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Name one mega city with lots of housing where the prices have actually gone down. It isn't rocket science: add more supply in a hot area, it attracts more demand. Kind of like how building wider highways doesn't really do anything for traffic jams.

Most cities would like to keep their growth in check somehow so they have the appropriate infrastructure ready for it. Things that distort that (AirBNB, Chinese speculators, etc...) throw all of that off.




Induced Demand (ie "bigger highways leads to more traffic") depends on having an alternative. IE, traffic can take a different route, people can take public transit, people can stay home, etc.

It sounds like you are claiming that it is impossible to out build housing demand. This cannot be true. There is a finite population of people that want to live in any one place.


You are correct and the argument you are responding to is evidence of the boom period we are in.

The NY Metro area is the definitive example of what you are talking about. Every lane of highway or bridge built increased traffic because it enabled someone to get the house they wanted cheaper somewhere else.

Now, construction costs are too high and land is in tight supply. The result? Infill of formerly blighted areas (aka gentrification).


Induced demand is not an infinitely scalable effect. There is some point at which adding more lanes will in fact reduce traffic congestion (ignoring logistical issues with extremely wide roads, which isn't the point of the induced demand argument).

With housing, the induced demand is mediated by housing prices. More housing lowers prices, which attracts more demand, which raises prices. But it's not going to raise prices above where they would have been had no new housing been built. (If prices were higher in the more housing scenario, what's stopping the person who moved to the city at those higher prices from moving in the less housing scenario?)


So what you just claimed here is that adding more supply attracts more demand. With that logic by removing supply we reduce demand. So Airbnb would be reducing demand, especially on infrastructure since part time residents don't use the most expensive infrastructure ( schools ).

Also there are cities where housing prices have stayed in check, and generally they have done it by building more supply. Here is a ink to a graph that show the difference between Dallas and Atlanta and San Francisco ( https://fred.stlouisfed.org/graph/?g=oe8E ). For reference Atlata had over twice as many new units constructed per year as San Francisco with half the population. This is why I say denying the supply side fix is dishonest. There is no reasonable measure where what you claim about supply attracting demand is true.


Eventually it would right? If rents shoot up and people can’t make a living at it in that city, they will simply go elsewhere. AirBNB also doesn’t need public schools or the other businesses and services that are dedicated to residents, so those would go away also (and do in Airbnb heavy areas).

Dallas and Atlanta are nit great examples, as they basically have unlimited land to expand on.


Chinese speculators reduce growth by keeping property vacant. Airbnb doesn't affect growth.

House prices are not growth, and they generate the tax revenue that you say helps get the infrastructure ready.


Building more supply to keep up with demand, no matter how real, would be growth.




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