“Luxury” construction causes high rents like umbrellas cause rain

Noah Smith in Noahpinion:

Imagine if you went outside and saw that it had started to rain, and that people on the street were opening their umbrellas. And imagine that you ran around waving your arms and saying “Stop! Stop! Umbrellas make rain worse!!” People would think you were a silly person, and rightly so.

But why don’t people think that umbrellas make rain worse? After all, everyone knows that rain typically starts to intensify shortly after people start opening their umbrellas. But we have a good causal theory of why rain happens, and we know that umbrellas have nothing to do with it; we know that the umbrellas are a response to the problem, rather than the cause.

The same should be true for market-rate housing construction and rising rents.

More here.