It's curious how the same stupidly simple market theories never apply in the inverse. Why is it that mass immigration doesn't increase rents across the rental market?
How are they stupid? Market theories are a mathematical fact.
If you've got 5 properties and 6 people who need a home people are going to compete with each other until one is priced out. Conversely landlords are going to compete for renters if there are 4 people and 5 properties.
What part of that isn't true?
That's a simple, closed example but the principle is the same. I don't know how anyone can claim that something other than that is true.
But to answer your question, an increase in population increases housing costs. That's how we got here. It's not only migration, it's people having families and changing preferences with more people living alone. But the price pressure is applied unevenly. There is more demand where there is more work, some areas are more attractive to people for non-work reasons too.
But overall prices do go up with an increase in population, one reason why more housing needs to be built, and more housing where people want to live, mostly cities. That will reduce price pressures, provide work for people and generally make the country a nice place to live by reducing housing insecurity.
> How are they stupid? Market theories are a mathematical fact.
FFS they are not. They're an encoding of some the behavior and assumptions of a particular culture. That is almost certainly your culture, you HN commenter, but being embedded in it makes it hard to see it for what it is.
If there exists a mathematical function that describes the behavior of a particular system - in this case human market participants living in a particular society - what makes that function not true? Maybe not in the form a QED mathematical proof but still correct.
Simplistic invisible hand market theories rarely do more than describe most behaviours under particular conditions; they generally don't do well at capturing the edge conditions that humans bend the world to via collusion, corruption, and other non free market behaviours.
The other 'failure' is that many seem to assume only single optimums exist - in real world scenarios and even in simple somewhat contrived examples there are optimums that capture the market to the advantage of a few sellers and other optimums that deliver the most to large numbers of people.
Hotelling's Law is likely the simplest possible example of market theory producing a stable outcome that consumes more energy and is less efficient than a planned deployment; there are other examples of problematic outcomes from falling back into the narcotic embrace of "market forces".
Yes you are largely correct - our knowledge of how markets work in all scenarios and edge cases is incomplete, which is why these are active areas of research by economists, but there is plenty of research on the effects of those non-free market behaviors. As you might imagine it is generally not good.
I also don't think any economist fails to acknowledge that there may be multiple minima/maxima in a market. Hotelling law as we know today is an observation of an optimal game theory result - it actually does bring maximal payoff for the participants at equilibrium. If you want to change the equilibrium condition to say - minimize transportation and energy costs, you will likely have to change part of the rules of the game via policy/zoning/etc.
The "market forces" you speak of is simply the aggregate actions and result of people looking maximize their efforts. Embracing of market forces does not mean taking an ultra-capitalist-libertarian-laissez-faire view on economics. Instead it is acknowledging that the participants in the game will always seek to maximize their payoffs given a set of rules.
Naively discounting these "market forces" to act in this way and find unintended optimal solutions is where problematic outcomes occur by shortsighted policy makers. It is by NOT embracing the effect of market forces is where trouble arises.
_If_ there exists such a function. Does such a function exist? You seem to be simply assuming that. In that case you’re assuming something is true in order to prove it is true.
Yes these functions exist. Both theoretically and practically. These are the supply and demand curves and it can be measured. You can then derive functions from the measurements, with the shape of that function defining different types of market behavior. The inputs of that function are in principal simple and answers the question how does price change as the supply and demand of a good changes? (or the inverse - how does demand change as the price changes?)
I think the main reason we don’t see this is that very few places actually ever have ‘mass’ migration, relative to overall population. I found one study, which shows a relatively small effect that is probably hard to see considering all the other things that impacts housing prices:
https://www.sciencedirect.com/science/article/pii/S016604622...
Of course immigration increases rental costs. If you increase the supply of available labor and demand for housing, wages will decrease and home rental/purchase prices increase.
Immigration also increases the size of the economy, so wages are not necessarily affected in direct proportion. There is the question of existing demand for labor (there may be a relative shortage) and where the labor goes/is needed. But as the economy grows more jobs are created, and the economy may become more productive.
If the economy is bad you'll get also emigration to some extent.
It could increases the size of the economy longer term but makes the average poorer. If there is an area of the economy with worker shortages it could increase production. But add immigration to a balanced job market and wages drop, employer profit increases (rich get richer) and the economy grows. Replacing workers with slaves increases the economy. Canada has encouraged mass migration and it has kept wages extremely low and has also increased the price of housing.
Because migration doesn't add or subtract people, it just moves them around. So the average between an overfilled city and the empty country side results in the overall rental market only changing very slowly.
> Why is it that mass immigration doesn't increase rents across the rental market?
... it does? Or at least it can. Not on its own, but it's a contributing factor. An influx of demand without an increase of supply, in a market with an already-low vacancy rate, will of course increase rents.
