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Comment by SllX | Hacker News Reader

No but when figuring out what informs a price you want to look at supply and demand first. There’s room for other variables, but you normally start there.

EDIT: While I’m inside the edit window, let me throw in another big variable as an example. Costs are another factor that inform a price, and a big one. You could make a case that it deserves higher billing than supply and demand, but if your costs are $X but you can only sell your widget for $X-1, and not $X+>=0, then $X-1 is your price ceiling. Your business is unprofitable and losing money.

I’m trying to be careful with my words but I still seem to be leaving some people with the impression that I think supply and demand is the only variable that informs a price. It’s not, but it’s still incredibly important and often dismissed as a non-factor when discussing San Francisco rental and real estate prices with San Franciscans.

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But property supply itself is a constrained effect of politics and the relative power of various social groups, not a unique and independent primary cause.

If landlords can make a killing by constraining supply politically, they will. So the primary cause is the incentive system and the political environment which makes it possible for them to do that.

It's all about how the reward functions are designed. So of course if you reward scarcity and profiteering that's what you get - as a secondary outcome, not a primary cause.

Political factors can also inform supply, it doesn’t change the fundamental calculus of supply and demand, merely shapes the supply.

If you have a bunch of left wing groups who are anti-development fighting to keep supply constrained even while complaining the rent is too damn high and the character of the City is changing and yadda yadda yadda, who are you[1], as a landlord, to take the wind out of their sails when you are profiting from their protests?

[1] The general “you”, not you specifically.

This is just wildly incorrect. Landlords are very strongly opposed to left wing groups in SF, based on political funding. Landlords are the number one target of progressive legislation. The most left wing supervisor is literally a tenants rights attorney who ran on protecting rent control and wrote the law banning evictions.

It depends on your definition of "landlord". If by landlord you mean the typical NIMBY homeowner then sure it's true. But in practice landlords can make more money off of building more units vs squeezing out more profit from a smaller amount of units. So if you were a politician and followed the advice of the greediest landlord you would not end up with scarcity. The political environment doesn't listen to the greediest landlord though. It primarily listens to the homeowner type of landlord.

That's not typical of California landlords because of Prop 13. The tax benefits entirely shifts the market towards the benefit of properties that have been in the same hands for a very long time. So building new units will be far less profitable than old buildings, long-held, without any significant renovation. It's very rare to find an existing property on the market that is profitable to rent out at current market prices, because there's a lot of anticipated value gains built in to current prices.

In cities with zoning constraints, developers are the only natural predators of landlords. They are entirely different skillsets, building new units requires managing an extremely difficult political process for permits, raising capital, working with contractors and labor, etc. Being a landlord requires very different analysis and skills.

There may be a few landlords with the capacity to cross over to development too, but it isn't many of them.

>but it’s still incredibly important and often dismissed as a non-factor when discussing San Francisco rental and real estate prices

I've literally never seen it dismissed as a non factor - not even once.

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