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Adding more housing doesn't solve density, reduce demand, or lower prices: https://pricetags.wordpress.com/2015/06/16/big-money-big-buildings-and-why-just-addi

Adding more housing doesn't solve density, reduce demand, or lower prices: https://pricetags.wordpress.com/2015/06/16/big-money-big-buildings-and-why-just-adding-supply-doesnt-work/ https://pricetags.wordpress.com/2015/06/16/big-money-big-bui... Adding more housing tends to exacerbate all the problems they're already facing.

scarmig 11y ago
"… adding new capacity can no doubt release some of the upward pressure on rents" The rest is just an extended argument that the international rich are using real estate as a speculative investment vehicle/store of money. True, but that doesn't mean that adding housing exacerbates the problem of rich people bidding the prices of housing higher.
idlewords 11y ago
Housing can mean a lot of different things. Adding luxury condos will not help. Adding SROs and other forms of housing for the currently homeless would definitely help.
- simoncion 11y ago
  Frankly, you have to add "luxury" housing, housing for regular people, and housing for low-income folks. Demanding that one form of construction be privileged over the others (or that no "luxury" housing be built, EVER) is a part of what's causing the housing construction logjam in the city.
- jcnnghm 11y ago
  Where do you think the people that would live in new luxury condos go if there are no new luxury condos? Any chance they may buy up existing rental properties and evict long-time residents?
  - JupiterMoon 11y ago
    The idea (and I don't know if it is correct) is that a significant proportion of luxury apartments go to foreign investors seeking secure places to store cash in the case that Russia/China/Some oil dictatorship decides they don't like the wealthy individual in question anymore and they have to flee. Such investors don't care if the property is worth $1 million or $5 million merely that in an emergency it is worth some amount in the millions. There is also a question in the UK if such investors are engaging in money laundering using our property market. This segment of buyers therefore tends to skew the market with what would otherwise be irrational buying practises (extremely overpriced purchases, several million $/£ cash-in-a-suitcase purchases etc). The problem for middle class people being that the domestic luxury condo buyers then get pushed into midrange property market where they outbid the middle class. The middle class then move into the low range property market outbidding the working class etc.
    - jordanthoms 11y ago
      If new construction is allowed though, the people parking money will encourage more development. You can always add another 5 floors to the top of the building which nobody lives in like they do in NYC.
      - JupiterMoon 11y ago
        One additional risk is what happened in Spain and Ireland though. A lot of property stands empty there still.
seibelj 11y ago
If 1 million people live in a city, and you add 10 million more apartments, would that lower the price of each apartment? Of course, because you increased the supply. Adding housing absolutely decreases the average price of housing. This is supply and demand. Now, does adding a small amount of housing have any appreciable effect on average price? No. Therefore, the solution is massive construction of new housing.
- JoeAltmaier 11y ago
  Um, you can't wave a wand and get more housing. It has to go for a rent, that pays the developer for the construction AND land price including annual property tax. In a high-land-value area, available housing will only be built for those that can afford it. No magic bullet.
  - simoncion 11y ago
    Couple of things: * Generally, in CA, unless a property changes hands, its annual property tax increase is capped at 2% per year. * AIUI, SF could waive any property tax increases for residential properties that would have been triggered by flattening the existing structures in order to build much more rental housing. [0] [0] I'm not convinced that there would be any if the property didn't change hands, but it has been years since I read Prop 13.
    - dragonwriter 11y ago
      > Generally, in CA, unless a property changes hands, its annual property tax increase is capped at 2% per year. I think you are referring to the maximum increase in tax basis value (which is only equal to the maximum property tax increase if it is taxed at the maximum value already, though that's probably the case, given the low cap on property tax rates also in Prop 13.) And you are oversimplifying in a way which is misleading in this discussion: new construction triggers full cash value assessment not limited to the annual 2% increase. > AIUI, SF could waive any property tax increases for residential properties that would have been triggered by flattening the existing structures in order to build much more rental housing. To the extent that they could, where would the sense be in that? Accommodating more people, but reducing the public available to provide services needed by those people?
CydeWeys 11y ago
All that article says is that a few super-expensive building projects won't bring down apartment rents for the rest of us. Well, duh. It wasn't supposed to. It was catering to the very high end of the market. Change zoning restrictions and make it a lot easier to build denser housing everywhere. One lot that currently supports a single house could easily support a five-floor, ten-unit building with much higher aggregate rent than the house. I don't understand how anyone can say with a straight face that adding more housing exacerbates the problem of not having enough housing. It's not like there's infinite demand, and if you add ten million houses then eleven million people will instantly move to San Francisco. You don't say that giving a starving man food will only make his problems worse. Just curious, do you own real estate in San Francisco?
- mtviewdave 11y ago
  >I don't understand how anyone can say with a straight face that adding more housing exacerbates the problem of not having enough housing. Say you have a building with 3 units all of a type that do not appeal to foreign investors and wealthy people looking for pied-a-terres, and thus are occupied by people who live and perhaps work in San Francisco. Tear it down and replace it with a building with 10 units, all of which do appeal to the aforementioned investors and wealthy people. Then say 8 units get sold to investors who leave the units unoccupied most of the time, and 2 units get sold to people who want to live in the neighborhood. You've now reduced the amount of housing stock available to San Franciscans, even though you've increased the total number of units. We've had discussions here on HN relatively recently where people discuss housing price inflation in London caused by foreign investors. Vancouver also has a large number of condo high-rises that sit mostly empty most of the time, because they're not occupied. That can just as easily happen in San Francisco. Obviously that won't happen if we build 10 million units. But we're not going to build 10 million units. The danger is that San Francisco builds enough units to attract additional investor demand, but not enough to satiate that demand. Which could leave actual San Franciscans worse off.
  - s0uthPaw88 11y ago
    Can you provide links to back up your assertion that investors would buy housing and then not utilize the space? Seems like a bad investment then...

scarmig 11y ago

"… adding new capacity can no doubt release some of the upward pressure on rents" The rest is just an extended argument that the international rich are using real estate as a speculative investment vehicle/store of money. True, but that doesn't mean that adding housing exacerbates the problem of rich people bidding the prices of housing higher.

idlewords 11y ago

Housing can mean a lot of different things. Adding luxury condos will not help. Adding SROs and other forms of housing for the currently homeless would definitely help.

simoncion 11y ago
Frankly, you have to add "luxury" housing, housing for regular people, and housing for low-income folks. Demanding that one form of construction be privileged over the others (or that no "luxury" housing be built, EVER) is a part of what's causing the housing construction logjam in the city.
jcnnghm 11y ago
Where do you think the people that would live in new luxury condos go if there are no new luxury condos? Any chance they may buy up existing rental properties and evict long-time residents?
- JupiterMoon 11y ago
  The idea (and I don't know if it is correct) is that a significant proportion of luxury apartments go to foreign investors seeking secure places to store cash in the case that Russia/China/Some oil dictatorship decides they don't like the wealthy individual in question anymore and they have to flee. Such investors don't care if the property is worth $1 million or $5 million merely that in an emergency it is worth some amount in the millions. There is also a question in the UK if such investors are engaging in money laundering using our property market. This segment of buyers therefore tends to skew the market with what would otherwise be irrational buying practises (extremely overpriced purchases, several million $/£ cash-in-a-suitcase purchases etc). The problem for middle class people being that the domestic luxury condo buyers then get pushed into midrange property market where they outbid the middle class. The middle class then move into the low range property market outbidding the working class etc.
  - jordanthoms 11y ago
    If new construction is allowed though, the people parking money will encourage more development. You can always add another 5 floors to the top of the building which nobody lives in like they do in NYC.
    - JupiterMoon 11y ago
      One additional risk is what happened in Spain and Ireland though. A lot of property stands empty there still.

seibelj 11y ago

If 1 million people live in a city, and you add 10 million more apartments, would that lower the price of each apartment? Of course, because you increased the supply. Adding housing absolutely decreases the average price of housing. This is supply and demand. Now, does adding a small amount of housing have any appreciable effect on average price? No. Therefore, the solution is massive construction of new housing.

JoeAltmaier 11y ago
Um, you can't wave a wand and get more housing. It has to go for a rent, that pays the developer for the construction AND land price including annual property tax. In a high-land-value area, available housing will only be built for those that can afford it. No magic bullet.
- simoncion 11y ago
  Couple of things: * Generally, in CA, unless a property changes hands, its annual property tax increase is capped at 2% per year. * AIUI, SF could waive any property tax increases for residential properties that would have been triggered by flattening the existing structures in order to build much more rental housing. [0] [0] I'm not convinced that there would be any if the property didn't change hands, but it has been years since I read Prop 13.
  - dragonwriter 11y ago
    > Generally, in CA, unless a property changes hands, its annual property tax increase is capped at 2% per year. I think you are referring to the maximum increase in tax basis value (which is only equal to the maximum property tax increase if it is taxed at the maximum value already, though that's probably the case, given the low cap on property tax rates also in Prop 13.) And you are oversimplifying in a way which is misleading in this discussion: new construction triggers full cash value assessment not limited to the annual 2% increase. > AIUI, SF could waive any property tax increases for residential properties that would have been triggered by flattening the existing structures in order to build much more rental housing. To the extent that they could, where would the sense be in that? Accommodating more people, but reducing the public available to provide services needed by those people?

CydeWeys 11y ago

All that article says is that a few super-expensive building projects won't bring down apartment rents for the rest of us. Well, duh. It wasn't supposed to. It was catering to the very high end of the market. Change zoning restrictions and make it a lot easier to build denser housing everywhere. One lot that currently supports a single house could easily support a five-floor, ten-unit building with much higher aggregate rent than the house. I don't understand how anyone can say with a straight face that adding more housing exacerbates the problem of not having enough housing. It's not like there's infinite demand, and if you add ten million houses then eleven million people will instantly move to San Francisco. You don't say that giving a starving man food will only make his problems worse. Just curious, do you own real estate in San Francisco?

mtviewdave 11y ago
>I don't understand how anyone can say with a straight face that adding more housing exacerbates the problem of not having enough housing. Say you have a building with 3 units all of a type that do not appeal to foreign investors and wealthy people looking for pied-a-terres, and thus are occupied by people who live and perhaps work in San Francisco. Tear it down and replace it with a building with 10 units, all of which do appeal to the aforementioned investors and wealthy people. Then say 8 units get sold to investors who leave the units unoccupied most of the time, and 2 units get sold to people who want to live in the neighborhood. You've now reduced the amount of housing stock available to San Franciscans, even though you've increased the total number of units. We've had discussions here on HN relatively recently where people discuss housing price inflation in London caused by foreign investors. Vancouver also has a large number of condo high-rises that sit mostly empty most of the time, because they're not occupied. That can just as easily happen in San Francisco. Obviously that won't happen if we build 10 million units. But we're not going to build 10 million units. The danger is that San Francisco builds enough units to attract additional investor demand, but not enough to satiate that demand. Which could leave actual San Franciscans worse off.
- s0uthPaw88 11y ago
  Can you provide links to back up your assertion that investors would buy housing and then not utilize the space? Seems like a bad investment then...