2 ms·

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

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.

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.