5 ms·

But you can build higher density housing which increases the overall number of living units in a region, thus increasing the supply.

zepto 5y ago
For a short period of time you can increase the supply, but the demand will keep up with it.
- Kalium 5y ago
  At 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 ago
    I 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 ago
      Neither 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 ago
        Apple 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 ago
        This 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 ago
        The 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.
        missedthecue 5y ago
        That's why I used more examples than only Shenzhen.
        zepto 5y ago
        The same logic applies. Manhattan is only 10% cheaper and yet is 4x denser. Clearly density doesn’t solve the cost problem.
    - Spivak 5y ago
      I don’t think that people are denying the economics, only that for high-demand housing the game is different. The price of housing isn’t completely elastic since for a given area it’s a function of the available salaries in the area. You hit a ceiling where above which there are no buyers and below which you get 20 cash offers the day you list. So oddly the thesis is that housing prices are actually too low and we’re playing by concert ticket rules. Part of this has to do with the availability of mortgages as a function of income. And that there is so much demand for housing at a given price that any increase in supply we could actually realistically build would just get bought up instantly at the current price and we can’t increase the supply enough to actually drive prices down.
      - civilized 5y ago
        > we can’t increase the supply enough to actually drive prices down. Well you'll never do it with that attitude! Seriously, though. Every action taken in the US, other than the government spending trillions of dollars, is so piddly that no one gets to see a meaningful impact of any policy. And so people make up theories unconnected from reality, with no skin in the game, because nothing will ever actually change.
      - mixmastamyk 5y ago
        Oh no, there are an incredible number of econ deniers everywhere these days. Every time an apartment building is proposed for a parking lot in California for example, they come out of the woodwork.
      - civilized 5y ago
        On reflection, I don't think I buy your premises here: 1. Salaries (and spending proclivities) are hardly so tightly banded that X is affordable for everyone who might want to move to an area and X+1 isn't. Tech company salaries alone vary a ton. 2. Housing prices are not set in a centralized way like concert ticket prices. Those points notwithstanding, I do agree that if there's tons of pent-up demand for a product, tiny increases in supply are not going to change a seller's market into a buyer's market. It may take a lot of supply to overcome induced demand, market psychology and price stickiness, but there is an amount of added supply that would do it. It's just not the case that every rich person in the world wants to move to, say, San Francisco. Once you've built enough, you're going to have inventory that is moving slower than the sellers would prefer, and sellers will then lower price to make that inventory accessible to a wider pool of buyers.
    - tzs 5y ago
      It is because basic economics is only a crude approximation for real world economics. That's why Economics departments at universities require you to take a few courses after Ec101 before they will give you a degree in the subject.
      - civilized 5y ago
        So after I take many more advanced economics courses, I will understand the unexplainable reason why housing prices will never go down no matter how much supply is increased? And why this conclusion is so certain that there is neither any evidence nor any need for evidence?
    - missedthecue 5y ago
      Because understanding it means their housing price should go down. If they can pretend supply/demand doesn't apply, they can keep advocating NIMBY policies that increase the price of their house year after year.
      - civilized 5y ago
        Yeah, it's weird. If building more housing will cause the value of their neighborhoods to skyrocket, why not do it and make a killing? Are we to believe that their deep sentimentality about neighborhood character overrides any consideration of the supposedly massive amounts of cash on the table?
        Kalium 5y ago
        I find it best modeled as a collective action problem. SF in particular, and California in general, has handed out vetos on housing with a quite free hand. There are a great many people who have no particular reason to want to change their surroundings. Especially when they are keenly aware of how many of their neighbors will happily shoot down any effort they might make to make a killing. In short, the massive amount of cash is realistically not on the table in the eyes of many. What they do have is civic pride, property taxes decades out of step, and an ever-appreciating asset. All of which they can reasonably expect to pass on to their children.
        civilized 5y ago
        So no one wants to enormously increase the value of their ever-appreciating asset by allowing for more housing to be constructed? Because of... civic pride? Really? I'm a homeowner in a desirable area. In my area I see the urge to veto upzoning and keep the riff-raff out, keep traffic from getting worse, etc. pitted against the desire to increase affordability by upzoning. That opposition of interests makes sense. The idea that I could make a killing from upzoning never occurred to me. It seems very implausible.
        Kalium 5y ago
  - zepto 5y ago
    > with sufficient supply. You keep saying this as if supply can be increased arbitrarily. It simply can’t. You can increase density for short while until you hit limits, but network effects will keep demand increasing as you do. Obviously demand is not infinite, but there is no reason to suppose that currently desirable places can be made affordable.
    - Kalium 5y ago
      > You keep saying this as if supply can be increased arbitrarily. It simply can’t. True! You eventually run into physical limits of density and what we are capable of constructing. However, this naively seems likely to be far higher than we have now. Some back of the envelope math is in order, then. SF has a surface area of about 30,000 acres. Kowloon Walled City, a very dense place that actually existed, had between 33,000 and 50,000 people in 6.5 acres. Extrapolating, that puts SF at a possible maximum population of between 152 and 230 million people. That's using construction technology from the 60s and 70s, so we could perhaps do better today. With this in mind, it does seem likely that the density of the SF Bay specifically and California in general could be reasonably increased. There's quite a lot of room for opportunity to house people between SF's current population of 875000 and a population several times that of California. > You can increase density for a while, but network effects will keep demand increasing as you do. Sure! As I touched on previously, induced demand in housing is a very real effect. You're absolutely right. However "any induced demand effects are overwhelmed by the effect of increased supply". https://appam.confex.com/appam/2018/webprogram/Paper25811.html https://appam.confex.com/appam/2018/webprogram/Paper25811.ht... I believe, and please correct me if I am mistaken, that what is described here as induced demand is what you are referring to as network effects. > Obviously demand is not infinite, but there is no reason to suppose that currently desirable places can be made affordable. Expensive places have been made less exorbitantly expensive before. That seems like an excellent reason to suppose that a currently desirable place can be made affordable. I understand that this is a matter of opinion on which reasonable people might differ.
      - zepto 5y ago
        > Expensive places have been made less exorbitantly expensive before. Places like SF? What examples are you thinking of? Manhattan is a lot like SF, but is 4x the density. It has done very little to prevent prices rising.
- gumby 5y ago
  Cities have ways to increase the amount of living space per m2 of land: build up.

zepto 5y ago

For a short period of time you can increase the supply, but the demand will keep up with it.

Kalium 5y ago
At 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 ago
  I 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 ago
    Neither 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 ago
      Apple 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 ago
      This 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 ago
        The 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.
        missedthecue 5y ago
        That's why I used more examples than only Shenzhen.
        zepto 5y ago
        The same logic applies. Manhattan is only 10% cheaper and yet is 4x denser. Clearly density doesn’t solve the cost problem.
  - Spivak 5y ago
    I don’t think that people are denying the economics, only that for high-demand housing the game is different. The price of housing isn’t completely elastic since for a given area it’s a function of the available salaries in the area. You hit a ceiling where above which there are no buyers and below which you get 20 cash offers the day you list. So oddly the thesis is that housing prices are actually too low and we’re playing by concert ticket rules. Part of this has to do with the availability of mortgages as a function of income. And that there is so much demand for housing at a given price that any increase in supply we could actually realistically build would just get bought up instantly at the current price and we can’t increase the supply enough to actually drive prices down.
    - civilized 5y ago
      > we can’t increase the supply enough to actually drive prices down. Well you'll never do it with that attitude! Seriously, though. Every action taken in the US, other than the government spending trillions of dollars, is so piddly that no one gets to see a meaningful impact of any policy. And so people make up theories unconnected from reality, with no skin in the game, because nothing will ever actually change.
    - mixmastamyk 5y ago
      Oh no, there are an incredible number of econ deniers everywhere these days. Every time an apartment building is proposed for a parking lot in California for example, they come out of the woodwork.
    - civilized 5y ago
      On reflection, I don't think I buy your premises here: 1. Salaries (and spending proclivities) are hardly so tightly banded that X is affordable for everyone who might want to move to an area and X+1 isn't. Tech company salaries alone vary a ton. 2. Housing prices are not set in a centralized way like concert ticket prices. Those points notwithstanding, I do agree that if there's tons of pent-up demand for a product, tiny increases in supply are not going to change a seller's market into a buyer's market. It may take a lot of supply to overcome induced demand, market psychology and price stickiness, but there is an amount of added supply that would do it. It's just not the case that every rich person in the world wants to move to, say, San Francisco. Once you've built enough, you're going to have inventory that is moving slower than the sellers would prefer, and sellers will then lower price to make that inventory accessible to a wider pool of buyers.
  - tzs 5y ago
    It is because basic economics is only a crude approximation for real world economics. That's why Economics departments at universities require you to take a few courses after Ec101 before they will give you a degree in the subject.
    - civilized 5y ago
      So after I take many more advanced economics courses, I will understand the unexplainable reason why housing prices will never go down no matter how much supply is increased? And why this conclusion is so certain that there is neither any evidence nor any need for evidence?
  - missedthecue 5y ago
    Because understanding it means their housing price should go down. If they can pretend supply/demand doesn't apply, they can keep advocating NIMBY policies that increase the price of their house year after year.
    - civilized 5y ago
      Yeah, it's weird. If building more housing will cause the value of their neighborhoods to skyrocket, why not do it and make a killing? Are we to believe that their deep sentimentality about neighborhood character overrides any consideration of the supposedly massive amounts of cash on the table?
      - Kalium 5y ago
        I find it best modeled as a collective action problem. SF in particular, and California in general, has handed out vetos on housing with a quite free hand. There are a great many people who have no particular reason to want to change their surroundings. Especially when they are keenly aware of how many of their neighbors will happily shoot down any effort they might make to make a killing. In short, the massive amount of cash is realistically not on the table in the eyes of many. What they do have is civic pride, property taxes decades out of step, and an ever-appreciating asset. All of which they can reasonably expect to pass on to their children.
        civilized 5y ago
        So no one wants to enormously increase the value of their ever-appreciating asset by allowing for more housing to be constructed? Because of... civic pride? Really? I'm a homeowner in a desirable area. In my area I see the urge to veto upzoning and keep the riff-raff out, keep traffic from getting worse, etc. pitted against the desire to increase affordability by upzoning. That opposition of interests makes sense. The idea that I could make a killing from upzoning never occurred to me. It seems very implausible.
        Kalium 5y ago
- zepto 5y ago
  > with sufficient supply. You keep saying this as if supply can be increased arbitrarily. It simply can’t. You can increase density for short while until you hit limits, but network effects will keep demand increasing as you do. Obviously demand is not infinite, but there is no reason to suppose that currently desirable places can be made affordable.
  - Kalium 5y ago
    > You keep saying this as if supply can be increased arbitrarily. It simply can’t. True! You eventually run into physical limits of density and what we are capable of constructing. However, this naively seems likely to be far higher than we have now. Some back of the envelope math is in order, then. SF has a surface area of about 30,000 acres. Kowloon Walled City, a very dense place that actually existed, had between 33,000 and 50,000 people in 6.5 acres. Extrapolating, that puts SF at a possible maximum population of between 152 and 230 million people. That's using construction technology from the 60s and 70s, so we could perhaps do better today. With this in mind, it does seem likely that the density of the SF Bay specifically and California in general could be reasonably increased. There's quite a lot of room for opportunity to house people between SF's current population of 875000 and a population several times that of California. > You can increase density for a while, but network effects will keep demand increasing as you do. Sure! As I touched on previously, induced demand in housing is a very real effect. You're absolutely right. However "any induced demand effects are overwhelmed by the effect of increased supply". https://appam.confex.com/appam/2018/webprogram/Paper25811.html https://appam.confex.com/appam/2018/webprogram/Paper25811.ht... I believe, and please correct me if I am mistaken, that what is described here as induced demand is what you are referring to as network effects. > Obviously demand is not infinite, but there is no reason to suppose that currently desirable places can be made affordable. Expensive places have been made less exorbitantly expensive before. That seems like an excellent reason to suppose that a currently desirable place can be made affordable. I understand that this is a matter of opinion on which reasonable people might differ.
    - zepto 5y ago
      > Expensive places have been made less exorbitantly expensive before. Places like SF? What examples are you thinking of? Manhattan is a lot like SF, but is 4x the density. It has done very little to prevent prices rising.
gumby 5y ago
Cities have ways to increase the amount of living space per m2 of land: build up.