>determined by the economic opportunity of the land.
That makes sense for agricultural land that is being worked as well as it can be, where there are already roads for tractors and no improvement could help it become more productive, but in a city the same square feet of land can support anywhere between one and a thousand residences depending on what is invested in to it.
If rent was really inelastic, anywhere that it was profitable to build housing would be a free infinite money opportunity, because no matter how high you stacked the apartments they'd all rent for more than it cost to build them. You'd be able to build a skyscraper with 100 floors of penthouses in the middle of a rich suburban neighborhood, if increased supply really did nothing to reduce rents.
The rent of a land site is equal to the economic advantage obtained by using the site in its most productive use, relative to the advantage obtained by using marginal (i.e., the best rent-free) land for the same purpose, given the same inputs of labor and capital.
Income is income ---doesn't matter if that's ag, manufactures, retail, commercial, or wage or salary of a residential tenant.
The restriction of new housing increases rent on the remaining lots. NIMBYism, architectural codes, zoning, etc., serve to restrict what can be built, so that the rent on what can be built increases.
There's a great, highly readable, 1930s take on this in "Resistances to the Adoption of Technological Innovations", Bernhard J. Stern. See the section title "Building".
>The restriction of new housing increases rent on the remaining lots. NIMBYism, architectural codes, zoning, etc., serve to restrict what can be built, so that the rent on what can be built increases.
If reductions in supply raise the price, you are saying that it is elastic. I basically agree with you on this, it seems. Supply restrictions raise prices.
This is the whole idea behind a land value tax. Where a tax is made on the unimproved value of land, surplus value is taken by the taxing authority (and presumably returned as public expenditures). The landlord cannot increase rent to compensate (supply hasn't changed, price has), and the result, if other conditions permit, should be increased supply in the sense that idle property is now rented, and low-density / low-value uses are replaced by higher-density / higher-value uses.
The tax applies to the unimproved value so that property investments which increase utility and utilisation are not discouraged. Idle land is penalised.
Real-world validation of the theory ... varies, though seems generally to bear it out. A considerable problem is in getting the LVT in place to begin with, and in dealing with other barriers to enhancement, including zoning and building codes.
In the alternative, increasing asset valuation allows property owners to benefit from constrained supply. Part of their gains come through rent, but a large share is simply in the asset inflation of their property. This can be exercised as collateral on loans for other spending or investment.
I think your facts are plausible but your terminology is wrong. The market can be elastic if either the supply or the demand is elastic, or both. You are saying that the price is not elastic but then contradicting yourself by correctly saying that supply changes change the price.
That makes sense for agricultural land that is being worked as well as it can be, where there are already roads for tractors and no improvement could help it become more productive, but in a city the same square feet of land can support anywhere between one and a thousand residences depending on what is invested in to it.
If rent was really inelastic, anywhere that it was profitable to build housing would be a free infinite money opportunity, because no matter how high you stacked the apartments they'd all rent for more than it cost to build them. You'd be able to build a skyscraper with 100 floors of penthouses in the middle of a rich suburban neighborhood, if increased supply really did nothing to reduce rents.