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THE VIEW FROM HERE - The Myth of Supply and Demand should not be mistaken for the Law of Supply and Demand. Unfortunately, many people do not know that the myth and the law exist side by side. Thus, they are easily bamboozled into believing the myth. Most Angelenos are aware that LA City Hall, Pravda West (LA Times) and other media outlets have been pushing the false narrative that Los Angeles has a housing shortage which has resulted in the homeless crisis. These professional prevaricators rely on the myth that rising prices means there must be a shortage. To the contrary, under the laws of Supply and Demand prices rise during a glut – until they don’t.
Getting it Right
The fair market price is the price at which a willing seller will sell and a willing buyer will buy.
A whole another universe of economic and psychological laws exists within that word, willing.
(1) Willingness is a belief which may be totally false. Thus, the mere fact that two people agree on a price does not mean that it is the fair market value.
(2) Willingness means that the data on which the buyer and seller agree must be for the same market. Fraudsters, such as the LA Times, the City Council and most judges rely on patently false data, except in January 2012, Judge Allan Goodman rejected Garcetti’s Hollywood Community Plan as intentionally based on fatally flawed data.
Just as there is no market for transportation encompassing bicycles and Rolls Royces, there is no housing market including Rental Controlled Units (RSO unit) and luxury apartments. The fraud which LA City Hall, the Pravda West, and increasingly the courts have promoted is that we have a homeless crisis due to a failure to have enough construction. Thus, their solution is to construct more luxury units, despite the fact that we have a glut of over 200,000 vacant apartments and houses in Los Angeles. They promote the idiotic myth that construction of high-end luxury units will increase the supply of low end apartments. If this fallacy were true, then there would be no glut of vacant apartments with homeless encampments at their doorsteps. Are we to believe that when the city has 300,000 vacant apartments all of a sudden, the apartment rents will drop from $2,000 per month to $350 per month?
The reality is known – the city systematically destroyed tens of thousands of RSO units throwing well over 100,000 people onto the streets. Destroying RSO units drove up the rents on other apartments as some of the evicted people could afford the rent of the least expensive non RSO apartments. Building more $4,000 per month apartments did not increase the housing supply for the poor. Densification drives up housing costs since the more density on a parcel the more for which it will sell – until it doesn’t.
Corruption Destroys the Law of Supply and Demand
There can be no willing buyers and sellers when corruption has become judicially sanctioned. The role of government under both Adam Smith and Keynes was to protect the Price System and when the courts trample the law to death, the economic arena ceases to function. As most Angelenos should now know, the city council operates by an unlawful vote trading system (criminalized by Penal Code § 86), where each councilmember is mandated to vote yes on each project. Thus, it does not matter how many laws a developer wants waived, all he has to do is bribe one councilmember and he is guaranteed unanimous city council approval. It would take a myopic moron not to foresee that judicially sanctioning the criminal vote trading system would accelerate the destruction of RSO units, hence of homelessness, resulting thousands of needless deaths among the homeless.
From an Economic Standpoint, Far More Destructive than the Visible Homeless Are the Invisible Millennials
The Millennials are becoming invisible because they are fleeing from Los Angeles. Our population had been steadily declining. The population loss corresponds with Garcetti’s Manhattanization Mania. After Judge Richard Fruin’s December 2016 decision that the city council’s actions were de facto non-justiciable, aka above the law, there was no stopping the destruction of RSO units and the increasing number of homeless. Nothing makes corruption grow faster than judicial protection.
Judge Fruin Made Los Angeles Unlivable for Millennials
City Hall corruption not only caused homelessness, but it also made Los Angeles financially unrealistic for Family Millennials. A generation is considered to have transitioned from the Young phase to the Family phase at age 25. Millennials were born between 1981-1996. By 2006, the first of them had become family Millennials; by 2017 (right after Fruin’s decision), we were more than a decade into Family Millennials. They were leaving the single dorm room style of living and turning to detached homes with yards and with earning enough money to provide for a family including college educations. They foresaw that insanely high housing costs meant they could not send their kids to college. As renters, they could never build equity.
Housing ceased to be about providing a safe, decent place to live and instead became focused on one thing – the monetization of housing as a commodity to benefit Wall Street. Those few who understood that the role of government is to provide for the quality of life realized that Wall Street, the LA City Council and the state courts cared about only one thing – to loot the housing market by unconscionable and unending real estate frauds. The LA Times is their mouthpiece for non-stop disinformation. Developers, city councilmembers and the judiciary became more powerful and wealthier. How many judges have off shore bank accounts?
By 2023, all Millennials are Family Millennials, and they are the main segment fleeing Los Angeles, although a number of poor people, especially Blacks have been reading the tea leaves and they have relocated to the Inland Empire, The Antelope Valley, and the Old South. Los Angeles is left with us altercockers, but we’re dying off. Since Millennials are leaving and Asian immigrants are skipping LA to move to directly inland states, Los Angeles population will continue to drop, but the prices of single-family homes are likely to continue to increase – until they don’t.
Let’s remember that as Family Millennials abandon Los Angeles, employers are also departing. Our economy is more dependent on construction despite the fact that excessive densification is destroying Los Angeles as viable economic base for the middle class.
(Richard Lee Abrams has been an attorney, a Realtor and community relations consultant as well as a CityWatch contributor. You may email him at [email protected]. The opinions expressed by Mr. Abrams are not necessarily those of CityWatchLA.com.)
