"We have seen corporate landlords—who own a larger share of the rental market than ever before—use inflation as an excuse to hike rents and reap excess profits beyond what should be considered fair and reasonable."
Zoning is only a small part of the problem. Even if you zoned a bunch of new land today, if you let the private, free market have its course, then what do you think will be built on that land? Highly unaffordable luxury flats/houses, because that is what leads to the highest profit margins for the private sectors builders. And those flats will be bought up by investors or wealthy individuals to create more unaffordable rent.
That’s the core issue, individual private sector interests are not aligned to be altruistic interests for the good of society. They want to maximise profit, nothing more. Hence, you need someone willing to build houses and sell them at a loss, so average people can afford housing again. Only the government can sell for a loss and remain in business.
Ergo, you can zone all the land you want, but if you only let private sector builders have it, then you’ll just get more and more unaffordable properties built, chasing rich foreign investors, tech millionaires, or pension funds.
This is the core issue with Thatcherism/deregulation/privatisation. An individual company’s profit margins don’t always align with the good of society, but society needs essential services (water, sewage, electricity, food, housing, defense). These things need to be provided to all citizens, urban and rural, but doing so doesn’t always guarantee a profit, so you can’t just leave it to the private sector only.
You’re so close! Once you figure out those luxury flats will go for quite a lot, then free up downchannel housing you’ll understand how this all actually shakes out when people can build.
But that’s not what actually happens!! It’s like the Laffer Curve, we don’t actually see any of these benefits of letting the free market try to create all these supposed benefits and efficiencies. The textbooks say they should happen but in practice they never do. Even when the UK government releases state owned brownfield land, developers build overpriced flats no one in the local area can actually afford. So it doesn’t actually create any net new living space because 1) the local populace can’t afford it, 2) it gets bought by investors.
How does having investors scoop up luxury flats release downchannel housing at all? I have never seen that happen. Even in places where land is cheap and zoned for residential, like in areas of Utah, they never actually build affordable housing on it. People end up locked into renting.
It’s not a metaphor, it’s as you say, an economic theory for the optimal rate of taxation, which exists somewhere between 0% and 100%. However, in the USA it has been put into practice over the past 30 years, where taxes on the extremely wealthy have fallen drastically over that time, with the thinking being that this would raise government revenue and also all that trickle down hogwash. Only it hasn’t, and it has only served to weaken revenues at the local community and state level, and caused wealth inequality worse than the gilded age.
In terms of housing, you are correct in principle, if the supply of housing was to drastically increase such that it outpaced demand, then sure, prices would fall. But this is a specious argument for a number of reasons. First, even if zoning was abolished tomorrow, it’s impossible to actually build new housing in most of the world’s most expensive cities, such as NYC, London, and LA, because there’s simply no space to build anywhere, except on the extreme periphery. London still has some brownfield land, but LA is boxed in by mountains, and Manhattan literally has no more space because it’s an island. So where do you actually build? Vertically, okay, but then you have destroy existing structures.
Secondly, and perhaps more importantly, even if you allowed easy zoning, and cleared out lots for mega towers, who is going to actually build so much supply so as to flood the market in order to crater prices and make housing affordable? That’s the dumbest thing ever, no builder wants to see prices come down, that would be like DeBeers flooding the market with diamonds, massively increasing supply and dropping the price, and killing their own profits/margins. Builders want high prices, not low, they have no incentive go on a building boom like in 2007 such that prices drop.
So you’re left with my original argument: you can’t leave housing solely to the for-profit, private sector. They have no incentive to build affordable housing, or flood the market with over supply in order to drop prices.
Yeah but by whom? What’s the incentive for private sector builders to do that at scale if it means lower prices and lower margins by dramatically increasing supply?
Why do you think this will significantly impact margins? If a builder builds a house for $300k right now, the cost of the lot is eating a shitload of that $300k. If my home doubles in value (which it has), the land itself is more valuable.
By the same token, if I build a 4 story apartment building on my same lot, I make significantly more money over time than I would selling it once to a homeowner.
Your own answer from earlier said so: increase supply massively whilst demand stays constant, means prices come down. Fair enough.
Well, if prices come down, margins by definition decrease, because building materials and labour aren’t decreasing too.
Ergo, even if zoning restrictions were relaxed massively, and permits handed out quickly and easily, there’s no incentive to flood the market like in 2007. This is especially true of big high rise, high density properties, as there usually are only a few companies who can build such buildings (in central London there’s like 4), so it makes collusion to keep supply low much easier. Sort of like how OPEC works.
Zoning is only a small part of the problem. Even if you zoned a bunch of new land today, if you let the private, free market have its course, then what do you think will be built on that land? Highly unaffordable luxury flats/houses, because that is what leads to the highest profit margins for the private sectors builders. And those flats will be bought up by investors or wealthy individuals to create more unaffordable rent.
That’s the core issue, individual private sector interests are not aligned to be altruistic interests for the good of society. They want to maximise profit, nothing more. Hence, you need someone willing to build houses and sell them at a loss, so average people can afford housing again. Only the government can sell for a loss and remain in business.
Ergo, you can zone all the land you want, but if you only let private sector builders have it, then you’ll just get more and more unaffordable properties built, chasing rich foreign investors, tech millionaires, or pension funds.
This is the core issue with Thatcherism/deregulation/privatisation. An individual company’s profit margins don’t always align with the good of society, but society needs essential services (water, sewage, electricity, food, housing, defense). These things need to be provided to all citizens, urban and rural, but doing so doesn’t always guarantee a profit, so you can’t just leave it to the private sector only.
You’re so close! Once you figure out those luxury flats will go for quite a lot, then free up downchannel housing you’ll understand how this all actually shakes out when people can build.
But that’s not what actually happens!! It’s like the Laffer Curve, we don’t actually see any of these benefits of letting the free market try to create all these supposed benefits and efficiencies. The textbooks say they should happen but in practice they never do. Even when the UK government releases state owned brownfield land, developers build overpriced flats no one in the local area can actually afford. So it doesn’t actually create any net new living space because 1) the local populace can’t afford it, 2) it gets bought by investors.
How does having investors scoop up luxury flats release downchannel housing at all? I have never seen that happen. Even in places where land is cheap and zoned for residential, like in areas of Utah, they never actually build affordable housing on it. People end up locked into renting.
The Ladder Curve is not a concrete thing. It’s a metaphor to explain optimal taxation. It was literally first drawn on a napkin
How does an increase in supply that outpaces demand not lower prices? That’s the question you need to answer.
“Locked into renting” and “affordable housing” have no meaning and are useless terms for discussion.
It’s not a metaphor, it’s as you say, an economic theory for the optimal rate of taxation, which exists somewhere between 0% and 100%. However, in the USA it has been put into practice over the past 30 years, where taxes on the extremely wealthy have fallen drastically over that time, with the thinking being that this would raise government revenue and also all that trickle down hogwash. Only it hasn’t, and it has only served to weaken revenues at the local community and state level, and caused wealth inequality worse than the gilded age.
In terms of housing, you are correct in principle, if the supply of housing was to drastically increase such that it outpaced demand, then sure, prices would fall. But this is a specious argument for a number of reasons. First, even if zoning was abolished tomorrow, it’s impossible to actually build new housing in most of the world’s most expensive cities, such as NYC, London, and LA, because there’s simply no space to build anywhere, except on the extreme periphery. London still has some brownfield land, but LA is boxed in by mountains, and Manhattan literally has no more space because it’s an island. So where do you actually build? Vertically, okay, but then you have destroy existing structures.
Secondly, and perhaps more importantly, even if you allowed easy zoning, and cleared out lots for mega towers, who is going to actually build so much supply so as to flood the market in order to crater prices and make housing affordable? That’s the dumbest thing ever, no builder wants to see prices come down, that would be like DeBeers flooding the market with diamonds, massively increasing supply and dropping the price, and killing their own profits/margins. Builders want high prices, not low, they have no incentive go on a building boom like in 2007 such that prices drop.
So you’re left with my original argument: you can’t leave housing solely to the for-profit, private sector. They have no incentive to build affordable housing, or flood the market with over supply in order to drop prices.
Yes existing structures need to come down. Homes built for one family should be purchased and turned into large homes for many families.
Yeah but by whom? What’s the incentive for private sector builders to do that at scale if it means lower prices and lower margins by dramatically increasing supply?
Why do you think this will significantly impact margins? If a builder builds a house for $300k right now, the cost of the lot is eating a shitload of that $300k. If my home doubles in value (which it has), the land itself is more valuable.
By the same token, if I build a 4 story apartment building on my same lot, I make significantly more money over time than I would selling it once to a homeowner.
Your own answer from earlier said so: increase supply massively whilst demand stays constant, means prices come down. Fair enough.
Well, if prices come down, margins by definition decrease, because building materials and labour aren’t decreasing too.
Ergo, even if zoning restrictions were relaxed massively, and permits handed out quickly and easily, there’s no incentive to flood the market like in 2007. This is especially true of big high rise, high density properties, as there usually are only a few companies who can build such buildings (in central London there’s like 4), so it makes collusion to keep supply low much easier. Sort of like how OPEC works.