4 ms·

I used to live in what could be called "respectable housing for the indigent" - studio apartments in a 1920s building, with radiator heat, college fridge, and o

I used to live in what could be called "respectable housing for the indigent" - studio apartments in a 1920s building, with radiator heat, college fridge, and only 40A of electricity per unit. I stayed there while getting back on my feet after a failed robotics startup in 2012. Currently, I live in a luxury apartment about 4 blocks away. A 2013 building, it has AC and gigabit internet, and free wifi on the roof deck The housing problem is that - while the difference in utility between these units is huge, the rental price difference is just a few hundred per month. Granted that they are the same square footage. "The indigent" cannot afford base-level housing.

pmorici 8y ago
Yes, SF is a perfect example where demand so wildly outstrips supply that the dominating driver of cost is space. Whether it is nice space or a total dump is only a small percentage of what dictates the over all price. Look at it this way, say a small apartment has 12 Square feet of counter space in the kitchen laminate counters cost $25 per square foot and granite costs $50. the relative cost difference between luxury and cheapo now is almost nothing once amortized and compared to the total rent.
- fierro 8y ago
  This is a really interesting theory. Initially I read this and nodded in agreement. But now I question, if demand in SF is truly so high, wouldn't those renting out nicer places be able to charge more? An increase in overall demand means some portion of that is an increase in demand for "luxury" housing, so wouldn't the rent for those units rise accordingly?
  - dmoy 8y ago
    Because the prices are already super high for both? The primary utility there is close proximity to extremely high paying jobs.
    - stephengillie 8y ago
      Both examples are within a mile of Amazon's offices, and one bus away from Redmond.
  - YokoZar 8y ago
    It is illegal to charge more for a lot of the places that could be made nicer. Demand remains, quality suffers.
  - pmorici 8y ago
    Nicer places can charge more. It's just what when push comes to shove people aren't going to move 5 hours away for nice finishes. They will how ever put up with cheap counter tops if it means being 1 block from the metro. The over riding factor as other have pointed out is space and location. everything else doesn't really move the needle when you are looking at markets with very high prices.
- thatfrenchguy 8y ago
  It’s fake luxury though :-/
  - stephengillie 8y ago
    "Luxury" is a normative term, a qualifier. Utility - how useful it is, it how many problems it solves - gives a more positive, quantative measure.
village-idiot 8y ago
In my area (socal) the gap between really nice housing and garbage is shockingly small. Not a rental unit, but the gap between a crappy house (unmaintained 1950s with a staircase in the bathroom) and an ultra modern home with a pool next door was only 20% or so. I view this as a sign that the market is way off its mark.
- stephengillie 8y ago
  Curious about which is next door to the modern home - is it a modern home with a pool, next to a 1950s home? Or is it a modern home next door to a house with a pool, in a different neighborhood than the 1950s house? In the past, I've heard that a house's value can maximize at 140% of the value of its neighbors, so a 1950s house in the same neighborhood as the modern house might drag down the modern house's value.
  - sjg007 8y ago
    Not if it’s a mid century modern. Also in LA you can basically build whatever you want. There are few deed restrictions etc...
- roymurdock 8y ago
  land is generally 90%+ of the value out here in santa monica. 1 story tear downs go for $2M in the area i live. the new owners usually want to build their own thing - a big spanish style ranch or weird japanese/modernist house - it's the land that's valuable and scarce, not the access to construction crews and building materials
- treis 8y ago
  >staircase in the bathroom Wow how does that happen?
  - village-idiot 8y ago
    I wondered that as well.
  - 8y ago
khuey 8y ago
The "difference in utility" between those two units is actually not huge, that's why the prices are similar. Your two homes are comparable on location and size which are the largest components of utility. The housing with low utility is in Bumfuck, IL where there haven't been any jobs for 40 years.

pmorici 8y ago

Yes, SF is a perfect example where demand so wildly outstrips supply that the dominating driver of cost is space. Whether it is nice space or a total dump is only a small percentage of what dictates the over all price. Look at it this way, say a small apartment has 12 Square feet of counter space in the kitchen laminate counters cost $25 per square foot and granite costs $50. the relative cost difference between luxury and cheapo now is almost nothing once amortized and compared to the total rent.

fierro 8y ago
This is a really interesting theory. Initially I read this and nodded in agreement. But now I question, if demand in SF is truly so high, wouldn't those renting out nicer places be able to charge more? An increase in overall demand means some portion of that is an increase in demand for "luxury" housing, so wouldn't the rent for those units rise accordingly?
- dmoy 8y ago
  Because the prices are already super high for both? The primary utility there is close proximity to extremely high paying jobs.
  - stephengillie 8y ago
    Both examples are within a mile of Amazon's offices, and one bus away from Redmond.
- YokoZar 8y ago
  It is illegal to charge more for a lot of the places that could be made nicer. Demand remains, quality suffers.
- pmorici 8y ago
  Nicer places can charge more. It's just what when push comes to shove people aren't going to move 5 hours away for nice finishes. They will how ever put up with cheap counter tops if it means being 1 block from the metro. The over riding factor as other have pointed out is space and location. everything else doesn't really move the needle when you are looking at markets with very high prices.
thatfrenchguy 8y ago
It’s fake luxury though :-/
- stephengillie 8y ago
  "Luxury" is a normative term, a qualifier. Utility - how useful it is, it how many problems it solves - gives a more positive, quantative measure.

village-idiot 8y ago

In my area (socal) the gap between really nice housing and garbage is shockingly small. Not a rental unit, but the gap between a crappy house (unmaintained 1950s with a staircase in the bathroom) and an ultra modern home with a pool next door was only 20% or so. I view this as a sign that the market is way off its mark.

stephengillie 8y ago
Curious about which is next door to the modern home - is it a modern home with a pool, next to a 1950s home? Or is it a modern home next door to a house with a pool, in a different neighborhood than the 1950s house? In the past, I've heard that a house's value can maximize at 140% of the value of its neighbors, so a 1950s house in the same neighborhood as the modern house might drag down the modern house's value.
- sjg007 8y ago
  Not if it’s a mid century modern. Also in LA you can basically build whatever you want. There are few deed restrictions etc...
roymurdock 8y ago
land is generally 90%+ of the value out here in santa monica. 1 story tear downs go for $2M in the area i live. the new owners usually want to build their own thing - a big spanish style ranch or weird japanese/modernist house - it's the land that's valuable and scarce, not the access to construction crews and building materials
treis 8y ago
>staircase in the bathroom Wow how does that happen?
- village-idiot 8y ago
  I wondered that as well.
- 8y ago

khuey 8y ago

The "difference in utility" between those two units is actually not huge, that's why the prices are similar. Your two homes are comparable on location and size which are the largest components of utility. The housing with low utility is in Bumfuck, IL where there haven't been any jobs for 40 years.