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Building Luxury condos does create affordable housing. Where do you think those people move from? interesting thought from this link: If you destroy 10,000 lu

Building Luxury condos does create affordable housing. Where do you think those people move from? interesting thought from this link: If you destroy 10,000 luxury condo's in Toronto tomorrow, will your prices go down? https://www.strongtowns.org/journal/2017/8/1/how-luxury-housing-becomes-affordable https://www.strongtowns.org/journal/2017/8/1/how-luxury-hous...

sudosysgen 6y ago
Of course, destroying luxury condos and not replacing them with anything will not help. But the housing market is more complicated that straightforward supply and demand, with a lot of second and third order effects, and in the end building incredible amounts of luxury condos has done nothing for rent prices and housing availability in Toronto, or in Montreal where I live.
- teen 6y ago
  How is supply and demand not the major factor here?
  - sudosysgen 6y ago
    Because the housing market has mechanisms (such as leveraged landlords) that mean that the price of land tends to inflate up until a situation of equilibrium such that the price of rent is always relatively high in any city where land is somewhat constrained, because zoning is a thing, because most people cannot get mortgages and are as such not able to participate in the condo market, because the price of land is wildly variable for reasons of zoning, because real estate investors do not always operate rationally (for example, empty rental homes held purely as stores of value), because the type of housing affects the type of transportation used which affects which kinds of land is suitable for use as housing, because not all housing is created equal in function or in value, and so on. Simply supply and demand is not a sufficient mechanism to explain the housing markets in cities such as Toronto.
- colinmhayes 6y ago
  This is a naive take. Building luxury condos has definitely caused prices to drop, it's just that the effect of increased demand increased prices by more. Without the supply increase housing would be even more expensive.
  - sudosysgen 6y ago
    I honestly don't believe this is the case. There is no empirical reason to believe it is the case, and there is research that suggests that it isn't the case [0] [0] : http://econ.geo.uu.nl/peeg/peeg1914.pdf http://econ.geo.uu.nl/peeg/peeg1914.pdf
    - aljg 6y ago
      >>> "no empirical reason to believe it is the case." It takes chutzpah to assert a negative. But I appreciate that you honestly don't believe it. Perhaps this will cause you to update your priors? [0]: https://research.upjohn.org/cgi/viewcontent.cgi?article=1325&context=up_workingpapers https://research.upjohn.org/cgi/viewcontent.cgi?article=1325...
claudeganon 6y ago
...or international investors buy them up as an asset store or to launder money, leaving them mostly vacant. We unfortunately live in the real world, not an economist’s toy box, and have the example of Vancouver to prove it.
- what_ever 6y ago
  Isn't that a separate problem which Vancouver is already trying to fix by occupancy rules?
  - claudeganon 6y ago
    Vancouver is fixing the problem that the parent said is the solution - build a bunch of luxury stock to solve your housing crisis. It doesn’t work out that way in reality, which is what they’re now addressing.
TheSpiceIsLife 6y ago
People who buy luxury condos are probably not vacating affordable housing to do so. Why would you think that to be the case? The Strong Towns link you provided gives two examples of apartments build approximately a century ago. Trickle-down economics at its best. Build luxury apartments, fine. Probably not exclusively though, as in many cities the need is more pressing than that.
- aljg 6y ago
  No, that would be patently absurd. Of course they're vacating (the upper end of) mid-priced housing. It's almost as if an equivalent amount of mid-priced housing would suddenly become available. I wonder who you think would move into that? Build up.
  - vkou 6y ago
    > I wonder who you think would move into that? Typically, migrant tech workers who came from somewhere else. In the rest of the world that is not San Francisco, there is, in fact, an unprecedented rate of construction of new properties. Seattle has more active cranes building than anywhere else in North America. The Vancouver skyline changes year-over-year as 30-story condos spring up like mushrooms around SkyTrain stations. Toronto is building and densifying at breakneck speed. And yet, rent in each of these locations is sky-high, squeezing the lower classes. Could construction be faster? Sure. Would the problem be worse if there was no construction? Probably. Is construction fixing the issue? Hell, no, it's not. Not even close.
    - WalterBright 6y ago
      All that means is demand is increasing faster than supply.
      - TheSpiceIsLife 6y ago
        That’s a super simplistic perspective. Property developers are probably going to preferentially build high-margin housing, right? And they’re going to preferentially build those at a rate that doesn’t meet demand, in order to keep prices high. So what’s missing?

sudosysgen 6y ago

Of course, destroying luxury condos and not replacing them with anything will not help. But the housing market is more complicated that straightforward supply and demand, with a lot of second and third order effects, and in the end building incredible amounts of luxury condos has done nothing for rent prices and housing availability in Toronto, or in Montreal where I live.

teen 6y ago
How is supply and demand not the major factor here?
- sudosysgen 6y ago
  Because the housing market has mechanisms (such as leveraged landlords) that mean that the price of land tends to inflate up until a situation of equilibrium such that the price of rent is always relatively high in any city where land is somewhat constrained, because zoning is a thing, because most people cannot get mortgages and are as such not able to participate in the condo market, because the price of land is wildly variable for reasons of zoning, because real estate investors do not always operate rationally (for example, empty rental homes held purely as stores of value), because the type of housing affects the type of transportation used which affects which kinds of land is suitable for use as housing, because not all housing is created equal in function or in value, and so on. Simply supply and demand is not a sufficient mechanism to explain the housing markets in cities such as Toronto.
colinmhayes 6y ago
This is a naive take. Building luxury condos has definitely caused prices to drop, it's just that the effect of increased demand increased prices by more. Without the supply increase housing would be even more expensive.
- sudosysgen 6y ago
  I honestly don't believe this is the case. There is no empirical reason to believe it is the case, and there is research that suggests that it isn't the case [0] [0] : http://econ.geo.uu.nl/peeg/peeg1914.pdf http://econ.geo.uu.nl/peeg/peeg1914.pdf
  - aljg 6y ago
    >>> "no empirical reason to believe it is the case." It takes chutzpah to assert a negative. But I appreciate that you honestly don't believe it. Perhaps this will cause you to update your priors? [0]: https://research.upjohn.org/cgi/viewcontent.cgi?article=1325&context=up_workingpapers https://research.upjohn.org/cgi/viewcontent.cgi?article=1325...

claudeganon 6y ago

...or international investors buy them up as an asset store or to launder money, leaving them mostly vacant. We unfortunately live in the real world, not an economist’s toy box, and have the example of Vancouver to prove it.

what_ever 6y ago
Isn't that a separate problem which Vancouver is already trying to fix by occupancy rules?
- claudeganon 6y ago
  Vancouver is fixing the problem that the parent said is the solution - build a bunch of luxury stock to solve your housing crisis. It doesn’t work out that way in reality, which is what they’re now addressing.

TheSpiceIsLife 6y ago

People who buy luxury condos are probably not vacating affordable housing to do so. Why would you think that to be the case? The Strong Towns link you provided gives two examples of apartments build approximately a century ago. Trickle-down economics at its best. Build luxury apartments, fine. Probably not exclusively though, as in many cities the need is more pressing than that.

aljg 6y ago
No, that would be patently absurd. Of course they're vacating (the upper end of) mid-priced housing. It's almost as if an equivalent amount of mid-priced housing would suddenly become available. I wonder who you think would move into that? Build up.
- vkou 6y ago
  > I wonder who you think would move into that? Typically, migrant tech workers who came from somewhere else. In the rest of the world that is not San Francisco, there is, in fact, an unprecedented rate of construction of new properties. Seattle has more active cranes building than anywhere else in North America. The Vancouver skyline changes year-over-year as 30-story condos spring up like mushrooms around SkyTrain stations. Toronto is building and densifying at breakneck speed. And yet, rent in each of these locations is sky-high, squeezing the lower classes. Could construction be faster? Sure. Would the problem be worse if there was no construction? Probably. Is construction fixing the issue? Hell, no, it's not. Not even close.
  - WalterBright 6y ago
    All that means is demand is increasing faster than supply.
    - TheSpiceIsLife 6y ago
      That’s a super simplistic perspective. Property developers are probably going to preferentially build high-margin housing, right? And they’re going to preferentially build those at a rate that doesn’t meet demand, in order to keep prices high. So what’s missing?