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Seriously. Why is housing in Tokyo consistently affordable? Because the zoning rules allow high-density housing to grow with housing demand. Somehow in America

Seriously. Why is housing in Tokyo consistently affordable? Because the zoning rules allow high-density housing to grow with housing demand. Somehow in America we have convinced ourselves that if we stop high-density development in the cities that absolutely need it, we can make up for it by legislating prices lower. The solution to unaffordable housing certainly begins with building a lot more housing.

ghaff 10y ago
It also doesn't hurt that the Tokyo population has been growing rather slowly--about 0.5% per year.
- peterbonney 10y ago
  Yes, but it is also one of the largest, densest cities in the world, a place it arrived to by growing quickly and expanding its housing stock to match its growth.
  - ghaff 10y ago
    And Tokyo also has a great urban transit system etc. On the other hand, a lot of the population growth occurred between 1945 and 1965. [1] So it was starting from an historically low population and housing stock point for obvious reasons and had something of a clean slate. [1] http://www.metro.tokyo.jp/ENGLISH/ABOUT/HISTORY/history03.htm http://www.metro.tokyo.jp/ENGLISH/ABOUT/HISTORY/history03.ht...
  - deleted 10y ago
    [deleted]
cauterized 10y ago
I don't see a lot of people suggesting we can legislate our way out of housing prices without building more housing stock. What I do see is a lot of what amounts to saying that "those people" should just go somewhere else. As long as that somewhere else isn't one where I have to notice their homelessness. But yes. We have to build upwards. In cities where building vertically benefits the well-off (as in NY), and where it's profitable to do so, it happens. But note that it only generates high-end and expensive housing stock (excluding rules that require including "affordable" housing, which based on the examples I've seen seems to mean "affordable to a family making $120k/yr instead of the $500k you need to afford the market rate units in this development".) Will adding more housing stock at the top decrease prices at the bottom via market effects? Yes and no. If the availability does trickle down, it takes a very long time. Here in downtown Brooklyn there's a temporary glut of high-end housing added in the last 5 years. But compared to the number of people added to what was already a tight rental (and sales) market in the city 10-15 years ago, the number of units added is laughable. We're talking almost a million more people living in the city but something like 20-30,000 units (enough to house 50-100k people) having been added. So what happens? This oversupply will likely last about 5 years. The only real effect will be 1-2 year 10-15% concessions on rent in the new rental buildings until they can fill them up. People looking for high-end rentals will be able to take 24 hours instead of 3 minutes to commit to a specific apartment after viewing it, and might be able to get it if they wait an hour or two to apply instead of contacting the management company within 5 minutes of the listing going live. In a couple years, the high end rental market will go back to its normal cut-throat self. Maybe the gentrification of Crown Heights will be delayed by a couple years, but I doubt it. This trickle of new housing at $2500-4000 per person per month isn't nearly enough to keep up with the constantly expanding demand for units under $1200 per person per month. The for-sale units in the crazy high-end buildings will sit vacant until enough new Chinese billionaires are minted who want to park their money outside the country, and then they'll continue to sit vacant indefinitely anyway because they're investments rather than homes. The ones in only normally high end buildings will also sit vacant for a year or so and then generate a tiny bit less profit than the developers were hoping for. But sales don't really factor into the affordable housing market here anyway. If you're having trouble affording rent, buying is unimaginable.
- peterbonney 10y ago
  I'm also a New Yorker, and the examples you cite illustrate the problem. Why is it only profitable for developers to build dense housing in high-end neighborhoods right now? In large part because of our complex, draconian zoning rules - it's a huge economic hurdle to climb for developers, and contributes to making it not worth their while to build in cheaper neighborhoods. The affordable housing rules you mention are an example of an attempt to legislate our way out of the problem, and obviously they haven't worked. I'd say the reason they haven't worked is because they don't address the real issue: to have cheaper housing we need to reduce the barriers to building more housing. At least that's my personal view. I'm not an economist or a city planner or any kind of expert, just a rando on the Internet. :)
  - shostack 10y ago
    Is it really a zoning issue or is it simpler than that? I'd assume that in this market where debt is cheap, people with high income can leverage more and thus pay net higher prices. This results in a certain type of housing increasing in price/sqft whereas low income housing would not see as much of an increase due to limited ability of low income people to borrow as much. Net result is that a developer can profit quite a bit more from luxury housing than affordable housing. If you are a developer (which presumably means a for-profit business) and have a choice between the two, you naturally decide to go after the higher profit option. Can't say I'd blame them either. This is where incentives need to be provided to balance the profit equation. If they could make the same amount of profit, or gain other business benefits, I imagine the problem would start solving itself.
    - peterbonney 10y ago
      > If you are a developer (which presumably means a for-profit business) and have a choice between the two, you naturally decide to go after the higher profit option. That may be true if the limiting factor is the number of developers - they will only develop the highest-value properties. But in a city like New York the limiting factor is not developer capacity, at least not that I have ever heard. Developers are effectively constrained by the number of profitable building sites, not their capacity to put up new buildings. And, in turn, the number of profitable building sites is dependent on not just the cost of labor and materials, but the cost of navigating city planning, obtaining permits, etc. Don't forget that land is cheaper to acquire in less desirable neighborhoods, and it is also generally cheaper to build there due to lower existing density (which eases logistics by making it easier to get equipment in and out, allows more on-site storage, etc.). The development that maximizes returns is not always the development that maximizes revenue - cost and time also matter. And there are more developers who can handle building a 10-story building in the Bronx than can tackle an 80-story mega-project in Manhattan. Plus, a "cheap" neighborhood in NYC is often as expensive as an "expensive" neighborhood in most US cities, so if developers are willing to build in Milwaukee or Cleveland, they should be willing to build in the Bronx. But in a world where the administrative cost of starting a relatively small project is overwhelming vs. the potential returns, then those smaller projects in lower-price neighborhoods simply won't get built.
cstejerean 10y ago
The problem is that adding high density housing to an area not built for it has a chicken and egg problem. When you add a massive high rise a lot of people move in. They all need to commute somewhere. Except now the streets can't accommodate the car traffic and the public transit system is also inadequate. And it will take a decade to catch up. So in the meantime everyone around the new high rise gets to suffer for the next 10 years, and it's understandable why they aren't particularly excited about it. On the other hand you can't build up the infrastructure first because you don't have any money to do so pre-emptively.
- panglott 10y ago
  They're not talking about a massive high-rise in this article. They're talking about a four-story apartment building that has 10% more units than a conventional studio apartment building, and is on high-frequency transit lines with good bicycle access.
- Asooka 10y ago
  No area has historically been built for high density housing. You build the housing and that creates new problems that you then solve, which in turn cause more problems to solve, etc. etc. in a process usually known as "life". The important thing is to serve the zeitgeist of today, rather than the perfectly spherical zeitgeist in vacuum of imaginary tomorrow.

ghaff 10y ago

It also doesn't hurt that the Tokyo population has been growing rather slowly--about 0.5% per year.

peterbonney 10y ago
Yes, but it is also one of the largest, densest cities in the world, a place it arrived to by growing quickly and expanding its housing stock to match its growth.
- ghaff 10y ago
  And Tokyo also has a great urban transit system etc. On the other hand, a lot of the population growth occurred between 1945 and 1965. [1] So it was starting from an historically low population and housing stock point for obvious reasons and had something of a clean slate. [1] http://www.metro.tokyo.jp/ENGLISH/ABOUT/HISTORY/history03.htm http://www.metro.tokyo.jp/ENGLISH/ABOUT/HISTORY/history03.ht...
- deleted 10y ago
  [deleted]

cauterized 10y ago

I don't see a lot of people suggesting we can legislate our way out of housing prices without building more housing stock. What I do see is a lot of what amounts to saying that "those people" should just go somewhere else. As long as that somewhere else isn't one where I have to notice their homelessness. But yes. We have to build upwards. In cities where building vertically benefits the well-off (as in NY), and where it's profitable to do so, it happens. But note that it only generates high-end and expensive housing stock (excluding rules that require including "affordable" housing, which based on the examples I've seen seems to mean "affordable to a family making $120k/yr instead of the $500k you need to afford the market rate units in this development".) Will adding more housing stock at the top decrease prices at the bottom via market effects? Yes and no. If the availability does trickle down, it takes a very long time. Here in downtown Brooklyn there's a temporary glut of high-end housing added in the last 5 years. But compared to the number of people added to what was already a tight rental (and sales) market in the city 10-15 years ago, the number of units added is laughable. We're talking almost a million more people living in the city but something like 20-30,000 units (enough to house 50-100k people) having been added. So what happens? This oversupply will likely last about 5 years. The only real effect will be 1-2 year 10-15% concessions on rent in the new rental buildings until they can fill them up. People looking for high-end rentals will be able to take 24 hours instead of 3 minutes to commit to a specific apartment after viewing it, and might be able to get it if they wait an hour or two to apply instead of contacting the management company within 5 minutes of the listing going live. In a couple years, the high end rental market will go back to its normal cut-throat self. Maybe the gentrification of Crown Heights will be delayed by a couple years, but I doubt it. This trickle of new housing at $2500-4000 per person per month isn't nearly enough to keep up with the constantly expanding demand for units under $1200 per person per month. The for-sale units in the crazy high-end buildings will sit vacant until enough new Chinese billionaires are minted who want to park their money outside the country, and then they'll continue to sit vacant indefinitely anyway because they're investments rather than homes. The ones in only normally high end buildings will also sit vacant for a year or so and then generate a tiny bit less profit than the developers were hoping for. But sales don't really factor into the affordable housing market here anyway. If you're having trouble affording rent, buying is unimaginable.

peterbonney 10y ago
I'm also a New Yorker, and the examples you cite illustrate the problem. Why is it only profitable for developers to build dense housing in high-end neighborhoods right now? In large part because of our complex, draconian zoning rules - it's a huge economic hurdle to climb for developers, and contributes to making it not worth their while to build in cheaper neighborhoods. The affordable housing rules you mention are an example of an attempt to legislate our way out of the problem, and obviously they haven't worked. I'd say the reason they haven't worked is because they don't address the real issue: to have cheaper housing we need to reduce the barriers to building more housing. At least that's my personal view. I'm not an economist or a city planner or any kind of expert, just a rando on the Internet. :)
- shostack 10y ago
  Is it really a zoning issue or is it simpler than that? I'd assume that in this market where debt is cheap, people with high income can leverage more and thus pay net higher prices. This results in a certain type of housing increasing in price/sqft whereas low income housing would not see as much of an increase due to limited ability of low income people to borrow as much. Net result is that a developer can profit quite a bit more from luxury housing than affordable housing. If you are a developer (which presumably means a for-profit business) and have a choice between the two, you naturally decide to go after the higher profit option. Can't say I'd blame them either. This is where incentives need to be provided to balance the profit equation. If they could make the same amount of profit, or gain other business benefits, I imagine the problem would start solving itself.
  - peterbonney 10y ago
    > If you are a developer (which presumably means a for-profit business) and have a choice between the two, you naturally decide to go after the higher profit option. That may be true if the limiting factor is the number of developers - they will only develop the highest-value properties. But in a city like New York the limiting factor is not developer capacity, at least not that I have ever heard. Developers are effectively constrained by the number of profitable building sites, not their capacity to put up new buildings. And, in turn, the number of profitable building sites is dependent on not just the cost of labor and materials, but the cost of navigating city planning, obtaining permits, etc. Don't forget that land is cheaper to acquire in less desirable neighborhoods, and it is also generally cheaper to build there due to lower existing density (which eases logistics by making it easier to get equipment in and out, allows more on-site storage, etc.). The development that maximizes returns is not always the development that maximizes revenue - cost and time also matter. And there are more developers who can handle building a 10-story building in the Bronx than can tackle an 80-story mega-project in Manhattan. Plus, a "cheap" neighborhood in NYC is often as expensive as an "expensive" neighborhood in most US cities, so if developers are willing to build in Milwaukee or Cleveland, they should be willing to build in the Bronx. But in a world where the administrative cost of starting a relatively small project is overwhelming vs. the potential returns, then those smaller projects in lower-price neighborhoods simply won't get built.

cstejerean 10y ago

The problem is that adding high density housing to an area not built for it has a chicken and egg problem. When you add a massive high rise a lot of people move in. They all need to commute somewhere. Except now the streets can't accommodate the car traffic and the public transit system is also inadequate. And it will take a decade to catch up. So in the meantime everyone around the new high rise gets to suffer for the next 10 years, and it's understandable why they aren't particularly excited about it. On the other hand you can't build up the infrastructure first because you don't have any money to do so pre-emptively.

panglott 10y ago
They're not talking about a massive high-rise in this article. They're talking about a four-story apartment building that has 10% more units than a conventional studio apartment building, and is on high-frequency transit lines with good bicycle access.
Asooka 10y ago
No area has historically been built for high density housing. You build the housing and that creates new problems that you then solve, which in turn cause more problems to solve, etc. etc. in a process usually known as "life". The important thing is to serve the zeitgeist of today, rather than the perfectly spherical zeitgeist in vacuum of imaginary tomorrow.