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The cost of housing cannot go below the cost of servicing the debt required to construct the housing, otherwise that capital will flow elsewhere to find returns
by aorloff 9y ago
The cost of housing cannot go below the cost of servicing the debt required to construct the housing, otherwise that capital will flow elsewhere to find returns and no housing will be built. Realistic solutions will focus on ways to lower the cost to bring units to market and finding new low-cost sources of capital to fund it.
- busterarm 9y agoIs that a bad thing? Maybe we should be increasing the efficiency of the existing housing inventory. Second homes, timeshares, empty neighborhoods (...Las Vegas...), AirBNB properties show pretty clearly that there's an excess, or at least strange market incentives.
- eggpy 9y agoThat's not entirely true. LA had a semi-successful program to build housing that ultimately decreased the cost of _other_ expenses like shelters and jail. The program ran into problems for exactly the reason you stated, even though it was a net _reduction_ in social service expense for the people in the trial. So basically the equation is (cost of building housing per person) - (charged rent) + (mental health/ other support) <= (prison + hospital + shelter + existing homeless support services) Although that's coming from memory and I can't source it...
- dredmorbius 9y agoThe cost is driven by land value. Increased financing increases demand, increases land value (price). Reducing financing, or a land value (Georgian) tax should address both points.