In Poblenou, a district of Barcelona where I live, the city has decided that 50-70% of each property sold has to be purposed for social housing, i.e. limiting the rent to a fourth of the market price and choosing the tenants. Many of the district buildings are abandoned factory halls. I am rennovating one of them to become a house for my family, but am now forced to rent half of it to a poor family. From what I can see from the neighborhood is that there is almost no building activity and that private investments have stopped.

We have proof from studies that rent control actively makes things worse for everyone, including the people currently on rent control, because owners convert buildings to condos or exit the market entirely, actually raising average rents for rent control tenants. https://www.brookings.edu/articles/what-does-economic-eviden...

The argument that high rents are mainly due to large regulations and lack of building is largely not supported by the evidence. I mean, in most Europe there was such a building boom (due to low interest rates) that sand for concrete was getting scarce.

Suppose this is true. Then you replace that portion of the housing stock with new construction, and what problem is there? The problem is only if you're constrained from doing that.

> The other thing is that rents going up dramatically is a global phenomenon

There have been two major recent drivers of housing demand. One, the interest rates that until COVID were near-zero (which is a global phenomenon because capital markets are global). Two, since COVID, work from home causing people to move around and shift where the demand is. Also a global phenomenon.

Both of these can drive short-term increases in rents on the order of a few years, but they should also drive new construction, and then once the construction has caught up to the demand the rents would go back down.

Unless the construction isn't allowed to happen.

> The argument that high rents are mainly due to large regulations and lack of building is largely not supported by the evidence.

It very much is. You can take any two cities and account for things like median income and population density and when you're done you'll consistently find that the one with more restrictive zoning has higher rent.

AirBnB and the boom of private tourism rental is transforming city centers in the former. New housing is constructed, just on the outskirts of these cities and push people off the city. This is bad for the dymamic of the city, this is bad for the environment when people pushed outside of city centers usually have to resort to drive to go to work...where they used to live, this is bad for kids and becomes a health issue when kids can't walk to school anynore and this is even ultimately bad for tourism itself as these places lose their soul and every single restaurant becomes a shitty tourist trap where no effort is needed or made in term of quality and service.

If it were that simple can you give some good examples? Hong Kong has little regulation and crazy high prices, Tokyo is expensive for people on local salaries even if it looks cheap to us (and having structures depreciate to zero value over 20 years makes the market weird).

Tokyo is considered to have relatively affordable housing.

Hong Kong's lack of regulation is not particularly relevant to the situation. It is mainly a political issue. Much of the land in Hong Kong remains unused.

The problem is, as it can be observed in Budapest for example, that the new constructions focus on flats suitable for single people, or the short term renters, or the luxury segment, and the middle segment of the market is pretty much non-existent. Flats suitable for families are not being built, in the sizes and number of rooms where it would be useful you only have condos with rooftop terraces and such thins that unnecessarily inflate the prices.

Obviously when people construct buildings, they put in the nicest viable finishes and decor. No profit-seeking entity goes through all the effort of raising a structure only to finish it off with linoleum and shitty cabinets.

The lack of housing for families is a consequence of 4 roommates preferring cheaper rent in a 4bd than to rent 4 singles.

Interesting, I observe the exact opposite

New builds use low quality materials uniformly because that maximises their profit

There are exceptions, but they are exceptions to the rule

I am in New Zealand. Our building industry is in a dreadful state

In places where social housing works, the government builds enough new, shiny apartment buildings to keep the market rent low. Obviously, the construction of apartment buildings MUST FIRST BE EASY AND LEGAL for the government to do this.

Turns out that when you build something that's not particularly nice when it's new it becomes unattractive as it ages, which creates unattractive high-crime neighborhoods. Great to solve housing, but very unattractive for anyone else in the area. We basically stopped building them

At least in the US, a lot of the popular "historic" building types like the New York brownstone had a midlife period where they were deeply unpopular and ill-maintained.

This makes sense. Owners, even poor ones, will do their best to maintain their housing; less wealthy owners especially would know that they're likely stuck with their unit and should do their best to keep it comfortable. Renters have no incentive to (it might even be illegal for them to make improvements), and landlords are unlikely to cut into their profits if they can avoid it.

I would say that policy which encourages long-term renting - per-property, as well as per-renter - is deleterious to the socioeconomic fabric. The majority of a housing unit's life should be spent inhabited by its owners, and the majority of a person's life should be spent in a house owned by themselves or their family.

Further it’s not housing that creates poverty, and thus crime ridden neighborhoods. Somewhere is going to be relatively poor and thus both poorly maintained and crime ridden. Cities have seen the exact same building go through cycles of poverty to prosperity and back.

FWIW this is also very true in the United States, layouts of new units are generally completely unsuitable for families and that's why upper middle class but not rich enough folks in San Francisco tend to rent/buy condos in older buildings.

Different problem than in France I guess, where the square meterage is just too low, here in the US it's just wasted.

The families thing is also because all other things being equal, more bedrooms will lower the price per sq ft of a unit due to weaker demand; and right now studio and one-bedroom demand is so high that you could reasonably build a building full of them and generate profits.

Then there is the fact that city centers are choke full, no further place to build, what is there is often so old its protected from major changes by various rules and laws, and very expensive without exception. So where new stuff can be built is relatively remote. But then young folks complain how far that is from city center and their jobs, that they don't want to spend their lives commuting. Construction is certainly allowed, I haven't heard about single country banning it in any way, but folks want those central places for peanuts. Almost everybody wants them, still for peanuts. The fact is that even in proper communism stuff that was important, scarce and everybody wanted it was a prized treasure with hard competition and few winners.

Thats one of the things I see is changing with new generations - wanting it all right now, never happy, not much humility or hard work to get to some desired place. Then hard disappointment when reality ain't some fabulated tiktok feed. Ie I am working on setting up my = my family modest wealth and even after moving to Switzerland with pretty good job it will take me till 60 at least, even with my wife being a doctor. Young consider this a failure, maybe my kids will do so too but I don't care. Then folks vote for trump since he keeps saying how everything is shit, thats so easy to identify with. But for every unhappy western kid there are 10 or 100 ones coming from rest of the world working hard, not complaining, with laser focus on their goals. A bit of discipline and focus can get one pretty far, especially with such competition.

The solution is known: significant land value tax and looser regulations to actually use the land. This will not happen though because of lobbying of property and land owners who enjoy their rent seeking. They will always manage to find another scape goat. One day it's flippers, next day it's Airbnb. Anything but land owners being forced to pay taxes to fund the area they own land on.

You've got cause and effect backwards here. The population hasn't grown because the housing hasn't been built for them. The city population would have grown if more housing were available, but instead what happened is that the limited supply drive rents up and kept some people out.

Separately, there's also too few hotels in the city to accommodate tourists, so some housing was converted to that more profitable use. It all can be traced back to not building enough to satisfy increasing demand.

Average household size has declined due to changing social dynamics (longer times before marriage, fewer kids, etc.) so even if population is static you need more units. Spain went from 3 in 1990 to 2.5, which is a pretty drastic change.

I recommend you open Google maps, google Barcelona, and look at it. The whole city is a dense urban area, surrounded by steep hills. The whole city is covered with >6 story apartment blocks. This isn't the US, where you need to drive 8h to the nearest town.

I couldn’t find stats quickly for Barcelona but in other places the amount of space per person takes up in housing has gone way up. People now simply won’t accept housing conditions that were normal in the past.

If more housing doesn’t get built but each person demands more space faster than the population declines the outcome seems obvious.

So we do it inside US cities too.

It got to a point where construction isn't even really providing housing, because the units are unusable for regular people. There's an apartment block of just studios in my neighborhood which are not up to code (too small) but were grandfathered in as construction started before it changed. The change was enacted so that developers would stop making such useless buildings.

China built enough to house its entire population twice over. Didn't help them keep housing affordable just how the price of gold goes up and down despite a steady increase in supply.

We're well past the point where naive supply and demand is effective. There's infinite, induced demand.

Your example about China is pretty bad. They moved most of their population into cities over the past 50 years by massively building housing and making it affordable to their middle class.

Young people struggling to afford their own place in a tier 1 city in China is not evidence of it failing, it’s evidence of tenants being picky.

China’s housing has also had several bust cycles where the prices came down. Government intervention and bailouts prevented it from being as obvious, but supply and demand most certainly work.

By selling them to someone else who intends to sell them to someone else, just like every other commodity on the market. Real estate as an investment is less a bet on rents and more a bet on land value.

>Build for $1 mil.

>"This building is worth $2 mil! Give me a loan with it as collateral."

>Use the $2 mil to invest in something else.

Rinse and repeat. This is also the reason why CRE valuations have hardly fallen despite WFH et al. Everyone involved understands that valuations cannot fall, because more than the value of the buildings in question hangs in the balance.

Unrenovated flats are mostly there for speculation purposes, think of them as gold to be traded rather than something to live in.

How do people make money on crypto? Just sell it to another sucker. I've seen listings titled "Sale! Ten studio apartments!" - someone was literally selling all of them in one go.

Among the upper middle class around here it has become fashionable to have real estate investments - interestingly since recently also in Spain - because it's seen as a safe bet and, gradually, the default.

As for China: over 70% of household wealth there is tied to real estate. Compare that to the US, where it's less than half of that and even if you assume pension funds pour all their money into real estate, it's still less.

All those busts didn't decrease prices long term. Someone holding on to their housecoin through these cycles would still stand to gain.

That feels wrong. For most households, their biggest investment by far is their house. Few households which do not own a house have any kind of investment.

So if only 35% of all household wealth is in real estate, I would wager you have some outliers skewing the numbers (i.e. billionaires).

(This is not a criticism, just trying to reconcile the numbers)

A few medium-sized cities like Austin are the exception to this.

Lots of large cities are building a bunch. Every large city in Texas, Phoenix, Tucson, Salt Lake, etc.

The highest demand areas are high density areas. If you convert a medium density neighborhood to a high density neighborhood, the demand increases in that neighborhood, but the supply increases city-wide.

The reason rents increase in that neighborhood is that even though rents in high density areas have gone down and rents in medium density areas have gone down, that specific neighborhood has gone from a medium density area to a high density area and that limited amount of construction by itself isn't enough to cause high density areas overall to cost less than medium density areas had.

But notice what effect you're having on rents. The medium-density area had been $3000 units and high density units had been $4000. Now it's high density units, high density units city-wide have fallen to $3500, medium density units city-wide have fallen to $2600, the amount of housing stock has increased by thousands of new units, and you have people telling you that you've done something bad because the new $3500 units are more than the old $3000 units.

Then you do it again in another neighborhood. $2600 medium density units get converted to high density units, high density units go from $3500 to $3000, medium density units fall to $2300. The high density units are now as cheap as the medium density units originally were, but you're again accused of increasing rents from $2600 to $3000.

By the third time the high density units are now less than the medium density units originally were -- if you haven't already been assailed by local landlords using these arguments to prevent this from continuing -- but once again you're replacing $2300 medium density units with $2700 high density units and the claim is that you must be stopped to prevent rents from going up.

OK. Give me an example of a city that has:

1. Growing population.

2. New dense construction.

3. Decreasing sale prices (or at least flat prices).

I now have a real estate database for all the US real estate transactions since 1995, Japan since 2000, and for parts of Europe. I was not able to find such an example in this set for a city larger than 200k population.

And I'm sorry, I'm struggling to understand the logic in your post. In reality, rents are not a good indicator short-term. They are too mercurial and are affected by transient effects. For example, rents in SF fell by 30% during the pandemic. And not as a result of new construction.

If you want a more reliable indicator, you can look at 3-5 year sliding average for rents, or at sale prices.

I think you need to take a break and look at the real world. OP is right, and you don't understand it because you are oblivious to how things work in practice.

The bulk of this sort of investment is focused on a gentrification strategy, where cheap residential buildings in low-income neighborhoods are bought to flip them to cater to a high-income market. Often, occupation density is also lowered as the number of apartments per floor is reduced so that the real estate investors can market larger, spacious apartments.

The end result is that many low-income families are priced out of the market to make room to fewer high-income households. That's the reality of it.

You call it propaganda, I call it ignorance.

What you're referring to is the type of construction which is allowed under the existing regulations -- increasing density is prohibited so the only way to profitably operate a construction company is to make the same number of units into more expensive ones.

They don't convert a smaller number of units into a larger number of units because that's the thing they're not allowed to do, which is exactly the problem. Buying a 5-unit building and turning it into a 50-unit building would otherwise be quite profitable because you get to sell 10 times more units than you bought, which is profitable as long as the price of a unit is higher than the construction cost.

https://handluggageonly.co.uk/wp-content/uploads/2015/07/Han...

Here's an idealista link of properties for for sale:

https://www.idealista.com/pt/point/venta-viviendas/41.39993/...

A few things to point out is the city is already highly dense and meticulously planned (numbers suggest Barcelona has ~50% more people/sq km than NYC - it is far more densely populated than any city in the United States), and there's relatively a lot of property available for sale, but it's quite expensive if you're on a European salary. Arguably there's failed market clearing. And units are quite small by American standards, not at all something you can subdivide 5 units to 50 unless people are going to live in coffins. Final point is a large number of the cheaper properties will say "illegally occupied", because they have a (usually absentee/investor) owner who left the place empty and squatters have taken over who can't be evicted under Spanish law.

It's a complex situation and many more pages could be written about it by people who are on the ground and have ideas, but this one-size-fits-all "just build more density!" solution, while often reasonable in the (globally bizarre) American context with lots of land, car culture, deserted crime-ridden downtowns, etc, is out of touch with the complexity of what's going on in Barcelona/Spain/Europe more broadly.

And yes they could also just put up lots of 50 story steel skyscrapers to blot out Sagrada Familia, but then it would no longer be Barcelona.

That’s most certainly not an argument against building MORE (as in net positive people capacity) housing.

2019 - 978,763 2020 - 995,484 2021 - 964,177 2022 - 975,418 2023 - 979,882

For the same reason, the SF rents also dropped by 30% during the pandemic.

And if you look at the surrounding Travis County (in TX), the population (and prices) there grew.

You mean like the USA? Or just about every developed nation on the planet?

The problem is that employers want their employees physically present at the office, and roads can only carry them so fast, so being closer to job opportunities will reflect on the housing cost. Maybe the solution would be to make workplaces more widespread, improve transportation to expand commute reach under 30-60 minutes, or support more remote work.

The point remains that claiming that everything is down to "not building enough" misses half the equation.

In any case, what is the rationale for building more only to be able to accommodate more immigrants? (Because that's the situation)

European governments do not want to face this reality and prefer to try to convince people that immigration is good (polls show that the people increasingly disagree).

Case in point: Tokyo. You just need to make sure you _have_ to live in The City, and that there are no other options for you. And a shrinking population makes that _easier_.

Measures as drastic as this need correspondingly dire reasons. You can call it "housing crisis", but the truth is there are many ways to fix this that don't come even close to this level of communism.

Dezoning, for once - I've linked this before: https://unchartedterritories.tomaspueyo.com/p/why-japan-succ...

Simply building more, and encouraging people to build (instead of encouraging them to do absolutely anything else)

Or, of last resort, what this article is describing - use public funds to buy buildings and rent them cheaply. It's insane, if you do the math, but it's a lot less insane than rent control or what you're suggesting.

(apologies if Poe's Law).

What gives you the right to make up rules about what everyone else can do with a particular place on their world?

Laws are just rules that people happen to like. I know we consider the right to property to be fundamental, but the right to have somewhere to sleep is also pretty fundamental.

Now, in Europe the growing demand overall is due to immigration, which is a matter of policy and thus can also easily be reduced/regulated.

My family in Spain is either very house poor, making little and having to rent, or inherited more house than they ever need, and keep it underoccupied because trying to put it to more productive use is pretty risky. Regulations that foster better utilization would make a big dent, but they would be extremely unpopular. Even those that don't own an apartment just want one to be cheap so they can use it as a wealth building tool, as almost nobody wants housing as an investment to be a pretty dubious deal.

For example, build infrastructure that favor sprawling. This way people will prefer to live in nicer, smaller towns as long as they're still 30 minutes train ride from the city. (I'm in Paris now, and their RER is an awesome example of this.)

Encourage remote work, or at least don't hinder it.

Test some anti-car measures, like congestion taxes or just make whole neighborhoods car free. This makes commute time less directly proportional to physical distance - if you have to walk 10 minutes or take a train either way, you're more ok with living in a suburb.

The entire process from urban planning to construction completion can take 10-12 years, including about 5-6 years for general urban development planning and 2 years for partial planning and urban development projects.

source: https://www.bbvaresearch.com/wp-content/uploads/2024/11/Low-...

So may be if you solve the supply first, then you won't need to try to regulate the pricing. The law of supply and demand is like the Newton's laws of physics, it works.

But in Europe, the bureaucrats try to solve the problems created by regulation with even more regulation. It'll end badly when the far left/right use this to win the elections and who knows what will happen.

Do they teach this to you guys in school? Many people religiously believe it.

Newtonian physics is a model approximating reality, but it breaks down if you analyze cases that can be safely ignored for many engineering purposes, like traveling at high speeds.

Supply and demand are worse. They’re concepts approximating certain trends in economic outcomes that almost always break down in real world situations.

For example: more supply can generate more demand. Demand can be inflexible with respect to supply. Supply and demand are unstable and can change unpredictably. In a monopoly situation price can be manipulated. Short term large supply can hamper long term.

It’s weird that people try to explain the world with supply and demand as if everyone else was an idiot who doesn’t understand simple truths, while in reality they are the ones who don’t appreciate the complexity of things like urban development.

Here’s just a taste. Do please read and if you have a problem with the identification strategies, I would love to hear it.

- https://blocksandlots.com/wp-content/uploads/2020/02/Do-New-... - https://www.dropbox.com/s/oplls6utgf7z6ih/Pennington_JMP.pdf... - https://research.upjohn.org/up_workingpapers/316/ - https://research.upjohn.org/cgi/viewcontent.cgi?article=1325... - https://furmancenter.org/files/Supply_Skepticism_-_Final.pdf - https://www.sciencedirect.com/science/article/pii/S009411902... - http://andreas-mense.de/wp-content/uploads/2020/02/Mense-202...

Maybe try to research the city of Barcelona, its topology, the available space for construction, the process of developing high-rise buildings, and then try to ask yourself what steps need to be taken to build 100k new flats in the city?

Consider the infrastructure, the cost, the timeframe, steps needed to ensure quality, and make sure that it doesn't become unliveable like american downtowns, compensation to the current residents whose flats would have to be demolished, damage to the city's character...

Then you could maybe think about what happens when rent prices drop, and whether a decrease in apartment prices that follow would have some effect on the number of mortgage defaults.

Maybe consider the political support you'd need for such a development and how you'd get it from the existing residents?

Finally try to do some napkin math and figure out how quickly these new units would be bought up as vacation houses by the rest of Europe and the rest of Spain moving from smaller towns to the newly available stock in the city. For bonus points you could try to estimate how much new housing was built in Barcelona in the last 20 years.

Maybe that'll help. I'm really not sure what you mean by "identification strategies", but thanks for all your research about just letting developers build denser housing. I'm sure if they just listened to your simple advice, the problem would have been solved long ago. NYC and SF are known for their affordable and high quality rentals.

Seriously, all of the cities are massively overbuilt. More so the smaller ones, but even Shanghai, Beijing, Shenzhen, Chongqing. AirBnB is not allowed. Huge numbers of units sit never used and off market. BTW that's with a SHRINKING population. Overbuild estimate is 50M units (150M people) with some 20M units unfinished. Prices are insane and comparable to NYC/London @ $10k/m2, when incomes are only 30% as high.

Why? Financialization. Yes, property values ONLY started falling WHEN builders stopped completing buildings. They were not places to live, they were investment vehicles. This is just as true in London, Vancouver, NYC, SF, Miami, etc.

A 1 bedroom in the inner ring might go for around $400/mo, and in the outer ring around $200-300/mo. Double those numbers for 2bdrm, and 3-4x those numbers for the inner ring of a T1 like Beijing, Shanghai, Shenzhen, etc.

By American standards, that might be affordable, but median household income in China is around $300-400/mo, and the urban median household income is around $500/mo.

As such, it can be fairly unaffordable, but buyers who were lucky can continue to demand high(ish) rents while coasting on asset value depending on when they acquired property - especially inner ring property.

> A property bubble generally involves asset values rising past what rents support.

Rent is often used as a proxy for spending, but that doesn't necessarily work in China.

In China, because incomes outside of a couple top tier white collar employers remain low, private rents can be fairly inaccessible for the bottom half, so employers such as large factories often provide subsidized dorms/apartments, but these factory cities tend to be isolated and self contained from the larger community.

Furthermore, despite significant reforms, China still has a corruption problem, and the easiest way to convert black money into white money is real estate, so in that situation, asset depreciation is acceptable because it can make previously non fungible black yuan into fungible yuan or USD sellable or mortgagable assets.

This problem has constantly manifested all over Asia, and has tripped various former high flying economies like Malaysia (1990s), Thailand (1990s), India (2010s), Vietnam (present), etc.

https://bendyimby.com/2024/01/01/housing-supply-and-demand/

In supply and demand, you have these things called "supply curves," and "demand curves." The price is on the x axis, and the volume cleared in the marketplace is on the y axis. Changes in the situation move the curves around.

Aye, there's the rub. Changes in the situation do NOT move the gravity curves around in any scenario where Newtonian physics is a reasonable model to be using. So whatever kind of "law" this "law of supply and demand" actually is, it clearly is not like the laws of physics.

There are other factors to consider like transportation and traffic, the quality of life of the inhabitants, business, tourism, future growth, climate resilience and so forth.

This isn’t a let’s cut down a bunch of trees and build a house out of low quality lumber in a week kinda situation.

"we've tried not building any housing, and we're all out of ideas"

It took 20 months to build the 380-meter Empire State Building, which is about 6 days per story, and it is not made of low-quality lumber. Nowadays we know how to build taller buildings than that, though it usually takes a little longer; 广州周大福中心 took 6 years to build (75 months) ending in 02016 and has 111 floors in 530 meters, thus requiring about three weeks per floor. Barcelona wouldn't even be able to do the paperwork to build a new building in 6 years.

You might object that skyscrapers are impractically expensive. They can be a bit expensive, but they don't have to be. 广州周大福中心 is half residential, consisting of just over 600 apartments and hotel rooms, so contains space for about 1200 residences, and was built on a budget of US$1.5 billion, about US$1.3 million per residence-equivalent. This is partly because the residences are large; the building's total floor area is 508k square meters, so we're talking about 400 square meters per residence-equivalent. If you'd carved it into 40-square-meter efficiency apartments it would hold 12700 of them and house 25000 people, at a cost of US$120k per apartment. Also, skyscrapers that aren't among the world's tallest buildings are generally cheaper per unit area.

Skyscrapers are not the only way to get high population density, just the least bad way. 广州市 has 2500 people per square kilometer and a per capita GDP of US$23k per year. Manhattan, where the Empire State Building is (but which has lost the ability to build) has 29000 people per square kilometer and a per capita GDP of US$550k per year. Giza has 45000 people per square kilometer, without many skyscrapers, and a per capita GDP of about US$7000 per year (nominal).

Note that 广州周大福中心 occupies a lot of 27k square meters. The hypothetical same-sized building of efficiency apartments would have a population density of a million people per square kilometer, 20 times Giza's and 6 times Imbaba, Giza's densest district. Even the actually existing luxury building has a population density of about 50k per square kilometer, probably denser than Giza.

Barcelona? Barcelona has 15000 people per square kilometer and a per capita GDP of US$103k per year. Barcelona's problem is not that there isn't space for all the people or that greater density would inevitably produce misery.

广州市 = Guangzhou

广州周大福中心 = Guangzhou Chow Tai Fook Center

Edit: and BTW I find it bizarre to use Chinese characters like this on an English language forum without providing an English translation. To most readers here, they're a meaningless string of unfamiliar characters.

Build a fifty lane wide highway in the wilds of Montana and it will carry about as many cars as the current freeway.

We see induced demand in highways because the thing highways provide is valued (land for private vehicle operation), but the price charged is almost always far far less, usually zero. So just like a Starbucks that started to offer free coffee, the result is going to be long lines.

If housing was being offered below value, then you would surely see induced demand in housing. Imagine for instance if a govt program committed to offering apartments of unlimited size for $0/month. People would absolutely decide they need a 5000 sqft apartment instead of a 2000 sqft apartment, just as today they decide they need to drive to a store 10 miles away, instead of walking to one around the corner.

It does. Evidence: no large city in the US, Japan, or the Western Europe managed to lower housing prices long-term by increasing density.

Prices only go down if the city population goes down or stops growing.

Once the population growth returned, the prices went up as well. And no amount of new construction helped: https://www.globalpropertyguide.com/europe/austria/home-pric...

Again, perfectly fits my prediction and contradicts your model.

> For example: more supply can generate more demand. Demand can be inflexible with respect to supply. Supply and demand are unstable and can change unpredictably. In a monopoly situation price can be manipulated. Short term large supply can hamper long term.

Any model that tries to predict human behaviour will be imperfect, we all know that.

There is hardly a monopoly of housing in Spain, if we keep the current disconnection between supply and demand, prices will for sure keep increasing. There is evidence that building more reduces prices. It's not the only condition needed to reduce prices, but it's an important one:

https://commonwealthbeacon.org/housing/study-says-boosting-h... https://www.upjohn.org/research-highlights/new-construction-...

I didn't any suggestion to "disregard" the "law of supply and demand". I saw a suggestion that whatever kind of "law" this is, it is a very different kind of thing than a law of physics, to which a comparison was being made.

> Any model that tries to predict human behaviour will be imperfect, we all know that.

Yet we can rarely even bound the actual scale of the imperfection, so discussing "laws" of economics as if they are in some way similar to the law of gravity seems a little silly.

OK. Can you provide me just one example of a large city that reduced the housing sale prices by building more dense units? Not by crashing its economy or otherwise decreasing the population.

If your model is correct, there should be at least _some_ examples.

> There is evidence that building more reduces prices.

There is none. Your studies are basically nonsense. Here's the strongest result:

> One study cited in her report found that the average new apartment building lowers nearby rents by 5 percent to 7 percent “relative to the trend rent growth otherwise would have followed”

Translation: the prices grew, but we managed to P-hack a small subset of data that shows at least _some_ effect. They could not find actual _decreases_ and had to resort to "would have beens".

There's an overview article (that also contains the links to the study mentioned in your link): https://furmancenter.org/files/Supply_Skepticism_-_Final.pdf - feel free to look for the evidence for the failure of the "just build more".

2019 - 978,763 2020 - 995,484 2021 - 964,177 2022 - 975,418 2023 - 979,882

For the same reason, the SF rents also dropped by 30% during the pandemic.

And if you look at the surrounding Travis County (in TX), the population (and prices) there grew.

What you're describing here is jevon's paradox and it particularly works on unfulfilled markets with high price elasticity. Additionally the field of economics deals a lot of what you're describing in the contexts of monopolies/monopsonies.

But as a general rule of thumb, if something has an inelastic demand (as in housing) the law of supply and demand will always be the guiding concept to explain the shortage and high prices.

Well, up until 2008, that was common wisdom. Post-2008? Anyone still pushing that line won’t get far. In this case, that must be the free part of OP’s nickname speaking, right before the faler kicks in.

Here is a free textbook that requires no more than highschool math: https://openstax.org/books/principles-economics-3e/pages/3-i...

The "law of supply and demand" is a statement about aggregate, not individual behavior. "supply satifies demand" is not a statement about an inidividual transaction in which a person's desires/needs/wants were satisfied, it is about the aggregate behavior within an economy.

I think of it as an order book where supply is the ask and demand is the bid. You can only argue that supply never meets demand if there's no liquidity, but that doesn't refute the "law".

Can you expand on that claim?

The idea that people involved in housing are some how uniquely greedy has a long history and it's just wrong.

People who own housing - homeowners & landowners - are able to be more greedy than others because they are part of a cartel. The debate over housing reform & housing supply is about whether or not enforcing that cartel should be a government function.

It's a very good approximation and there are special cases that it doesn't work. But for a practical human life-scale reality almost all of daily use technology is based on these laws.

Does the supply/demand work in all situations? No, you need to have a at least some resemblance of a free market to let the market forces work.

The reasons we know that this law is working are not only empirical understanding (try selling your laptop on ebay and you'll empirically understand why) but there were at least 2 testing approaches that validated it:

1) Experimental validation via:

- Market simulation: Repeated trading rounds (Chamberlin, Smith) show prices converging to equilibrium when participants learn from prior outcomes. Public price data accelerates this process.

- Policy tests: Lab experiments confirm tax/price controls create predictable shortages (e.g., rent controls reducing housing availability).

2) Modeling approaches:

- Random coefficients logit models: Isolate price-quantity relationships by controlling for unobserved factors like brand loyalty.

- Industry analyses: Cement and airline markets demonstrate markup adjustments aligning with supply-demand predictions under competition.

- Instrumental variables: Cost shifters (e.g., raw material prices) validate causal price-quantity responses.

> It’s weird that people try to explain the world with supply and demand as if everyone else was an idiot who doesn’t understand simple truths about the world, while in reality they are the ones who doesn’t appreciate the complexity of things like urban development.

This is a strange argument. So basically the supply/demand curve works, but there are some consequences if you change the supply. Yes, they are. But if you want to have cheaper housing you will not save it if you don't build more even if there are other negatives from increased supply. And yes, urban development might be complicated, but the basics of "people need to live somewhere" is not. You might get favelas like in Brazil, but if your city grows and you don't build, because the people in the government and landlords get squeeze more profit from the market the problem will not be solved.

This is actually surprisingly common, often the full range of hot to cold happens between 5-15% of actuation or 85-95% of actuation.

There is no point in actually trying to dial in the temperature using the handle. Just don't.

Btw. I'm talking about tankless heaters.

Adam Smith was not aware of advertising. Suppliers can fabricate demand to manipulate the price. It's not a law, it's an assumption about human psychology and a wrong one.

In the case of Barcelona, supply is limited due to the geography of the area (sea/mountain) and the inner city is already extremely dense.

Really? Try selling pork sausages to Saudi market. There are many failed startups with huge marketing budgets failed, because there were not enough demand for their products.

The MIT Press had a book in the 90s called "Philosophies of Manufacture" that gathered together writings, pamphlets, letters and more that flowed around as the industrial revolution ramped up in the USA. It is filled with the actual industrialists and/or capitalists fretting about how there would not be enough demand for their products, and openly formulating plans to increase demand via new means (which today we would call advertising and marketing). This is not some idea flowing from progressive politics, it originates with the capital class itself.

You mean mass immigration and greed?

A world where bakers had to seek permission of other bakers to increase their daily bread production wouldn't be called a market, it would be called a cartel, and no one would be surprised to see bread prices rising through the roof if the cartel members were successful at enforcement.

Although it is true that the problem of excessive bureaucracy is not exclusive to Europe and very common in the US too.

I am tired of this zealotry toward free market absolutism, thougtlessly reciting econ 101's tenets as a mantra. Free stuff is good actually, some industries just work better and more efficiently as a centralized common: electricity, water, rail, healthcare... That's an empirical fact. I believe housing too could be on the list.

There is more to the economy than rational agents systematically looking for what's best at the lowest prices and lawful entrepreneurs tirelessly striving to improve the utility of their customers.

Aggressive city planning, outdated unchanging zoning, backlogs, rapid growth of heritage building, NIMBY protectionism supported by municipal gov, extreme tenant laws disincentivizing renting half empty properties, etc etc. The only solutions they’ve tried are rent control and extremely slow gov investment in housing which have done nothing to help (rent control historically reduces supply making the problem worse). They’ve tried everything except liberalizing the market and letting people build.

We don’t need to wait for huge gov spending programs to solve a problem when there’s already a mountain of capital waiting to build the second the gov lets them do it.

Not a fact. Easily demonstrated by falsification by examples of each of those where they have failed because of centralization. Infrastructure is deviously hard to get right. Edit: we can find examples of decentralized infrastructure that works great (internet, Apps, banking).

Healthcare in particular must always fail because there's an unreasonably infinite cost for and ideal service. There's no good answer to what price (what resource limitations) we should put on fixing little Jimmy's cancer. Governments struggle to make compromises in healthcare, and plenty of citizens are super unhappy with any compromises made. Of course a free market can't fix that problem either. Disclosure: I'm not a free market zealot.

Too many people want to define sides and then get idealist about "their side"; how tiresome. Perhaps you are similar to the free market zealots?

> I believe housing too could be on the

Be careful of what you wish for. Government housing is rarely brought out as an example of success? Maybe Singapore. "Too much government" is a common reason for housing (market) failure. Supply availability is mostly constrained by regulations. Demand is driven by desirability. House prices are driven by mortgage availability in developed countries. House unavailablity is often because of governmental choices over regulations and interest rates. Governments obviously mostly fail to get those right. What makes you believe a government can get socialised housing right?

We don't have infinite resources. Neither government provided services nor free markets solve that. Anyone answering with either of those solutions is the same.

You might find this article interesting: https://washingtonmonthly.com/2020/08/30/libertarians-took-c...

By "empirical fact", I meant that our socialized healthcare system here in France seems to do a better job than America's in two key metrics: cost (we dedicate a lesser part of our income to healthcare than Americans, through taxes) and life expectancy (ours is slightly higher).

The one caveat I would concede is that we have less access to experimental treatments for rare diseases, but we eventually get most of them. And at a better bargain than Americans too.

For electricity, we had a very cheap, clean grid thanks to our nuclear reactors. It started going downhill the instant Europe asked us to "liberalize" our national monopoly. "Private companies" began reselling electricity for a premium. These are essentially useless parasites. Price got up, all else equal.

As for housing, I know we already have more vacant homes than homeless people (from our national statistics agency). So the issue is only one of repartition. I don't care about any rationalization or gesturing about "market forces" or whatever. We ought to distribute housing to those that lack it.

I'll read your article, thanks.

There isn't a free market in housing in any large American city. They all have overly zealous zoning policies that restrict density, driving up prices.

Are you hiring junior or lower-budget developers? That might explain your experience. I've worked with great engineers in Spain, but of course, like anywhere, quality varies.

In LA for example, you can never get a rent controlled rent back to market. If someone is paying $600 for a 1 bedroom you're never going to catch back up to $1800.

All that said, I don't know why it has to be non profit. What you described is a just a real estate developer. Zoning is a more limiting factor than anything else.

By staying near market rates you’re not “lottery winning” some people. By reinvesting all profit into additional units, you’re going to slowly drive the costs down.

0: https://www.lowimpact.org/categories/economy/housing-commons...

https://www.bloomberg.com/news/features/2023-11-08/the-desig...

The solution, IMHO, building more, could be theoretically be championed by the State, but with ever-increasing construction costs, regulation, taxes on everything, scarcity of land in big cities, and pensions entitlements, where will the money come from? It's not cheap to build with the quality standards that we all desire everyone to have.

Building co-ops like those that exist in Vienna do exist in Spain, but they are not a panacea, the same problems that a State-run initiative has will apply.

It also creates a system where the only new buildings are luxury condos because on paper it’s usually the only thing that would turn a profit after investing a decade of hoop jumping and political wrangling. No affordable development would ever pass that sort of system.

So the gov is tasked with building affordable housing. Creating a bad situation themselves, pointing the finger at developers and only offering very expensive bandaids as the solution that happens to give them more power, money, and control over the city.

Kingmakers in an high end market while feigning solutions for the low end, and pushing the middle to the suburbs and small towns.

    numerous negative effects supported by a variety of studies both in Spain and abroad

I used to live in Vienna for 8 years (2005-2013). Looking at https://www.immobilienscout24.at/regional/wien/wien/wohnung-... the prices per square meter are a lot higher than I paid at the time: the cheapest rentals I saw was just above €10/m^2 (rare) and more commonly were around €15-20/m^2. When we left in 2013 we were paying €480 per month for a 65m^2 apartment (that was already cheap at the time but is even more out of the ordinary today).

Anecdotally everyone I know in Vienna started complaining about housing unaffordability around the time we left (it was never a topic when I got there) & that seems to still be the case.

Is it possible to get that affordable rent within, say, a year? My understanding is the wait list for this affordable housing can stretch multiple years.

Maybe Vienna is affordable to people living there, but at the cost of extreme difficulty for outsiders (even Austrian outsiders) to move there.

So, if you grew up in a poor village with little economic opportunity, you will have a lot of difficulty moving to Vienna to open up your job prospects. The affordable housing there comes at the cost of denying outsiders an opportunity to better their position in life.

Is that better than riding rents displacing longer term residents? Maybe, I don't know, but there are invisible victims to many affordable housing schemes.

Singapore is also hard to achieve but the HDB mandate made it that the government own monopoly on land so they're incentivized to provide maximum land utility to its population.

Japan has the best land use zoning in a way it makes it so easy to build and develop. They also have a very practical view on housing and do not see it as an appreciating asset critical to accumulating wealth.

I want to note that this is in big part due to earthquakes and nature in general. In Spain 100-year old houses (like in the article) are renovated and relatively easy to maintain. However in Japan, between the earthquakes, typhoons, and the weather in general, not only you need to be actively maintaining it (typhoons), but they become worse over time (earthquake damage accumulates).

Source: Spaniard who lives in Tokyo.

IMO geographical constraints should not be the all-in justification for a certain land-use/housing policy. I hear a lot chalk up the fact Barcelona stopped building since the 1980s because they're surrounded by mountains and the sea. Or recently with the LA fires people look at these wrong answers. There's no reason for things being like that other than NIMBYism and lack of long-term political will from local councils.

Barcelona's problems come from a very complicated regulatory regime that hasn't just lowered construction, but ultimately led to fewer people living in the same space. Regulations that favor the renter enough to make putting housing up for rent pretty risky in many ways. Minimal property taxes that let having an apartment unused be pretty attractive. Big tax advantages for owning an expensive apartment vs living in a smaller one and putting your savings into stocks. Prices that don't come down. A location so interesting, and yet at prices that are globally affordable, so it is more profitable to have an apartment dedicated to low-occupancy rate foreign tourism than to have it occupied all year long by a long term tenant. Cheap enough for an American in tech to buy an apartment downtown, and use it 3 weeks a year.

The market-centric changes that wouldn't just allow more building, but make the existing buildings be used more efficiently are just not in any local regulator's radar, because lowering prices might be nice for renters, but it'd be awful for owners, and there's a lot of those, and they vote.

You seem to be confused, and a tad ignorant too. Public housing investments are nothing new, and Barcelona has already benefitred from a massive urban development program at the turn of the century.

https://en.wikipedia.org/wiki/Eixample

Barcelona has already one if the highest population densities in the world. The examples you listed in Austria are already eclipsed by the massive appartment blocks in Barcelona and neighboring municipalities. Your average city block in Barcelona is already 6 stories high or greater. It's a dense urban area covered by massive residential blocks.

Even if you start demolishing blocks to replace them with hongkong-style skyscrapers, you would need a few decades to increase supply in a meaningful way, and even then the impact would be negligible.

Barcelona's problem is not supply.

This obviously a lot to pay for such miserable housing, but it’s also significantly less than private renters currently pay in the UK[1]:

> Excluding housing support, the average proportion of income spent on rent was 37% for social renters and 45% for private renters.

I’m not trying to suggest the current situation is as bad as early C20 Vienna. Thankfully, such poor conditions are not, to my knowledge, widespread. I imagine other needs like food and clothing are more affordable than they were then.

However, it does point to how expensive things have become. If we removed some regulation, would housing be pushed further towards cheaper but substandard dwellings?

I don’t think housing at 25% of low-income exists in the UK. If we extrapolated from the current, more expensive housing options, how different would 25% housing be from those in Vienna?

[1]: https://www.gov.uk/government/statistics/chapters-for-englis...

Does it mean that anyone, at any income level, and any family situation, in Austria can elect to move to Vienna and get a reasonable sized apartment within a short period of time, perhaps 1 month?

There's nothing wrong with believing that non-market housing is the way to go, but we can't judge success on rents alone.

You too could live right in the city at an affordable rate if AirBnB and property owners didn’t force out the locals to make a quick buck on holiday makers.

By blaming AirBnB as the root cause, you're implicitly admitting that the problem is too little housing supply.

Great. So how can you increase housing supply? Your solution would be to ban AirBnB, which frees up only less than two years worth of new housing stock, while simultaneously reducing tourism revenue. This is a temporary and non durable solution that solves none of the underlying problems that will lead to a lack of supply 5 or 10 years down the road.

The durable solution is to increase housing starts by deregulation and financial incentives or public housing. If you double housing starts, in a decade you would have to ban more than five AirBnBs worth of houses to break even. This is the durable solution.

When I lived in Mexico City, my friends would complain about gringos causing an increase in rents when the places they wanted to live for cheap were populated almost entirely by every Mexican who makes more money than they do.

Yet there was this implication that if you could somehow shut down gringo tourism, there would be no competition for living in the nice apartments in the nice neighborhoods. They would be desperate for your 2000 pesos or something.

Short term lets, landlords, corporate investors, foreign investors, property speculators, immigrants… are all soaking up the supply of housing and pricing locals out of an area! Fix it by banning the lot of it!

The other argument is always that none of that really matters, just build more houses okay? Millions of ‘em. Deregulate, reform planning, do whatever it takes.

Looking at the bigger picture you’d want to tackle both the demand and supply side. Housing is for living in, not investment, so disincentivise foreign investment, corporate landlords, buy to let, etc. and basically make it less attractive than other forms of investment.

This would help in a city like Barcelona because housing density is already high and frees up existing supply that can be occupied by locals once more. You might find a place in Poble Nou or Gracia again instead of having to trek out past Sant Cugat.

Similarly, houses need to be built and in many cases NIMBYism or planning regulation gets in the way of that. But another challenge is building the workforce to build not just the homes but the town infrastructure around them, as well as the incentives for businesses to do that as you say.

If you don’t tackle the issue on both the demand and supply side at the same time then I feel like you just end up where we are now, where lots of houses and flats are built but either unaffordable or snapped up by the wealth class as an asset.

I think that there is a negligence of the economic conditions that face the construction industry in this and most similar arguments. Construction tends to be a pain point for costs, yet it is almost universally seen as a bad career. How can we reconcile this?

It's a boom-and-bust industry. Some years there is more work than people can handle, others they are struggling to get paid. Part of the solution should be to try to level out the cycles by building public housing when there is a downturn, and pulling back when there is not.

However, this is basically opposite of the cycle of populist demand for public housing, which tends to spike when prices are high and taper off when they go down. I don't have the deep knowledge of economics to make this argument robust, but what I think I'm aiming at is a sort of Keynesian approach to construction policy.

We still have to wait a few years to see the real effect that bans have on prices. Lowering prices at most 3-5% by banning Airbnb won't make anybody happy and will come with some negative effects like reduced tourism (and other economic activity), which is a very important part of Spain's GDP.

If you want $$$ from tourism, you have to find ways to attract the rich.

D'oh!

The rich don't necessarily like their destinations touristy. They don't like to elbow their ways through crowds, stand in lineups, or have stranger "extras" in their pictures.

Airbnb contributes to "touristy".

If there were no AirBnB, the economics for a new high-rise hotel would be much better.

But it all comes down to increasing desirable supply (which may be density dwellings at the end of an express train) or building entire new cities (or rejuvenating others).

At some point, if supply outstrips demand, prices will start to stabilize - maybe fall.

My recommendation is that if you want to encourage tourism, change your mind. Build a great place to live and if you do a good job, you might get a boost in a century. I would call this "the Chicago model".

He's getting a "fame du jour" special deal - which for-sure does not.

On the other hand I’m very happy to freely use the new cycling roads and benefit from a somewhat stable and secure society where the chances are low to encounter a furious outcast that want to rob me.

Was it worth all his time & hassle? I'll guess "no", but I don't follow Spanish politics.

Meanwhile, a wide variety of Spanish lotteries offer you chances to win vastly larger prizes, at taxpayer expense, with a quick & easy ticket purchase. Have you bought one?

(/s?)

You have to pay €950 for an apartment 30km away because the average rent in the city center is €2000.

The average salary in Barcelona is €2800, whereas the average rent is €2000.

Do you understand the problem? I mean, answer your own question. Why do you pay €950/month to live in the boonies? Would you pay €950/month to live 30km away if you could pay less than that to live closer to the city center?

35% is a touch high but not out of line with the 30%ish recommendations from banks/estate agents over the years.

It might be an issue that the cost of the average 1br flat isn't attainable on a single average income. But I think we can see how we arrived here.

You need to redo your math. The effort rate is calculated taking into account all fixed monthly expenses, not just rent.

By your own numbers, rent alone is already higher than the maximum admissible effort rate for a household with above average incomes. On top of this you still need to account for your actual cost of living.

You're looking at a scenario where a household with an average or above average income has to endure a effort rate well above 40%-50% to afford living in Barcelona.

To make matters worse, in Barcelona rents do not drop that much even if you start to entertain commutes of well over 2h/day.

There's nothing healthy about it.

The most desirable areas to live are not for the average salaries.

Don’t get me wrong, I think housing is one of the most basic rights that every human being should have. That doesn’t mean rent should be as cheap in highly desirable areas as in not so desirable ones. If people are living around big populous cities due to work then make public transport good, cheap etc.