YIMBY Arguments

The emotion behind the young YIMBYs ("Yes in my backyard") contains a contradiction. Should people be allowed to pay $2,000/mo. for something that is worth $3,000/mo.? And if so, for how long? If you increase inventory and lower the rents, then you will have made things worse, because now people are paying $2,000 for something that used to be worth $3,000. The real estate market is generally efficient. The price per unit is precisely what people are willing to pay to live there. The price represents the value of that location.

The price of a good is determined first by its intrinsic value and then discounted or increased according to its associated supply and demand. Apples have a fixed intrinsic value to someone hungry who likes apples, regardless of the supply and demand surrounding it. However, real estate has dynamic intrinsic value. More supply can increase its intrinsic value, or it can reduce it, depending on where and how new units are built.

YIMBYs appeal to emotions by referring to people being uprooted from their neighborhoods, which is the classic gentrification argument. However, how long should someone be allowed to pay $1,000/mo. for something that is worth $3,000? It shouldn't be infinite. And who should bear the cost of that surplus? Demand is unfortunately democratically chosen, based on nearly pure market dynamics. But the redistribution of that real estate surplus is determined politically.

Demand fluctuates an order of magnitude faster than supply, when it comes to real estate, at least in the United States.