Hello people from reddit,
I'm from Spain and similarly to the rest of the world, rent and mortgages are through the roof. I would like to understand the REAL reason why this happens. People from the right-wing or libertarians in Spain say that there isn't enough housing, therefore the only thing we need to do is liberalize the restrictions concerning building and make more houses and apartments. This would in turn provide more housing and since there will be more offer, the prices will reduce. On the other hand people from the left-wing say that the prices raising is all because of companies such as Blackrock that speculate. Who is right in this matter? I don't really understand what they mean by "speculate" so it would be nice if someone could contextualize that for me. If there are any other reasons that may make housing prices increase, I would like to know them too. Thanks in advance.
Question about house pricing.
byu/PhilosopherPerfect27 ineconomy
Posted by PhilosopherPerfect27
1 Comment
The people on the right would be correct in this case. About 3 months ago, I ran econometric data on housing and it turns out that the main cause of elevated housing prices is related to reduced housing elasticity. Elasticity is the ability of consumers and producers to respond to changes in price. Specifically, supply elasticity is the issue. When housing prices surge, producers want to produce more to capture those higher prices. However, barriers to construction prevent them from doing so, which leads to shortages and consistently elevated prices.
Blackrock is a beneficiery of these shortages. The problem isn’t that Blackrock owns housing. The problem is that Blackrock has a perverse incentive to prevent additional housing because they benefit from these shortages. It’s cheaper for them to make campaign contributions to candidates who won’t allow expanded housing than it is to compete in a free market.