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not really - the apartments being built are expensive luxury apartments, mark up I'm told is around 100%. If they can't get the profit they move elsewhere and s
by chadcmulligan 6y ago
not really - the apartments being built are expensive luxury apartments, mark up I'm told is around 100%. If they can't get the profit they move elsewhere and start construction there, holding costs are obviously low for undeveloped land. If the government desired cheap rental apartments then the incentives would be different.
- epistasis 6y agoMarkup is 100%? Which housing market is that?! I find that rather incredible, because construction is not usually that lucrative, anywhere, and if such profit margins were possible there would be a glut of people rushing in to do it. Construction loans mean that starting capital for such a project isn't super high. Another thing about "only luxury," that means there's a regulation failure that only allows luxury homes to be built. We have a market system that means that the rich get served first. So if it's cheap to build, but only super expensive units come on the market, those who approve or deny building are letting too few units be built. In expensive markets like California, profits are typically around 10%-25%, no more than a few year's worth of housing costs rise. Therefore it's far easier to make money by buying and holding in California than through construction; higher profits and less risk.