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Wouldn't this also be a win for real estate developers and property investors? - Purchase old home or lot. - Tear down old structure. - Build new 4-plex or 6

Wouldn't this also be a win for real estate developers and property investors? - Purchase old home or lot. - Tear down old structure. - Build new 4-plex or 6-plex. - Sell/Rent 4-6 units on a plot. Example: "ABC" owns rancher on a single plot. Rents out rancher for $4000/mo. Current revenue is $48000/yr. "ABC" turns rancher into modern 6-plex on the same plot. Rents out each of the 6 units for $2000/mo. New revenue is $144000/yr. Of course, capital required to build a new structure will erode returns for initial years, but as long as the demand to live in Portland is still high, it seems like a more profitable strategy longterm? Unless I am totally off-base with these assumptions.

burkaman 6y ago
Yes, that's one of the main goals. They are encouraging affordable 6-plexes in the hopes of making housing in the city more affordable. Note that there is a rent ceiling based on the area, you can't build a 6-plex and charge whatever you want.
- imtringued 6y ago
  Indeed, the 6 plex is not profitable for developers seeking a quick buck. That exception is meant for non profits who want to fund affordable housing.
strstr 6y ago
Benefitting developers is a consequence. They are the middle man for housing. You can't get housing without aiding them (at least not easily). If your goal is to avoid benefitting developers, you will have a hard time encouraging housing.
Tiktaalik 6y ago
This is in fact one of the core criticisms of these sort of policies. The concern is that by increasing the allowed density on land, the underlying price of the land also subsequently increases. Accordingly the "value" that one gets for their dollar decreases. While before one may have paid 1.2M for an house and full lot, now suddenly 1.2M can't buy a full lot, but 900k can buy a 1000sqft apt part of that lot. There's an upside for someone that needed more room and could never afford a 1.2M house, or a renter that just wants more apt options, but there's a downside for someone who could afford an entire house but is now seeing the price of an entire house go up. All this being said, in practice it is arguable whether the land values do increase that much. The fact that these changes are being applied city wide at once may limit the effect.
justinph 6y ago
This would be a good problem to have. Developers are generally not interested in the 4-6 unit buildings. In my city, Minneapolis MN, development is large single family homes or multi-unit (40+) apartment buildings. From my understanding, the problem is generally capital: A 4-6 unit building is too costly for a homeowner or small-time real estate developer to take on, but too small for large well capitalized developer to bother with. Hopefully, this will change in time. But I think that it'll be large developers building in neighborhoods with homeowners. The equity will end up in the hands of large real estate trusts, and not small time operators.
joelhoffman 6y ago
I think you're right in the short term, but in the long term, if everyone does it, I think it runs the risk of actually providing enough supply to drive the rents down by a significant amount. Maybe enough to reduce profits vs the original $4000 ranch. I feel like this is as significant as the other reasons why denser housing has been opposed.
waynecochran 6y ago
Might be a win for slum lords.
- imtringued 6y ago
  You do not seem to know what a slum is and therefore I want you to stop misusing that word. Slums are usually the result of government restricting or failing to build enough housing (of the right kind) which forces people to build their own permanent housing without any permits at all. Because slum residents have to pay for the entire building upfront and build it themselves you can expect the quality of the buildings to be very low. There are slums in San Francisco. Those so called "tent cities". You get rid of slums by fulfilling housing demand.
  - rumanator 6y ago
    > Slums are usually the result of government restricting or failing to build enough housing (of the right kind) which forces people to build their own permanent housing without any permits at all. Your conspiracy theory makes no sense at all. The role of a government, if any, is to stop people from building shanty towns. That's what building regulation does: stop anyone from building sub-par housing. It makes absolutely no sense to claim that slums pop up because a government stops people from building slums.
siemprenocasa 6y ago
This reminds me of what Japan does (or in some cases around the Bay Area). People buy plots not for the house, but for the land. Then they built a new house/building in place of the old one - usually for better efficiency, amenities, and longevity. I would argue it's a good thing because it reduces sprawl and uses present land more efficiently. It's better than bulldozing hectares of land to build new developments in these isolated pockets. Generally, buyers would rather have something new where they don't have to worry about the repairs/maintenance/annoyance that comes from owning older houses, where it ends up being a money pit for future value (not including historical/charming old homes). It's like choosing: would you rather drive a 1990 or 2018 Toyota sedan? IDK, maybe this is an opportunity for a "home rebuilding" tax credit incentive or some kind of higher tax on developing new land instead of current land? As someone who moved to the US, I think one realization why this has not really taken effect is that there is just so much land, there is seemingly always more to build on. Thinking about smaller, denser nations, that is just not a feasible strategy.

burkaman 6y ago

Yes, that's one of the main goals. They are encouraging affordable 6-plexes in the hopes of making housing in the city more affordable. Note that there is a rent ceiling based on the area, you can't build a 6-plex and charge whatever you want.

imtringued 6y ago
Indeed, the 6 plex is not profitable for developers seeking a quick buck. That exception is meant for non profits who want to fund affordable housing.

strstr 6y ago

Benefitting developers is a consequence. They are the middle man for housing. You can't get housing without aiding them (at least not easily). If your goal is to avoid benefitting developers, you will have a hard time encouraging housing.

Tiktaalik 6y ago

This is in fact one of the core criticisms of these sort of policies. The concern is that by increasing the allowed density on land, the underlying price of the land also subsequently increases. Accordingly the "value" that one gets for their dollar decreases. While before one may have paid 1.2M for an house and full lot, now suddenly 1.2M can't buy a full lot, but 900k can buy a 1000sqft apt part of that lot. There's an upside for someone that needed more room and could never afford a 1.2M house, or a renter that just wants more apt options, but there's a downside for someone who could afford an entire house but is now seeing the price of an entire house go up. All this being said, in practice it is arguable whether the land values do increase that much. The fact that these changes are being applied city wide at once may limit the effect.

justinph 6y ago

This would be a good problem to have. Developers are generally not interested in the 4-6 unit buildings. In my city, Minneapolis MN, development is large single family homes or multi-unit (40+) apartment buildings. From my understanding, the problem is generally capital: A 4-6 unit building is too costly for a homeowner or small-time real estate developer to take on, but too small for large well capitalized developer to bother with. Hopefully, this will change in time. But I think that it'll be large developers building in neighborhoods with homeowners. The equity will end up in the hands of large real estate trusts, and not small time operators.

joelhoffman 6y ago

I think you're right in the short term, but in the long term, if everyone does it, I think it runs the risk of actually providing enough supply to drive the rents down by a significant amount. Maybe enough to reduce profits vs the original $4000 ranch. I feel like this is as significant as the other reasons why denser housing has been opposed.

waynecochran 6y ago

Might be a win for slum lords.

imtringued 6y ago
You do not seem to know what a slum is and therefore I want you to stop misusing that word. Slums are usually the result of government restricting or failing to build enough housing (of the right kind) which forces people to build their own permanent housing without any permits at all. Because slum residents have to pay for the entire building upfront and build it themselves you can expect the quality of the buildings to be very low. There are slums in San Francisco. Those so called "tent cities". You get rid of slums by fulfilling housing demand.
- rumanator 6y ago
  > Slums are usually the result of government restricting or failing to build enough housing (of the right kind) which forces people to build their own permanent housing without any permits at all. Your conspiracy theory makes no sense at all. The role of a government, if any, is to stop people from building shanty towns. That's what building regulation does: stop anyone from building sub-par housing. It makes absolutely no sense to claim that slums pop up because a government stops people from building slums.

siemprenocasa 6y ago

This reminds me of what Japan does (or in some cases around the Bay Area). People buy plots not for the house, but for the land. Then they built a new house/building in place of the old one - usually for better efficiency, amenities, and longevity. I would argue it's a good thing because it reduces sprawl and uses present land more efficiently. It's better than bulldozing hectares of land to build new developments in these isolated pockets. Generally, buyers would rather have something new where they don't have to worry about the repairs/maintenance/annoyance that comes from owning older houses, where it ends up being a money pit for future value (not including historical/charming old homes). It's like choosing: would you rather drive a 1990 or 2018 Toyota sedan? IDK, maybe this is an opportunity for a "home rebuilding" tax credit incentive or some kind of higher tax on developing new land instead of current land? As someone who moved to the US, I think one realization why this has not really taken effect is that there is just so much land, there is seemingly always more to build on. Thinking about smaller, denser nations, that is just not a feasible strategy.