Can Increasing Housing Supply Lower Rents?

Housing rents and prices have become a big topic in the last few years. So in metropolitan cities Housing rents are around the minimum wage. So you’re thinking about how you’re going to feed yourself by paying the money you get for rent.

Minister of Treasury and Finance Mehmet Şimşek spoke on this issue. In his speech He stated that housing supply will increase and thus prices will decrease.. So does increasing housing supply really work? There are some conflicting statements, what are they?

What are the details of the housing supply statement?

Mehmet Simsek, “In the medium term, to combat inflation and prevent price increases in rents. Housing supply will be increased, new social housing projects will be developed to compensate for losses in the housing stock caused by earthquakes. and low-income citizens’ access to housing will be increased.” He made a statement as follows. Because housing supply has almost not increased in the last ten years.

Considering the balance of supply, demand and price, the increase in the number of houses Of course it will help reduce rents. But there are some problems.

There is a difference between the increase in private housing and the increase in social housing.

We can explain this situation as follows. If the Treasury will help individuals individually to increase the housing supply, it is not possible for rental prices to decrease. Because the neighborhood where the house is built has a certain average rent and there will be no one who wants to rent their house below the average. In addition, the increase in the prices of materials used in housing construction, that is, It is a complete exaggeration to expect rents to be low as a result of increased costs.

The situation will be different if the supply is provided by building social housing, that is, if the purchase or rental is determined by lottery for low-income citizens. So, let’s think about the district we mentioned above. When lower priced houses and lower rent houses are built in that district, demand will shift there. In this way Those with higher prices will not be in demand and will have to reduce their prices.

It is quite difficult to make an inference from Mehmet Şimşek’s sentence.

Şimşek mentions that the housing supply will be increased. But it does not mention what form these residences will be in. In the rest of the sentence, he mentions that social housing projects will also be developed. But this to replace the earthquake-related loss stock explains.

A special increase in housing supply may also reveal the opposite of what is expected.

First of all, with the housing supply, there may be homeowners who will own several houses at the same time. This will not cause prices to drop. No one lowers their rent because they have too much house.. You may be thinking of a landlord who owns 400 houses but hires a hitman to evict his tenant and rent the house again at a higher price. So just because a person owns more than one house does not make him or her ‘considerate’.

The other big problem is that suddenly The idea that those who own more houses pay different taxes. According to the Central Bank’s statement, it is planned to impose a gradual taxation according to the number of houses owned, to collect extra taxes from empty houses, and even to determine the interest rate on the home loan accordingly. Although it may seem like a useful plan at first, it is impossible to think that the extra loan interest and the extra taxes will not be deducted from the tenants.

If we look at the result, if the housing supply in question will be in the form of social housing projects and will help low-income people, will reduce prices in the long run. However, this will remain a mystery if increasing the housing supply on an individual basis will be encouraged. Because housing supply incentive and purchase and second home tax at the same time is a contradiction.

Our other content that may interest you: