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> It mainly leads to building high-end housing in desirable locations Which is perfectly fine! It still works, because houses do not have intrinsic price tags.
by mabbo 8y ago
> It mainly leads to building high-end housing in desirable locations
Which is perfectly fine! It still works, because houses do not have intrinsic price tags. They have intrinsic ordering of values, but their price is determined by what people are willing to pay.
Line up every person in the city in order of how much they're willing to spend on a home. Do the same with the homes available. Face the two lines across from each other. Everyone will buy a home nearby to what is across from them right now. Building a whole bunch more houses on the top end of the house scale doesn't leave those mansions empty, it just drives the mid-range homes further down the scale.
Supply shorter causes those further up the scale of "willing to spend on a home" to have only modest homes as options (what's across from them). At the same time, it pushes less and less desirable homes (often ones 2 hours commute from work) in front of those less able to afford homes.
If you want to argue that the divide between rich and poor is growing, and it's a problem, oh heck yeah I'm on board for that argument. But conflating the housing shortage problems with that allows the landlords to keep getting richer.
- cortesoft 8y agoThis has an assumption that the people are a fixed group - that if you add more housing, that will mean better housing for the people at the end of your 'line'. This doesn't take into account something mentioned in the article - that increased housing supply is going to attract MORE of the highly skilled workers that were driving up costs, and those people are going to be the ones filling up the houses, not poorer people. This is a form of induced demand. https://en.wikipedia.org/wiki/Induced_demand https://en.wikipedia.org/wiki/Induced_demand
- wbl 8y agoAnd the highly skilled workers were where before this? Oakland suffers because SF doesn't build.
- cortesoft 8y agoThey live in the surrounding areas or other parts of the country. They will move closer to the cities, with shorter commutes, as housing prices move down.
- nostrademons 8y agoSounds like a win all around.
- stale2002 8y agoThere are low income requirements in many cities though. For every X number of expensive apartments, builders must sell Y% low income housing. Even if you only care about the low income stuff, upzoning still helps, and gets you what you want.
- bluGill 8y agoInduced demand is nonsense. It really means there is unmet demand at the price point. Once everyone who wants a house at a price point gets one. Same applies to roads: if you build them big enough eventually there are enough lanes. What really you are saying is we don't want to build enough for all the unmet demand at the current price point. This is a perfectly fine thing. Roads are expensive, if we can get people to not drive someplace because the current roads are too crowded that might be a worthwhile thing. Unlimited road expansion quickly requires expensive bridges. Building more houses actually starts to fix the road problem because dense enough houses makes public transportation practical. Yes rich folks will move into San Francisco at first. However their old house isn't in middle of nowhere, it is a longer commute away from San Francisco, and that house is available.
- secabeen 8y ago> Once everyone who wants a house at a price point gets one. Same applies to roads: if you build them big enough eventually there are enough lanes. Here is a report from UC Davis that shows otherwise: http://www.dot.ca.gov/research/researchreports/reports/2015/10-12-2015-NCST_Brief_InducedTravel_CS6_v3.pdf http://www.dot.ca.gov/research/researchreports/reports/2015/...
- paulddraper 8y agoYes, other factors can change to compensate. In that case, people drove more miles with bigger roads, meaning congestion doesn't decrease very much. But big picture: more people got more of what they wanted, which to drive farther (without more congestion).
- tastygreenapple 8y agoI think the parent comment was pretty clear in their argument - you have to build enough roads to get ahead of constrained consumption. If they built an extra lane on every road between me and the pizza shop, I'd go the pizza shop more. I dont' go to the pizza shop as often as I'd like because I hate traffic, if there were less traffic, I'd be better off. But I won't drive any more than I'd like to, I think we could build more roads and build that capaity for more people.
- mixmastamyk 8y agoOn the other hand, if you don’t build, rich workers will win and force folks out anyway. At least with more supply folks are forced out more slowly, if at all.
- pcwalton 8y agoInduced demand applies to roads because people have a choice whether to drive or not. But they don't have a choice of whether they need a house or not. For housing it's not induced demand--it's just demand.
- toast0 8y agoSome people choose not to live in the Bay Area (or SF specifically) because prices are too high. Or they choose to live with more people per unit of housing because of pricing.
- Domenic_S 8y agoA couple problems: > houses do not have intrinsic price tags New housing does, or at least it has a minimum price tag. A builder selling housing for less than it cost them to build will not be building much housing! > Line up every person in the city in order of how much they're willing to spend on a home. People can freely move downmarket, but can't freely move upmarket, so the demand is moving opposite the supply.
- tomp 8y agoHouses are fairly cheap. It's land that's expensive. So the only thing the developer needs to do, is accurately predict sales price in order to not overpay for the land.
- grecy 8y agoAnd what if the rich people are so much richer than the poor(er) people they just buy multiple houses until they own them all? More houses doesn't fix that problem.
- refurb 8y agoWell considering that’s never happened in history (“buy multiple houses until they own them all”), I’m not too worried about that.
- learc83 8y agoHasn't that happened many times in history? The landed gentry owning land, everyone else "renting". In many countries today, home ownership is pretty rare, and the majority of people rent.
- borkt 8y agoAirbnb is making this a distinct possibility. I regularly run into people in my small, tourism based town who own 2 or more properties they sit on and rent through airbnb. The most frustrating was a guy who after receiving inheritance is doing exclusively this. Meanwhile the city is spending money buying run down apartments above market rate, competing with these investors who bring little value, to meet the demands of the community to protect the tenants from being forced out. It is wildly inefficient and would not exist if airbnb followed local laws. If this is allowed to continue, I could easily see airbnb units exceeding the number of hotel units we have in town, where the total number of rooms is nearing 10% of the towns population.
- cosmodisk 8y agoAnd here's the problem - "investment". Residential property should never be an investment,it should only be a place one calls home.
- sokoloff 8y agoSo if someone wants to rent a house (for whatever valid reasons), we prevent that somehow? Sorry, want to live here? You have to buy; we don’t allow residential investing here.
- dalore 8y ago> Line up every person in the city in order of how much they're willing to spend on a home. Do the same with the homes available. Face the two lines across from each other. Everyone will buy a home nearby to what is across from them right now. Building a whole bunch more houses on the top end of the house scale doesn't leave those mansions empty, it just drives the mid-range homes further down the scale. What if people buy multiple homes? Doesn't that mean people down the line get none? And then the people who buy multiple can rent seek or leave them empty. They just get more money to buy more houses. Doesn't always push the price of the mid range houses down.
- whatshisface 8y agoIf the multi-home buyer "rent-seeks" more homes than they otherwise would, tenants will be less desperate for housing and rent will fall. If the multi-home buyer buys the same number of houses as before, some of them will be the newly built houses... and prices will fall. The only way you could lose is if you built new houses that nobody would buy.
- xvedejas 8y agoDespite rent-seeking being undesirable for purposes of equality, more people rent-seeking over more houses does mean more competition in the rental market, and you'd expect rental prices to go down as a result. If you want to eliminate rent-seeking and have low housing costs, the only solution is an appropriate land value tax plus sufficient construction. You can't have affordability with insufficient construction, supply is a prerequisite.
- drak0n1c 8y agoIf an investor is planning to buy $1 million worth of housing, it is strictly better that he spends it on 2 small units in the midst of a luxury high-rise than spending it by snapping up 2 large traditional family homes. High density central housing reduces prices for the suburbs. That's why Tokyo housing is so cheap.
- pmart123 8y agoThis is definitely a good point. Let’s think of two scenarios. 1. Stick a lot of affordable housing in building, but math works since the developer can make money selling the high priced units. 2. Increase total housing supply through less restrictive zoning, meaning more developers are building units they plan to sell at list price. Scenario one is only possible if some people are paying too much for housing, and the people that are squeezed the most are the middle class. Scenario two probably means that the poorest group is displaced. New York has been attempting scenario one. I’m not sure if SF has tried to accomplish either route, leading to the worst case scenario.
- kradroy 8y ago#1 can be tricky in SF. If you mix affordable and market rate housing in the same development, there are still "luxury" amenities in the building. The HOA fees are not capped by law and with special assessment fees could possibly exceed a BMR mortgage payment. I'm not familiar with the configuration of all-BMR developments, but I assume there are HOA fees for those as well. This situation can make affordable housing unaffordable. In SF there's no reasonable way to stabilize (let alone bring down) home prices without less restrictive zoning.
- pmart123 8y agoI remember in my control engineering classes, my professor would say that the worst buildings to construct in a high earthquake risk area are midrises (~18 stories). I'm not an expert on this matter, but if this is correct, San Francisco has a natural challenge to housing that NYC doesn't have. Building tall is expensive, and building low doesn't create optimal density.
- kjdndisneinj 8y agoThat's a pretty simple regulatory change to cap HOA fees as a percentage of rent for affordable units though. Obviously the developers will fight this, and the rich tenants will never exercise or swim near poor people, but conceptually it's easy enough to solve.
- dragonwriter 8y ago> Line up every person in the city in order of how much they're willing to spend on a home. This is the “city as a closed universe” fallacy. What you actually have to do is line up every potential purchase of a home (which may be more than one per buyer) in the city by any person in the world in that order. Which is why you can't move the needle very much in a high demand region by increasing supply in any way that is practical over any reasonable period [0]; there's usually a lot of available demand that must be filled before you see a perceptible price drop. [0] at least before considering the effect that population density outpacing service and infrastructure scaling can have on desirability, which isn't usually the effect people are looking to leverage to reduce price, though making the city into a hellhole does have that effect.
- cletus 8y agoExactly this. The problem is that capital is essentially globally mobile at this point. I personally support making cities for the residents of that city first and foremost. An example of this would be: - All property ownership needs to be tied to a person as in no shielding behind LLCs for tax purposes at least (you might for privacy reasons). - Owning a property in a city makes you a resident of that city (and country). Your worldwide income and assets are now taxable.
- ryandrake 8y agoHow about also: - A property that is unoccupied for more than N days in a year is considered abandoned and forfeit to the public. Pick an N that makes sense. We have too many “investors” just buying property (that could be used to house people) and sitting on it empty like it’s some lump of gold. Or they leave it vacant only to vacation to for a weekend per year. End this speculation and waste and prices become more affordable.
- CydeWeys 8y agoThis seems unenforceable; how do you know if a property is unoccupied, and for how long? Cletus' suggestion is more enforceable.
- anigbrowl 8y agoIt works fine in economic simulations. It works out terribly on human timescales. I could post a couple thousand words describing the negative feedback loop this can create but you're not even thinking about transaction costs.
- guelo 8y agoSo you just ignore the study and make pronouncements that fit your pre-existing assumptions. It's almost like a religion with econ 101 types.
- kevin_thibedeau 8y ago> Supply shorter causes those further up the scale of "willing to spend on a home" to have only modest homes as options In some built out places, perfectly good homes are torn down just to make way for a replacement only the wealthy can afford. Depreciation doesn't level the playing field if the field keeps getting replaced.
- notSupplied 7y agoAgreed. What does high end even mean? A modern high rise with high end amenities like a roof top swimming pool and nice interior appliances and craftsmanship? I visited a friend in Atlanta who lived in such a high rise at a fraction of the rent of what a similar unit would cost in SF. A vast majority of the price of housing is from the supply-demand of that particular piece of land. Sticking a pool and some quartz countertops in there doesn't suddently make it ONLY viable as a rich-man's home, incapable of satisfying any of the middle-class demand that is overflowing in the area.