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Reno's back on: The Fort Reno concert series will go on. NPS finally issued permits, though it will require increased security. Organizers want to find a way to keep police presence from distracting from the community-oriented feel of the concerts. (Post)

Higher wages: The minimum wage in DC increases today from $8.25 to $9.50 per hour. This is the first several increases that will affect up to 40,000 workers. The minimum wage will eventually rise to $11.50 and then be tied to the inflation rate. (City Paper)

Longer days?: DC teachers voted no on extending the school day, despite promises of extra pay. While DC schools with longer days have seen gains on standardized tests, the teacher's union wants the discussion to be part of contract negotiations. (Post)

St. Elizabeths stalled: DDOT has delayed work on St. Elizabeths' east campus until 2015 at the earliest. The setback comes amid funding uncertainty for the Department of Homeland Security's redevelopment of the west campus. (WBJ)

New York's "pop ups": A map shows where developers can build upward as a matter of right in New York City, regardless of existing neighborhood character. (CityLab)

Rental demand: Demand for rental units has gone up across the country since 2009. But supply can't keep up and rents keep going up. In some areas, more houses in the outer suburbs are becoming rental units. (CityLab)

Accessible rideshare?: Ride sharing services face another legal battle on whether they have met the standard of "reasonable accommodations" for wheelchair users. How can they encourage their drivers to serve this demographic? (NextCity)

And...: A Metro official answers rider questions about the Silver Line. (Post) ... DC's zoning update will also change bicycle parking rules. (WashCycle) ... Many of New York's most expensive apartments are not occupied for most of the year. (Quartz)

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Kelli Lafferty works as a federal contractor on various projects in transportation planning and management. She loves all things cities, public transit, and rail. She lives in Navy Yard. 

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Many of New York's most expensive apartments are not occupied for most of the year. (Quartz)

A useful data point in our ongoing debate about whether building luxury housing necessarily leads to lower rents. Here, added housing doesn't even really increase population/density! The real estate market is far more complex than simple supply & demand.

by Dizzy on Jul 1, 2014 8:59 am • linkreport

Of course Fort Reno will go on. Who was it harming???

As for that cool map of NYC where one can build higher, guaranteed, we need one of those in DC, pronto.

by Thayer-D on Jul 1, 2014 9:01 am • linkreport

It is a blowback on the Airbnb model as well.

Oh, why don't I buy a place in the city, use it for two months, and short-term rent it out for the other ten. I'll make 10,000. Not a bad return if you have extra money sitting in your bank.

But that does tend to drive the price of housing up as well.

by charlie on Jul 1, 2014 9:05 am • linkreport

I'm glad DC is raising its minimum wage, but the city to watch will be Seattle, which is raising the rate to $15.

http://seattletimes.com/html/opinion/2023962633_michaelsaltsmanopedminimumwagexxxml.html

by kob on Jul 1, 2014 9:24 am • linkreport

@ Dizzy:Many of New York's most expensive apartments are not occupied for most of the year.

A useful data point in our ongoing debate about whether building luxury housing necessarily leads to lower rents.

Exactly. This is an example where local government got carried away by promises of increased property tax revenue without actually serving its constituents. Unless you consider the property taxes for all that empty space 'easy money' as the absent inhabitants of that empty space do not cost any money either.

We need more building for people around the median income.

by Jasper on Jul 1, 2014 9:35 am • linkreport

@Dizzy
I really don't understand your point. If we have 100 units, and overseas investors buy 5% of the units- presumably at the top end- then we have 95 units for New Yorkers. If we have 200 units, and overseas investors buy the top 5% of units, then we have 190 units for New Yorkers. That means there are an additional 95 units for New Yorkers. It strikes me that even accounting for a certain level of demand from overseas investors, it is essential to add supply. Fortunately, Mayor DiBlasio agrees with me.

by renegade09 on Jul 1, 2014 10:00 am • linkreport

"A useful data point in our ongoing debate about whether building luxury housing necessarily leads to lower rents. Here, added housing doesn't even really increase population/density! The real estate market is far more complex than simple supply & demand."

I'm not sure what simple supply and demand means as opposed to complex supply and demand. Supply and demand is still at work here - but in the case of NYC the demand is not a function only of employment in NYC, but includes a certain number of global wealthy who keep multiple units in places arund the world. Ergo, its impact on certain externalities is different. Ditto allowing more motel rooms in Rehoboth does not increase the number of people walking to work - that does not mean its not potentially a rational choice for Rehoboth - nor does it mean the demand for motel rooms in Rehoboth is infinite.

Anyway, if this phenomenon does cause problems for NYC, the remedy is obvious - and has been siezed on by Mayor DeBlasio - tax the highest incomes till the tax revenues offset the negatives. In NYC Mayor DeBlasio wants to use the revenues to fund universal Pre-k. Seems like a good idea to me. I hope my enthusiasm for taxing the rich to pay for universal pre-k does not make me a right wing supply sider ;)

note, if there are issues with taxing incomes in such units (problems establishing residency, for example) one could attempt to directly tax high value units in some way.

meanwhile, IIUC, DC is proposing cutting taxes on the highest incomes, and has cut taxes certain classes of bond interest. Evidently the DC council thinks DC has too few super rich, not too many. That however is a policy choice, not a failure of microeconomics.

by AWalkerInTheCity on Jul 1, 2014 10:03 am • linkreport

@ Jasper; not arguing with you in tax revenue but that was basically the Williams plan. Stuff the city with young people that will boost income and real estate taxes, take the extra tax and spend it on social services on existing residents to keep them quiet, and hope the kids leave before they get expensive.

Median household income in DC is 64K. For a first time buyer, that might be 225 to 250K.

by charlie on Jul 1, 2014 10:04 am • linkreport

and lets keep the quartz article in perspective. It provides data only for the section from Park to 5th, between 49th and 70th. Thats not even the majority of the upper east side, only the toniest part of it. It hasnt been a source of housing for middle income NYers in any time I am familiar with (I lived in NYC in the mid 70s). AFAIK it doesn't have a large share of the new growth in NYC. And even in that exclusive district, its only 30% of units that are not inhabited year round.

by AWalkerInTheCity on Jul 1, 2014 10:08 am • linkreport

@renegade09

I really don't understand your point. If we have 100 units, and overseas investors buy 5% of the units- presumably at the top end- then we have 95 units for New Yorkers. If we have 200 units, and overseas investors buy the top 5% of units, then we have 190 units for New Yorkers. That means there are an additional 95 units for New Yorkers. It strikes me that even accounting for a certain level of demand from overseas investors, it is essential to add supply.

I'm certainly not arguing against the notion of adding supply in general. In the types of cases identified here, though, we have properties where the amount of new occupied housing diverges from the amount of new units. If such a building goes up on an empty lot, that's one thing. If it was a redevelopment and we had to kick out 100 public housing residents to build it, the calculus changes...

Note also that it's not just overseas investors. A significant chunk of the luxury condo market is made up of the 0.1% who keep pads in the various major cities. And don't pay much in the way of taxes to that jurisdiction, aside from property taxes. In some cases, when they use them seasonally, they rent them out the rest of the time to cover the taxes. It's certainly a residential use, but it's not quite the "added housing! more density!" it might seem.

I'm not sure what simple supply and demand means as opposed to complex supply and demand.

Complex supply and demand takes into account things like induced demand and the fact that housing is an extremely differentiated good - it is variously as a basic human right/entitlement, a universally-demanded commodity, a major capitol good, and a key investment vehicle. While supply and demand continues to apply, it does not operate in so straightforward of a way as is commonly argued here, e.g. 'if you just keep building more luxury units on U Street, eventually rents on U Street will go down!'

Supply and demand applies to traffic as well, but simply adding more lanes does not reduce congestion.

by Dizzy on Jul 1, 2014 10:23 am • linkreport

Anyway, if this phenomenon does cause problems for NYC, the remedy is obvious - and has been siezed on by Mayor DeBlasio - tax the highest incomes till the tax revenues offset the negatives.

It is very difficult to tax the incomes of people who don't actually 'live' in your city, whether they own property there or not. Lots of interesting court cases on this having to do with competing jurisdictional claims to taxation.

by Dizzy on Jul 1, 2014 10:31 am • linkreport

One can always tax non-primary residences. That would seem to be the ideal solution, either putting a break on demand for luxury pieds-a-terre, or using the demand for said to increase the budget and address our other problems.

The only downside I can think of is that you might inadvertently end up punishing people with two-body problems.

by alurin on Jul 1, 2014 10:45 am • linkreport

"Complex supply and demand takes into account things like induced demand"

the fact that lowering price moves the market along the demand curve is PRECISELY what "simple" supply and demand is about. No complexity necessary and it applies to all goods and services.

" and the fact that housing is an extremely differentiated good"

Most goods are.

" - it is variously as a basic human right/entitlement" as is food.

", a universally-demanded commodity"
Ditto for food.

"a major capitol good,"

As are vehicles, furniture, etc.

"and a key investment vehicle."

Only really unique thing, but not for rental housing people are just buying a service, not an investment vehicle.

" While supply and demand continues to apply, it does not operate in so straightforward of a way as is commonly argued here, e.g. 'if you just keep building more luxury units on U Street, eventually rents on U Street will go down!'"

Except the above qualifications do not alter that statement.

"Supply and demand applies to traffic as well, but simply adding more lanes does not reduce congestion."

you and some other folks like this meme of "hey urbanists, you talk about induced demand for roads, but want to build more housing, isnt there a contradiction there?"

1. Induced demand for roads is not likely to be 100% of supply, ceteris paribis. When people say you can't build your way out of congestion they are usually combining induced demand with growth that would happen anyway. In theory you CAN build your way out of congestion, even with unpriced roads - go ride a highway in Wyoming. The issue is that its a particularly costly way to solve congestion, esp in a built up metro area (even in a non-green field suburb - and a fortiori in an urban area)

2. The real problem with induced demand is that the road is provided free. A priced road will still have SOME induced demand, but far less, and only people who value using the road/lanes more. Induced demand associated with a priced road is arguably not a problem at all (depending on issues relating to externalities). I personally think the beltway HOT lanes were a great idea. I would be very much opposed to providing housing for free, the way we provide most roads. Then we would have a horrible problem of induced demand. However no one is calling for free housing - just allowing more high density housing to lower prices modestly.

I do recall discussing this before, but for some reason it needs to be regularly repeated (time for FAQ, DA?)

by AWalkerInTheCity on Jul 1, 2014 10:50 am • linkreport

You could tax non-primary residences, or just do some kind of luxury tax - a higher property tax rate on residences with values above some level per sq ft (indexed to inflation.)

Of course that would impact the rich folks who have lived in DC for decades - many of whom are among the biggest opponents of density. I don't think they would like the idea.

by AWalkerInTheCity on Jul 1, 2014 10:52 am • linkreport

Also from DCs perspective if people are paying a lot of property taxes and not using a lot of services, that seems like a net gain? Also if they are high rollers they probably do drop plenty of cash when they are in the city. I mean I'm not a fan of the super rich, but having a few in the city isn't necessarily a terrible thing.

by BTA on Jul 1, 2014 11:12 am • linkreport

It is very easy to tax non-residents. Just ask anyone that owns a vacation home in many seaside areas ... they tax non-resident property owners at much higher rates.

by Thad on Jul 1, 2014 11:18 am • linkreport

@AWITC

the fact that lowering price moves the market along the demand curve is PRECISELY what "simple" supply and demand is about. No complexity necessary and it applies to all goods and services.

We're not talking about lowering price and moving along the demand curve, we're talking about an instance where adding certain kinds of supply actually shifts the demand curve. Adding more luxury supply shifts the demand curve upward.

As are vehicles, furniture, etc.

Vehicles (with the possible exception of long-lifespan things like trains) are not capital goods, I don't think. Certainly not in the same way as structures that can stand for centuries. Furniture certainly isn't.

Only really unique thing, but not for rental housing people are just buying a service, not an investment vehicle.

The renters are buying the service. The owner is using it as an investment vehicle/source of income (literally a rent-seeking mechanism).

Induced demand for roads is not likely to be 100% of supply, ceteris paribis.

Depending on the location, it could be less or it could even be more. Obviously, it is context dependent. Same with housing - building a luxury high rise in the middle of Burke (which would never happen) will probably not induce too much in the way of demand. Doing same at Takoma would have a drastically different effect.

2. The real problem with induced demand is that the road is provided free. A priced road will still have SOME induced demand, but far less, and only people who value using the road/lanes more. Induced demand associated with a priced road is arguably not a problem at all (depending on issues relating to externalities). I personally think the beltway HOT lanes were a great idea. I would be very much opposed to providing housing for free, the way we provide most roads. Then we would have a horrible problem of induced demand. However no one is calling for free housing - just allowing more high density housing to lower prices modestly.

A free road may have zero direct monetary cost, but using it still carries some costs (chiefly time, which is the congestion coin of the realm), as well as other associated costs (gas, wear-and-tear, etc.). Those costs are weighed against other potential costs and avenues (pun slightly intended).

The mechanism of induced demand for roads is that it doesn't just move things along the demand curve, but rather shifts the demand curve. Land use is intensified as a new road option (whether new or expanded road) is available, increasing aggregate demand.

The housing induced demand mechanism works similarly. Previously, Petworth (or, if you go back far enough, U Street and Columbia Heights) were no-go zones as far as people with significant purchasing power went. Each added luxury building makes an area less and less of a no-go zone, bringing some or all of the entire area's supply of housing into that segment of the market. Where before, demand from those with med-to-high purchasing power had been close to zero, now the demand has greatly increased.

And whereas the new 200 or 500 or 1,000 luxury units have added to supply, the increase in demand caused by moving this entire area into a much larger and wealthier housing market segment ultimately raises prices across the board. Voila - gentrification through redevelopment.

As usual, I think we're in agreement on most of the broad policy fixes. I'm probably much more adamant about the need to add capacity first and foremost in areas where displacement isn't much of a concern - I'm looking at you, Wards 2 & 3. And, obviously, expanding transit and adding housing capacity accordingly.

We should stop being shocked, though, when you get comments like the ones in the recent article about the proposed DC United stadium, where residents of Buzzard Point are terrified that any redevelopment signals a tidal wave that will sweep them right out. Because they're not really wrong - and no realistic amount of aggregate regional added capacity is going to save them. Telling them: "no no, all these luxury condos next door will lower rents!" isn't going to work as a response, because it's probably not true.

(In the medium-to-long run, stasis won't save them either, so it's a delaying tactic at best, but that's a differnt story).

by Dizzy on Jul 1, 2014 11:25 am • linkreport

@Thad

It is very easy to tax non-residents. Just ask anyone that owns a vacation home in many seaside areas ... they tax non-resident property owners at much higher rates.

In terms of income taxes, pretty much every jurisdiction has some sort of reciprocity or credit for taxes paid to other states provision. This is done so as to not drive out all of those high-earners.

Jurisdictions do come up with creative solutions (e.g. taxing NBA players on the income they earned while in town for road games), but the long and short of it is that you don't end up paying income taxes in every single jurisdiction where you may own some land.

by Dizzy on Jul 1, 2014 11:33 am • linkreport

"We're not talking about lowering price and moving along the demand curve, we're talking about an instance where adding certain kinds of supply actually shifts the demand curve. Adding more luxury supply shifts the demand curve upward."

But thats not induced demand per se, thats an externality effect. Note, despite the "more luxury buldings increases desirability" meme even the direction of impact is not obvious. Lots of people from Chevy Chase to Logan Circle to Clarendon to Mclean think new luxury buildings make the area less desirable. Im not one for fear of 'skyscrapers' but at some point that is certainly true.

"Vehicles (with the possible exception of long-lifespan things like trains) are not capital goods, I don't think. Certainly not in the same way as structures that can stand for centuries. Furniture certainly isn't."

Anything with a useful life of over a year is considered a durable good. If it generates a stream of useful services, its a capital good. Housing is just a more long lasting capital good. Furniture, purchased by a business is considered a capital good for economic account and tax purposes.

"The renters are buying the service. The owner is using it as an investment vehicle/source of income (literally a rent-seeking mechanism)."

Thats true of all kinds of services. Barber shops, yoga salons, gardening services, whatever.

"Depending on the location, it could be less or it could even be more. Obviously, it is context dependent."

It can't be more. at 100% the congestion returns, and the incentive to use the road more disappears. A priori its like to be less than 100% and empirical studies have confirmed that IIUC.

"A free road may have zero direct monetary cost, but using it still carries some costs (chiefly time, which is the congestion coin of the realm), as well as other associated costs (gas, wear-and-tear, etc.). Those costs are weighed against other potential costs and avenues (pun slightly intended)."

A free road does not mean everyone will use it for that reason. But the reason it leads to excessive use is because its free. Thats why pricing roads is a very good way to address the induced demand problem for roads. The same applies to housing, but we already price housing.

"The mechanism of induced demand for roads is that it doesn't just move things along the demand curve, but rather shifts the demand curve."

No it moves along the long run demand curve. The full long run demand curve reflects long term changes made in response to a price, as opposed to short term changes. Thats why demand is typically "more elastic" in the long run than in the short run. This is really pretty basic microecon.

" Land use is intensified as a new road option (whether new or expanded road) is available, increasing aggregate demand."

Aggregate demand is a term of art referring to all demand in the entire economy, and is generally used in reference to macroeconimic policy. Using it the way you do here is confusing.

"The housing induced demand mechanism works similarly. Previously, Petworth (or, if you go back far enough, U Street and Columbia Heights) were no-go zones as far as people with significant purchasing power went. Each added luxury building makes an area less and less of a no-go zone, bringing some or all of the entire area's supply of housing into that segment of the market. Where before, demand from those with med-to-high purchasing power had been close to zero, now the demand has greatly increased."

Again, thats an externality effect. Note, I also think that narrative is wrong. The changes in most DC areas is due to renvovation of row houses and the apt buildings are a lagging indicator. The upper green line is a partial exception because the metro itself (and DCUSA) compressed the entire process - but even in those areas gentrification was already occuring. Had the green line been completed but the apt buildings been banned by zoning the transition would have happened anyway. Probably just as fast. Maybe faster.

"We should stop being shocked, though, when you get comments like the ones in the recent article about the proposed DC United stadium, where residents of Buzzard Point are terrified that any redevelopment signals a tidal wave that will sweep them right out. Because they're not really wrong - and no realistic amount of aggregate regional added capacity is going to save them. Telling them: "no no, all these luxury condos next door will lower rents!" isn't going to work as a response, because it's probably not true."

Buzzard point residents may be correct - as thats an area where the local geography, and the massive negative externalities of vacant and industrial properties makes 'next neighborhood over" gentrification of rowhouses particularly difficult. Though I do beleive some of that is happening already. But thats not typical - most neighborhoods that are less physically isolated, next neighborhood over gentrification works just fine without hirises.

by AWalkerInTheCity on Jul 1, 2014 11:43 am • linkreport

I do NOT mean to get personal, but discussions of demand curves and other concepts out of micro econ would be enhanced if people would take an intro course in microecon. Its like trying to discuss the shape of a new bridge without studying Civil Engineering.

by AWalkerInTheCity on Jul 1, 2014 11:46 am • linkreport

http://www.slideshare.net/Alamazfar/short-run-and-long-run-demand

by AWalkerInTheCity on Jul 1, 2014 11:51 am • linkreport

@Dizzy - I am talking about property taxes. For example, on Hilton Head Island in SC, property taxes are 4% for residents and 6% for non-residents and corporations.

by Thad on Jul 1, 2014 1:03 pm • linkreport

The New York thing has been true for decades and it's probably more than the 5% in a few buildings suggested upthread. What has changed is that there's more of it and it's happening in other cities. It's apparently driving up costs in Vancouver which is a popular "safe harbor" for people in China--the New Yorker had something on this recently. I wouldn't be surprised if it's not just luxury units.

by Rich on Jul 1, 2014 1:40 pm • linkreport

@AWITC

Thanks for the snark, but I got a 5 on the AP Micro exam and took several additional econ courses. Didn't get to Econ Stats or Econometrics, but I'm conversant enough in the basics. Transcripts available upon request.

But thats not induced demand per se, thats an externality effect.

Externalities can and do cause supplier-induced demand, no? I'm not sure what the distinction there is. What is your definition of "induced demand per se?"

Anything with a useful life of over a year is considered a durable good. If it generates a stream of useful services, its a capital good. Housing is just a more long lasting capital good. Furniture, purchased by a business is considered a capital good for economic account and tax purposes.

By definition, capital goods are used in the production of goods and services. A vehicle is a capital good for a taxi owner or a transit service. It is generally not thought of as a capital good for an individual consumer; nor is furniture. Accounting definitions and economic definitions can vary. Anyway, this is a tangent in which you tried (and failed) to demonstrate your superior knowledge of economic terms, so let's move on.

Thats true of all kinds of services. Barber shops, yoga salons, gardening services, whatever.

Those services are dependent on providing services to others - you cannot really utilize them solely on yourself. Housing is different in that you can occupy a unit yourself and enjoy the good that way or you can turn it into a service for rent. Land is considered fundamentally different, as I'm sure you know.

It can't be more. at 100% the congestion returns, and the incentive to use the road more disappears. A priori its like to be less than 100% and empirical studies have confirmed that IIUC.

Sure it can - if the response to added capacity (due to imperfect information and/or various externalities) results in not just filling up the new capacity, but exceeding it.

Take a two-lane road. If it gets widened to four lanes, but the land use (and other) response generates more than an additional traffic lane's worth of demand, you haven't just filled up the new capacity but overfilled it and made traffic worse than it was before.

A free road does not mean everyone will use it for that reason. But the reason it leads to excessive use is because its free. Thats why pricing roads is a very good way to address the induced demand problem for roads. The same applies to housing, but we already price housing.

As I mentioned, it's not that it is 'free' - driving, as we talk about to no end here, obviously does carry costs. It is that it is more affordable relative to benefit (including both monetary and non-monetary considerations) than alternatives. The same is true of housing.

Will answer the rest later.

by Dizzy on Jul 1, 2014 1:55 pm • linkreport

"Thanks for the snark, but I got a 5 on the AP Micro exam and took several additional econ courses. Didn't get to Econ Stats or Econometrics, but I'm conversant enough in the basics. Transcripts available upon request."

Thats nice. However the difference between short run and long run elasticity is pretty basic.

"Externalities can and do cause supplier-induced demand, no? I'm not sure what the distinction there is. What is your definition of "induced demand per se?""

the road case. No complex externalities necessary. build it they will come. Add supply, lower price (or on the roads, congestion) get more use.

"By definition, capital goods are used in the production of goods and services. A vehicle is a capital good for a taxi owner or a transit service. It is generally not thought of as a capital good for an individual consumer"

There are in fact analyses that so treat it.

" nor is furniture."

No difference in principle, but not many studies focusing on it.

" Accounting definitions and economic definitions can vary. "

So?

"Anyway, this is a tangent in which you tried (and failed) to demonstrate your superior knowledge of economic terms, so let's move on."

No, Im trying to demonstrate that the implication that supply and demand is not a good way to view housing markets (and as a first order approximation, "simple" supply and demand) is incorrect.

"Those services are dependent on providing services to others - you cannot really utilize them solely on yourself. Housing is different in that you can occupy a unit yourself and enjoy the good that way or you can turn it into a service for rent."

There are lots of types of equipment that can be used to provide oneself with services that can also be purchased on the market. Vehicles of course, but also exercise equipment, kitchen equipment, etc.

"Sure it can - if the response to added capacity (due to imperfect information and/or various externalities) results in not just filling up the new capacity, but exceeding it."

Imperfect info and externalities can go either way, so I would still say the a priori expectation is under 100%. And I am quite sure that empirical studies have so shown.

"Take a two-lane road. If it gets widened to four lanes, but the land use (and other) response generates more than an additional traffic lane's worth of demand, you haven't just filled up the new capacity but overfilled it and made traffic worse than it was before."

but as the land gets filled up the traffic will get worse. Now its possible that because of the lag between starting construction and traffic growth, and the fact that the house cost is now sunk, that you will get 100% or more. but unlikely a priori, and afaik studies have shown less.

"As I mentioned, it's not that it is 'free' - driving, as we talk about to no end here, obviously does carry costs. "

I said the road is free, not that driving was free. We could make housing free, but living in a house would still have costs (utilities, furnishings, etc)

That there is still a cost to driving does not mean that an unpriced road is not "free" Or if you dislike that word, lets just say unpriced. That leads to the distortion that creates excessive demand. The same would hold if we failed to price housing. But in the case of market rate housing, not only are we pricing housing, we putting in no public financial input.

Now, when we have a public service that accompanies the housing, that we cannot or will not price, that may be the equivalent of induced demand for roads. That is why most jurisdictions (but not DC?) require an educational proffer for new buildings. DC attempts to address the parking externality by mandating parking - I think a better way is to better price parking.

by AWalkerInTheCity on Jul 1, 2014 2:18 pm • linkreport

There are many case where "simple" supply and demand is problematic. Labor markets, where lack of work can lead to deteriorating skills, where there are profound social interactions that impact pricing and externalities, etc. The energy sector, where certain externalities threaten life on earth. Some industries where concentration leads to oligopoly type pricing. IP type industries, where marginal costs are close to zero, but prices cannot economically be zero.

Housing, despite all the quibbles, is probably CLOSER to an econ 101 market than most.

by AWalkerInTheCity on Jul 1, 2014 2:21 pm • linkreport

@ charlie:not arguing with you in tax revenue but that was basically the Williams plan. Stuff the city with young people that will boost income and real estate taxes, take the extra tax and spend it on social services on existing residents to keep them quiet, and hope the kids leave before they get expensive.

The Williams plan counted on both income and property tax. That's fine. Counting on just property tax is shortsighted because you forgo a bunch of income tax.

Median household income in DC is 64K. For a first time buyer, that might be 225 to 250K.

Great. Where are the new (family) units in DC between 150k and 500k? Start building them DC (and Arlington, and Alexandria, etc).

by Jasper on Jul 1, 2014 9:10 pm • linkreport

@AWITC

Thats nice. However the difference between short run and long run elasticity is pretty basic.

Indeed it is. Elasticity of demand is the responsiveness of demand to a change in price. And simple supply-and-demand posits that an increase in price will create a reduction in demand. I am arguing that we're seeing demand rise even as prices rise. There is no way to accomplish that without actual shifts of the demand curve (or the supply curve, which is another can of worms).

Here's an illustration from a certified actual economist: http://theincidentaleconomist.com/wordpress/agency-problems/

His figure 1A shows an increase in supply, with no change in the demand curve. Q is higher, prices are lower. 1B shows induced demand, which shifts the demand curve (OMGWTFBBQ for the last time), which causes the price to stay the same even as supply has increased. I argue that the demand curve in some of the instances discussed (adding luxury housing) shifts the demand curve even further, to the point where the prices is actually higher than before, despite greater supply.

That's the crux of it.

by Dizzy on Jul 2, 2014 4:12 pm • linkreport

Housing, despite all the quibbles, is probably CLOSER to an econ 101 market than most.

There is no possible way this is true, given the massive number of interventions into this market. Unless you actually believe that an econ 101 market would produce our super-segregated, sprawling, and inefficient housing reality.

by Dizzy on Jul 2, 2014 4:14 pm • linkreport

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