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Assuming an informal oligopoly, say, that maintains price collusion by rigid price increases, that would raise prices, but it would generate vacancies. Either they would have to exercise the discipline to keep the vacancies off the market, or prices would sink back down to equilibrium fairly quickly.
The analysis is not even that complex, man.
Economic theory says that prices always return to equilbrium in the long run. But again, that's not always caused by an increase/decrease in aggregate demand or an increase/decrease in aggregate supply. It's often caused by irrational actors finally caving into market pressure and lowering their prices. Then a formerly "kinked" demand curve becomes "unkinked."
You're assuming that a rise in prices is always caused by a shift in the supply or demand curves. But that's certainly not true in the short run. If that were the case, then there'd be no such thing as a "sticky" price to begin with. And whether that "short run" is 2 years, 5 years, or 10 years is tough to say. You're also assuming that economic models closely align with reality. Yes, when supply increases, prices should drop (and they do drop in the long run), but that's only when you have perfectly rational actors in a perfectly competitive market.
But we don't live in a world full of completely rational actors in a perfectly competitive market. If people acted rationally at all times, then we'd never see bubbles.
Economic theory says that prices always return to equilbrium in the long run. But again, that's not always caused by an increase/decrease in aggregate demand or an increase/decrease in aggregate supply. It's often caused by irrational actors finally caving into market pressure and lowering their prices. Then a formerly "kinked" demand curve becomes "unkinked."
You're assuming that a rise in prices is always caused by a shift in the supply or demand curves. But that's certainly not true in the short run. If that were the case, then there'd be no such thing as a "sticky" price to begin with. And whether that "short run" is 2 years, 5 years, or 10 years is tough to say. You're also assuming that economic models closely align with reality. Yes, when supply increases, prices should drop (and they do drop in the long run), but that's only when you have perfectly rational actors in a perfectly competitive market.
But we don't live in a world full of completely rational actors in a perfectly competitive market. If people acted rationally at all times, then we'd never see bubbles.
1. Sticky prices, as far as I recall the literature, are attributed either to oligopoly type pricing situations, or to institutional factors, not to irrationaliy. That is to say, they emerge for specific cauases and do not just pop out of nowhere.
2. Bubbles arise from A. People rationally wanting to buy something they can sell at a profit B. People having difficulty determining how much of the demand they see is driven by fundamentals, and how much is driven by others like themselves who only want to resell at a profit. Its less likely to happen in rental markets, and indeed during the recent housing bubble prices went well above their normal ratios to rents.
Analysis of irrationality has a place. You seem to want to use it as a Deus Ex Machina to make the case that increasing housing supply will not impact price. I see no reason to expect things to happen that way. That does not mean its impossible - landlords could all of a sudden decide, irrationally, to charge rents above market clearing levels, and do absorb the vacancies for some time. It COULD happen. But its not really a likelihood worth a few dozen posts, unless someone is invested in opposing policies to increase supply, or in denying the also real possibility that we will see a decline in housing prices soon.
The Kojo show today was about the landlords' market in rental housing.
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Originally Posted by brooklynborndad
Either they would have to exercise the discipline to keep the vacancies off the market
I don't know of many other major markets (maybe Atlanta) where so many of the large apartments are controlled by publicly traded REITs. REITs are not ideal investment vehicles for real estate by any means -- they have a tendency to under-invest in capital in order to boost quarterly returns -- but they have a very clear incentive to maximize current cash flow and therefore keep apartments rented. They also have a lot of people looking over their shoulders, so no, I can't imagine that so many of them could participate in some sort of conspiracy.
The real conspirators are the NIMBYs who, in the name of "property values" and "character" and "traffic," are artificially limiting the market response to high values (i.e., increasing supply through new construction). Even if that response wasn't limited, it would take time for supply to catch up with demand -- apartments take a while to build, and that time lag explains why commercial real estate is subject to a constant froth-bubble-crash cycle (one big broker calls it "the property clock").
I know it's easier to blame the rentiers instead, but thy enemy is thyself.
Higher capacity and fixed routing, but the critical point is that rail spurs development, which equals tax money.
This! Redevelopment is the name of the game. Buses don't drive high density development where housing can be built with the intent people living there won't have cars. The streetcar network will change every corridor it runs on into high density zones where most people don't use cars. The zoning rewrite happening now to reduce required parking is also going to go a long way in changing future development. DC is becoming an apartment/condo city separating itself from the more traditional two floor row house cities like Philly and Baltimore. The density in DC is going to approach 13,000-13,500 by 2030 and the streetcar network is necessary to help move the city into the future.
Higher capacity and fixed routing, but the critical point is that rail spurs development, which equals tax money.
Streetcars will certainly spur development if you hand out subsidies to develop along corridors where it runs. That's what they did in Portland. Corridors with heavy government subsidization have flourished; corridors without it have not.
You could run a brand new fleet of trolley buses down Georgia and H Street and get the same effect as a streetcar with the proper subsidies and tax incentives.
And you can build high capacity buses, so that argument is also bogus. Plus, it costs three times as much to build a streetcar as it does a bus, so you could run buses more frequently than you can streetcars.
Streetcars are great for people suffering from terrible bouts of nostalgia. But they're impractical. I grew up in a neighborhood with streetcars and the best thing SEPTA ever did was replace the 23 with brand new buses. It'll be funny when the streetcars come and they're constantly late because they can't maneuver around double-parked cars, cars blocking the intersection, and overall bad drivers.
If we're going to bring back streetcars for nostalgia's sake, can we bring back the milkman while we're at it?
This! Redevelopment is the name of the game. Buses don't drive high density development where housing can be built with the intent people living there won't have cars. The streetcar network will change every corridor it runs on into high density zones where most people don't use cars. The zoning rewrite happening now to reduce required parking is also going to go a long way in changing future development. DC is becoming an apartment/condo city separating itself from the more traditional two floor row house cities like Philly and Baltimore. The density in DC is going to approach 13,000-13,500 by 2030 and the streetcar network is necessary to help move the city into the future.
Streetcars are not driving high density development. Gentrification is driving high density development. There's plenty of high density development near Logan Circle, Adams-Morgan, Georgetown and Mount Pleasant, none of which are served by light rail (or particularly well-served by Metro for that matter).
All the streetcar does is accelerate a gentrification process that had been well underway. The streetcar will not facilitate easier movement around the city.
Streetcars are not driving high density development. Gentrification is driving high density development. There's plenty of high density development near Logan Circle, Adams-Morgan, Georgetown and Mount Pleasant, none of which are served by light rail (or particularly well-served by Metro for that matter).
All the streetcar does is accelerate a gentrification process that had been well underway. The streetcar will not facilitate easier movement around the city.
Streetcars increase property values. That spurs development in blighted areas. That development is high density. Gentrification is a natural process. It is also a neccessary process. Every city goes through it. The problem with affordable housing in DC is not about gentrification. It's about a lack of density. The higher the buildings, the more affordable housing there is. It's a supply problem. That is why Montgomery County gives density bonuses for all new buildings since they have to provide MPDU affordable units. If the neighborhoods in DC are worried about affordability, let developers build 20-30 story towers and there will be enough capacity for tons of affordable housing through ADU. People are so clueless about affordable housing they don't even realize their fight against density is raising their property value.
You are helping make DC expensive by trying to stop high density development. Think about your stance on the McMillan Site. If DC continues to not allow high density, there will never be an over abundance of affordable housing.
Streetcars will certainly spur development if you hand out subsidies to develop along corridors where it runs. That's what they did in Portland. Corridors with heavy government subsidization have flourished; corridors without it have not.
You could run a brand new fleet of trolley buses down Georgia and H Street and get the same effect as a streetcar with the proper subsidies and tax incentives.
And you can build high capacity buses, so that argument is also bogus. Plus, it costs three times as much to build a streetcar as it does a bus, so you could run buses more frequently than you can streetcars.
Streetcars are great for people suffering from terrible bouts of nostalgia. But they're impractical. I grew up in a neighborhood with streetcars and the best thing SEPTA ever did was replace the 23 with brand new buses. It'll be funny when the streetcars come and they're constantly late because they can't maneuver around double-parked cars, cars blocking the intersection, and overall bad drivers.
If we're going to bring back streetcars for nostalgia's sake, can we bring back the milkman while we're at it?
Which is why DC needs to limit parking and make it harder and impractical to drive in DC which will free up capacity on streets and help change people's mode of travel. DC wants to have a 75% non-autoshare by 2032. The higher the density and more expensive the parking, the less cars there will be on the road.
Really? Then why haven't property values exploded in North and Southwest Philly relative to neighborhoods like Chestnut Hill and Andorra that don't have streetcar lines? Why aren't yuppies rushing to move into Haddington since streetcars spur so much development?
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Originally Posted by MDAllstar
That spurs development in blighted areas.
Again, why isn't gentrification booming in the hard core North Philly and Southwest Philly ghettos that have extensive streetcar lines?
Quote:
Originally Posted by MDAllstar
You are helping make DC expensive by trying to stop high density development. Think about your stance on the McMillan Site. If DC continues to not allow high density, there will never be an over abundance of affordable housing.
You're right. That's why the city should build on Meridian Hill and Rock Creek Park, too.
Which is why DC needs to limit parking and make it harder and impractical to drive in DC which will free up capacity on streets and help change people's mode of travel. DC wants to have a 75% non-autoshare by 2032. The higher the density and more expensive the parking, the less cars there will be on the road.
This response does not even come close to addressing any of the points I raised.
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