5 ms·

> Unfortunately, it does not mean you get lower cost of housing You don't believe in supply and demand? I'm not saying you have cheap housing. I'm saying you

> Unfortunately, it does not mean you get lower cost of housing You don't believe in supply and demand? I'm not saying you have cheap housing. I'm saying you would have more expensive housing if there were fewer of them, the same way GPUs are more valuable when there are fewer of them.

nemo44x 4y ago
What you're not factoring in is the cost of labor and materials. They are both already quite expensive and when you have a building boom the costs of both will skyrocket. What will happen is you'll end up with cheaply constructed housing made from the worst materials. And that's the good outcome. The bad outcome is the rich who are looking for alternate investments will buy up all the labor and materials and build construction for themselves and will build rentals. That's the bad outcome. The awful outcome, and likely outcome is that the labor and materials will be bought by newly formed real estate companies that will build rental property that is ugly and expensive - because they control the market more and more as they merge into 2 super landlord companys.
- OnlineGladiator 4y ago
  The cost of the house itself is nothing compared to the cost of the land. Houses don't appreciate in value because of the houses (which deteriorate over time) - they appreciate because of the scarcity of land.
  - nemo44x 4y ago
    Sure, but houses don't depreciate as quickly as you might think. There's a few reasons for this: - Constructing a new building isn't as cheap as when the existing structure was built. For instance, my home cost about $15,000 to build 100 years ago. Today the structure itself is worth more than that. Inflation matters here. - People maintain and improve their homes. New kitchens, roofs, flooring, furnaces, siding, etc. In essence you are rebuilding a home 1 piece at a time from the day it is made. If you don't then the house gets to a point it can't be lived in. People who haven't looked at new build prices for 10 years are shocked at what it costs today.
    - OnlineGladiator 4y ago
      Nothing you're saying is wrong, but it doesn't change the fact that the land is an order of magnitude more valuable than the building (I'm speaking broadly and for residential real estate). We still have more lumber than land. In a very hand-wavy way we have more labor than land. The limiting factor is always what drives the price.
      - timerol 4y ago
        This is not accurate outside of a handful of broken housing markets. In Philadelphia[1] land is often 1/5 of the total value. There are definitely some parcels that are undeveloped[2] or underdeveloped[3], but most properties are more balanced. [1] I chose Philly because of a good clickable property tax browser https://property.phila.gov/?p=881576550 https://property.phila.gov/?p=881576550, and because it keeps separate land vs. improvement assessments. [2] This is in no way a statement that Rittenhouse Square should be developed. Parks are good. https://property.phila.gov/?p=885705260 https://property.phila.gov/?p=885705260 [3] https://property.phila.gov/?p=881520352 https://property.phila.gov/?p=881520352
        rovolo 4y ago
        Your [1] example is a 100+ unit apartment building. In the context of this thread, we're discussing single-unit buildings like your [3] example.
        timerol 4y ago
        Single-unit buildings close to downtown can have higher land costs. But single-unit buildings in single-unit neighborhoods are, again, around 1/5 land cost. https://property.phila.gov/?p=492129100 https://property.phila.gov/?p=492129100 https://property.phila.gov/?p=581427500 https://property.phila.gov/?p=581427500 https://property.phila.gov/?p=212348000 https://property.phila.gov/?p=212348000 https://property.phila.gov/?p=344136100 https://property.phila.gov/?p=344136100
        4y ago
  - rdw 4y ago
    I used to believe this and then I got into the area. It depends on the area of course but it turns out that the cost of the house is quite significant. House construction costs are $200-500 per square foot, putting even a medium-sized house at around a quarter of a million dollars. When you look at the costs of empty plots of land versus similar plots of land with houses on them, you'll see that the housed plots of land cost the same as the empty plots plus the construction costs of a similar-sized house. In the areas where I looked, the costs of the house dominated, such that the land value is about 20% of the total value of the plot. Even the variance that occurs at that level can be further explained by the value of potential future plots of land on the space -- a plot of land that has one house but could hold a second (for whatever reason) is more valuable than an otherwise-identical plot that can only support one house.
dragonwriter 4y ago
> You don't believe in supply and demand? Induced demand is a thing, as (and much more common) are demand curves that are flat enough that shifting the supply curve to the right by some large fraction of the current market clearing quantity has no discernable effect on the market clearing price. Real life supply and demand involves more than the simplest Econ 101 illustrative examples of the general direction of the ideal relation.
- jvm-hn 4y ago
  While you are right that the dynamics are complex, research has clearly established that an increase in housing supply decreases its cost. See e.g. https://www.lewis.ucla.edu/research/market-rate-development-impacts/ https://www.lewis.ucla.edu/research/market-rate-development-...

nemo44x 4y ago

What you're not factoring in is the cost of labor and materials. They are both already quite expensive and when you have a building boom the costs of both will skyrocket. What will happen is you'll end up with cheaply constructed housing made from the worst materials. And that's the good outcome. The bad outcome is the rich who are looking for alternate investments will buy up all the labor and materials and build construction for themselves and will build rentals. That's the bad outcome. The awful outcome, and likely outcome is that the labor and materials will be bought by newly formed real estate companies that will build rental property that is ugly and expensive - because they control the market more and more as they merge into 2 super landlord companys.

OnlineGladiator 4y ago
The cost of the house itself is nothing compared to the cost of the land. Houses don't appreciate in value because of the houses (which deteriorate over time) - they appreciate because of the scarcity of land.
- nemo44x 4y ago
  Sure, but houses don't depreciate as quickly as you might think. There's a few reasons for this: - Constructing a new building isn't as cheap as when the existing structure was built. For instance, my home cost about $15,000 to build 100 years ago. Today the structure itself is worth more than that. Inflation matters here. - People maintain and improve their homes. New kitchens, roofs, flooring, furnaces, siding, etc. In essence you are rebuilding a home 1 piece at a time from the day it is made. If you don't then the house gets to a point it can't be lived in. People who haven't looked at new build prices for 10 years are shocked at what it costs today.
  - OnlineGladiator 4y ago
    Nothing you're saying is wrong, but it doesn't change the fact that the land is an order of magnitude more valuable than the building (I'm speaking broadly and for residential real estate). We still have more lumber than land. In a very hand-wavy way we have more labor than land. The limiting factor is always what drives the price.
    - timerol 4y ago
      This is not accurate outside of a handful of broken housing markets. In Philadelphia[1] land is often 1/5 of the total value. There are definitely some parcels that are undeveloped[2] or underdeveloped[3], but most properties are more balanced. [1] I chose Philly because of a good clickable property tax browser https://property.phila.gov/?p=881576550 https://property.phila.gov/?p=881576550, and because it keeps separate land vs. improvement assessments. [2] This is in no way a statement that Rittenhouse Square should be developed. Parks are good. https://property.phila.gov/?p=885705260 https://property.phila.gov/?p=885705260 [3] https://property.phila.gov/?p=881520352 https://property.phila.gov/?p=881520352
      - rovolo 4y ago
        Your [1] example is a 100+ unit apartment building. In the context of this thread, we're discussing single-unit buildings like your [3] example.
        timerol 4y ago
        Single-unit buildings close to downtown can have higher land costs. But single-unit buildings in single-unit neighborhoods are, again, around 1/5 land cost. https://property.phila.gov/?p=492129100 https://property.phila.gov/?p=492129100 https://property.phila.gov/?p=581427500 https://property.phila.gov/?p=581427500 https://property.phila.gov/?p=212348000 https://property.phila.gov/?p=212348000 https://property.phila.gov/?p=344136100 https://property.phila.gov/?p=344136100
        4y ago
- rdw 4y ago
  I used to believe this and then I got into the area. It depends on the area of course but it turns out that the cost of the house is quite significant. House construction costs are $200-500 per square foot, putting even a medium-sized house at around a quarter of a million dollars. When you look at the costs of empty plots of land versus similar plots of land with houses on them, you'll see that the housed plots of land cost the same as the empty plots plus the construction costs of a similar-sized house. In the areas where I looked, the costs of the house dominated, such that the land value is about 20% of the total value of the plot. Even the variance that occurs at that level can be further explained by the value of potential future plots of land on the space -- a plot of land that has one house but could hold a second (for whatever reason) is more valuable than an otherwise-identical plot that can only support one house.

dragonwriter 4y ago

> You don't believe in supply and demand? Induced demand is a thing, as (and much more common) are demand curves that are flat enough that shifting the supply curve to the right by some large fraction of the current market clearing quantity has no discernable effect on the market clearing price. Real life supply and demand involves more than the simplest Econ 101 illustrative examples of the general direction of the ideal relation.

jvm-hn 4y ago
While you are right that the dynamics are complex, research has clearly established that an increase in housing supply decreases its cost. See e.g. https://www.lewis.ucla.edu/research/market-rate-development-impacts/ https://www.lewis.ucla.edu/research/market-rate-development-...