6 ms·

It is complicated, though. Rich people moving in to a working class neighborhood makes the neighborhood more attractive to other rich people, both directly and

It is complicated, though. Rich people moving in to a working class neighborhood makes the neighborhood more attractive to other rich people, both directly and by bringing in rich people amenities. So building high end housing can ultimately cause more demand and higher bids for the existing housing in the neighborhood.

djsumdog 9y ago
..and create whole areas like Capitol Hill which are mostly tech people moving in, pushing out others .. or what's going on in Freemont where homes that people bought for $120k now go for $800k (and you see low-to-middle income workers like cashiers, nurses, hair-stylists, cash out on their houses and move way out). This is a good start, but I hope they don't stop building and complete all the existing projects. The prices are still high. ST3 will help make it easier to live where you want, with a lower income, and still be able to commute reasonably, by train, to work.
weeksie 9y ago
While that's intuitive, that's not an argument against building high end housing. I do agree that it's complicated, though! As someone who lives in New York, I can attest that affluent people will just rent the apartments that already exist in the neighborhood and drive the prices up for everyone. The difference is that the shitty tenement one bedroom gets bumped to 3k/month because the affluent will displace the current occupants. If you build luxury buildings, the affluent will move into those. Sure, that will have a second order effect on the desirability of the neighborhood (which is what I believe you are arguing), but I am of the belief that that is a separate issue. Gentrification is its own bag of worms. A while back someone said "Luxury Housing is future middle class housing" and that rings pretty true. The economic incentives are to build nice properties and over time those properties get old. A good percentage of them get divided up into smaller places or simply rented for less as new inventory comes on line.
fulafel 9y ago
Alternative conclusion: So building high end housing can ultimately cause the rich people move to the high end housing away from the working class neighbourhood, making room for lower income people.
Lazare 9y ago
Yes, but many of those people will be moving from other neighborhoods in the same city; when they move they vacate an older, less attractive, lower rent dwelling. The history of US housing is (with a few exceptions, notably the post WWII housing boom) a story of people building premium housing that, as it ages, becomes affordable housing. Thing how many big old houses end up converted into duplexes or townhouses. But lately we've 1) used zoning to stop the conversion of premium housing into cheaper housing and 2) used zoning and planning permission to stop the construction of premium housing and then wondered why we don't have enough affordable housing. What a mystery! > It is complicated, though. It's a complex system with many different forces in play, yeah, but it's not that complicated. If you build more housing, the price of housing drops. Building expensive apartments in a neighbourhood doesn't magically create affordable apartments in the same neighbourhood, but it certainly doesn't hurt. The exception would be if, somehow, building 100 units of housing somehow attracts more than 100 families into the city from outside the area, which...I dunno, it could happen, but is it? Has it ever? It sounds unlikely at first glance.
- toyg 9y ago
  > if, somehow, building 100 units of housing somehow attracts more than 100 families into the city from outside the area The problem in some cities (London) is that this does happen at some level: 100 units of housing attract enough investors to start a speculative price rise, as they buy multiple units each. Maybe 50 of those units will stay empty forever, but average prices in the area will have been pushed up for good, compounding the problem.
  - Kalium 9y ago
    I'll take you at your word and assume that induced housing demand is in fact a real, verified, problem in London. In no place in the US is this true. Even in San Francisco 100 units of new housing get occupied in excess of 80% by households already in SF.
    - maxsilver 9y ago
      > In no place in the US is this true Induced housing demand is common in the majority of cities across the US. The act of creating urban housing makes an area in higher demand than the housing just built could actually supply. The action of creating 100 units of supply simultaneously generates ~120+ units of demand. Most people refer to this as "gentrification", even if that label isn't totally accurate. It obviously doesn't last forever, you can't generate more demand indefinitely. But it absolutely does happen -- we see the results all the time. And to be clear that's not an argument against new housing -- we obviously need to build more housing. But it's a common observation that new 'market-rate' urban housing does not lower prices, but raises them in short and medium length timeframes (yes even in non-coastal cities, yes even in small towns, etc). We see this in Seattle too. Seattle rents are 4.5% higher than last year, or 50% higher than they were 5 years ago, according to the articles own data. They'll be even higher next year, and Seattle Times will write an article about the winter slowdown in leasing, and rents will rise even higher again a year later. Until the bubble pops, the cycle will continue.
imtringued 9y ago
The problem is that there are more jobs than housing. Existing homeowners oppose residential construction because it lowers their property value. They don't oppose commercial construction because it increases their property value. If these people truly valued the "character" of their city then they wouldn't try to make it more attractive to other people. They want those new people and they want them to buy their overpriced property.
MachinShinn- 9y ago
Rich people don't move into 500 square foot studios. You could build a hundred of these modern high rise condo towers without attracting a single genuinely rich person.
kspaans 9y ago
Can someone explain the economics of this? Presumably the landlords in the working class neighbourhood are already charging as much rent as the market will bare. When richer people moving in, are they outbidding locals? Are the landlords looking at the new tenants and noticing they can charge more? Why is the rich person willing to pay more if, presumably, the apartments/houses in this neighbourhood aren't as nice as ones in other areas? Is it a slower, more secondary effect where over a period of time more rich people move in and somehow raise demand which leads to overbidding by a second wave of newcomers? Maybe I'm presuming too much, but I don't understand why rich people would be willing to overpay for "low quality" housing in the working class area? Are they actually paying market rent, but what's happened is that all of the current residents are somehow paying below-market rent?
- enra 9y ago
  If the market rent increases in the neighborhood because its not more hip or desirable, the landlords can renovate the apartments to sale or rent with higher prices. Before they wouldn't necessarily have economic motivation to do it.

djsumdog 9y ago

..and create whole areas like Capitol Hill which are mostly tech people moving in, pushing out others .. or what's going on in Freemont where homes that people bought for $120k now go for $800k (and you see low-to-middle income workers like cashiers, nurses, hair-stylists, cash out on their houses and move way out). This is a good start, but I hope they don't stop building and complete all the existing projects. The prices are still high. ST3 will help make it easier to live where you want, with a lower income, and still be able to commute reasonably, by train, to work.

weeksie 9y ago

While that's intuitive, that's not an argument against building high end housing. I do agree that it's complicated, though! As someone who lives in New York, I can attest that affluent people will just rent the apartments that already exist in the neighborhood and drive the prices up for everyone. The difference is that the shitty tenement one bedroom gets bumped to 3k/month because the affluent will displace the current occupants. If you build luxury buildings, the affluent will move into those. Sure, that will have a second order effect on the desirability of the neighborhood (which is what I believe you are arguing), but I am of the belief that that is a separate issue. Gentrification is its own bag of worms. A while back someone said "Luxury Housing is future middle class housing" and that rings pretty true. The economic incentives are to build nice properties and over time those properties get old. A good percentage of them get divided up into smaller places or simply rented for less as new inventory comes on line.

fulafel 9y ago

Alternative conclusion: So building high end housing can ultimately cause the rich people move to the high end housing away from the working class neighbourhood, making room for lower income people.

Lazare 9y ago

Yes, but many of those people will be moving from other neighborhoods in the same city; when they move they vacate an older, less attractive, lower rent dwelling. The history of US housing is (with a few exceptions, notably the post WWII housing boom) a story of people building premium housing that, as it ages, becomes affordable housing. Thing how many big old houses end up converted into duplexes or townhouses. But lately we've 1) used zoning to stop the conversion of premium housing into cheaper housing and 2) used zoning and planning permission to stop the construction of premium housing and then wondered why we don't have enough affordable housing. What a mystery! > It is complicated, though. It's a complex system with many different forces in play, yeah, but it's not that complicated. If you build more housing, the price of housing drops. Building expensive apartments in a neighbourhood doesn't magically create affordable apartments in the same neighbourhood, but it certainly doesn't hurt. The exception would be if, somehow, building 100 units of housing somehow attracts more than 100 families into the city from outside the area, which...I dunno, it could happen, but is it? Has it ever? It sounds unlikely at first glance.

toyg 9y ago
> if, somehow, building 100 units of housing somehow attracts more than 100 families into the city from outside the area The problem in some cities (London) is that this does happen at some level: 100 units of housing attract enough investors to start a speculative price rise, as they buy multiple units each. Maybe 50 of those units will stay empty forever, but average prices in the area will have been pushed up for good, compounding the problem.
- Kalium 9y ago
  I'll take you at your word and assume that induced housing demand is in fact a real, verified, problem in London. In no place in the US is this true. Even in San Francisco 100 units of new housing get occupied in excess of 80% by households already in SF.
  - maxsilver 9y ago
    > In no place in the US is this true Induced housing demand is common in the majority of cities across the US. The act of creating urban housing makes an area in higher demand than the housing just built could actually supply. The action of creating 100 units of supply simultaneously generates ~120+ units of demand. Most people refer to this as "gentrification", even if that label isn't totally accurate. It obviously doesn't last forever, you can't generate more demand indefinitely. But it absolutely does happen -- we see the results all the time. And to be clear that's not an argument against new housing -- we obviously need to build more housing. But it's a common observation that new 'market-rate' urban housing does not lower prices, but raises them in short and medium length timeframes (yes even in non-coastal cities, yes even in small towns, etc). We see this in Seattle too. Seattle rents are 4.5% higher than last year, or 50% higher than they were 5 years ago, according to the articles own data. They'll be even higher next year, and Seattle Times will write an article about the winter slowdown in leasing, and rents will rise even higher again a year later. Until the bubble pops, the cycle will continue.

imtringued 9y ago

The problem is that there are more jobs than housing. Existing homeowners oppose residential construction because it lowers their property value. They don't oppose commercial construction because it increases their property value. If these people truly valued the "character" of their city then they wouldn't try to make it more attractive to other people. They want those new people and they want them to buy their overpriced property.

MachinShinn- 9y ago

Rich people don't move into 500 square foot studios. You could build a hundred of these modern high rise condo towers without attracting a single genuinely rich person.

kspaans 9y ago

Can someone explain the economics of this? Presumably the landlords in the working class neighbourhood are already charging as much rent as the market will bare. When richer people moving in, are they outbidding locals? Are the landlords looking at the new tenants and noticing they can charge more? Why is the rich person willing to pay more if, presumably, the apartments/houses in this neighbourhood aren't as nice as ones in other areas? Is it a slower, more secondary effect where over a period of time more rich people move in and somehow raise demand which leads to overbidding by a second wave of newcomers? Maybe I'm presuming too much, but I don't understand why rich people would be willing to overpay for "low quality" housing in the working class area? Are they actually paying market rent, but what's happened is that all of the current residents are somehow paying below-market rent?

enra 9y ago
If the market rent increases in the neighborhood because its not more hip or desirable, the landlords can renovate the apartments to sale or rent with higher prices. Before they wouldn't necessarily have economic motivation to do it.