There are rules for renting out appartments for good reasons. For example, it influences the worth of appartments around it, and it messes up housing costs in a broader area.
Another example of the free market not working outside a very simplistic view.
If a new participant enters a market and that causes changes in pricing, it is not because the new participant has made the market less efficient.
If the new participant was offering a worse deal than the incumbents, nobody would trade with them. It is only because the new participant is offering a better deal than the incumbents that their actions change the market prices. And that's a good thing.
You seem to take the free market as a premise and from there deduce that it is a desirable construct. The point was that the nature of the free market has an undesirable effect on prices.
Quite a good comment. I had never considered that taking the free market as a premise might not be the correct decision.
On further reflection, I still think it is the correct decision.
If someone wants to rent a property more badly than anyone else wants to (i.e. they are willing to pay more) then why shouldn't they get it instead of the others? This will push prices up, but that's a natural effect of allocating scarce resources to whoever wants them most.
I think you have accidentally conflated "whoever wants them most" with whoever is willing and able to pay the most.
I am not sure how you would find out whether I want to live on the street where I grew up more than, for example, a billionaire Russian oligarch, but I think that even if I wanted it one thousand times more I would remain unable to afford it.
It may be that many other people gave the oligarch some money to show that they, in some exchange, had a total want for said oligarch to live there more than my want, but this is a different claim implying a very strong assumption about the addition and fungibility of wants, making them indistinguishable from money itself.
Can you make a good argument for why free market doesn't work here?
I don't feel that ...
>There are rules for renting out appartments for good reasons. For example, it influences the worth of appartments around it, and it messes up housing costs in a broader area.
... is really an useful argument against free market as it fails to explain why either of those are inherently bad things.
Because there are negative externalities to someone constantly renting out their unit for short term stay. In a completely free market, there are no rules to protect the neighbours from these negative externalities.
In the case of multi-family investment properties like a duplex or three family, the externalities are positive.
Investment properties have incentives in place to not spend money on maintenance, not spend on upkeep to the extent the owner can get away with it.
With a vacation rental the incentive is to make it as nice as possible to charge a premium, and the rents support a higher level of finish and polish to a property.
I live right between two short term rentals and people come and go all the time, and I love it. I've met so many cool people, especially from Europe travelling in the US.
The house is kept up much nicer than the other multi families around it.
None of the guests have ever once had a party, made noise, left trash or anything negative.
Which is another form of non free market. It's just whether you want the rules enforced at the level of housing co-operative, community or the state government.
As you move up the levels, the market becomes less free (easier to move to a different apartment block if you don't like the rules than to move to a different state) but becomes far better at protecting against the negative externalities (housing cooperative doesn't have the same enforcement capabilities as local or state governments).
Another example of the free market not working outside a very simplistic view.