If demand increases faster than supply increases, then prices go up. It does not mean supply&demand theory is invalid.

So, demand and supply has increased dramatically in almost every single city in the world, and in almost no cities has supply outpaced demand? The world is not an economics 101 textbook.

In Canada for example, the only province with functional and affordable housing is the one that enacted serious rent control and public housing, and they didn't have to build a lot. Seems to me that supply and demand isn't the whole thing if your goal is to have affordable housing.

California is short by millions of units. This number can be calculated. A cheap city example is Cleveland. The reason why it's so cheap? In 1960, 900,000 people lived there. Today, 400,000 people live there. The population of LA in 1960 was 2.4 million. Today, its over 4 million in the city proper. Units in LA are on the market for a weekend, you sign your lease on monday, and move in by thursday. In Cleveland, listings stay up for months. The result is that 600k buys you two bedrooms and a bath in LA, and six bedrooms and seven baths in Cleveland. It's a very basic supply and demand problem.

> A cheap city example is Cleveland. The reason why it's so cheap? In 1960, 900,000 people lived there. Today, 400,000 people live there.

Cleveland is not actually that cheap (it just looks dirt cheap to people earning Californian dollars). And Cleveland would instantly be as expensive as California, if Silicon Valley headquartered there instead of California -- the fact that 900k people once lived there would not help in any way.

The prices of places is largely not determined by supply or demand. It's determined by the value of the property around it, and that property in aggregate is determined by the wealth of the jobs congregated there, and the concentration of capital located there. Only by redefining "demand" to not mean "persons needing homes" but instead to mean "anything that impacts the price" can you make a supply vs demand model work for housing.

> The population of LA in 1960 was 2.4 million. Today, its over 4 million in the city proper. Units in LA are on the market for a weekend, you sign your lease on monday, and move in by thursday.

The population of Grand Rapids, Michigan was ~198k in 1970. Today, it's still ~198k in 2020 -- same population, almost exactly. Despite this, units in Grand Rapids are on the market for a weekend, you sign your lease on Monday, and move in by Thursday. Despite this, units cost has increased by about 700% during that time.

Because, again, supply and demand are not the primary factors in housing costs in the US. They haven't been for over 50+ years now.

> It's determined by the value of the property around it, and that property in aggregate is determined by the wealth of the jobs congregated there, and the concentration of capital located there.

The value of something is set by what people are willing to pay for it. I.e. supply and demand.

> Despite this, units cost has increased by about 700% during that time.

Average inflation since 1970 is 565%. 700% is within that, as inflation measurements are inexact and there are regional differences as well.

And yet in Detroit, the price of rent has increased while occupancy rates, incomes and population have decreased. This leads me to believe that the rising prices of rent on average in all cities in the first world is not actually a supply and demand issue. When the price for a mortgage is far above what the average person can afford, land prices start having little bearing on rent, and the reverse happens: rent prices start having a bearing on land prices.

Taking Cleveland for example, despite there being a massive surplus of housing units as you say, the average price of rent is 1123$, while the average household income is of only 26179$. This means that the average household pays 51% (!!) of their income into housing in recent years, while there is a surplus of housing.

I don't understand how this can be stated as supply and demand. It seems to me that rent simply increases so as to saturate the budget of the lower class, regardless of supply.

I would also observe that in most cities the average price of housing as a share of average income is steadily rising. This leads me to believe that what is actually happening is that prices of rent are increasing synchronously,

> in almost no cities has supply outpaced demand?

Detroit. Rural communities.

In real estate, it takes a while (years) for supply to catch up with demand. What you're seeing is simply city populations are rising quickly.

Detroit has some of the greatest increases in rent in the US[0]. Despite its population decreasing [1].

As for rural communities, they are not comparable in the slightest to cities.

[0] : https://detroit.curbed.com/2020/3/4/21164568/detroit-rent-ra...

[1] : https://worldpopulationreview.com/us-cities/detroit-populati...

> As for rural communities, they are not comparable in the slightest to cities.

Anything can be proven by discarding data that doesn't fit. Rural population is in decline, and prices drop with it. You can even buy entire towns in Appalachia for a song.

> Detroit

Your own cite says: “New housing construction has barely kept pace with the growth in housing demand over the past decade.”

>Your own cite says: “New housing construction has barely kept pace with the growth in housing demand over the past decade.”

This is an empty statement the article writer wrote to attempt to justify it. Housing demand in Detroit cannot have increased, because the population of Detroit was and is decreasing. If you can explain to me how a decreasing population can mean an increase in demand, I'd be all ears.

What groups of people are moving in and out of Detroit? One explanation could be that people who previously could afford rents in Detroit can no longer do so, and the ones moving in are the ones who can afford these rents and mortgages. A lot of these low income neighborhoods in inner city Detroit have been raised and left to nature over the years, historic supply in the city center has been destroyed and what is left or is currently being constructed might be pricier housing comparatively. The working class greatly outnumbers the capital class everywhere. Take it with a grain of salt as I don't have any data in front of me, I'm merely postulating, but this would explain this trend.

The rate of occupied housing in Detroit has drastically decreased, while average rent has increased. If the supply and demand hypothesis of the real estate market held, one would believe that given the fungibility and non-stratified nature of housing in a given city, cratering occupancy rates would correspond to a decrease in average rent priced. If you believe that housing is indeed stratified and that the surplus of affordable housing has so little an effect on the average price of rent in the entire city, whose average income I should remind you is of under 30 000$ while the average price of rent is of more than 12 000$ a year, then I see no way that building luxury apartments could still mean a sizeable decrease in the price of affordable housing in say, Toronto.

> empty statement

Sorry, it's your cite.

> explain

Simple. People sharing living arrangements deciding to not share anymore. Fewer families with children, more single professionals. Confusing Detroit the city with Detroit the metropolitan area.

Both the detroit city and detroit metropolitan areas have decreasing populations and drastically increasing rent prices.

The share of unoccupied housing exploded from 2010 to 2018, to 23%, according to the census. This is a sure-fire indicator that supply is far, far superior to demand. And yet, the price of rent increased. This means that supply and demand simply does not explain the rising price of rent. I don't see anyway that demand might be higher than supply, while unoccupancy rates are above 10%.

Also, if you want a source that doesn't make empty, baseless economic statements without backing them by facts, there is this one: https://www.metrotimes.com/news-hits/archives/2019/03/06/is-...

I simply used the one above because it was clearer about the primary source used. But of course, websites run by real-estate investors will make baseless claims about supply and demand, without backing them up with any data, that is simply a fact of the matter as such a mentality seems to be widespread.

Again, your own cite contradicts your thesis:

"Despite the increases in Detroit, the city's average rent is still among the lowest in the nation at $610. But that's quickly changing in and near downtown and Midtown, where the flow of new residents is creating a greater demand for housing."

Toronto (as a region) is getting about 100 000 new residents every year. It's hard to say that supply and demand isn't working because really, there is SO MUCH DEMAND, supply can hardly catchup. Montreal still has a decent cost of living for housing and guess what, that's because their demand is lower (harder for non-French speaking people to establish themselves there)

That is true, but it is not the whole answer, as rent increases even in cities where population is stagnant or decreasing.

But yes, Toronto needs more affordable high density rental housing, as well as much better transit.

This is incorrect. Those homes are expensive because the land beneath them is expensive. The finishes are largely irrelevant.

And the land is expensive because there are not enough places like them.

It all comes down to job growth driving demand on housing supply. The better the local economy, the more hiring is going on, the more people are recruited and look for housing convenient to work. Hardly anyone uproots themselves and moves to a new city without having a job lined up first. The value of the underlying land is speculative based on demand induced by job growth.

> For one, these condos being built can essentially not be rented,

Non-occupancy tax. Vancouver has one.[1]

1. https://vancouver.ca/home-property-development/empty-homes-t...

A non-occupancy tax is orthogonal to this particular issue, a lot of high rise condos cannot be rented, reasonably. And so they are only accessible to people that can afford to buy them, occupied or not.

Why can't they be rented?

Exorbitant HOA/Condo Association fees and regulations that make renting out a condo unfeasible, or outright banned.

Cool. So then people who buy condos for investment will have to choose between paying the non-occupancy tax or putting their money in property that isn't encumbered by those regulations. Accordingly the price of condos in buildings with such regulations should fall.

Alternatively, if a city council has the votes to implement a non-occupancy tax, they may have the votes to nullify HOA clauses that forbid renting. Or levy additional taxes on such HOAs. Since it's the HOA that's forbidding renting, the HOA should foot the bill for the non-occupancy tax, not the owner of the unit.

It's fairly common to include HOA dues and fees in the rent when renting out a condo.

I would like to see that happen then. It might work.

However, even in Vancouver the occupancy tax is not being enforced nearly rigorously enough for such an effect, and the occupancy tax is still too little.