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I'm not sure what you mean, but I'll try to express myself more clearly. In the most basic sense of economics for prices to fall supply has to increase more th

by fram 10y ago

I'm not sure what you mean, but I'll try to express myself more clearly. In the most basic sense of economics for prices to fall supply has to increase more than demand. If demand increases more than supply the opposite is true. There's nothing saying that a more supply can't also increase demand or even increase demand more than supply. When more wealthy (or ambitious) people move into an area it often leads to that area becoming more attractive (schools, restaurants, entertainment get better) increasing demand. Therefor there's nothing particularly strange about arguing that luxury condos could lead to higher rents as the op makes it out to be.

_delirium 10y ago
Yeah, this is one particular kind of gentrification cycle that's sometimes seen in cities (most clearly in parts of Manhattan). Higher-quality new housing is built, which is one part of making an area more attractive to more affluent residents, which drives up prices despite there being more total housing available than before. What of course is less agreed on is how to untangle all the interacting causal factors here. Manhattan is a particularly stark example because not only did its 20th-century building boom go along with long-term price increases, but it also went along with decreased population density. Compared to year 1900 Manhattan, year 2000 Manhattan had more square feet of residential space and fewer people living in it! (The reason for that is that wealthier families demand more square feet of living space per person, and in the case of Manhattan this effect outpaced the net increase in residential space.)
- gragas 10y ago
  >Higher-quality new housing is built, which is one part of making an area more attractive to more affluent residents, which drives up prices despite there being more total housing available than before. This has me convinced that people might be right that new housing could lead to higher rent in some cases, but at the same time those people are wrong for arguing against basic supply and demand. Sure, supply increased and prices went up. But it could be that demand increased more than supply did, as pointed out by the parent comment.
- morgante 10y ago
  In practice, it's impossible to keep this from happening. If you don't construct luxury housing, it's not like you can keep people from moving in. Witness all the tech employees living in genuinely terrible Mission apartments. All that happens is you end up with gentrification that works around construction laws: old single-family homes being converted into hacker houses, run-down houses being rented by well-paid tech workers, with lower income people being forced to move ever further away. Objectively, most San Francisco housing is really not attractive. Yet rents are still extremely high because there is demand despite the poor housing. It makes far more sense to construct efficient luxury housing which can soak up the luxury demand so high-income earners don't end up taking over the traditionally affordable housing. Now that the construction pipeline is finally coming through, we're seeing this effect and rental prices are starting to fall. If your theory were true, we'd expect rents to be rising now that construction has finished—the exact opposite of what has happened. It might be possible to make an area unattractive for gentrification, but I think it's pretty damn hard. Construction bans certainly don't do it. Not even violence does (though crime as an affordable housing strategy is significantly under-researched).
stale2002 10y ago
That's a fairly unique and interesting argument that I've never heard before. I usually just dismiss these types of arguments as "this person doesn't understand economics". But your argument essentially is that housing has a Network Effect that increases in value as more people join the market. (or perhaps can be described as some sort of two-sided market?)

by fram 10y ago

_delirium 10y ago

Yeah, this is one particular kind of gentrification cycle that's sometimes seen in cities (most clearly in parts of Manhattan). Higher-quality new housing is built, which is one part of making an area more attractive to more affluent residents, which drives up prices despite there being more total housing available than before. What of course is less agreed on is how to untangle all the interacting causal factors here. Manhattan is a particularly stark example because not only did its 20th-century building boom go along with long-term price increases, but it also went along with decreased population density. Compared to year 1900 Manhattan, year 2000 Manhattan had more square feet of residential space and fewer people living in it! (The reason for that is that wealthier families demand more square feet of living space per person, and in the case of Manhattan this effect outpaced the net increase in residential space.)

gragas 10y ago
>Higher-quality new housing is built, which is one part of making an area more attractive to more affluent residents, which drives up prices despite there being more total housing available than before. This has me convinced that people might be right that new housing could lead to higher rent in some cases, but at the same time those people are wrong for arguing against basic supply and demand. Sure, supply increased and prices went up. But it could be that demand increased more than supply did, as pointed out by the parent comment.
morgante 10y ago
In practice, it's impossible to keep this from happening. If you don't construct luxury housing, it's not like you can keep people from moving in. Witness all the tech employees living in genuinely terrible Mission apartments. All that happens is you end up with gentrification that works around construction laws: old single-family homes being converted into hacker houses, run-down houses being rented by well-paid tech workers, with lower income people being forced to move ever further away. Objectively, most San Francisco housing is really not attractive. Yet rents are still extremely high because there is demand despite the poor housing. It makes far more sense to construct efficient luxury housing which can soak up the luxury demand so high-income earners don't end up taking over the traditionally affordable housing. Now that the construction pipeline is finally coming through, we're seeing this effect and rental prices are starting to fall. If your theory were true, we'd expect rents to be rising now that construction has finished—the exact opposite of what has happened. It might be possible to make an area unattractive for gentrification, but I think it's pretty damn hard. Construction bans certainly don't do it. Not even violence does (though crime as an affordable housing strategy is significantly under-researched).

stale2002 10y ago

That's a fairly unique and interesting argument that I've never heard before. I usually just dismiss these types of arguments as "this person doesn't understand economics". But your argument essentially is that housing has a Network Effect that increases in value as more people join the market. (or perhaps can be described as some sort of two-sided market?)