Housing is a supply-demand issue

A recent article in the Park Record (“Heber City Council takes up short-term rentals”) is ostensibly about how the Heber City Council is addressing the proliferation of short-term rentals in Heber City, but the subtext is really about how the Heber Council has turned its back on the free market by embracing the discredited philosophy of central planning as its core governing principle.

The only solutions the council offered towards making housing more available is through regulation and government manipulation of the free market, whereas the best solution to solving the housing crisis would be to eliminate onerous regulations on housing and unleashing the power of the free market. 

The current housing crisis is often referred to as a crisis of affordability, but I think that it’s more a crisis of availability, even though the two issues are closely joined at the hip.

If we apply a simple economic analysis to the housing crisis, we quickly see that the reason housing prices are so high is because demand has outstripped supply, causing prices to rise. In order to counter this, the supply of housing should be increased to meet demand, which in turn would cause prices to fall as equilibrium is met.

The rise of short term rentals is a symptom of this imbalance as homeowners are correctly choosing the profit-maximizing behavior of renting homes for a brief duration at the expense of longer term rentals.

To address this market failure, the council should be looking at ways to increase housing supply so no one faction (long term vs. short term) would crowd the other out. Unfortunately, the Heber City Council does not think this way. Instead, their proposals focus on more regulation of the housing market, ignoring the fact that it is over-regulation that has gotten us into this crisis to begin with.

Micah Kagen

Heber City

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