[lumirth]

I mean… duh? Genuinely baffled at people struggling to understand this. When there’s more of a thing, it costs less. Which is good when that thing is essential, like housing.

Not sure the idea of housing being an asset which endlessly accrues value is good for anybody involved, long-term. Open to disagreement, though! I’m no economist.

[Gigachad]

I guess the confounding factor is that the population isn't fixed. Greater construction could result in population growth which cancels out the gains from greater supply. You'd have to build faster than population growth to lower prices. And generally developers aren't looking to do that.

[jakelazaroff]

Sure they are. What developer wouldn't rather rent out ten apartments for $2k/mo than two apartments for $4k/mo?

[Gigachad]

Depends what the situation is, if the rents are absurdly high where you can undercut them and still profit then of course they would rather build more. If they are getting close to cost price, developers won't build more to lower it beyond that. At that point if you want to lower prices more you'd have to look at lowering the cost of construction.

[bombcar]

Developers usually want to buy land, build house/apartment, and sell house/apartment.

They want to flow as much as possible - so if there are unlimited building spots you get a smattering of various options being built as they all find there niche.

If the building lots are rare, then they all will be built into the most expensive possibility.

[epistasis]

If you try to take any local action that might lower housing prices or even keep them steady, you will likely be stymied by a large contingent of people that deny that new housing could ever raise rents.

The idea that supply and demand don't apply to housing is quite popular:

https://www.jstor.org/stable/27397156

And the very few academic articles that try to refute housing supply lowering prices get a lot of press:

https://hellgatenyc.com/take-that-ezra-klein/

Even when it's not peer-reviewed and contradicts a ton of more serious research attempts, a bid of research which rarely gets popular press coverage.

It's like climate denialism, there's huge demand for denialist positions and very little research to back it up, so the press does not reflect the research.

[CBLT]

People are quick to point out that induced demand exists - especially people that aren't fond of change.

Very broadly speaking, people mis-estimate effect sizes in economics by orders of magnitude. Induced demand is just their foothold to claim an effect exists, before they go about claiming the effect size they want to see.

[tialaramex]

How would induced demand work for housing? I understand it for say transit use or car travel or like Facebook visits, but when there's twice as much housing do I... buy another home? Buying extra houses as "an investment" in a culture that is hell bent on depreciating my investment by building more housing is one of those "r/WallStBets" crazy plays, if I'm wrong I will lose my shirt and everybody will laugh at me.

Also, even if that were a problem, which seems dubious, you can regulate it. Massive tax hikes for second and subsequent homes are a thing in some places.

[bombcar]

I love induced demand. I'm going to use it to get rich - buy up some abandoned town somewhere, and then pay to run a 100 lane superhighway to it; induced demand means the town will fill up instantly and be hugely valuable!

[seanmcdirmid]

It doesn’t work unless there is currently repressed demand for living in that abandoned town because not enough housing or other factors.

No one is complaining about a housing shortage today in buffalo which used to have twice as much housing stock as it does today, because the demand simply isn’t there now.

[bombcar]

Exactly - induced demand is just a misnomer/misunderstanding. "Pent-up demand" would be a much better way to explain it - but that would reveal that at some point the demand ceases; even SF has some limit - once all 12 billion people live there, demand will level off.

[trollbridge]

Good analogy. I've always considered induced demand a bit of a fantasy.

New businesses the sprout up that market themselves certainly induce a bit of demand, but more lanes and stoplights doesn't exactly motivate people to want to go somewhere.

[cyberax]

> When there’s more of a thing, it costs less.

Yeah, and when we add lanes to roads, the average speeds increase and commutes get shorter. Right?

Also, if the government gives me $1 billion, then I'll be rich. But what happens if the government gives everyone $1 billion? Everyone will be rich, right?

[svpk]

... Your examples seem to undercut your point if I'm understanding what you're trying to say.

In your first example the "cost" in the form of traffic etc. was reduced so more people "buy" in the sense that they go on the road until you reach a new "cost" equilibrium. In practice that equilibrium is quite close to the original cost so it doesn't fix the issue traffic. But if that same number of people had driven before the high way expansion traffic would have been way worse; the cost would have been too high so they previously opted not to drive.

In your second example by increasing the supply of money the money ends up costing less; it becomes worthless due to inflation.

When there's more of a thing it cost less.

To be fair, building more housing can be like highway example. If there's tons of pent up demand of people looking to move somewhere increasing supply dramatically can fail to move the needle on cost because there's many marginal buyers who all have basically the same price. If you've got a million people who want to move somewhere and are all willing to pay up to 500k for a house the price of a house won't fall under 500k until you've built at least a million more homes.

[cyberax]

> ... Your examples seem to undercut your point if I'm understanding what you're trying to say.

That perhaps you shouldn't assume that kindergarten-level theories always correctly describe complex markets?

> In your first example the "cost" in the form of traffic etc. was reduced so more people "buy" in the sense that they go on the road until you reach a new "cost" equilibrium.

So go on, do continue this line of thinking. You built more houses.... then what?

Feel free to refer to my explanation: https://news.ycombinator.com/item?id=47433743 - as usual, downvoted by people who can't face the truth.

[simianwords]

Your previous comment is misleading and incorrect.

Even then, I’m curious as to what point you were trying to make with the building roads thing.

Isn’t it a good thing that more roads are built even if induced demand is observed? More people are able to use the roads.

[cyberax]

Come on, think about it.

You got more people into the place. Now more employers move in, as they have access to a bigger pool of employees. What's next?

Put yourself into the shoes of a real estate developer.

[simianwords]

Yeah that’s induced demand and it’s a good thing for the economy.

The rents are supposed to reduce only temporarily. But the goal is to not reduce is permanently. The goal is to increase land utility. Building houses helps with that cause.