4 ms·

This generally doesn't happen for two primary reasons. First cities are not closed systems. Places like LA and the Bay Area have a built up demand that exceed

by slg 5y ago

This generally doesn't happen for two primary reasons. First cities are not closed systems. Places like LA and the Bay Area have a built up demand that exceeds housing. The new housing would have to be added at an extremely high right to keep up with that demand otherwise the city just grows rather than becomes cheaper. When a city simply grows, the cheaper units never flow down to the bottom of the market as someone else will move in who lives outside the city and was previously priced out of the mid-tier housing. We see the same type of thing when designing transportation systems in a city. Adding in a new road can actually increase traffic as it ends up encouraging more people to drive who otherwise wouldn't have. Also the housing market is not a singular market. The type of person who would live in a 3 bedroom luxury condo is not the same type of person who would live in an SRO hotel that shares a bathroom. Most people have a small window of what housing they consider acceptable and what budget they can afford. When a city gentrifies and knocks down SRO housing and replaces it with luxury condos (something that has happened a lot in both LA and the Bay Area over the last couple decades), the available units at the bottom of the market decreases in favor of the top of the market. That doesn't result in everyone in the city just moving up one rung on the housing ladder. Competition for the affordable units is now even higher because there are less of them available.

JumpCrisscross 5y ago
> cheaper units never flow down to the bottom of the market “Never” is too strong. It happened to me in New York. I negotiated down my rent on account of nearby buildings with better amenities opening at slightly higher but similar enough pricing, net effective. Meanwhile, Brooklyn and San Francisco were busy blocking all new construction, thereby forcing their restaurant workers to compete with millionaires.
- slg 5y ago
  You are disputing a point I never made. I didn't say "no units ever get cheaper". I said when growth outpaces new housing "cheaper units never flow down to the bottom of the market". You said yourself that the new construction had slightly higher pricing meaning your unit was in the same basic market as the new construction and also implies you likely were not shopping at "the bottom of the market". Do you think you would have been able to negotiate your rent down if the new building was in an entirely different class and was charging 2x or 3x your rent?
  - JumpCrisscross 5y ago
    > Do you think you would have been able to negotiate your rent down if the new building was in an entirely different class and was charging 2x or 3x your rent? Yes. What do you think people bidding for ultra-lux housing do if they don’t have supply? In New York, the ultra-wealthy have penthouses. In San Francisco, they have rows of townhouses. Which one do you think displaces more affordable housing?
    - xbar 5y ago
      I think you are saying San Francisco should embrace greater density in order to solve its problem. That's pretty short-term thinking. Start here: San Francisco, for very specific geographic and regional reasons, will not have sufficient housing in the next century, and it will continue to have growing homeless populations. Solve for a 50-year horizon.
      - JumpCrisscross 5y ago
        > San Francisco, for very specific geographic and regional reasons, will not have sufficient housing in the next century Some of the densest cities on the planet are on islands. San Francisco is on a peninsula. It is a low density city with tons of infill potential. That densification potential, together with slow population growth in the developed world, makes the problem perfectly tenable. (That said, homeowners would lose money. So not holding my breath.)
        nasmorn 5y ago
        No way would homeowners lose money long term if San Francisco turns into Hong Kong. They are land owners first and foremost
        JumpCrisscross 5y ago
        > No way would homeowners lose money long term if San Francisco turns into Hong Kong In the short term they would. And in the long term, they would gain wealth but lose their iron grip on the city. Never underestimate the seductiveness of power. As long as San Francisco’s renters believe density is impossible or will price them out, homeowners (specifically, about half a dozen families) will retain their lock on the city.
stickfigure 5y ago
With sufficient deferred maintenance, today's 3 bedroom luxury condo is next decade's slum. It takes time to reach steady-state.
- slg 5y ago
  A 3 bedroom luxury condo never becomes an SRO hotel with shared bathrooms regardless of how little maintenance goes into the place. A neglected property will obviously fall down market in terms of desirability, but a place like that will never reach the actual bottom of the market.
  - zuminator 5y ago
    I can't provide a counterexample to the specific 3br luxury->SRO scenario, but it certainly does happen on occasion that previously expensive units wind up getting subdivided into cheaper units. I knew someone who lived in a low-end furnished room (with shared bathroom) that had previously been part of a larger unit.
    - slg 5y ago
      I'm not sure that is an equivalent example. The previous example was housing falling into a lower tier of the market through lack of maintenance. Your example is actively retrofitting a place to be in a different tier of the market. That isn't really the same thing because your example requires new investments and is actively creating new housing at the bottom of the market rather than just allowing a place to deteriorate through inaction.
      - stickfigure 5y ago
        You're thinking too specific. Retrofits can be expensive or they can be cheap. The point is that housing stock drifts downmarket as it ages. Sometimes quickly. I used to live in San Luis Obispo, CA. There's a house in the middle of town that clearly used to be an enormous beautiful mansion. It looks like it belongs on a plantation. It's still beautiful, but it's now 9 funky apartments. Street view: https://www.google.com/maps/@35.2749914,-120.6611941,3a,75y,174.95h,93.45t/data=!3m6!1e1!3m4!1sBXSqOHKlUnq5KH9L6Y9h-g!2e0!7i16384!8i8192 https://www.google.com/maps/@35.2749914,-120.6611941,3a,75y,...
themacguffinman 5y ago
That sounds like an argument to add housing at an extremely high rate. Of course places like the Bay Area have huge pent up demand that requires huge supply to satisfy, the housing in these cities have been constricted for decades and needs substantial resources to correct. This is like saying that more money generally doesn't help debt if you accumulate more debt than you earn. Somehow, the point is missed. The existence of SRO hotels and similarly "special" dwellings are symptoms of severe housing deficit yet they're portrayed as necessary. There's no reason that the bottom of the housing market needs to be specially gimped, especially when LA is paying $2600 per month for a tent. In a less starved & dysfunctional market, old and adequate housing stock can satisfy that role.
dcolkitt 5y ago
> someone else will move in who lives outside the city I don't really see this as a gotcha. Those would-be new arrivals to the city don't materialize out of thin air. Presumably they left some other place behind, and their migration is freeing up housing stock wherever they leave behind. The underlying dynamic is still the same. New housing increases low-end affordability by soaking up mid-end demand for old housing stock. Maybe you build housing in the Bay Area, and all it does is bring in new people who pay the same market rate. But that migration will free up housing stock in Ohio. The only difference is that instead of helping the house poor in your local area the policy helps the house poor in flyover country. Unless you place a lot more moral weight on helping Californians than Midwesterners, what's the difference?
- slg 5y ago
  >Unless you place a lot more moral weight on helping Californians than Midwesterners, what's the difference? The difference is that housing costs take up a much higher percentage of wages in California than Ohio and as a result there are many many more homeless people in California than Ohio. Sure, if you want to take a holistic view of the entire planet, the people have to come from somewhere and there is a finite demand for global housing. However that just isn't a practical way to look at it when the problems are localized. Different cities and regions have varying levels of desirability. It makes sense to build housing in those cities and regions for a wide spectrum of the population. The solution shouldn't just be "if you are poor, move to Ohio".
- thethimble 5y ago
  With this logic, it’s not necessary to build housing at all. There’s plenty of extremely low cost housing available in South Dakota.
- havelhovel 5y ago
  My sense of community would have to be severely damaged or underdeveloped to be content with municipal policies possibly helping individuals who live thousands of miles away while passing by people living in tents on a daily basis.
- Seattle3503 5y ago
tboughen 5y ago
This may be true if the housing market has sufficient capacity to build homes at the required rate. The UK’s experience over the past 50 years is that the private sector has built around 170k homes per year, but the rate of household formation suggests we need around 300k extra each year. The U.K. hasn’t built 300k+ homes per year (or anything like that) since the government stopped building houses - the private sector has never picked up the slack. And the result is hugely increased prices.
- pas 5y ago
  What's the bottleneck? Obviously the demand is there, right? What's constraining the private supply side to expand? (More explicitly: what happened when the public sector building shrunk, why private sector did not pick up the slack?) Is the difference that council housing is in a large part publicly funded? Difference in the permitting process?
tylerhou 5y ago
> Adding in a new road can actually increase traffic as it ends up encouraging more people to drive who otherwise wouldn't have. You're alluding to "induced demand," which does not claim that adding a new road increases traffic. When it becomes "cheaper" (in terms of time) to drive, more people will start driving, but the cost of driving (time to get from A to B) still goes down. This is basic economics, except with time instead of money. Adding a new road is a positive supply shock, which causes demand to rise until equilibrium, but the new price is going to be below the old price. See: https://youtu.be/6dwSIO_Slhc?t=236 https://youtu.be/6dwSIO_Slhc?t=236, except imagine the supply shock is in the other direction.
- imtringued 5y ago
  The problem with wider roads is a shift away from walking, cycling, public transport to car driving but that isn't what the comment complained about, considering the car (the single family home) is already there and anything you do can only increase efficiency. Building apartments it is the exact opposite and can only help over the long term.
- slg 5y ago
  Your logic is present in a lot of economic thinking, but it is flawed as it assumes people are purely rational actors that make decisions at the margins. That is a classic Economics 101 assumption that turns out to only be true in theory. In reality people are stubborn. We chase sunk costs and we repeat inefficient behavior because it is habit. People therefore won't necessarily choose to drive based on an evaluation of that individual trip. They will base it on things like whether they own a car, whether they have an unlimited pass for their local mass transit system, and simply what they did the last time they made the same trip. Therefore traffic can actually exceed where it was before as new and improved roads can lead to people buying more cars and people being less reliant on public transit.
  - tylerhou 5y ago
    You're right that basic econ doesn't always hold, but in practice, it often does. In this case we actually have data on how road expansion affects transport times, which show that transport times slightly drop (as econ 101 predicts). https://www.thecgo.org/wp-content/uploads/2020/10/Can-We-Build-Our-Way-Out-of-Urban-Traffic-Congestion.pdf https://www.thecgo.org/wp-content/uploads/2020/10/Can-We-Bui... (Pages 8-10)
imtringued 5y ago
>We see the same type of thing when designing transportation systems in a city. I don't know how to describe this but sometimes people say things that drive an agenda which from a first glance support the agenda but when you dig deep down into the details you realize that there is a second message that completely contradicts the actual agenda the comment pushes. For example, "induced demand" is something that happens on roads because they are free to use by any road user. By building wider roads you make it very cheap to drive both in terms of congestion and money. Public transport costs money, is space efficient and slow. Driving a car is inefficient, convenient, fast and when you consider the "better service" it is worth the additional cost. Therefore people will stop using public transport and start driving cars, because roads are free. This almost contradicts the agenda because housing isn't provided for free, you have to pay for it and you have to pay a huge premium for inefficient but convenient housing (single family homes). Of course, the problem is that there is a subsidy that encourages inefficiency similar to free roads, namely property tax freezes. An old single family home may have a lower tax burden than a new apartment. It's effectively a subsidy to homeowners that haven't moved out. However, the real contradiction lies in the fact that the argument hasn't been against property tax freezes, instead the criticism is aimed at new construction, which does not suffer from the subsidy problem.

by slg 5y ago

JumpCrisscross 5y ago

> cheaper units never flow down to the bottom of the market “Never” is too strong. It happened to me in New York. I negotiated down my rent on account of nearby buildings with better amenities opening at slightly higher but similar enough pricing, net effective. Meanwhile, Brooklyn and San Francisco were busy blocking all new construction, thereby forcing their restaurant workers to compete with millionaires.

slg 5y ago
You are disputing a point I never made. I didn't say "no units ever get cheaper". I said when growth outpaces new housing "cheaper units never flow down to the bottom of the market". You said yourself that the new construction had slightly higher pricing meaning your unit was in the same basic market as the new construction and also implies you likely were not shopping at "the bottom of the market". Do you think you would have been able to negotiate your rent down if the new building was in an entirely different class and was charging 2x or 3x your rent?
- JumpCrisscross 5y ago
  > Do you think you would have been able to negotiate your rent down if the new building was in an entirely different class and was charging 2x or 3x your rent? Yes. What do you think people bidding for ultra-lux housing do if they don’t have supply? In New York, the ultra-wealthy have penthouses. In San Francisco, they have rows of townhouses. Which one do you think displaces more affordable housing?
  - xbar 5y ago
    I think you are saying San Francisco should embrace greater density in order to solve its problem. That's pretty short-term thinking. Start here: San Francisco, for very specific geographic and regional reasons, will not have sufficient housing in the next century, and it will continue to have growing homeless populations. Solve for a 50-year horizon.
    - JumpCrisscross 5y ago
      > San Francisco, for very specific geographic and regional reasons, will not have sufficient housing in the next century Some of the densest cities on the planet are on islands. San Francisco is on a peninsula. It is a low density city with tons of infill potential. That densification potential, together with slow population growth in the developed world, makes the problem perfectly tenable. (That said, homeowners would lose money. So not holding my breath.)
      - nasmorn 5y ago
        No way would homeowners lose money long term if San Francisco turns into Hong Kong. They are land owners first and foremost
        JumpCrisscross 5y ago
        > No way would homeowners lose money long term if San Francisco turns into Hong Kong In the short term they would. And in the long term, they would gain wealth but lose their iron grip on the city. Never underestimate the seductiveness of power. As long as San Francisco’s renters believe density is impossible or will price them out, homeowners (specifically, about half a dozen families) will retain their lock on the city.

stickfigure 5y ago

With sufficient deferred maintenance, today's 3 bedroom luxury condo is next decade's slum. It takes time to reach steady-state.

slg 5y ago
A 3 bedroom luxury condo never becomes an SRO hotel with shared bathrooms regardless of how little maintenance goes into the place. A neglected property will obviously fall down market in terms of desirability, but a place like that will never reach the actual bottom of the market.
- zuminator 5y ago
  I can't provide a counterexample to the specific 3br luxury->SRO scenario, but it certainly does happen on occasion that previously expensive units wind up getting subdivided into cheaper units. I knew someone who lived in a low-end furnished room (with shared bathroom) that had previously been part of a larger unit.
  - slg 5y ago
    I'm not sure that is an equivalent example. The previous example was housing falling into a lower tier of the market through lack of maintenance. Your example is actively retrofitting a place to be in a different tier of the market. That isn't really the same thing because your example requires new investments and is actively creating new housing at the bottom of the market rather than just allowing a place to deteriorate through inaction.
    - stickfigure 5y ago
      You're thinking too specific. Retrofits can be expensive or they can be cheap. The point is that housing stock drifts downmarket as it ages. Sometimes quickly. I used to live in San Luis Obispo, CA. There's a house in the middle of town that clearly used to be an enormous beautiful mansion. It looks like it belongs on a plantation. It's still beautiful, but it's now 9 funky apartments. Street view: https://www.google.com/maps/@35.2749914,-120.6611941,3a,75y,174.95h,93.45t/data=!3m6!1e1!3m4!1sBXSqOHKlUnq5KH9L6Y9h-g!2e0!7i16384!8i8192 https://www.google.com/maps/@35.2749914,-120.6611941,3a,75y,...

themacguffinman 5y ago

That sounds like an argument to add housing at an extremely high rate. Of course places like the Bay Area have huge pent up demand that requires huge supply to satisfy, the housing in these cities have been constricted for decades and needs substantial resources to correct. This is like saying that more money generally doesn't help debt if you accumulate more debt than you earn. Somehow, the point is missed. The existence of SRO hotels and similarly "special" dwellings are symptoms of severe housing deficit yet they're portrayed as necessary. There's no reason that the bottom of the housing market needs to be specially gimped, especially when LA is paying $2600 per month for a tent. In a less starved & dysfunctional market, old and adequate housing stock can satisfy that role.

dcolkitt 5y ago

> someone else will move in who lives outside the city I don't really see this as a gotcha. Those would-be new arrivals to the city don't materialize out of thin air. Presumably they left some other place behind, and their migration is freeing up housing stock wherever they leave behind. The underlying dynamic is still the same. New housing increases low-end affordability by soaking up mid-end demand for old housing stock. Maybe you build housing in the Bay Area, and all it does is bring in new people who pay the same market rate. But that migration will free up housing stock in Ohio. The only difference is that instead of helping the house poor in your local area the policy helps the house poor in flyover country. Unless you place a lot more moral weight on helping Californians than Midwesterners, what's the difference?

slg 5y ago
>Unless you place a lot more moral weight on helping Californians than Midwesterners, what's the difference? The difference is that housing costs take up a much higher percentage of wages in California than Ohio and as a result there are many many more homeless people in California than Ohio. Sure, if you want to take a holistic view of the entire planet, the people have to come from somewhere and there is a finite demand for global housing. However that just isn't a practical way to look at it when the problems are localized. Different cities and regions have varying levels of desirability. It makes sense to build housing in those cities and regions for a wide spectrum of the population. The solution shouldn't just be "if you are poor, move to Ohio".
thethimble 5y ago
With this logic, it’s not necessary to build housing at all. There’s plenty of extremely low cost housing available in South Dakota.
havelhovel 5y ago
My sense of community would have to be severely damaged or underdeveloped to be content with municipal policies possibly helping individuals who live thousands of miles away while passing by people living in tents on a daily basis.
Seattle3503 5y ago

tboughen 5y ago

This may be true if the housing market has sufficient capacity to build homes at the required rate. The UK’s experience over the past 50 years is that the private sector has built around 170k homes per year, but the rate of household formation suggests we need around 300k extra each year. The U.K. hasn’t built 300k+ homes per year (or anything like that) since the government stopped building houses - the private sector has never picked up the slack. And the result is hugely increased prices.

pas 5y ago
What's the bottleneck? Obviously the demand is there, right? What's constraining the private supply side to expand? (More explicitly: what happened when the public sector building shrunk, why private sector did not pick up the slack?) Is the difference that council housing is in a large part publicly funded? Difference in the permitting process?

tylerhou 5y ago

> Adding in a new road can actually increase traffic as it ends up encouraging more people to drive who otherwise wouldn't have. You're alluding to "induced demand," which does not claim that adding a new road increases traffic. When it becomes "cheaper" (in terms of time) to drive, more people will start driving, but the cost of driving (time to get from A to B) still goes down. This is basic economics, except with time instead of money. Adding a new road is a positive supply shock, which causes demand to rise until equilibrium, but the new price is going to be below the old price. See: https://youtu.be/6dwSIO_Slhc?t=236 https://youtu.be/6dwSIO_Slhc?t=236, except imagine the supply shock is in the other direction.

imtringued 5y ago
The problem with wider roads is a shift away from walking, cycling, public transport to car driving but that isn't what the comment complained about, considering the car (the single family home) is already there and anything you do can only increase efficiency. Building apartments it is the exact opposite and can only help over the long term.
slg 5y ago
Your logic is present in a lot of economic thinking, but it is flawed as it assumes people are purely rational actors that make decisions at the margins. That is a classic Economics 101 assumption that turns out to only be true in theory. In reality people are stubborn. We chase sunk costs and we repeat inefficient behavior because it is habit. People therefore won't necessarily choose to drive based on an evaluation of that individual trip. They will base it on things like whether they own a car, whether they have an unlimited pass for their local mass transit system, and simply what they did the last time they made the same trip. Therefore traffic can actually exceed where it was before as new and improved roads can lead to people buying more cars and people being less reliant on public transit.
- tylerhou 5y ago
  You're right that basic econ doesn't always hold, but in practice, it often does. In this case we actually have data on how road expansion affects transport times, which show that transport times slightly drop (as econ 101 predicts). https://www.thecgo.org/wp-content/uploads/2020/10/Can-We-Build-Our-Way-Out-of-Urban-Traffic-Congestion.pdf https://www.thecgo.org/wp-content/uploads/2020/10/Can-We-Bui... (Pages 8-10)

imtringued 5y ago

>We see the same type of thing when designing transportation systems in a city. I don't know how to describe this but sometimes people say things that drive an agenda which from a first glance support the agenda but when you dig deep down into the details you realize that there is a second message that completely contradicts the actual agenda the comment pushes. For example, "induced demand" is something that happens on roads because they are free to use by any road user. By building wider roads you make it very cheap to drive both in terms of congestion and money. Public transport costs money, is space efficient and slow. Driving a car is inefficient, convenient, fast and when you consider the "better service" it is worth the additional cost. Therefore people will stop using public transport and start driving cars, because roads are free. This almost contradicts the agenda because housing isn't provided for free, you have to pay for it and you have to pay a huge premium for inefficient but convenient housing (single family homes). Of course, the problem is that there is a subsidy that encourages inefficiency similar to free roads, namely property tax freezes. An old single family home may have a lower tax burden than a new apartment. It's effectively a subsidy to homeowners that haven't moved out. However, the real contradiction lies in the fact that the argument hasn't been against property tax freezes, instead the criticism is aimed at new construction, which does not suffer from the subsidy problem.