6 ms·

The root cause of the supply constraint that ultimately gives real estate it's value is the land, and more specifically, the land being in a particular location

The root cause of the supply constraint that ultimately gives real estate it's value is the land, and more specifically, the land being in a particular location. For example, a row of condos built right next to a major employer of the town, in the center of the city. That land is going to be valuable so long as that town exists, and as the population continues to grow, will only become more valuable. Adding more houses won't reduce the value of those condos the same way that adding more lanes to a highway doesn't reduce the congestion. The idea that houses are appreciating assets doesn't come from some fundamental law or ideology. It comes from recognizing reality. There is only so much land where people want to live, and population tends to increase (we are talking about urban and suburban areas, of course), so the demand and price increase. It's pretty simple, really. NIMBYism, zoning laws, permitting, those are always familiar and convenient boogiemen for people who don't want to do actual analysis of market factors. But, what you are really wanting to argue against is private property ownership.

weeksie 5y ago
You can always build more dense housing on land that is in high demand. In fact, doing that is the most obvious and effective way to keep prices low for desirable locales. Backed up by pretty much all the economic research on the subject in the last decade.
- dimitrios1 5y ago
  Great, is that economic research based on thought experiments or reality? I'd love to read it. Let's go back to my example. You build denser housing on top of or next to the condos I mentioned, what happens? The workers move in closer to the city center. The price is low for a short period of time, until more people migrate. Just like when the highway opens up a new lane. The traffic is better for a short period, until more people begin using the highway more. Then you are back to the status quo. You could argue that you can just keep building up and up until you cross the threshold of demand affecting the price, but without a market incentive to do that, it's wishful thinking at best. "Well the government could fund it" you could say, and indeed it can. But speaking of economic research, everytime the government has done such a thing, it causes widespread economic depression of the local area.
  - weeksie 5y ago
    Those are empirical studies. The Finnish one is the most recent I'm aware of, but they all say basically the same thing[1], here are a couple more [2][3]. Housing does not suffer from induced demand like road capacity does. This is easy to disprove by reading those studies. Sure, building nicer better neighborhoods does make them more desirable but it doesn't follow that they have to be more expensive, as long as you build enough homes for people to live in. Taken to its conclusion the induced demand argument against density is an argument against improving quality of life in general, and pretty nihilistic. [1] https://ideas.repec.org/p/fer/wpaper/146.html https://ideas.repec.org/p/fer/wpaper/146.html [2] https://www.dropbox.com/s/oplls6utgf7z6ih/Pennington_JMP.pdf?dl=0 https://www.dropbox.com/s/oplls6utgf7z6ih/Pennington_JMP.pdf... [3] https://docs.wixstatic.com/ugd/7fc2bf_ee1737c3c9d4468881bf1434814a6f8f.pdf https://docs.wixstatic.com/ugd/7fc2bf_ee1737c3c9d4468881bf14...
  - ProfessorLayton 5y ago
    >You could argue that you can just keep building up and up until you cross the threshold of demand affecting the price, but without a market incentive to do that, it's wishful thinking at best. Tokyo, with its reasonable zoning, seems to have figured out how to build densely without being absurdly expensive. The key here is that the "market" is indeed allowed to figure it out, and not as restricted by NIMBYism. The best thing the government can do right now is to get out of the way in regards to building more units.
  - volkl48 5y ago
    Tokyo has managed to keep housing prices pretty affordable (and while Japan's population may be shrinking, Tokyo's has continued to grow). Unsurprisingly, they build a LOT of housing and removed most legal/regulatory obstacles to building it a few decades ago. They issue more permits for new housing units in a year than the entire state of California does, even though California has more than double the population. (or for an East Coast comparison - they issue around 9x the housing permits that NYC does, even though the population is <50% larger). There have been many articles written on this topic by many publications that you can find, but here's one citation: https://www.ft.com/content/023562e2-54a6-11e6-befd-2fc0c26b3c60 https://www.ft.com/content/023562e2-54a6-11e6-befd-2fc0c26b3...
- johnnyanmac 5y ago
  >You can always build more dense housing on land that is in high demand. you CAN. But that takes a while. There's always something under construction in Califnornia and a good portion of that is trying to build more apartments and housing. The time to make those don't keep up with the influx of people emmigrating to LA or otherwise leaving the parents' homes to seek their own lifestyle. It's honestly a more feasible solution to try and convince certain companies to build in a city that is otherwise "vacant". Make it a place where people will work around, have the existing land and homes appreciate in value. That's why Amazon and Apple had such aggressive bid wars from cities to try and get them to make new campuses in their respective city areas.
  - andrewmutz 5y ago
    We dont have a shortage of dense housing because it takes to long to build We have a shortage of dense housing because it is illegal to build dense housing in the places it should exist, and where it is legal, community review processes quickly shut it down
    - johnnyanmac 5y ago
      It's a bit of both, at least for my state specifically. There is a bunch of gatekeeping, but also some necessary restrictions and codes in California which is stricter than most other states, but necessary given its history. You can't take shortcuts anymore here like you could in the 60's (or heck, even in the 80's in terms of Los Angeles). It's a a long and expensive process and I wouldn't be surprised if some deals fell through something because the minimum expenses exceeded what some potential clients expected.
- jjav 5y ago
  > You can always build more dense housing on land that is in high demand. In fact, doing that is the most obvious and effective way to keep prices low for desirable locales. Backed up by pretty much all the economic research on the subject in the last decade. In which dense cities in Canada (or the USA) did this work, resulting in a desirable dense city with cheap housing?
nybble41 5y ago
> The idea that houses are appreciating assets doesn't come from some fundamental law or ideology. It comes from recognizing reality. Houses are not appreciating assets, in general. They are durable goods but tend to degrade if not maintained. Land is often an appreciating asset for the reasons you mentioned. And of course the "NIMBYism, zoning laws, permitting" play a part in that, by restricting the land available for various desired uses. Removing these factors would help, though of course it wouldn't completely negate the tendency for land prices to rise, especially in densely populated areas. > But, what you are really wanting to argue against is private property ownership. Removing private property ownership wouldn't make more land available, or cause it to be used more efficiently. Quite the opposite in fact.
- dimitrios1 5y ago
  To be clear, I wasn't suggesting that I support removing private ownership. I was merely suggesting to parent to be honest about what they are really upset at. It isn't NIMBYs or town councils with their, admittedly, sometimes backwards zoning laws. Its private parties who own land and are acting in their own best interests.
hibikir 5y ago
I think that most YIMBYs are arguing the opposite: That if I buy a piece of land, and I want to build a duplex in it, all the way to the property line, I should be able to do it. As it is, zoning and the approval processes make all kinds of viable projects impossible to do, by the property owners. If I wanted to turn my single family house into a duplex, or just tear it down and build bigger, to far closer to the property line, I'd be completely unable to do so, because the zone is R1, the minimum offset to the edge of the property is enough to part 2 F-150s lined front to back. The maximum legal usable square footage, across all levels, of the house must not exceed 40% of the square footage of the lot. Most of my property must, by regulation, be lawn, and the taller I build, the more lawn I need. There's houses with this zoning structure right next door to supermarkets. So how is asking to be allowed to redevelop your own lot being against private property ownership? If land is so plentiful nobody wants to build taller, the land will remain very low density. But the idea of having a lot that, if razed, would be worth a million dollars, but where building a duplex is illegal is not, in any way, going against private ownership.
- nullc 5y ago
  > So how is asking to be allowed to redevelop your own lot being against private property ownership? To answer that: consider, would me being allowed to build a joint pig farm and jet engine testing facility 10 feet from your bedroom window be compatible with your property rights? Externalities exist. Changes in the usage-- which includes density-- of the surrounding property can have a real effect on the existing residents. Debate over zoning is just a debate over the thresholds. This isn't to say that existing policies in any particular place are well informed. But the basic concept of setting out the characteristics of neighboring properties, particularly to the extent that these rules were done in advance of your ownership and were clearly established, not only doesn't conflict with private property rights but can help protect them.
  - bombcar 5y ago
    There’s a far cry between “no unlicensed pig farms” and “each house must be an entire freeway’s width from the next one”, especially as one is a different type of use instead of just a more dense one.

weeksie 5y ago

You can always build more dense housing on land that is in high demand. In fact, doing that is the most obvious and effective way to keep prices low for desirable locales. Backed up by pretty much all the economic research on the subject in the last decade.

dimitrios1 5y ago
Great, is that economic research based on thought experiments or reality? I'd love to read it. Let's go back to my example. You build denser housing on top of or next to the condos I mentioned, what happens? The workers move in closer to the city center. The price is low for a short period of time, until more people migrate. Just like when the highway opens up a new lane. The traffic is better for a short period, until more people begin using the highway more. Then you are back to the status quo. You could argue that you can just keep building up and up until you cross the threshold of demand affecting the price, but without a market incentive to do that, it's wishful thinking at best. "Well the government could fund it" you could say, and indeed it can. But speaking of economic research, everytime the government has done such a thing, it causes widespread economic depression of the local area.
- weeksie 5y ago
  Those are empirical studies. The Finnish one is the most recent I'm aware of, but they all say basically the same thing[1], here are a couple more [2][3]. Housing does not suffer from induced demand like road capacity does. This is easy to disprove by reading those studies. Sure, building nicer better neighborhoods does make them more desirable but it doesn't follow that they have to be more expensive, as long as you build enough homes for people to live in. Taken to its conclusion the induced demand argument against density is an argument against improving quality of life in general, and pretty nihilistic. [1] https://ideas.repec.org/p/fer/wpaper/146.html https://ideas.repec.org/p/fer/wpaper/146.html [2] https://www.dropbox.com/s/oplls6utgf7z6ih/Pennington_JMP.pdf?dl=0 https://www.dropbox.com/s/oplls6utgf7z6ih/Pennington_JMP.pdf... [3] https://docs.wixstatic.com/ugd/7fc2bf_ee1737c3c9d4468881bf1434814a6f8f.pdf https://docs.wixstatic.com/ugd/7fc2bf_ee1737c3c9d4468881bf14...
- ProfessorLayton 5y ago
  >You could argue that you can just keep building up and up until you cross the threshold of demand affecting the price, but without a market incentive to do that, it's wishful thinking at best. Tokyo, with its reasonable zoning, seems to have figured out how to build densely without being absurdly expensive. The key here is that the "market" is indeed allowed to figure it out, and not as restricted by NIMBYism. The best thing the government can do right now is to get out of the way in regards to building more units.
- volkl48 5y ago
  Tokyo has managed to keep housing prices pretty affordable (and while Japan's population may be shrinking, Tokyo's has continued to grow). Unsurprisingly, they build a LOT of housing and removed most legal/regulatory obstacles to building it a few decades ago. They issue more permits for new housing units in a year than the entire state of California does, even though California has more than double the population. (or for an East Coast comparison - they issue around 9x the housing permits that NYC does, even though the population is <50% larger). There have been many articles written on this topic by many publications that you can find, but here's one citation: https://www.ft.com/content/023562e2-54a6-11e6-befd-2fc0c26b3c60 https://www.ft.com/content/023562e2-54a6-11e6-befd-2fc0c26b3...
johnnyanmac 5y ago
>You can always build more dense housing on land that is in high demand. you CAN. But that takes a while. There's always something under construction in Califnornia and a good portion of that is trying to build more apartments and housing. The time to make those don't keep up with the influx of people emmigrating to LA or otherwise leaving the parents' homes to seek their own lifestyle. It's honestly a more feasible solution to try and convince certain companies to build in a city that is otherwise "vacant". Make it a place where people will work around, have the existing land and homes appreciate in value. That's why Amazon and Apple had such aggressive bid wars from cities to try and get them to make new campuses in their respective city areas.
- andrewmutz 5y ago
  We dont have a shortage of dense housing because it takes to long to build We have a shortage of dense housing because it is illegal to build dense housing in the places it should exist, and where it is legal, community review processes quickly shut it down
  - johnnyanmac 5y ago
    It's a bit of both, at least for my state specifically. There is a bunch of gatekeeping, but also some necessary restrictions and codes in California which is stricter than most other states, but necessary given its history. You can't take shortcuts anymore here like you could in the 60's (or heck, even in the 80's in terms of Los Angeles). It's a a long and expensive process and I wouldn't be surprised if some deals fell through something because the minimum expenses exceeded what some potential clients expected.
jjav 5y ago
> You can always build more dense housing on land that is in high demand. In fact, doing that is the most obvious and effective way to keep prices low for desirable locales. Backed up by pretty much all the economic research on the subject in the last decade. In which dense cities in Canada (or the USA) did this work, resulting in a desirable dense city with cheap housing?

nybble41 5y ago

> The idea that houses are appreciating assets doesn't come from some fundamental law or ideology. It comes from recognizing reality. Houses are not appreciating assets, in general. They are durable goods but tend to degrade if not maintained. Land is often an appreciating asset for the reasons you mentioned. And of course the "NIMBYism, zoning laws, permitting" play a part in that, by restricting the land available for various desired uses. Removing these factors would help, though of course it wouldn't completely negate the tendency for land prices to rise, especially in densely populated areas. > But, what you are really wanting to argue against is private property ownership. Removing private property ownership wouldn't make more land available, or cause it to be used more efficiently. Quite the opposite in fact.

dimitrios1 5y ago
To be clear, I wasn't suggesting that I support removing private ownership. I was merely suggesting to parent to be honest about what they are really upset at. It isn't NIMBYs or town councils with their, admittedly, sometimes backwards zoning laws. Its private parties who own land and are acting in their own best interests.

hibikir 5y ago

I think that most YIMBYs are arguing the opposite: That if I buy a piece of land, and I want to build a duplex in it, all the way to the property line, I should be able to do it. As it is, zoning and the approval processes make all kinds of viable projects impossible to do, by the property owners. If I wanted to turn my single family house into a duplex, or just tear it down and build bigger, to far closer to the property line, I'd be completely unable to do so, because the zone is R1, the minimum offset to the edge of the property is enough to part 2 F-150s lined front to back. The maximum legal usable square footage, across all levels, of the house must not exceed 40% of the square footage of the lot. Most of my property must, by regulation, be lawn, and the taller I build, the more lawn I need. There's houses with this zoning structure right next door to supermarkets. So how is asking to be allowed to redevelop your own lot being against private property ownership? If land is so plentiful nobody wants to build taller, the land will remain very low density. But the idea of having a lot that, if razed, would be worth a million dollars, but where building a duplex is illegal is not, in any way, going against private ownership.

nullc 5y ago
> So how is asking to be allowed to redevelop your own lot being against private property ownership? To answer that: consider, would me being allowed to build a joint pig farm and jet engine testing facility 10 feet from your bedroom window be compatible with your property rights? Externalities exist. Changes in the usage-- which includes density-- of the surrounding property can have a real effect on the existing residents. Debate over zoning is just a debate over the thresholds. This isn't to say that existing policies in any particular place are well informed. But the basic concept of setting out the characteristics of neighboring properties, particularly to the extent that these rules were done in advance of your ownership and were clearly established, not only doesn't conflict with private property rights but can help protect them.
- bombcar 5y ago
  There’s a far cry between “no unlicensed pig farms” and “each house must be an entire freeway’s width from the next one”, especially as one is a different type of use instead of just a more dense one.