Air B-n-B and Uber followed a "rental" model that has predictable effects, and whether you consider them negative is a matter of perspective. When you take assets that are underutilized by their owners, and shift to a rental model to allow more efficient utilization of said assets, you increase the value of those assets tremendously, and effectively increase collective wealth.
To the extent it gets ugly, it's when you start maximizing how much value you extract out of the model. If you extract nearly all the value you've added, then the net benefit for everyone else is pretty minimal. This is where competition is supposed to step in to balance things out...
It definitely gets worse when people start thinking of these as investments to squeeze. I think the transition to serving investors is where AirBnB started to really create negative externalities.
It's an increase in "collective" wealth only if we hold "total" wealth to be the best measure. Many people would say median wealth is more important. Underlying wealth inequality can put the outcomes of an efficient market in conflict with public policy.
People who can afford an investment property make more money, people who already owned property get a payout, and people who can afford to vacation somewhere nice find it easier to get a room. People without that wealth get displaced. Aggregate wealth has gone up, even if the situation is worse for most participants.
Couldn't agree with you more. It's amazing how much better it all works out when there's a thriving competitive marketplace; it makes it much harder to extract so much value out.
More multifamily housing is the answer. There are too many constraints on building density. Furthermore, more uniform proper taxes should be assessed to promote development. Tax every residential property by the square foot, to make single family homes very expensive, and multifamily cheap. This would aid in the conversion to more units.
The restrictions placed on urban residential construction in American cities has been a direct attack on working people. No one has a right to a mansion downtown, and anyone who must have one should be taxed heavily for the privilege. All US urban areas could have reasonable market-rate rents with sufficient construction of new units and appropriate urban density.
You make a good point, but it's only true insofar as supply is increased -- as people with spare time and cars offer taxi services and those with empty spare rooms in their homes offer letting.
However, if existing or upcoming taxi drivers opt to work for Uber rather than the local taxi company, or people buy up housing for the sole purpose of AirBnB letting, nothing is added.
The context of the discussion is a model where people are renting rather than buying. Sure, maybe supply doesn't increase, but when demand increases, either renting gets too expensive and people start buying, or you increase supply.
Housing affordability problems come from restrictions on supply, not demand changes. California could end all of its housing affordability problems within a decade by relaxing building codes, promoting residential development and allowing greater density. It will never happen, but it would be an EASY fix. Even Manhattan, with its constrained space, even it could dramatically lower rental prices by allowing greater density, ending height limits, and most of all, allowing developers to build what they want without pleasing local corruption thugs, ahem, I mean community boards.
Here in Chicago, the city frequently requires that high rise apartment buildings build a bunch of three and four bedroom apartments that the market does not want, then requires that new buildings set aside cheap units for public housing. It is a corruption racket where the connected get a free place in a new ritzy building, but it massively increases housing costs. Even worse, new apartment buildings are more or less banned in many neighborhoods, so apartment buildings are leveled and replaced with luxury single family homes. In my neighborhood it is common to see three and four flat apartment buildings with $900-$1300 apartments replaced with $800k to $1m+ single family homes. There is a recent batch facing a factory and a beer distributor (trucks in and out, all day and all night).
Almost all residential neighborhoods are zoned for multi-family, but the city has effectively stopped so much construction, favoring luxury housing. Chicago is CHOOSING gentrification. Never forget that California, New York City, Washington, DC, Boston, ..., they CHOSE gentrification. They can fix it, but they must be willing to upset the real estate barons and the rich @ssholes who think cities should have suburban-level density. If Trump gets elected, I would love for him to start signing executive orders to override urban planning zoning restrictions to massively build out housing in expensive cities. It would be wonderful to watch racist, poor-people-hating Democrats justify their horrific record on housing.
I have lived in Asian cities that have easily built enough housing to keep it affordable. There is no reason why NYC and Chicago cannot have towers and towers of studio and one bedroom apartments that are in high-demand. Frankly, LA and San Francisco could do the same, albeit with higher costs because of earthquake resistance, but even allowing low-rise buildings full of tiny apartments would have a dramatic impact on rents rather quickly. It is not that hard to build out tens of thousands of units that way.
Instead the evil rich people will have a handful of "affordable" units created for $2m each with $300 rents, while ever more market rate housing is destroyed and replaced with more single-family mansions. In a proper market, post-war single family homes would be leveled and replaced with high rises. That is what progress looks like. We do not need a handful of "free" housing, but rather millions of units of market-rate housing. With proper functioning markets, there will be more than enough units for Air B&B to use.
We can fix hour housing problems easily, with simple, broad-based deregulation and the elimination of height and density restrictions. Of course suburbs can remain single family, with perhaps high-rise buildings around train stations, plus parking garages (suburban stations never have enough parking), but it is absurd how cities are promoting single family housing. It is effectively regulating working and middle class people out of our cities, and it needs to stop. Similarly, cities need to massively increase property taxes on single family homes to help the transition along. If people need to have a mansion in Manhattan or San Francisco, let them pay the same taxes as similarly-sized properties with high-rise structures.
Air B-n-B and Uber followed a "rental" model that has predictable effects, and whether you consider them negative is a matter of perspective. When you take assets that are underutilized by their owners, and shift to a rental model to allow more efficient utilization of said assets, you increase the value of those assets tremendously, and effectively increase collective wealth.
To the extent it gets ugly, it's when you start maximizing how much value you extract out of the model. If you extract nearly all the value you've added, then the net benefit for everyone else is pretty minimal. This is where competition is supposed to step in to balance things out...
It definitely gets worse when people start thinking of these as investments to squeeze. I think the transition to serving investors is where AirBnB started to really create negative externalities.
It's an increase in "collective" wealth only if we hold "total" wealth to be the best measure. Many people would say median wealth is more important. Underlying wealth inequality can put the outcomes of an efficient market in conflict with public policy.
People who can afford an investment property make more money, people who already owned property get a payout, and people who can afford to vacation somewhere nice find it easier to get a room. People without that wealth get displaced. Aggregate wealth has gone up, even if the situation is worse for most participants.
Couldn't agree with you more. It's amazing how much better it all works out when there's a thriving competitive marketplace; it makes it much harder to extract so much value out.
More multifamily housing is the answer. There are too many constraints on building density. Furthermore, more uniform proper taxes should be assessed to promote development. Tax every residential property by the square foot, to make single family homes very expensive, and multifamily cheap. This would aid in the conversion to more units.
The restrictions placed on urban residential construction in American cities has been a direct attack on working people. No one has a right to a mansion downtown, and anyone who must have one should be taxed heavily for the privilege. All US urban areas could have reasonable market-rate rents with sufficient construction of new units and appropriate urban density.
You make a good point, but it's only true insofar as supply is increased -- as people with spare time and cars offer taxi services and those with empty spare rooms in their homes offer letting.
However, if existing or upcoming taxi drivers opt to work for Uber rather than the local taxi company, or people buy up housing for the sole purpose of AirBnB letting, nothing is added.
The context of the discussion is a model where people are renting rather than buying. Sure, maybe supply doesn't increase, but when demand increases, either renting gets too expensive and people start buying, or you increase supply.
Housing affordability problems come from restrictions on supply, not demand changes. California could end all of its housing affordability problems within a decade by relaxing building codes, promoting residential development and allowing greater density. It will never happen, but it would be an EASY fix. Even Manhattan, with its constrained space, even it could dramatically lower rental prices by allowing greater density, ending height limits, and most of all, allowing developers to build what they want without pleasing local corruption thugs, ahem, I mean community boards.
Here in Chicago, the city frequently requires that high rise apartment buildings build a bunch of three and four bedroom apartments that the market does not want, then requires that new buildings set aside cheap units for public housing. It is a corruption racket where the connected get a free place in a new ritzy building, but it massively increases housing costs. Even worse, new apartment buildings are more or less banned in many neighborhoods, so apartment buildings are leveled and replaced with luxury single family homes. In my neighborhood it is common to see three and four flat apartment buildings with $900-$1300 apartments replaced with $800k to $1m+ single family homes. There is a recent batch facing a factory and a beer distributor (trucks in and out, all day and all night).
Almost all residential neighborhoods are zoned for multi-family, but the city has effectively stopped so much construction, favoring luxury housing. Chicago is CHOOSING gentrification. Never forget that California, New York City, Washington, DC, Boston, ..., they CHOSE gentrification. They can fix it, but they must be willing to upset the real estate barons and the rich @ssholes who think cities should have suburban-level density. If Trump gets elected, I would love for him to start signing executive orders to override urban planning zoning restrictions to massively build out housing in expensive cities. It would be wonderful to watch racist, poor-people-hating Democrats justify their horrific record on housing.
I have lived in Asian cities that have easily built enough housing to keep it affordable. There is no reason why NYC and Chicago cannot have towers and towers of studio and one bedroom apartments that are in high-demand. Frankly, LA and San Francisco could do the same, albeit with higher costs because of earthquake resistance, but even allowing low-rise buildings full of tiny apartments would have a dramatic impact on rents rather quickly. It is not that hard to build out tens of thousands of units that way.
Instead the evil rich people will have a handful of "affordable" units created for $2m each with $300 rents, while ever more market rate housing is destroyed and replaced with more single-family mansions. In a proper market, post-war single family homes would be leveled and replaced with high rises. That is what progress looks like. We do not need a handful of "free" housing, but rather millions of units of market-rate housing. With proper functioning markets, there will be more than enough units for Air B&B to use.
We can fix hour housing problems easily, with simple, broad-based deregulation and the elimination of height and density restrictions. Of course suburbs can remain single family, with perhaps high-rise buildings around train stations, plus parking garages (suburban stations never have enough parking), but it is absurd how cities are promoting single family housing. It is effectively regulating working and middle class people out of our cities, and it needs to stop. Similarly, cities need to massively increase property taxes on single family homes to help the transition along. If people need to have a mansion in Manhattan or San Francisco, let them pay the same taxes as similarly-sized properties with high-rise structures.
I believe that it’s actually spelled “greed”.