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(b) figure out a way to lower rent (and in turn tax revenue).

This isn't mysterious or hard, and I've written comments about it before (https://news.ycombinator.com/item?id=7073079). There are two ways to lower the cost of something: increase the supply or decrease demand. It's quite easy to build more units on a given parcel of land but SF has mostly chosen not to do so (http://www.theatlanticcities.com/housing/2013/10/san-francis...).

The real problem starts with voters, since they're the ones electing the mayor, city council, and other officials, who respond to voter preferences against building stuff but who also deal with voters complaining about high rents. They're in a situation similar to the ones Bryan Caplan describes in The Myth of the Rational Voter, which is a fascinating book that deserves not just to be read but reread (http://www.amazon.com/The-Myth-Rational-Voter-Democracies/dp...).

Can you point to an example of a place/time where a housing supply increase alone (no economic weakness or other drop in demand) has led to decreased prices?

Yeah—Houston and Dallas, today. See also Matt Yglesias's The Rent is Too Damn High.

More generally, if you get more supply in the face of increasing demand, but not enough to lead to actual decreases, you still get smaller increases, per basic micro econ.

Smaller increases I might believe, but after watching buildouts rent above market (sometimes much more so) in around a dozen areas (and average prices continue to rise), I strongly suspect the simple micro econ story is wrong.

About Houston: is Iglesias the source for that? If not, where would I read more? and is the buildout preceeding reduced prices post 2008?

My girlfriend's experience is that rental prices have been rising sharply in Houston for Montrose and the Heights. There are bargains to be had in East End district, but that's too edgy for her. There are cheaper places to live, but you end up driving everywhere.

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