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The purpose of real estate development is to make real estate more valuable. So if you have laws restricting that development you need to look further than jus

The purpose of real estate development is to make real estate more valuable. So if you have laws restricting that development you need to look further than just "real-estate investors don't want development." Even ones not doing the development benefit financially - landlords love being able to raise the rents cause other people in the area built a bunch of new shit. The better off - and therefore more politically-connected - you are as a homeowner, the more you care about "I don't want the wrong people living next to me" compared to "I need to maximize short-term property values." (And the long-term property values trends clearly shows that cities with more development, that more people want to move to, are where you find ROI.)

DeathArrow 3y ago
> the more you care about "I don't want the wrong people living next to me" Then, by some modern definition, you are a nazi and a bigot.
pitaj 3y ago
> The purpose of real estate development is to make real estate more valuable. Nope. It's to make money for the developers. > Even ones not doing the development benefit financially - landlords love being able to raise the rents cause other people in the area built a bunch of new shit. Gentrification is a result of shortage. When wealthier people are priced out of rich neighborhoods, the only place for them to go is poor neighborhoods. It just so happens that poor neighborhoods with the least amount of political power are the first ones to be redeveloped when there's a shortage of housing. > And the long-term property values trends clearly shows that cities with more development, that more people want to move to, are where you find ROI. Reversed causation. It's literally just supply and demand. Places with high demand and not enough supply have growing property values. Places that are actually able to build housing to even kinda meet demand are doing much better. You can see a ton of development but that doesn't really mean anything. Often there's not even enough development to meet the rate of growth in a given city, let alone reduce prices meaningfully.
- majormajor 3y ago
  > Nope. It's to make money for the developers. Sure. Let's look a simple condo case: Developer pays X for property. Developer spends Y to build a building. Developer sells N units for Z. To make money, NZ has to be greater than XY aka the total value of that parcel is now higher. > Reversed causation. It's literally just supply and demand. Places with high demand and not enough supply have growing property values. Places that are actually able to build housing to even kinda meet demand are doing much better. Yeah, short-term, why was that parcel before the condo building worth less? Because there was less demand for what was there before than for what was there after it. Development increase short-term values by providing immediate units with nicer amenities or better condition or more size or whatever. Probably pretty uncontroversial. But also development increases long-term values by continuing to grow long term demand. Development, residences, businesses, services - in the most successful cities, all that flow of money produces more and more demand and value over time. Not a lot of demand to live on an empty lot in the middle of nowhere where there's not a nice house and there's no nearby jobs... So flip the causation: if there hadn't been development to allow all the people in [popular city of your choice] in the first place, it wouldn't be so popular and have such high demand today. That's not completely separate from geographical factors like rivers, but it's also got a lot to do with development - take, say, the land where a river meets a train line and compare it to the land downstream without the train.
  - aetherson 3y ago
    When you build new housing (as in, increase the number of units of housing that are available in total), you make your lot more valuable, which makes other lots less valuable. So a developer makes makes money by making their lot more valuable, but they do not "make real estate more valuable" generally. This is much like, you know, every other thing in the world. When a shoe manufacturer makes shoes, their shoes have value, but the value of all other shoes are slightly less because there's now one more competitor for demand for all those other shoes.
    - andyferris 3y ago
      With shoes, sure. With housing, it depends. There can be a proximity effect. The old house next to all the nicely redeveloped new houses is now worth more, even if the total number of bedrooms hasn't changed during the redevelopment, because it is in a nicer environment (and a buyer might want to redevelop the old house, and live in a nice house in a nice suburb).
bobthepanda 3y ago
The thing is that large developers love restricting development because it limits competition. If there is only a limited supply of land to build further on, it is much easier to corner said market of land and sit on it if the prices are not high enough for your liking. The cheapest development is the kind that larger developers do not bother with (one house to two or three on a single plot of land, rather than large complexes)
- deleted 3y ago
  [deleted]
- thwarted 3y ago
  This is not the case in SF. Developers want to build, but entrenched interests fight and delay, often using the rhetoric that doing so only makes developers richer and the only reason developers want to develop is so the developers themselves make money (as if this is some kind of purity test of intent).
  - Qwertious 3y ago
    As much as I hate giving NIMBYs any credit, it's important to remember that developers don't want to lower the price of housing - they want to make money, but the higher the cost of housing the more profit they make. For instance, suppose they build 100 apartments in the suburb of X. They know that for every $1k the price of housing in X drops, they lose $100k. So weirdly, they tend to leave housing vacant and sell it at a drip-feed so that they're always selling less houses than there are buyers - there is a huge difference between selling 3 apartments to 4 buyers, vs selling 4 apartments to 4 buyers. This particularly bad when there are few, large developers instead of lots of small developers, as the few large developers can collude to price-fix much easier. Please don't interpret this as contradicting the fact that California needs to massively overhaul its zoning/construction permit system - the fact that it can take years to receive permission instead of weeks is a big reason for the price of housing (and raises capex requirements which results in fewer but larger developers, see previous paragraph). Ditto for all the zoning that mandates exclusively single-family homes, and other such pointless exclusionism.
deleted 3y ago
[deleted]

DeathArrow 3y ago

> the more you care about "I don't want the wrong people living next to me" Then, by some modern definition, you are a nazi and a bigot.

pitaj 3y ago

> The purpose of real estate development is to make real estate more valuable. Nope. It's to make money for the developers. > Even ones not doing the development benefit financially - landlords love being able to raise the rents cause other people in the area built a bunch of new shit. Gentrification is a result of shortage. When wealthier people are priced out of rich neighborhoods, the only place for them to go is poor neighborhoods. It just so happens that poor neighborhoods with the least amount of political power are the first ones to be redeveloped when there's a shortage of housing. > And the long-term property values trends clearly shows that cities with more development, that more people want to move to, are where you find ROI. Reversed causation. It's literally just supply and demand. Places with high demand and not enough supply have growing property values. Places that are actually able to build housing to even kinda meet demand are doing much better. You can see a ton of development but that doesn't really mean anything. Often there's not even enough development to meet the rate of growth in a given city, let alone reduce prices meaningfully.

majormajor 3y ago
> Nope. It's to make money for the developers. Sure. Let's look a simple condo case: Developer pays X for property. Developer spends Y to build a building. Developer sells N units for Z. To make money, NZ has to be greater than XY aka the total value of that parcel is now higher. > Reversed causation. It's literally just supply and demand. Places with high demand and not enough supply have growing property values. Places that are actually able to build housing to even kinda meet demand are doing much better. Yeah, short-term, why was that parcel before the condo building worth less? Because there was less demand for what was there before than for what was there after it. Development increase short-term values by providing immediate units with nicer amenities or better condition or more size or whatever. Probably pretty uncontroversial. But also development increases long-term values by continuing to grow long term demand. Development, residences, businesses, services - in the most successful cities, all that flow of money produces more and more demand and value over time. Not a lot of demand to live on an empty lot in the middle of nowhere where there's not a nice house and there's no nearby jobs... So flip the causation: if there hadn't been development to allow all the people in [popular city of your choice] in the first place, it wouldn't be so popular and have such high demand today. That's not completely separate from geographical factors like rivers, but it's also got a lot to do with development - take, say, the land where a river meets a train line and compare it to the land downstream without the train.
- aetherson 3y ago
  When you build new housing (as in, increase the number of units of housing that are available in total), you make your lot more valuable, which makes other lots less valuable. So a developer makes makes money by making their lot more valuable, but they do not "make real estate more valuable" generally. This is much like, you know, every other thing in the world. When a shoe manufacturer makes shoes, their shoes have value, but the value of all other shoes are slightly less because there's now one more competitor for demand for all those other shoes.
  - andyferris 3y ago
    With shoes, sure. With housing, it depends. There can be a proximity effect. The old house next to all the nicely redeveloped new houses is now worth more, even if the total number of bedrooms hasn't changed during the redevelopment, because it is in a nicer environment (and a buyer might want to redevelop the old house, and live in a nice house in a nice suburb).

bobthepanda 3y ago

The thing is that large developers love restricting development because it limits competition. If there is only a limited supply of land to build further on, it is much easier to corner said market of land and sit on it if the prices are not high enough for your liking. The cheapest development is the kind that larger developers do not bother with (one house to two or three on a single plot of land, rather than large complexes)

deleted 3y ago
[deleted]
thwarted 3y ago
This is not the case in SF. Developers want to build, but entrenched interests fight and delay, often using the rhetoric that doing so only makes developers richer and the only reason developers want to develop is so the developers themselves make money (as if this is some kind of purity test of intent).
- Qwertious 3y ago
  As much as I hate giving NIMBYs any credit, it's important to remember that developers don't want to lower the price of housing - they want to make money, but the higher the cost of housing the more profit they make. For instance, suppose they build 100 apartments in the suburb of X. They know that for every $1k the price of housing in X drops, they lose $100k. So weirdly, they tend to leave housing vacant and sell it at a drip-feed so that they're always selling less houses than there are buyers - there is a huge difference between selling 3 apartments to 4 buyers, vs selling 4 apartments to 4 buyers. This particularly bad when there are few, large developers instead of lots of small developers, as the few large developers can collude to price-fix much easier. Please don't interpret this as contradicting the fact that California needs to massively overhaul its zoning/construction permit system - the fact that it can take years to receive permission instead of weeks is a big reason for the price of housing (and raises capex requirements which results in fewer but larger developers, see previous paragraph). Ditto for all the zoning that mandates exclusively single-family homes, and other such pointless exclusionism.

deleted 3y ago

[deleted]