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What is SD's hidden agenda. Company said they'd get back to me in ten days? Getting a Mortgage Loan. Jobs in Europe SE. Business Development Manager - Germany. Business Development Manager - France. Gerente de Ventas para la zona sur de Europa. If a market is highly competitive and has no irregularities, basic economic principles suggest that economic returns will be competed down to zero.
Essentially, no provider of a good should be able to raise its price above that of other providers without losing consumers because no one would unnecessarily pay extra for the same product. Unfortunately, in the real world, markets for goods and services are manipulated in favor of special interests on a regular basis. Decades of cronyism, aided by the good intentions of policies meant to alleviate the situation, have made much of urban America affordable to only the wealthy, with grievous results.
Housing prices, like all other prices, are set by supply and demand: If the supply of housing on the market increases, the quantity of housing sold increases and the price of housing decreases. If the demand for housing increases, both the price and quantity of housing sold increase. In the post-industrial, knowledge-based economy, in which education is more and more important to getting a well-paying job, cities across the country are rising in importance.
Cities offer easy scaling up of businesses and easy connection to other knowledge centers: New York City is famously unaffordable, but home prices and rents have also been spiking in places like Denver, Nashville, and Atlanta, and generally across cities with a sufficiently high population of the college-educated.
Demand to live in these hip, high-wage areas has consistently increased while less-educated, rural counties slowly depopulate. Turning to the shady nature of urban housing markets: This process primarily works through influencing government regulations in a way that privileges certain firms or people over others.
The first type of supply constraint is the closing off of existing units from the rest of the market. Rent control is exactly what it sounds like: Rent control is a seemingly intuitive concept that can be popular with the general public: However, rent control is widely shunned by housing policy experts across the political spectrum for amplifying rent-seeking behavior.
Furthermore, under rent control, landlords have a permanent incentive not only to pass on upkeep on their apartments, but also to make life miserable for rent-controlled tenants to get them to leave so they can make more money by replacing them with tenants paying the market rate.
This situation is worsened by underfunding of housing regulation and compliance inspectors.
Rent control also reduces the incentive to build new housing, which is the root problem, because landlords will have to reserve some units for below-market prices. The other type of housing rigging is rent-seeking restriction on new construction. Across cities nationwide, landlords and their suburban equivalents, homeowners associations have used their political power to hugely increase the scope of land-use regulations.
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They determine how high buildings can go, how many apartment units can be put in a building, and myriads of other details about urban planning. San Francisco, again, serves as a particularly dire case study; across the vast majority of the city, buildings are not even allowed to go higher than four stories tall.