4 ms·

Of course, the real question that needs to be asked is "if affordable housing isn't profitable, what do we do?" There are many things that we all want society t

Of course, the real question that needs to be asked is "if affordable housing isn't profitable, what do we do?" There are many things that we all want society to have that aren't profitable.

AnthonyMouse 7y ago
> Of course, the real question that needs to be asked is "if affordable housing isn't profitable, what do we do?" Right, and that's a good policy question. But once you answer it, you no longer need a politician-operated bank. For example, the main thing that makes affordable housing unprofitable is that artificial scarcity created by zoning rules puts the creation cost above the price threshold for what's considered affordable housing. So you have to fix that, but once you do, any ordinary bank will fund those now-profitable construction projects.
- lsc 7y ago
  >For example, the main thing that makes affordable housing unprofitable is that artificial scarcity created by zoning rules puts the creation cost above the price threshold for what's considered affordable housing. So you have to fix that, but once you do, any ordinary bank will fund those now-profitable construction projects. So, I agree with this, of course, but there's still an argument for subsidizing the 'affordable' projects first. - this argument is that even in the above case (where, I agree, eventually cheap (compared to cost of construction) projects will be constructed,) more expensive housing (larger, more luxurious) will be constructed first because it's more profitable, and building companies and homeowners will do all they can to keep less expensive units out of the market as long as they can (I mean, builders will switch once they can't sell any more luxury units, but homeowners won't, and more homeowners means more anti-building pressure.) I think there's an argument to be made, in this case where the housing market has been so distorted for so long, for moving utilitarian, smaller-unit high-density construction projects to the front of the line. Luxury housing needs a lot less subsidies, but if you don't put something in to prevent your housing subsidies from going to luxury housing, your housing subsidies will go to luxury housing. (removing restrictions on density isn't a subsidy, you say? tell that to the people who's houses will be worth less if we build enough of the small condos to satisfy small condo demand. If we do build enough housing, the average Californian will lose a lot of money due to the decrease in real-estate prices. Sure, it's not a a government subsidy, but changing the rules so that one group gains and another loses is going to be opposed by the losers.)
  - AnthonyMouse 7y ago
    > more expensive housing (larger, more luxurious) will be constructed first because it's more profitable Is this even true? You can put eight little studios with shared bathrooms and kitchens in the same amount of space as one big luxury three bedroom, and you get more rent from eight $600 apartments than one $4000 one. The reason the cheap little apartments don't get built is that they're explicitly prohibited by zoning (or implicitly prohibited by things like per-unit parking requirements that destroy the economics). > I think there's an argument to be made, in this case where the housing market has been so distorted for so long, for moving utilitarian, smaller-unit high-density construction projects to the front of the line. The problem is that this creates a massive discontinuity at the point where you go from "affordable housing" to market rate housing, and screws over anyone who can't get into "affordable housing" either because they're $200/year over the income threshold (even though still quite poor) or because the demand for "affordable housing" continues to outstrip the supply even for people who qualify for it. And the latter is necessarily the case until you actually build enough of it that it would cause market rate housing to become affordable anyway.
  - Lazare 7y ago
    > more expensive housing (larger, more luxurious) will be constructed first because it's more profitable, and building companies and homeowners will do all they can to keep less expensive units out of the market as long as they can That's almost entirely due to regulations that restrict density. For example, strict parking space requirements sharply limit the number of units you can build in a given parcel. If you are required by law to only let 10 people live on a parcel that could comfortably house 80, you're going to have to maximise the amount of money you get from those 10 people. Repeal the laws that force developers to focus on luxury housing, and you'll get less luxury housing. It's not rocket science, and it works well in areas which have done so.
Lazare 7y ago
1) Give the poor enough money that housing will be affordable. 2) Subsidise housing directly. 3) Change regulations so building affordable housing will be profitable. There's nothing fancy or unusual about housing. The poor might struggle to afford food, so we give them money (eg, via EITC) so they can afford food, we give them food directly (in the form of vouchers, such as food stamps) so that they have food, and we use industrial policy to ensure that food will be cheap and available, so they can afford food. This works pretty well! Food is very cheap in the US, to the extent that many people suggest we've gone too far and made it too cheap and available. Note that at no point does "invest city pensions funds in a slush fund to make loans to people wanting to build artisanal dairies" come up, because that's actually not going to solve the problem.

Of course, the real question that needs to be asked is "if affordable housing isn't profitable, what do we do?" There are many things that we all want society to have that aren't profitable.

AnthonyMouse 7y ago

> Of course, the real question that needs to be asked is "if affordable housing isn't profitable, what do we do?" Right, and that's a good policy question. But once you answer it, you no longer need a politician-operated bank. For example, the main thing that makes affordable housing unprofitable is that artificial scarcity created by zoning rules puts the creation cost above the price threshold for what's considered affordable housing. So you have to fix that, but once you do, any ordinary bank will fund those now-profitable construction projects.

lsc 7y ago
>For example, the main thing that makes affordable housing unprofitable is that artificial scarcity created by zoning rules puts the creation cost above the price threshold for what's considered affordable housing. So you have to fix that, but once you do, any ordinary bank will fund those now-profitable construction projects. So, I agree with this, of course, but there's still an argument for subsidizing the 'affordable' projects first. - this argument is that even in the above case (where, I agree, eventually cheap (compared to cost of construction) projects will be constructed,) more expensive housing (larger, more luxurious) will be constructed first because it's more profitable, and building companies and homeowners will do all they can to keep less expensive units out of the market as long as they can (I mean, builders will switch once they can't sell any more luxury units, but homeowners won't, and more homeowners means more anti-building pressure.) I think there's an argument to be made, in this case where the housing market has been so distorted for so long, for moving utilitarian, smaller-unit high-density construction projects to the front of the line. Luxury housing needs a lot less subsidies, but if you don't put something in to prevent your housing subsidies from going to luxury housing, your housing subsidies will go to luxury housing. (removing restrictions on density isn't a subsidy, you say? tell that to the people who's houses will be worth less if we build enough of the small condos to satisfy small condo demand. If we do build enough housing, the average Californian will lose a lot of money due to the decrease in real-estate prices. Sure, it's not a a government subsidy, but changing the rules so that one group gains and another loses is going to be opposed by the losers.)
- AnthonyMouse 7y ago
  > more expensive housing (larger, more luxurious) will be constructed first because it's more profitable Is this even true? You can put eight little studios with shared bathrooms and kitchens in the same amount of space as one big luxury three bedroom, and you get more rent from eight $600 apartments than one $4000 one. The reason the cheap little apartments don't get built is that they're explicitly prohibited by zoning (or implicitly prohibited by things like per-unit parking requirements that destroy the economics). > I think there's an argument to be made, in this case where the housing market has been so distorted for so long, for moving utilitarian, smaller-unit high-density construction projects to the front of the line. The problem is that this creates a massive discontinuity at the point where you go from "affordable housing" to market rate housing, and screws over anyone who can't get into "affordable housing" either because they're $200/year over the income threshold (even though still quite poor) or because the demand for "affordable housing" continues to outstrip the supply even for people who qualify for it. And the latter is necessarily the case until you actually build enough of it that it would cause market rate housing to become affordable anyway.
- Lazare 7y ago
  > more expensive housing (larger, more luxurious) will be constructed first because it's more profitable, and building companies and homeowners will do all they can to keep less expensive units out of the market as long as they can That's almost entirely due to regulations that restrict density. For example, strict parking space requirements sharply limit the number of units you can build in a given parcel. If you are required by law to only let 10 people live on a parcel that could comfortably house 80, you're going to have to maximise the amount of money you get from those 10 people. Repeal the laws that force developers to focus on luxury housing, and you'll get less luxury housing. It's not rocket science, and it works well in areas which have done so.

Lazare 7y ago

1) Give the poor enough money that housing will be affordable. 2) Subsidise housing directly. 3) Change regulations so building affordable housing will be profitable. There's nothing fancy or unusual about housing. The poor might struggle to afford food, so we give them money (eg, via EITC) so they can afford food, we give them food directly (in the form of vouchers, such as food stamps) so that they have food, and we use industrial policy to ensure that food will be cheap and available, so they can afford food. This works pretty well! Food is very cheap in the US, to the extent that many people suggest we've gone too far and made it too cheap and available. Note that at no point does "invest city pensions funds in a slush fund to make loans to people wanting to build artisanal dairies" come up, because that's actually not going to solve the problem.