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There is no reason to suggest increased availability will result in increased affordability. The only way to impact affordability is to lower values, the prices
by austincheney 5y ago
There is no reason to suggest increased availability will result in increased affordability. The only way to impact affordability is to lower values, the prices people will sell for.
- tanbog5 5y agoI'm no economist, but I'm willing to bet in most markets, must of the time, an increase in supply is often followed by a decrease in cost. Not always of course, and were talking about housing which has a bunch of other factors going on but it's usually helpful.
- austincheney 5y agoSupply/demand ratios don’t work against fixed assets. You can’t clone or replicate a geographic segment of Earth.
- irishloop 5y agoBut you can build higher density housing which increases the overall number of living units in a region, thus increasing the supply.
- zepto 5y agoFor a short period of time you can increase the supply, but the demand will keep up with it.
- Kalium 5y agoAt the risk of being contentious, it may be worth considering that there is no place on earth where the demand to live there is truly infinite. This suggests that demand can be sated and prices brought down with sufficient supply. Of course, there is such a thing as induced demand for housing. Studies of it show that it's not so strong as to eliminate the effect of adding supply to a tight market. With these in mind, why would we not expect demand to eventually fall behind supply as California approaches something resembling a healthy housing market?
- civilized 5y agoI will never understand why so many people are absolutely convinced, on the basis of seemingly no explainable evidence, that basic economics doesn't apply to housing.
- deleted 5y ago[deleted]
- zepto 5y agoNeither will I. The number of people who think you can build an infinite number of homes in a finite space of land, or who are unaware of network effects, is surprising.
- civilized 5y agoApple can't build an infinite number of computers either. Chiquita can't grow an infinite number of bananas. And both of these companies are deeply networked in the global economy. So what will happen if Apple triples its computer production, or Chiquita triples its banana production? Does the price magically increase like housing does in NIMBY economics?
- missedthecue 5y agoThis is the skyline of the Bay Area. https://cdn.vox-cdn.com/thumbor/q4QVkPZrTO8_USbDEe6nPfz8w8c=/0x0:3911x2690/1200x800/filters:focal(1542x1548:2166x2172)/cdn.vox-cdn.com/uploads/chorus_image/image/66469054/shutterstock_1264688284__1_.0.jpg https://cdn.vox-cdn.com/thumbor/q4QVkPZrTO8_USbDEe6nPfz8w8c=... This is the skyline of Hong Kong. https://images.squarespace-cdn.com/content/v1/59f3777b64b05fdbae7f32ac/1558551681929-3PF7WDQK4RLRC9WAQH54/HK.jpg https://images.squarespace-cdn.com/content/v1/59f3777b64b05f... Hong Kong has cheaper housing while also have 10x as many residents. Same goes for places like Tokyo, Singapore, and Shenzhen. No, you can't create more land, but you can create more housing.
- zepto 5y agoThe argument that that the only reason shenzen housing is cheaper than SF is density is absurd on its face. If your argument is that we can increase SFs population by 10% to maybe get a 30% reduction in average home price, then I agree. But that doesn’t change affordability.
- gumby 5y agoCities have ways to increase the amount of living space per m2 of land: build up.
- civilized 5y agoI don't understand what this abstract terminology means. Do you believe it is impossible to build more housing in California? If so, why? If not, what are you talking about?
- snidane 5y agoHousing is a special story. It doesn't behave according to the standard economic theory of equalizing supply and demand like yogurts or bananas. Housing is strongly inelastic market, meaning you can't increase supply when there is demand easily The market is essentially stalled. It doesn't 'clear'. People would rather keep it idle out of the market than rent or sell under price. On top of that it has entered a bubble territory recently in which people buy, not based on their value judgment of the property, but because they expect to offload it to someone else in the future with a profit. Housing is not a 'supply and demand market dynamic, but a 'greater fool' market dynamic.
- resonantjacket5 5y agoHousing is not actually that special. It is true it doesn't behave according to the econ 101 model that most high schoolers learn in class, but in econ 201+ classes explain it. The main difference is that land is the limiting factor or more accurately legally buildable land in this case with zoning.
- koolba 5y agoHousing in CA is also unique in that the combination of refinance rates and Prop 13 make selling your home for the same house right next door a losing proposition. Most long term owners are deeply incentivized by CA’s property tax cap to never sell and if anything take an equity loan / rent it out. I can’t even imagine the total financial devastation if they suddenly ratcheted up the tax rates via reassessment. It’d be a fire sale for all but the top end of the income ladder.
- pcwalton 5y ago> The market is essentially stalled. It doesn't 'clear'. People would rather keep it idle out of the market than rent or sell under price. This theory fails to explain why housing prices in San Francisco fell during the dotcom bust. https://www.bayareamarketreports.com/trend/3-recessions-2-bubbles-and-a-baby https://www.bayareamarketreports.com/trend/3-recessions-2-bu...
- deleted 5y ago[deleted]
- 6gvONxR4sf7o 5y agoThe network effects of cities increase with density. The more people move there, the more incentive there is for people to move there. The cost of housing is a function of that marginal person who is on the verge of moving there. If I’m on the edge, then all my friends and all my employers move there, then I have even more reason to move there too. When you move there, I’m willing to pay more to move there too. In other words demand isn’t constant. As I understand it, it’s an open question as to whether more housing means lower prices via simple supply and demand, or higher prices via network effects.
- ItsMonkk 5y agoExactly. Every person living in a city is a positive externality for the businesses. And every business is a positive externality for the residents. It's a network effect. The more people in a city, the better it is. The people who own empty lots contribute nothing, and their empty lot keeps going up in value. When you incentivize people to say no to housing because the more they say no, the higher the value of the house, they are going to say no. It doesn't matter how much the state demands. You don't want centralized forces creating a mess, you want decentralized forces. We need to stop swimming upstream. The only way out of this is to tax the land equal to those positive externalities. The only way out is a Land Value Tax. When you under tax the land, the price of the house balloons. Once you have a Land Value Tax in place and increased housing supply means lower taxes, all the NIMBY's will quickly convert to YIMBY's - it will be a breeze to get new housing built. Fix the incentives. Land Value Tax[0]. [0]: https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty https://astralcodexten.substack.com/p/your-book-review-progr...
- 6gvONxR4sf7o 5y ago> the more they say no, the higher the value of the house Isn’t the argument we’re talking about saying the opposite? The more housing (i.e. the more they say yes), the higher the value of their house?
- ItsMonkk 5y ago
- tedunangst 5y agoSuggestions for how a city might arbitrarily lower property values? People are willing to pay $750k for my condo. How does the city convince them they only want to pay $500k?
- jtbayly 5y agoBus in homeless people to do drugs and poop on your steps. That ought to take care of it.
- mint2 5y agoNope, that had zero success in lowering SF prices and only resulted in some well off people making very callous remarks at the plight of others. Sure maybe it kept them from going even higher but we don’t have the counterfactual available to ever know.
- austincheney 5y agoIf you need a case study Detroit successfully lowered values pretty dramatically more than 10 years ago.
- civilized 5y agoDetroit had and continues to have an enormous amount of abandoned, decrepit housing that no one wants to buy. Maybe that's why they have low housing prices. I doubt that the city government had much to do with it.
- boring_twenties 5y agoI remember looking at some of those houses. One was listed for sale for $1,500. Not a typo, one thousand five hundred dollars. The catch was that the property taxes were still like $15k a year or something.
- tedunangst 5y agoFollowed by an economic boom as people from around the country moved there for the cheap housing?
- Gigachad 5y agoYou can increase land value while decreasing housing value. Building high density housing you can build affordable housing on incredibly high land values
- SamReidHughes 5y agoHave you never seen an order book? Do you not get how they work?
- jayd16 5y agoIt's fine to argue price elasticity but its silly to say there's "no reason to suggest."
- austincheney 5y agoHow so? Honestly, California deserves to fail here if they continue to repeat the same ineffectual things while ignoring data and inventing conclusions that have never proven true.
- pengaru 5y agoIf you add enough housing+residents it will lower the values as the places become overcrowded metropolises less people want to live in. But somewhere like the SF Bay Area has a loooooong way to go before it gets anywhere near that bad. Relative to most of the nation, it can get heaps worse in terms of crowding and QoL and still look exceptionally good. I don't see prices going down anytime soon, except if something like the homeless problem evolves into a continuous stream of violence and structure fires.
- geogra4 5y ago> If you add enough housing+residents it will lower the values as the places become overcrowded metropolises less people want to live in. Maybe at some extremely high level it becomes untenable but both Manhattan and Paris are very desirable places to live and they have 3-4x the population density of sf.
- pengaru 5y agoRight, which means you can effectively ruin SF through the lens of many existing residents, by turning it into a Manhattan, and still not have affordable housing there. So why do it?
- kelnos 5y agoConsider that Brooklyn has over 2x the density of SF, but median home prices 40% less. I agree that turning SF into Manhattan would ruin it in many people's eyes, but turning it into Brooklyn would be... not all that much of a change?