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As a thought experiment, imagine the city tore down every other building in Chicago and filled every square inch of real estate with cookie cutter copies of the

As a thought experiment, imagine the city tore down every other building in Chicago and filled every square inch of real estate with cookie cutter copies of the John Hancock center. The number of total available units in the city would skyrocket. Do you believe per unit price would remain the same?

slg 8y ago
The per unit price would obviously drop compared to the existing John Hancock Center. The per unit cost citywide might drop (I don't have enough information about Chicago to say for sure, but it is certainly feasible). But it is unlikely that any of these new units would be as cheap as the cheapest units that currently exist in Chicago. That is a problem that this market approach to affordable housing doesn't solve. Housing isn't a single market in which every unit is interchangeable. You need a wide variety of different housing options in order to house a wide variety of people.
- Consultant32452 8y ago
  Obviously in a real scenario different types of housing would be built. But if you increase the supply of total housing by 20x, then I feel confident some housing would be cheaper than the current cheapest housing. Even if that just means the current cheapest housing becomes cheaper than it is today. If you doubt this would happen at 20x, don't let me stifle your imagination. There could be 50x or 100x more units. Do you honestly believe there is no amount of supply that would result in significant housing price drops, even at the low end?
  - slg 8y ago
    I am not sure what point you are really getting at here, but sure, if you increase the housing supply 100x there would be a significant drop in housing costs. I don't know how admitting to that fact impacts the real world considering actual growth rates are probably 4 orders of magnitude smaller. My original point still stands that we can't just leave things up to the market to fix the bottom of the housing market.
    - Consultant32452 8y ago
      Ok, so we agree that at 100x the current supply the price would drop. What is stopping builders from creating 100x supply? There's only two things I see that make sense as answers here. One is regulation/zoning. Let's assume we could fix that. The second would be if the sale price dropped below the nominal cost of constructing new units, with some wiggle room in there for opportunity cost to builders who might make more money by choosing to build elsewhere. Do you believe that's the case currently in NYC, Chicago, etc? Is the price so low that it's not even worth it for builders to bother creating new units, because they couldn't recoup their costs?
      - slg 8y ago
        >The second would be if the sale price dropped below the nominal price of construction new units, with some wiggle room in there for opportunity cost to builders who might make more money by choosing to build elsewhere. You also have to factor in the opportunity cost of the land/unit too which is where the argument starts to fall apart. Why build a unit that rents for $X when you can increase your build costs by Y% and charge a rent higher than $X + Y%. That is why new construction generally comes in at or near the top of the market. Construction costs generally don't make up most of the costs of new homes in places like San Francisco, Chicago, or Los Angeles. But sure, if you want to create a world with no zoning laws and with 10000% increase in housing supply, I am sure it will solve all the problems with pure brute force.
        Consultant32452 8y ago
        There's not an infinite supply of wealthy people at the top of the market. The more of those units that get built, the tighter the margins get squeezed and the less attractive it becomes to build those. Fixing zoning laws doesn't necessarily mean having no zoning laws. Ok, building more housing is "brute force." The other option on the table seems to be a tiny sliver of poor people win the artificially low priced housing lottery. I understand why that might feel good, but I don't see how it actually solves the problem in the long run.
reaperducer 8y ago
At the Hancock Center? Yes. People pay a premium to live there because it's near shopping and jobs and transit and the lake. Crap neighborhoods will continue to be crap, just with cheap housing that nobody wants to live in. People aren't water. They don't flow to any available crevice. They go where the stuff they need and want is.

slg 8y ago

The per unit price would obviously drop compared to the existing John Hancock Center. The per unit cost citywide might drop (I don't have enough information about Chicago to say for sure, but it is certainly feasible). But it is unlikely that any of these new units would be as cheap as the cheapest units that currently exist in Chicago. That is a problem that this market approach to affordable housing doesn't solve. Housing isn't a single market in which every unit is interchangeable. You need a wide variety of different housing options in order to house a wide variety of people.

Consultant32452 8y ago
Obviously in a real scenario different types of housing would be built. But if you increase the supply of total housing by 20x, then I feel confident some housing would be cheaper than the current cheapest housing. Even if that just means the current cheapest housing becomes cheaper than it is today. If you doubt this would happen at 20x, don't let me stifle your imagination. There could be 50x or 100x more units. Do you honestly believe there is no amount of supply that would result in significant housing price drops, even at the low end?
- slg 8y ago
  I am not sure what point you are really getting at here, but sure, if you increase the housing supply 100x there would be a significant drop in housing costs. I don't know how admitting to that fact impacts the real world considering actual growth rates are probably 4 orders of magnitude smaller. My original point still stands that we can't just leave things up to the market to fix the bottom of the housing market.
  - Consultant32452 8y ago
    Ok, so we agree that at 100x the current supply the price would drop. What is stopping builders from creating 100x supply? There's only two things I see that make sense as answers here. One is regulation/zoning. Let's assume we could fix that. The second would be if the sale price dropped below the nominal cost of constructing new units, with some wiggle room in there for opportunity cost to builders who might make more money by choosing to build elsewhere. Do you believe that's the case currently in NYC, Chicago, etc? Is the price so low that it's not even worth it for builders to bother creating new units, because they couldn't recoup their costs?
    - slg 8y ago
      >The second would be if the sale price dropped below the nominal price of construction new units, with some wiggle room in there for opportunity cost to builders who might make more money by choosing to build elsewhere. You also have to factor in the opportunity cost of the land/unit too which is where the argument starts to fall apart. Why build a unit that rents for $X when you can increase your build costs by Y% and charge a rent higher than $X + Y%. That is why new construction generally comes in at or near the top of the market. Construction costs generally don't make up most of the costs of new homes in places like San Francisco, Chicago, or Los Angeles. But sure, if you want to create a world with no zoning laws and with 10000% increase in housing supply, I am sure it will solve all the problems with pure brute force.
      - Consultant32452 8y ago
        There's not an infinite supply of wealthy people at the top of the market. The more of those units that get built, the tighter the margins get squeezed and the less attractive it becomes to build those. Fixing zoning laws doesn't necessarily mean having no zoning laws. Ok, building more housing is "brute force." The other option on the table seems to be a tiny sliver of poor people win the artificially low priced housing lottery. I understand why that might feel good, but I don't see how it actually solves the problem in the long run.

reaperducer 8y ago

At the Hancock Center? Yes. People pay a premium to live there because it's near shopping and jobs and transit and the lake. Crap neighborhoods will continue to be crap, just with cheap housing that nobody wants to live in. People aren't water. They don't flow to any available crevice. They go where the stuff they need and want is.