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There's absolutely zero evidence of "induced demand" for housing. And all available evidence suggests that 1: SF & CA have huge shortages of homes and 2: Buildi

• ScottBurson 7y ago
  While I vigorously support more construction in the SF metro area, I think expectations need to be set correctly as to the amount of construction required to actually bring prices down, instead of just slowing their rate of increase. It's a lot. I don't recall all the numbers, but I believe I saw something suggesting that we need to increase the rate of housing starts by a factor of 4 just to stabilize prices. To actually bring them down would require even more than that. Again, we should absolutely do it, in my opinion, but if we were to only double construction — difficult as that will already be, politically — and prices didn't plateau, people might conclude that it doesn't work. We need to make sure they know what it's going to take. It's not so much induced demand as it is pent-up demand. Lots more people would already love to live here — indeed, many have moved away solely because of housing costs.
  • davidw 7y ago
    This is definitely a fair point. There's also - in my mind, living in a smaller town - the idea that it'd be nice if everyone coordinated to catch up mostly at the same time, so that it's not just Portland or Seattle or Boulder or San Diego or wherever... but everywhere.
    • BurningFrog 7y ago
      The bigger point is that today allowing housing construction is a burden for cities. You hint that it would be good if all cities shared that burden. This is especially true in California, due to Prop 13. If we reformed the relevant rules, so cities profited from allowing new housing, I think a lot would change in this area!
      • ScottBurson 7y ago
        Yeah, Prop. 13 is such a disaster. Supposedly, the big selling point was that seniors on fixed incomes were getting priced out of their homes. But that would only happen because they have a substantial, appreciating asset. These aren't poor people who deserve our sympathy; they're relatively well-off people with a cash-flow problem! We could have solved their cash-flow problem without destroying our cities' tax bases by allowing them to defer some of their taxes [0] until their property was sold. Here's a great article from 2014 that talks about it: https://techcrunch.com/2014/04/14/sf-housing/ https://techcrunch.com/2014/04/14/sf-housing/ As for cities profiting from allowing new housing, this might interest you: http://www.henrygeorge.org/pcontents.htm http://www.henrygeorge.org/pcontents.htm [0] For example, the amount of tax due immediately could be allowed to grow at 2% annually, following the Prop. 13 formula. Also, the tax due at sale could be limited to, say, 70% of the gain on the sale. That limit would probably never take effect, in practice, but I've learned from previous occasions where I've proposed this that people tend to get hung up on the possibility that one might owe more in tax than one stood to make on the sale. In fact, if you run the numbers, it takes some very strange assumptions to make the deferred tax even approach getting that large; but this rule should assuage that concern. (Basically, you'd need several years of strong price growth followed by a sudden, huge collapse.)
• refurb 7y ago
  For cities like NYC and SF I think it’s clear there is a ton of induced demand. If housing prices were cut in half in SF you’d see WAY more people moving here.
  • buss 7y ago
    That's not induced demand, that's a standard demand curve. The price drops and more people buy it. Induced demand is "adding supply increased the price"
    • refurb 7y ago
      The best example of induced demand ignores price. Build more freeways and you get more drivers.
      • AnthonyMouse 7y ago
        > The best example of induced demand ignores price. > Build more freeways and you get more drivers. That's like having a McDonalds without enough cashiers and then saying "hire more cashiers and you sell more hamburgers" is induced demand because the hamburgers cost the same but you sell more of them. That's not induced demand, you're just changing the price. Having to wait in line (or sit in traffic) is a cost. If you reduce the cost, demand goes up, but that's just ordinary supply and demand again.
  • tmh79 7y ago
    Comments above are correct, I'd also add that NYC and SF are "inducing demand" not by building housing, but by building office space at a rate 8x-12x that they are building residential dwelling units. Over the past ~10 years, for every home the SF bay has added it has added office space for 8 jobs. Adding housing doesn't create more demand for housiing, adding more offices creates more demand for housinig.
• jariel 7y ago
  There is no shortage of homes in San Francisco. Prices are a function of demand and that's it. Every city has to ultimately decide what kind of community they want to have and then act accordingly. As SF is an attractive city, every home ever built there will essentially be bought or occupied, there is nearly an unlimited number of people who would like to live there - so it's merely a matter of what kind of density and price they choose to have. Do they want SF to be a city of skyscrapers, with tiny expensive flats like NYC? Or a neighbourhood of fairly expensive homes as it is now. Nobody anywhere will doubt that 'building significantly more homes' will reduce the average cost of homes but ultimately SF residents will decide what they want to do: if they don't want skyscrapers or high-density style buildings, it's their business.
  • jjeaff 7y ago
    SF is not a neighborhood of "fairly expensive homes". It is a neighborhood of some of the most expensive homes on the planet. At a median home price of $1.7m, owning a home in SF is reserved for those grandfathered in or the wealthy.
    • jariel 7y ago
      The homes on Monte Rey are even more expensive but it's beside the point. There is plenty of inexpensive housing in Cali and the US to accommodate most needs. Everyone deserves 'affordable housing' but not everyone deserves 'affordable housing' in the specific spot they want. And FYI New York and Hong Kong even more expensive and much denser - should NYC 'triple its density'? Will that make thins better? Or maybe there's something missing from this logic.
• usaar333 7y ago
  > There's absolutely zero evidence of "induced demand" for housing. There absolutely is. Here's a great paper studying the effect of removing rent control in Cambridge, MA (https://economics.mit.edu/files/9760 https://economics.mit.edu/files/9760) which found that rent in non-rent controlled units went up as a result of the removal. The effect is similar to what GP stated -- gentrification causes a feedback loop that can affect all housing. All said, it is very possible (and I subscribe to the idea) that the Bay Area would not suffer from much induced demand because people are in the area for the economic opportunity, not for local amenities.
  • tlb 7y ago
    The fact that ending rent control increases prices does not support the claim that building more homes increases prices. They should have opposite effects according to basic supply and demand theory.
    • usaar333 7y ago
      Ending rent control also should lead to lower prices in non rent controlled housing according to supply and demand. The sequence of events that lead to a rise in prices are similar - that is there is evidence that more affluent people moving in to a local area can result in rents going up for others in that same area.
      • cbHXBY1D 7y ago
        A good example is Jerry Brown's 10K Project — his plan to attract 10,000 people to live in downtown Oakland by 2001, which was the cornerstone of his tenure as mayor. The idea was that 10k affluent people would create a positive feedback loop of gentrification. As someone living in the area in the 90s-2000s, I can say it "worked" but at the expense of the working class as Oakland began gentrifying rapidly by 2010.
      • tlb 7y ago
        Raising the price of one good usually causes the price of substitute goods to go up. For example, if the price of wheat goes up because of import duties, the price of rice will also go up as people switch from wheat to rice. In the rent control example, many people held on to RC apartments because they were a great deal, even though they weren't where they wanted to live. After RC ended, they moved to apartments they preferred (since there was no longer a big price differential), increasing demand (and thus price) for the originally non-RC apartments.
• DataWorker 7y ago
  Agree with points 1 and 2. But build the homes in less dense areas where they be seen by the community as a net positive. Or add to existing density where appropriate. Try to add density in the suburbs is inefficient at best, frankly I’m not sure what it solves.