You absolutely can. It exists as a layer, not the basic layer. No one can dispute that given a huge number of assumptions that we take for granted low vacancy leads to high rents.
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Okay, I m open minded. Would you mind describing a scenario in any type of market where a factor has a stronger effect than supply/demand that doesn’t involve government intervention? And cartel actions count as s/d. I personally have never seen high vacancy and high prices or low vacancy and low prices. I think most commodity Traders would be startled to to hear Supply/demand was not key to pricing.
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I think it’s important to understand if low vacancy is a system or a disease. For example, when my partner and I moved to Portland five years ago, vacancy rates were only marginally higher than today, maybe a tick above 3% compared to 2.8% now. Rents, however, were fairly stable the first two years we lived here, but have since skyrocketed. Right off the bat we can say that they don’t seem like a prime causal factor for high prices, or at least don’t tell the whole story.
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As I understand it, that’s a really low vacancy rate, lower than SF, so low it’s hard to get much lower because people do move. The question is did the demand rise during that period?
Doesn’t involve government intervention? Does that mean the government won’t send in police to evict people if they live on land that doesn’t belong to them? If so then I think it’s pretty easy to imagine a situation with low vacancy and low rent.
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I’m afraid that’s not what I meant. All I was referring to was government price controls and other Market interventions, not enforcement of property rights.
Speaking of which I was thinking of the comment of about government involvement in food prices. To my knowledge most government programs are to keep prices up not down, milk being one of the few exceptions I recall.
But what about government intervention in interpretation of rent contracts? Can a landlord say there are no dogs allowed in the building? If so, what about seeing eye dogs? Can landlords choose renters based on the colour of their skin or their religion? Am I allowed to pay rent with sex or is that prostitution? Can I secure my rent against a promise of selling myself into slavery if I don’t? Does the government break up monopolies? If so what counts as a monopoly and what doesn’t? Who enforces that and what measures are in place to prevent corruption on their part? What about building codes, those directly affect rental houses? Can I build a fire trap and rent it out cheap to people who can’t afford better, if I do and it does go up in flames, can they sue me for my negligence? What about the hundreds of years of common law surrounding the interpretation of contracts in general, without which you’d have no idea what a rental agreement even means?
And you say cartels count as supply and demand. I’m not sure i understand the line. Would a 15th century King of England be government or just an example of supply and demand? He sends goons to demand taxes from the peasants and they risk violence or imprisonment if they can’t pay, why is that not like a cartel? Why is a democratic government not like a cartel? Can’t private actors interfere with markets just like governments can if they have sufficient power either through violence, wealth or even just charisma? What if the pope makes a decree about fair rent and landlords in some latin american countries risk serious social repercussions if they don’t comply? Is that a “government”? What about a society that doesn’t have a fixed governing body but that has clear social rules that are enforced by mobs when broken, is that government intervention?
If you want examples of how people don’t consistently buy things at the lowest price available and don’t actually have a fixed cut-off price that they’ll pay for something (these are key assumptions of supply and demand), they are numerous. If you want examples of goods that don’t seem to be affected by supply and demand they are numerous. I think we could make a case that a rental unit is more like a unique piece of fine art than like a fungible commodity. People don’t move every hour depending on where they can get the best rent, and people can’t just put up buildings overnight to respond to increased demand.
But the whole government intervention vs. no government intervention is not something I can work with. You know what you mean (well, do you know what you mean?) but there is no way that I could know exactly what set of laws “no government intervention” implies, and I don’t want to talk about it just to find out that my example wasn’t a true example of no government intervention.
I’d like to know why you think rent is easy to analyze through simply supply and demand analysis. I have never seen evidence that is it. You can’t go from this:
To this:
And act like they are driven by the same forces.
ETA: In my haste using MS paint I labelled my arrows in the wrong direction. The group to the left is the people with homes, the group to the right are the homeless. Of course, this makes absolutely no difference to the point.
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I appreciate that you took a lot of time to write that. I’m sorry I can’t discuss it, if that is what you wanted.
I think I need to take as step back and try and understand how it is I tick people off here with what seem to me simple, self evident ideas of economics like “low supply=high prices” or “getting paid to be creative is a nice way to make a living even if it’s not very personally expressive”. Clearly there’s a cultural divide even though viewed from outside liberal, educated society we are probably way more similar than not.
Cheers.
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I’m just advocating what seem to me simple, self-evident ideas like, “things are usually more complicated than they seem” and “doing the same thing over and over and expecting different results is dumb.” The fact that the latter is an observable fact of the last few decades of our lives and that our leaders keep using the same old theories to make decisions makes me feel like I’m taking crazy pills.
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CBC happened to address the issue of rent controls and housing availability today regarding Toronto (and with comparisons to other cities).
This is just a high level summary of different observations, and you can do more digging, but basically rent prices don’t seem primarily driven by supply, rent controls don’t seem to discourage new construction. Just like minimum wage doesn’t cause unemployment.
Economic models that disagree with these realities are and have always been childish, and we have the evidence to say so.
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