2 ms·
To answer the question of the headline: Not at all. Once a house is built, the cost of building is a sunk cost. > if you could reduce the costs of constructio
by teddyh 5y ago
To answer the question of the headline: Not at all. Once a house is built, the cost of building is a sunk cost.
> if you could reduce the costs of construction, housing costs would fall as well.
Why? What drives prices down is competition. Lower costs of construction might help with that, but only slightly, and I would guess that it will only help enough to shift the prices if construction costs are lowered by a magnitude or so.
This whole argument sounds like arguing that we must reduce wages across the board in order to lower prices of goods. This never works.
- goodcanadian 5y agoI think you are missing a subtlety. You are quite right that the cost of housing is determined by supply and demand. However, neither side of the equation is fixed. You can create more supply by building more houses. However, construction has a cost. This effectively creates a floor price below which supply will not increase. You cannot realistically drive the price below this floor unless demand is falling.