If all the companies building houses form a cartel they don’t need to lower prices as supply increases.

To Steele Man here I guess: If housing becomes too ridiculously expensive it locks a lot of lower income consumers out of the market, meaning you can’t extract value from them. There’s a lot of money to be made selling stuff to the poor, that’s why Walmart and McDonald’s are successful. No capitalist makes money off of someone living in a tent under a bridge. So really the big capitalists would probably love an opportunity to throw up the capitalist version of Commie Blocks to milk the working poor of their meager wages, but they’re blocked from doing so because the petite-bourgeois-real-estate-owners benefit from a housing situation where they can charge college students 3000k a month for a studio with no AC.

There’s a complex relationship between land values, development costs, development financing, and the overall demand for housing, but all of it adds up to an incentive to only build housing when there is excess demand. Financing from banks is dependent on projecting a certain amount of profit from building housing. Owning land has almost no real carrying cost. Developers build when the market is going up, and they sit tight when the market is down, which creates a ratchet effect. Housing gets built when it’s in high demand, and building stops when the demand wanes. Because of how long it takes to get a development done, how many steps there are, and how much planning is involved, there’s no situation where developers accidentally build way too many houses.

Housing isn’t built by “companies” in the way that products are built. There’s no house factory that gets ramped up and needs to keep producing and growing production, with unit costs going down and there needing to be a certain steady production in order to maintain the value of the factory as an asset. Housing requires the coordination of land, developers, tradespeople, investors, banks, local government, and so on. Every housing development, from a single spec or custom home all the way up to a high-rise apartment building or suburban housing development, is essentially a separate enterprise that spins up and winds down in the space of a couple years. The structural elements are closer to infrastructure development than consumer products, so the whole exercise of lowering the per-unit costs and then selling more volume doesn’t really apply.

The closest thing to how this works in the market is that the per-square-foot value of a housing unit is the main metric for real estate investors/developers/owners, while the housing unit itself is the relevant metric for actual customers for houses. Housing units can get smaller, and therefore cheaper on a per-unit basis, while the per=square-foot value goes up. We’re running into the limits of that math now, as tiny condos are selling for the upper-limit of what people can afford while being basically as small as you can make them while still qualifying as dwelling units.

That’s a bit of a ramble, someone else can correct me on the finer points, but the gist is that, no, companies are not incentivized to make housing cheaper. If housing got cheaper, it would mean the underlying asset was going down in value, which means landlords and developers have less incentive to start new construction projects. They just wait for housing to be expensive again and then start building. The only way to combat this would be decommodification of housing combined with some sort of state program to either build housing directly, or incentivize building housing counter-cyclically. As long as housing is a commodity, and development is driven purely by profit motive, housing will always get more expensive.

Edit: One more thing, land is a major limiting factor, not just because there’s a fixed amount of it, but also because densification of land has diminishing returns. Tall buildings are an efficient use of land when you want density, but on a per-square-foot basis, tall buildings are vastly more expensive than smaller ones. What that means is that economies of scale don’t work the way you think they would for building. Suburbs make sense, economically, because although the land use is high, the cost to build is relatively low, whereas a big residential tower might cost 3x/4x/5x as much to build in terms of the actual livable area. You can’t just sprawl forever, and you can’t just build higher and make up the cost in volume, so there’s no way to drive unit-costs towards zero like with consumer products.

Within the liberal economic orthodoxy there’s a belief that there’s an equilibrium point where “social utility” is maximized where businesses arrive at a point where they can neither increase nor decrease costs nor increase nor decrease the supply without losing profit, and their models tend to put that point at a much higher supply than it actually arrives at in reality. This is because increasing supply is not a fixed cost: while economies of scale exist, they’re also limited by other material factors such as availability of resources, availability of land, and availability of labor. The models do take this into account, but neglect to consider that even in a competitive market this is still a material barrier to just scaling up production indefinitely.

With housing this is further limited by the fact that housing has to go somewhere, and then that space is indefinitely used by it. It actively consumes and occupies land in an area, and because of this tends to appreciate in value once it exists. So you end up with multiple barriers to just increasing supply with market forces: land becomes increasingly expensive the more of it gets used and becomes unavailable and the more nearby land becomes valuable, housing that exists can be rented or just kept vacant and either way passively makes the owner money over time (albeit in the latter case it doesn’t make a liquid profit until sold or utilized, but it would still be considered a valuable asset and form of wealth that increases year over year), and housing can be moved at basically any price to not just people who will use it as housing but to profiteers looking to rent or flip it.

This isn’t something being churned out of an assembly line, but a massive hoard of wealth that maximizes its owners’ profits when they limit its supply and availability.

Also market prices are fundamentally irrational, not actually dictated by idealistic supply and demand curves, and just as much dictated by companies going “lol, lmao, pay this” as they are by some sort of utile balancing by the end consumer.

it’s obviously competition??? landlords/developers are no less monopolistic than other markets but “goods” that everyone needs are much more difficult to consolidate than others. if there isn’t a national syndicate able to price-control the whole affair somebody is going to spring up to offer (slightly) lower prices somewhere, which compromises it.

with modern computers and communications equipment we probably aren’t that far off from it being feasible to run a total housing monopoly, but the empire is going to die before that happens

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