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Speculation that this is the case in SF, but is an effect I've seen: You can get a dip in average rent without (sufficiently) dropping bottom quartile rents, w

Speculation that this is the case in SF, but is an effect I've seen: You can get a dip in average rent without (sufficiently) dropping bottom quartile rents, which is what NIMBYism tends to block, by having a lot of nice condos built. The top quartile of rents dips heavily as places jockey for condo buyers, everyone moves in to a nicer place as the wave spreads, but the price at the bottom remains (mostly) the same (even if unit quality goes up), because the oldest buildings get torn down at the end of the wave, rather than genuinely increasing the housing supply (because land to develop on is still hard to come by). So it's possible average rents dipped, but service workers still struggle to afford rent, even if they struggle in a nicer unit. Tl;dr: I expect the building that happened raised low-end apartment quality rather than drop price, even if average rent is down. Because NIMBYism.

zazen 10y ago
This sounds plausible, and it chimes with the article's statement that the new supply is at the high end. Thanks! If people were only blocking certain kinds of development, that would explain why low-end prices stay high even while there's a lot of construction causing the median price to drop.
- deleted 10y ago
  [deleted]
- SomeStupidPoint 10y ago
  I think of it as: NIMBYism keeps high-density zoned land high value, so the floor never comes out of the market, even if you squish the top down. Houses don't belong in (the core of) major metros anymore, but there are a lot of wealthy home owners who live there, and have built up political networks over decades or centuries. It's a tragedy of our system that we let 20 residents keep out 200.
  - mooreds 10y ago
    Should the 20 just be bought out, or forced to sell, or allowed to rezone and then sell one by one (with the first person getting the most money, as each lot is turned into a high rise). We are facing some of this in the city in which I live and I don't really know how to address it (I can see validity in the arguments of both sides) so was wondering what you see as the path forward.
    - SomeStupidPoint 10y ago
      This is a tough one. I'm generally leery of things like eminent domain, because they can be very problematic. On the other hand, there's a good chance that converting a lot of blocks also means we need to up utility capacity in the area, which can be very disruptive for residents, so it also makes sense to rebuild an area at a time. I like the idea of having the city nominate regions, and then any time 90% of a block agrees, the whole block is sold as a unit (or maybe auctioned with minimum bid) and rezoned at that time. (This kind of idea meshes well with the development plan of having several high density clusters smattered around the city as neighborhood focal points, which is what my city recently switched to.) It doesn't quite fix the utilities problem or some people being forced out, but I think it balances out a lot of competing forces reasonably, and keeps us from working with weird lots during development (as the city can repartition the block during rezone).
foota 10y ago
This is not entirely accurate. If the median rent drops, this means necessarily that the rent for at least some portion of the renters below the 50th percentile has dropped. So while it is possible that the very bottom hasn't changed much, the middle/top of bottom necessarily has.
- SomeStupidPoint 10y ago
  It's not necessary for the bottom quartile (which is what I was talking about) to change at all for the median to move, as long as the median stays above the highest value in the bottom quartile. The lower-middle quartile could absorb all of the change. A quartile is 25%, or a quarter, if you didn't know. My concern was for bottom quartile rents, since the bottom 20% of society is largely concentrated on the low end of that quartile, and they're largely the ones who actually suffer from high housing costs (as opposed to merely having fewer luxuries).
  - foota 10y ago
    Sorry, I misread your comment. I'm curious what a rent vs percentile curve looks like for the area. Unfortunately, I wasn't able to find one.
refurb 10y ago
This is a theory, but wouldn't dropping upper quartile rents automatically flow down to lower quartiles? Let's say you have a market with 3 apartments for rent. $100, $200, $300 per month. Luxury apartment is created and starts at $400 per month, but no one rents, so they drop it to $300 per month. The guy renting a non-luxury apartment for $300 says "screw that" and moves to the luxury apartment. Plus, the guy renting the non-luxury apartment looks at comparables and says "jesus, a luxury apartment is $300, mine is maybe worth $200". And so on, all the way down the line. Sure it's not a perfect example, but I can see how cheaper luxury apartments could cause prices to fall overall.
- SomeStupidPoint 10y ago
  I get the chain effect, but because of the scarcity of land zoned that way, the buildings that are currently the bottom end up torn down rather than rented for less, and the land re-used because the base value of the land doesn't allow the rent to drop. So you see drops across most of the market, except at the bottom. This market effect is actually good! It keeps land cycling to be productively used and everyone gets to live in a nicer place. The problem is we need to rezone land to drop the value of highly dense land, so those low end apartments drop a bit, rather than being repurposed. (At least, until cities are rebalanced a bit.)
  - refurb 10y ago
    That makes sense. There would be a floor to rents, so the bottom wouldn't have much further to fall.

zazen 10y ago

This sounds plausible, and it chimes with the article's statement that the new supply is at the high end. Thanks! If people were only blocking certain kinds of development, that would explain why low-end prices stay high even while there's a lot of construction causing the median price to drop.

deleted 10y ago
[deleted]
SomeStupidPoint 10y ago
I think of it as: NIMBYism keeps high-density zoned land high value, so the floor never comes out of the market, even if you squish the top down. Houses don't belong in (the core of) major metros anymore, but there are a lot of wealthy home owners who live there, and have built up political networks over decades or centuries. It's a tragedy of our system that we let 20 residents keep out 200.
- mooreds 10y ago
  Should the 20 just be bought out, or forced to sell, or allowed to rezone and then sell one by one (with the first person getting the most money, as each lot is turned into a high rise). We are facing some of this in the city in which I live and I don't really know how to address it (I can see validity in the arguments of both sides) so was wondering what you see as the path forward.
  - SomeStupidPoint 10y ago
    This is a tough one. I'm generally leery of things like eminent domain, because they can be very problematic. On the other hand, there's a good chance that converting a lot of blocks also means we need to up utility capacity in the area, which can be very disruptive for residents, so it also makes sense to rebuild an area at a time. I like the idea of having the city nominate regions, and then any time 90% of a block agrees, the whole block is sold as a unit (or maybe auctioned with minimum bid) and rezoned at that time. (This kind of idea meshes well with the development plan of having several high density clusters smattered around the city as neighborhood focal points, which is what my city recently switched to.) It doesn't quite fix the utilities problem or some people being forced out, but I think it balances out a lot of competing forces reasonably, and keeps us from working with weird lots during development (as the city can repartition the block during rezone).

foota 10y ago

This is not entirely accurate. If the median rent drops, this means necessarily that the rent for at least some portion of the renters below the 50th percentile has dropped. So while it is possible that the very bottom hasn't changed much, the middle/top of bottom necessarily has.

SomeStupidPoint 10y ago
It's not necessary for the bottom quartile (which is what I was talking about) to change at all for the median to move, as long as the median stays above the highest value in the bottom quartile. The lower-middle quartile could absorb all of the change. A quartile is 25%, or a quarter, if you didn't know. My concern was for bottom quartile rents, since the bottom 20% of society is largely concentrated on the low end of that quartile, and they're largely the ones who actually suffer from high housing costs (as opposed to merely having fewer luxuries).
- foota 10y ago
  Sorry, I misread your comment. I'm curious what a rent vs percentile curve looks like for the area. Unfortunately, I wasn't able to find one.

refurb 10y ago

This is a theory, but wouldn't dropping upper quartile rents automatically flow down to lower quartiles? Let's say you have a market with 3 apartments for rent. $100, $200, $300 per month. Luxury apartment is created and starts at $400 per month, but no one rents, so they drop it to $300 per month. The guy renting a non-luxury apartment for $300 says "screw that" and moves to the luxury apartment. Plus, the guy renting the non-luxury apartment looks at comparables and says "jesus, a luxury apartment is $300, mine is maybe worth $200". And so on, all the way down the line. Sure it's not a perfect example, but I can see how cheaper luxury apartments could cause prices to fall overall.

SomeStupidPoint 10y ago
I get the chain effect, but because of the scarcity of land zoned that way, the buildings that are currently the bottom end up torn down rather than rented for less, and the land re-used because the base value of the land doesn't allow the rent to drop. So you see drops across most of the market, except at the bottom. This market effect is actually good! It keeps land cycling to be productively used and everyone gets to live in a nicer place. The problem is we need to rezone land to drop the value of highly dense land, so those low end apartments drop a bit, rather than being repurposed. (At least, until cities are rebalanced a bit.)
- refurb 10y ago
  That makes sense. There would be a floor to rents, so the bottom wouldn't have much further to fall.