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>> The endless red tape in new construction makes non-luxury bulidings unprofitable. Want cheaper rents? Fast-track approval for new apt buildings. > Luxury bu

>> The endless red tape in new construction makes non-luxury bulidings unprofitable. Want cheaper rents? Fast-track approval for new apt buildings. > Luxury buildings are more profitable because rooms are more spacious (literally requires less construction), you need to make fewer sales to make the same revenue (in a 10 story building you sell 40 condos instead of 80) and buyers are more financially stable (each sale is easier). Removing red tape has nothing to do with that. You're misunderstanding the GP's point. They're saying that heightened building costs make it irrational to choose to build lower-margin projects like non-luxury housing, because you don't have the margin to absorb those costs.

kerkeslager 9y ago
I understand the problem, I'm saying cutting red tape doesn't solve that problem. It's always going to be irrational to choose lower-margin projects. Let's say there's a 30% margin on luxury housing and a -10% margin on low-income housing, and you cut red tape, increasing margins by 20%. It doesn't suddenly become rational to build low-income housing. Margins are now 50% on luxury housing and 10% on low-income housing. All this has achieved is that builders make more money when they build luxury housing. The problem is that space in NYC is limited, and income inequality is such that the wealthy can and do pay orders of magnitude more for housing than the poor can. This means that, instead of dividing up the space in NYC between the wealthy and the poor, it's more profitable to divide up the space in NYC between the wealthy and not serve the poor at all. This incentive structure will always exist as long as the demand for luxury housing is greater than the total amount of housing available. There's no reason to believe we've hit the ceiling on what the demand for luxury housing. So even if we were to selectively cut red tape only on low-income housing, the wealthy could simply pay more for luxury housing to ensure that it remains most profitable to give them what they want. And meanwhile you're giving these incentives to the wealthy construction and real estate companies, increasing the income inequality that caused the problem in the first place. I've said before that HN would rather incentivize nails than use a hammer, and this is another case of this. If we want affordable housing, we need to require companies to build affordable housing as a condition of being able to build anything in NYC. Giving more money to already-wealthy people isn't going to solve this problem.

kerkeslager 9y ago

I understand the problem, I'm saying cutting red tape doesn't solve that problem. It's always going to be irrational to choose lower-margin projects. Let's say there's a 30% margin on luxury housing and a -10% margin on low-income housing, and you cut red tape, increasing margins by 20%. It doesn't suddenly become rational to build low-income housing. Margins are now 50% on luxury housing and 10% on low-income housing. All this has achieved is that builders make more money when they build luxury housing. The problem is that space in NYC is limited, and income inequality is such that the wealthy can and do pay orders of magnitude more for housing than the poor can. This means that, instead of dividing up the space in NYC between the wealthy and the poor, it's more profitable to divide up the space in NYC between the wealthy and not serve the poor at all. This incentive structure will always exist as long as the demand for luxury housing is greater than the total amount of housing available. There's no reason to believe we've hit the ceiling on what the demand for luxury housing. So even if we were to selectively cut red tape only on low-income housing, the wealthy could simply pay more for luxury housing to ensure that it remains most profitable to give them what they want. And meanwhile you're giving these incentives to the wealthy construction and real estate companies, increasing the income inequality that caused the problem in the first place. I've said before that HN would rather incentivize nails than use a hammer, and this is another case of this. If we want affordable housing, we need to require companies to build affordable housing as a condition of being able to build anything in NYC. Giving more money to already-wealthy people isn't going to solve this problem.