5 ms·

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 dwellin

by 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.
    - Kalium 9y ago
      Please accept my apologies, I should clarify. All the data I've ever seen on induced demand in major US cities suggests very strongly that building units in major cities does not create demand for a greater number of units than are constructed. The last study I saw on the subject in San Francisco showed that for 100 units of newly constructed supply, about 85 would be consumed by extant demand, roughly 15 would be consumed by new migrants, and less than 10 new units of demand that would not have existed otherwise gets generated. This is admittedly not obvious, and generally looks like purely generated demand when viewed at a very coarse level. Incidentally, induced demand is an idea I often see advanced as an argument against constructing housing.
- rorykoehler 9y ago
  Should be a wealth tax on empty housing. Prince Charles owns half of Mayfair, prime real estate, and it's all sitting empty.
- Lazare 9y ago
  The British media is definitely working overtime to make this seem like a problem, but I'm not entirely sure I believe there's smoke under all this fire. The headline I've seen over and over is that there are 20k empty homes in London. But from the 2017 Housing in London report, prepared by the Mayor of London's office[1]: > The number of recorded empty homes in London is far below its long-term average, at 1.7% of total stock. From the same report: > In the last two decades the number of jobs in London has grown by 40% and the number of people by 25%, but the number of homes by only 15% So if the number of people is increasing faster than the number of houses, and the percentage of empty houses is falling, then offhand I'd say your numbers are a bit exagerrated. Yes, certainly some people buy property as an investment and leave it empty, but even in London, it's not that many. And as for this: > average prices in the area will have been pushed up for good, compounding the problem. Asset price bubbles are a thing, but so far, everyone who's ever believed that prices were going to stay high forever has been burned, badly. What will keep London house prices high is that they're not building very many. If that changes, prices will fall. (And fall all the quicker when the people buying Mayfair properties as an investment decide to liquidate them before the price falls any further. As, again, is the way of asset bubbles.) [1]: https://files.datapress.com/london/dataset/housing-london/2017-01-26T18:50:00/Housing-in-London-2017-report.pdf https://files.datapress.com/london/dataset/housing-london/20...
  - crdoconnor 9y ago
    I've seen plenty of numbers on empty housing in London defined as "we asked the owners whether they live there and they said 'yes'". Anybody who doesn't think this is a problem just needs to take a look at one Hyde park. Nearly empty. Prime location. You could demolish that and build high rise flats for a thousand people there, maybe more. The problem isn't just how many prime location empty apartments there are but how big they are too.
    - Lazare 9y ago
      > You could demolish that and build high rise flats for a thousand people there, maybe more. That sounds like a big argument in favour of "building more units will fix the problem" then. :) > Anybody who doesn't think this is a problem just needs to take a look at one Hyde park. I'm going to stick with data over anecdotes. If the data we have is flawed, then we need better data in order to make decisions; it doesn't mean we should just ignore data.
- Retric 9y ago
  That's an easy 'problem' to solve. Empty housing has no need for public services like roads / schools and they still pay property taxes. Just keep building housing and let the speculators subsidize city services. Until, the bubble bursts and suddenly you get lot's of cheap housing on the market.
  - nkoren 9y ago
    Doesn't work that way in London: there's public revenue in the form of "stamp duty" for the sale of a property, but no ongoing property tax from an empty property. City services are funded by "Council tax", which is levied on residents, not properties. So, yeah, "easy" to solve if the market is structured right. It often isn't.
    - Retric 9y ago
      London has direct property taxes. They are set low, but empty property does not require a much in the way of city services. Granted, increasing property taxes would put pressure to rent out empty property. However, the occupancy rate is also very high so it's not currently a meaningful issue.
  - crdoconnor 9y ago
    The property taxes are very low, which is part of the problem. It isn't property owners subsidizing us it's us subsidizing them - the value of the land, predicated upon the value of the community surrounding is not being paid for through taxes. Raising property taxes would definitely solve the problems but the political forces arrayed against that are very powerful.
  - AnthonyMouse 9y ago
    > That's an easy 'problem' to solve. Empty housing has no need for public services like roads / schools and they still pay property taxes. Just keep building housing and let the speculators subsidize city services. Until, the bubble bursts and suddenly you get lot's of cheap housing on the market. Property taxes are part of the problem in many cases. When property taxes are low that doesn't really happen, but when they're high nobody wants to build new housing. Because the net present value of the future property tax comes out of what someone will pay for a new building, making it less profitable to construct one.
philipodonnell 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. You should probably provide a source on that one. Rents are sticky. Its equally likely they are already wealthy and want to move to a "hip" neighborhood which tend to be recently poor/urban. Rents don't fall as quick in the place they left but rise quickly in the place they're headed, which just raises the average rent in both places. It also creates demand for people who wanted to live in the former neighborhood and can now move there because there is a vacancy (or after any slight reduction in rent brings otherwise marginal renters). This is all just conjecture without data, and there is very little data studying this because, as the previous poster says, its complicated and there's no way to do a controlled experiment.

by Lazare 9y ago

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.
  - Kalium 9y ago
    Please accept my apologies, I should clarify. All the data I've ever seen on induced demand in major US cities suggests very strongly that building units in major cities does not create demand for a greater number of units than are constructed. The last study I saw on the subject in San Francisco showed that for 100 units of newly constructed supply, about 85 would be consumed by extant demand, roughly 15 would be consumed by new migrants, and less than 10 new units of demand that would not have existed otherwise gets generated. This is admittedly not obvious, and generally looks like purely generated demand when viewed at a very coarse level. Incidentally, induced demand is an idea I often see advanced as an argument against constructing housing.
rorykoehler 9y ago
Should be a wealth tax on empty housing. Prince Charles owns half of Mayfair, prime real estate, and it's all sitting empty.
Lazare 9y ago
The British media is definitely working overtime to make this seem like a problem, but I'm not entirely sure I believe there's smoke under all this fire. The headline I've seen over and over is that there are 20k empty homes in London. But from the 2017 Housing in London report, prepared by the Mayor of London's office[1]: > The number of recorded empty homes in London is far below its long-term average, at 1.7% of total stock. From the same report: > In the last two decades the number of jobs in London has grown by 40% and the number of people by 25%, but the number of homes by only 15% So if the number of people is increasing faster than the number of houses, and the percentage of empty houses is falling, then offhand I'd say your numbers are a bit exagerrated. Yes, certainly some people buy property as an investment and leave it empty, but even in London, it's not that many. And as for this: > average prices in the area will have been pushed up for good, compounding the problem. Asset price bubbles are a thing, but so far, everyone who's ever believed that prices were going to stay high forever has been burned, badly. What will keep London house prices high is that they're not building very many. If that changes, prices will fall. (And fall all the quicker when the people buying Mayfair properties as an investment decide to liquidate them before the price falls any further. As, again, is the way of asset bubbles.) [1]: https://files.datapress.com/london/dataset/housing-london/2017-01-26T18:50:00/Housing-in-London-2017-report.pdf https://files.datapress.com/london/dataset/housing-london/20...
- crdoconnor 9y ago
  I've seen plenty of numbers on empty housing in London defined as "we asked the owners whether they live there and they said 'yes'". Anybody who doesn't think this is a problem just needs to take a look at one Hyde park. Nearly empty. Prime location. You could demolish that and build high rise flats for a thousand people there, maybe more. The problem isn't just how many prime location empty apartments there are but how big they are too.
  - Lazare 9y ago
    > You could demolish that and build high rise flats for a thousand people there, maybe more. That sounds like a big argument in favour of "building more units will fix the problem" then. :) > Anybody who doesn't think this is a problem just needs to take a look at one Hyde park. I'm going to stick with data over anecdotes. If the data we have is flawed, then we need better data in order to make decisions; it doesn't mean we should just ignore data.
Retric 9y ago
That's an easy 'problem' to solve. Empty housing has no need for public services like roads / schools and they still pay property taxes. Just keep building housing and let the speculators subsidize city services. Until, the bubble bursts and suddenly you get lot's of cheap housing on the market.
- nkoren 9y ago
  Doesn't work that way in London: there's public revenue in the form of "stamp duty" for the sale of a property, but no ongoing property tax from an empty property. City services are funded by "Council tax", which is levied on residents, not properties. So, yeah, "easy" to solve if the market is structured right. It often isn't.
  - Retric 9y ago
    London has direct property taxes. They are set low, but empty property does not require a much in the way of city services. Granted, increasing property taxes would put pressure to rent out empty property. However, the occupancy rate is also very high so it's not currently a meaningful issue.
- crdoconnor 9y ago
  The property taxes are very low, which is part of the problem. It isn't property owners subsidizing us it's us subsidizing them - the value of the land, predicated upon the value of the community surrounding is not being paid for through taxes. Raising property taxes would definitely solve the problems but the political forces arrayed against that are very powerful.
- AnthonyMouse 9y ago
  > That's an easy 'problem' to solve. Empty housing has no need for public services like roads / schools and they still pay property taxes. Just keep building housing and let the speculators subsidize city services. Until, the bubble bursts and suddenly you get lot's of cheap housing on the market. Property taxes are part of the problem in many cases. When property taxes are low that doesn't really happen, but when they're high nobody wants to build new housing. Because the net present value of the future property tax comes out of what someone will pay for a new building, making it less profitable to construct one.

philipodonnell 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. You should probably provide a source on that one. Rents are sticky. Its equally likely they are already wealthy and want to move to a "hip" neighborhood which tend to be recently poor/urban. Rents don't fall as quick in the place they left but rise quickly in the place they're headed, which just raises the average rent in both places. It also creates demand for people who wanted to live in the former neighborhood and can now move there because there is a vacancy (or after any slight reduction in rent brings otherwise marginal renters). This is all just conjecture without data, and there is very little data studying this because, as the previous poster says, its complicated and there's no way to do a controlled experiment.