Right. But increasing the marginal cost of serving people, or decreasing the marginal revenue, means that you will build for less people than otherwise.
To oversimplify the supply and demand curve...
Let's say that there are 2 populations of people:
- 100 people in Group 1 who can pay $500/month
- 100 people in Group 2 who can pay $1000/month
Let's say that something (rent control, regulation, taxes, whatever) takes away $300 per month of what you would collect in rent.
Let's say that the cost of building an apartment building, amortized over time costs $400 per month.
You could build 200 units, and everyone is happy.
But with marginal costs higher than revenue for low income renters, you will probably just build the higher income housing.
This is oversimplified, but is what's happening in essence in New York and San Francisco. The well intentioned rent controls and other regulations are pushing the cost of development so high that builders are either neglecting the bottom and middle of the market, or skimping as much as possible when they're forced to address it.
We can argue that some of the regulation (no lead paint, etc) is good, but when you tilt the balance too far against the owners, then owners put their money elsewhere (stocks, bonds, etc.)
To oversimplify the supply and demand curve...
Let's say that there are 2 populations of people: - 100 people in Group 1 who can pay $500/month - 100 people in Group 2 who can pay $1000/month
Let's say that something (rent control, regulation, taxes, whatever) takes away $300 per month of what you would collect in rent.
Let's say that the cost of building an apartment building, amortized over time costs $400 per month.
You could build 200 units, and everyone is happy.
But with marginal costs higher than revenue for low income renters, you will probably just build the higher income housing.
This is oversimplified, but is what's happening in essence in New York and San Francisco. The well intentioned rent controls and other regulations are pushing the cost of development so high that builders are either neglecting the bottom and middle of the market, or skimping as much as possible when they're forced to address it.
We can argue that some of the regulation (no lead paint, etc) is good, but when you tilt the balance too far against the owners, then owners put their money elsewhere (stocks, bonds, etc.)