling countries out of poverty? Like a first world country sort of thing. Because to me it seems like higher salaries comes first, and the property would lag for a bit while the market reaches its new level. Does that make sense?
> There's more housing than people.
I don’t think this is really true. It’s naively true if you just look at the number of homeless people vs the number of empty units, but misses:
1. That markets need some portion of empty units for fluidity.
2. That many people aren’t homeless, but living in situations where they would take more housing if it was available. (Living with roommates, ex-partners, family, etc.)
3. Many places simply don’t have enough housing for everyone who wants to live there. If they did, people would move from other places.
You know, this is actual economic orthodoxy. The government is supposed to stimulate the productive economy (the part that's not rent-seeking like landlords) by causing inflation by overpaying it's employees (and hire). Which then forces private employers to pay more and causes high inflation. Why? This haircuts existing debts, both public and private and is very bad for rent-seeking, and good for anyone productive (making money).
Of course, that also shows the problem: it haircuts pensions as well, since they are a large part of the rent seeking class.
There is not more housing than people in places where people have the highest income. The median income of Sunnyvale is twice that in the US, but the median house is 5x more expensive there.
If housing supply is constrained, higher salaries simply mean people bid more on rentals and rents go higher.
The only answer is to build more housing and have a high property tax in unoccupied housing.
But housing supply is not constrained. There is more housing than people.
You could build as much more housing as you want, but if those houses only become accessible to purchase for those who already own real estate instead of for those who work, then nothing will change.
Is allowing price-fixing and deniability (ans a service) across 100 mile regions a problem, while you yourself are highlighting a supply-side crisis?
Yes. That’s a problem.
There is no price fixing. They just enabled landlords to find out how high the market price actually was when they didn't know it before due to it being a very opaque market.
The market price is the price for which people are renting places based on market forces.
If the only market forces are landlords keeping half of their units empty so they can keep $1400 units priced at $2400 because that’s what the software (and indeed service) are pushing them to do, that’s price fixing.
There’s extra steps, it’s a new form, but the price is fixed, and the point of allowing housing to be built isn’t being fulfilled.
Math failure here. If you keep half your $1400 units off the market and get $2400 for the others you are losing $400 per unit. Also there is zero evidence any landlords were doing this.
You don’t need evidence for vibes based thinking. The goal is to satisfy emotional needs, not logical consistency.
Except you can write off those $1400 units as $2400 of losses that will offset profits from another part of your business.
Not everything is "Economics 101."
>Except you can write off those $1400 units as $2400 of losses that will offset profits
No, the IRS doesn't allow tax deductions for the "missing $2400 rents" of unrented units. IRS only allows deducting ongoing expenses such as "maintenance, insurance, taxes, and interest," :
https://www.irs.gov/pub/irs-pdf/p527.pdf
If it's causally linked to higher prices, I agree. My question is whether we certainly know it's causally linked. In my mind right now it's similarly plausible that these things are just snake oil sold to landlords. There are a ton of conspiracy theories that would be a real problem, if true.
It's snake oil.
Landlords have an inherent trade off between holding out for a tenant who would pay a higher rent and not having the unit vacant in the meantime. Holding out for longer than that helps the other landlords at your expense. Meanwhile there are a large number of landlords, there is no way for the ones using a given system to force the others to do the same, and a significant percentage of them don't.
So if the system tells the landlords using it to do the thing that would increase rents if every landlord was using it, the "defectors" who don't use the system win out over anyone using it, which means using the system rather than defecting would cause you to lose money and everyone would have the incentive to defect.
Whereas if all the system is doing is suggesting the optimal point in the trade off between holding out for a higher paying tenant and renting the unit sooner, without assuming the other landlords are being required to use the same system, that's the same thing an individual landlord would do if they're not colluding.
The actual way landlords collude is through zoning boards, because then they have an enforcement mechanism, i.e. if someone is trying to defect by adding new units to alleviate the limited supply then the other landlords can sic the government on them, having passed the various laws against constructing those units there.
> So if the system tells the landlords using it to do the thing that would increase rents if every landlord was using it
This is precisely what happened. Quoting from my comment at the time (https://news.ycombinator.com/item?id=39579488) --
Subscribing to a pricing data service: legal.
Using data feed to guide pricing and set initial figures: legal.
Agreeing, either implicitly or explicitly, to let the pricing data feed set the price floor: collusion.
Leaving units unsold and refusing to lower the price despite insufficient demand: usually a bad business decision, possibly indicator of a market failure.
Leaving units unsold to maintain agreed-upon price floor despite insufficient demand: collusion, market manipulation. Congratulations, you are a cartel.
> possibly indicator of a market failure.
Almost always.
The trick is figuring out where the failure is coming from, and whether your society can find a lever to pull to fix it.
Homeowners are usually the ones who don’t want more building, not amorphous landlords who have very little control over zoning and permitting in a place like the Bay Area.
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