6 ms·

Market housing creates affordable housing by displacing demand. No matter what kind of housing you build, as long as it gets built now it will lower prices now.

TchoBeer 5y ago
More luxery houses would lower prices for luxery housing, but not necessarily for affordable housing. I don't know how much those are competing markets
- alisonkisk 5y ago
  They compete strongly. Rich people pay a lot for junky apartments due to the shortage.
  - TchoBeer 5y ago
    Somehow I doubt that's a considerable driver of affordable housing prices, but it's possible. Where did you get that from?
    - dnautics 5y ago
      You ever seen techies living in the mission district?
- nerfhammer 5y ago
  New housing is always relatively "luxury" because newness is itself a luxury. Much of what is relatively affordable now was relatively "luxury" when it was built. But if you stop building anything new it would be like trying to keep the price of cars down by banning new cars – what will happen after a decade or two if you did that?
  - TchoBeer 5y ago
    To use your car analogy- just because a new car will be worth more than a used one (and this is much more true of cars than houses), that doesn't mean there's no such thing as a luxery car. Sure, newness is a type of luxery (I'm not sure how much housing price depreciates with time, but I'll believe you on this one), but new houses can be built to cater to wealthy buyers or to cater to lower income buyers.
- ajmurmann 5y ago
  In addition to the relation between luxury housing market and affordable housing market that others are calling out, regulations and other hurdles to build are a reason expensive units are built rather than cheap ones. If you need 15 permits to build in SoMa and changes requested by one council can require going through the process for another permit again, your fixed cost gets so high that you really have no choice but to build expensive units. I'm sure housing cost would quickly get under control of SF for example were to eliminate any height and other zoning constraints and have as the only requirement that you are able to get insurance for your building.
mikepurvis 5y ago
That assumes there are market incentives to actually fill the housing that is built. What about when buildings of hundreds of luxury condos are built and they just sit empty, either owned by disinterested "investors" or unwilling to be sold for the market-directed price? Someone who studied this in Toronto by overlaying nighttime photos to find units where the lights are literally never on: https://www.movesmartly.com/articles/condo-units-sitting-empty-in-toronto https://www.movesmartly.com/articles/condo-units-sitting-emp...
- tylerhou 5y ago
  That blogpost you cited says that there is a 5% vacancy rate. That's well within the normal range. So I don't see how it supports your argument. https://www.reddit.com/r/badeconomics/comments/musne8/disproving_the_vacant_homes_myth/ https://www.reddit.com/r/badeconomics/comments/musne8/dispro...
  - mikepurvis 5y ago
    Fair— I kind of picked one at random. Obviously part of the point of that dude's effort is that this is a difficult thing to get numbers on. Here's some other coverage around responses to a planned vacant unit tax: https://www.blogto.com/real-estate-toronto/2021/02/real-estate-investors-toronto-sell-vacant-home-tax/ https://www.blogto.com/real-estate-toronto/2021/02/real-esta...
- ajmurmann 5y ago
  If you build more prices will come down and these "investments" will become nonviable.
  - mikepurvis 5y ago
    Maybe, but that is difficult when a) the "investors" are split between connected, powerful people who really don't want to see their investments go negative; and families just getting started who could be utterly ruined by an underwater mortgage, and b) the fact that the housing situation is a crisis now; there isn't time to faff around and hope that ten to twenty years the invisible hand of the market does this or that.
drewmate 5y ago
I think you're mostly right, but it's not as straightforward as 1 dwelling per household and everyone just moves up a rung. Market housing could get bought up by people who are currently living with roommates (but would like their own home) or one of the 52% of young adults currently living with their parents.[0] Those spots are then unlikely to become available for the homeless. This is just another symptom of the major lack of housing in the US, and needs to be solved as well, but it highlights how difficult it is to alleviate homelessness when there are other casualties of the housing market as well. By all means, build as much housing as soon as possible, but some of it will probably need to be specifically targeted at homeless or poorer populations. [0] https://www.pewresearch.org/fact-tank/2020/09/04/a-majority-of-young-adults-in-the-u-s-live-with-their-parents-for-the-first-time-since-the-great-depression/ https://www.pewresearch.org/fact-tank/2020/09/04/a-majority-...
- BobbyJo 5y ago
  Why are those people living with roommates? Because they can't afford not to. If they suddenly move out and fill up a space they otherwise couldn't afford, that requires that prices have gone down. price = F(supply, demand) therefore demand = G(price, supply) and supply = H(price, demand)

TchoBeer 5y ago

More luxery houses would lower prices for luxery housing, but not necessarily for affordable housing. I don't know how much those are competing markets

alisonkisk 5y ago
They compete strongly. Rich people pay a lot for junky apartments due to the shortage.
- TchoBeer 5y ago
  Somehow I doubt that's a considerable driver of affordable housing prices, but it's possible. Where did you get that from?
  - dnautics 5y ago
    You ever seen techies living in the mission district?
nerfhammer 5y ago
New housing is always relatively "luxury" because newness is itself a luxury. Much of what is relatively affordable now was relatively "luxury" when it was built. But if you stop building anything new it would be like trying to keep the price of cars down by banning new cars – what will happen after a decade or two if you did that?
- TchoBeer 5y ago
  To use your car analogy- just because a new car will be worth more than a used one (and this is much more true of cars than houses), that doesn't mean there's no such thing as a luxery car. Sure, newness is a type of luxery (I'm not sure how much housing price depreciates with time, but I'll believe you on this one), but new houses can be built to cater to wealthy buyers or to cater to lower income buyers.
ajmurmann 5y ago
In addition to the relation between luxury housing market and affordable housing market that others are calling out, regulations and other hurdles to build are a reason expensive units are built rather than cheap ones. If you need 15 permits to build in SoMa and changes requested by one council can require going through the process for another permit again, your fixed cost gets so high that you really have no choice but to build expensive units. I'm sure housing cost would quickly get under control of SF for example were to eliminate any height and other zoning constraints and have as the only requirement that you are able to get insurance for your building.

mikepurvis 5y ago

That assumes there are market incentives to actually fill the housing that is built. What about when buildings of hundreds of luxury condos are built and they just sit empty, either owned by disinterested "investors" or unwilling to be sold for the market-directed price? Someone who studied this in Toronto by overlaying nighttime photos to find units where the lights are literally never on: https://www.movesmartly.com/articles/condo-units-sitting-empty-in-toronto https://www.movesmartly.com/articles/condo-units-sitting-emp...

tylerhou 5y ago
That blogpost you cited says that there is a 5% vacancy rate. That's well within the normal range. So I don't see how it supports your argument. https://www.reddit.com/r/badeconomics/comments/musne8/disproving_the_vacant_homes_myth/ https://www.reddit.com/r/badeconomics/comments/musne8/dispro...
- mikepurvis 5y ago
  Fair— I kind of picked one at random. Obviously part of the point of that dude's effort is that this is a difficult thing to get numbers on. Here's some other coverage around responses to a planned vacant unit tax: https://www.blogto.com/real-estate-toronto/2021/02/real-estate-investors-toronto-sell-vacant-home-tax/ https://www.blogto.com/real-estate-toronto/2021/02/real-esta...
ajmurmann 5y ago
If you build more prices will come down and these "investments" will become nonviable.
- mikepurvis 5y ago
  Maybe, but that is difficult when a) the "investors" are split between connected, powerful people who really don't want to see their investments go negative; and families just getting started who could be utterly ruined by an underwater mortgage, and b) the fact that the housing situation is a crisis now; there isn't time to faff around and hope that ten to twenty years the invisible hand of the market does this or that.

drewmate 5y ago

I think you're mostly right, but it's not as straightforward as 1 dwelling per household and everyone just moves up a rung. Market housing could get bought up by people who are currently living with roommates (but would like their own home) or one of the 52% of young adults currently living with their parents.[0] Those spots are then unlikely to become available for the homeless. This is just another symptom of the major lack of housing in the US, and needs to be solved as well, but it highlights how difficult it is to alleviate homelessness when there are other casualties of the housing market as well. By all means, build as much housing as soon as possible, but some of it will probably need to be specifically targeted at homeless or poorer populations. [0] https://www.pewresearch.org/fact-tank/2020/09/04/a-majority-of-young-adults-in-the-u-s-live-with-their-parents-for-the-first-time-since-the-great-depression/ https://www.pewresearch.org/fact-tank/2020/09/04/a-majority-...

BobbyJo 5y ago
Why are those people living with roommates? Because they can't afford not to. If they suddenly move out and fill up a space they otherwise couldn't afford, that requires that prices have gone down. price = F(supply, demand) therefore demand = G(price, supply) and supply = H(price, demand)