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You can’t built a “$2k rental”. You can only build a rental that someone will pay for. Landlords are building luxury housing because it’s the only thing that’s

You can’t built a “$2k rental”. You can only build a rental that someone will pay for. Landlords are building luxury housing because it’s the only thing that’s profitable right now due to the immensely ridiculous laws that don’t help people. But if an apartment building popped up in downtown SF charging $800/mo, it’s not like only the low income people would live there. Many people living in $3000/mo apartments also want cheaper apartments, which pushes up the price! So you can’t build “cheap apartments” or “luxury apartments”. Only “apartments”. And lots of them. But if we suddenly built a million “luxury” apartments in each major city, then they couldn’t all charge high prices because there would be a bit of competition for tenants. Prices on the “slightly less luxury but still nice” apartments would have to drop faster.

TheOtherHobbes 3y ago
A non-trivial amount of "property" is speculation at best and concrete money laundering at worst, especially in the largest cities It's not supposed to saleable or rentable. But it does take up land that could be used for real housing. And it also drives up the perceived value - and price - of both rentals and outright buys. Rent control may or may not be a solution. But many of these schemes are run through shady shell companies, and aggressive enforcement of financial reporting and taxation would go some way to fixing the problem.
- Schiendelman 3y ago
  That's the case in any predictably supply restricted market. That behavior completely disappears if you don't restrict supply, because if people can build more housing, housing depreciates - and investors put their money somewhere else because they don't want to lose it.
  - BytesAndGears 3y ago
    This is the key. You can’t have a vacant building charging ridiculous rent because of “speculation” while there are 10 similar buildings nearby that charge half the price and have tenants. No sane investor would fund that
wwweston 3y ago
And which developers are going to build past the point of diminishing marginal returns?
- Schiendelman 3y ago
  Assuming you are actually interested, there are three different things that happen here in housing. Keep in mind you're describing how any commodity continues to have a growing market; you'd just never ask this about consumer goods since you're not used to thinking about how LG or Kohler or Fisher-Price stay in business. 1) Developers want to continue in their business, so they cut costs. This means factory built components, vertical integration, the same things that cut costs in every other industry. Today they have no incentive to actually compete. 2) Without zoning, any privately held land becomes available for housing, so you see completely new business models. A developer builds an entire neighborhood from scratch, for instance - this is how many of our late 1800s / early 1900s neighborhoods happened, before zoning, and they're often some of the best walkable urban centers now. 3) New entrants bring innovative solutions at scale. Modular buildings explode. People come up with shit you cannot possibly think of today.
  - wwweston 3y ago
    > you'd just never ask this about consumer goods since you're not used to thinking about how LG or Kohler or Fisher-Price stay in business. This is actually entirely backwards -- it's much more common for me to hear examples in informal conversation that show some understanding of how producers of household goods might want to avoid oversupply because it drives prices down and volume on smaller margins is a tough game, sometimes well worth the rewards, sometimes with its own undesirable consequences. I literally never hear this from anyone who talks about housing supply, to the point where I'd be willing to bet the majority of people talking about it online are only tangentially familiar with the concept of diminishing marginal returns at all and the other 90% it just never occurred to them it relates. > Today they have no incentive to actually compete. As long as you've got competition you have incentive to compete. Along with the incentive that cutting production costs in the world we have produces greater margins as surely as in some imagined counterfactual world where there's no zoning or something. > Without zoning Without zoning you might get out of having to account to a municipality, but nothing changes about the demand for different kinds of use in a given area or the economics of providing it. > Modular buildings explode. People come up with shit you cannot possibly think of today. because markets, right? Modular design and prefab have been a thing for decades. Where they have advantages, they should (and in some cases are) already thriving.
ryandrake 3y ago
> You can’t built a “$2k rental”. You can only build a rental that someone will pay for. Landlords are building luxury housing because it’s the only thing that’s profitable right now due to the immensely ridiculous laws that don’t help people. That's what I'm asking: Exactly which laws? Nobody seems to be specific.
- antisthenes 3y ago
  The combination of: 1. Land costs 2. Labor costs 3. Material costs 4. Zoning laws 5. Building codes For example some zoning laws have a height restrictions, which limits my development to 3-story buildings, when I would actually want to build a 5-story building For building codes, some would require me to put in $100 breakers, when I could do with simpler $20 breakers, etc. etc. for a LOT of items, which also feeds into the material costs. If you want more specifics than that - open up your county/city website and start reading. It's not up to HN to do the legwork for you.
  - postalrat 3y ago
    You're wrong. Not going to do the legwork to show you how.
    - dang 3y ago
      OK, but please don't post unsubstantive comments here.
- Schiendelman 3y ago
  Lots of people are specific, but it's a HUGE set of laws, and they're slightly different in different places. Like if someone says to you "supply restrictions due to single family zoning", someone else will say "Well Houston doesn't have that", but Houston allows you to sue your neighbor if they cast a shadow on your property, so it's a different method that gets to the same result.
  - afpx 3y ago
jjav 3y ago
> if we suddenly built a million “luxury” apartments in each major city How would you realistically "suddenly" build a million apartments? Is there enough labor in the country to do that? Enough land in each major city? A million is a lot. Some ddging suggests San Francisco has about ~400K housing units, is adding a million realistic? Let alone suddenly? > there would be a bit of competition for tenants But no builder will build apartments that might have to be rented at a loss if the bidding war takes prices too low.

TheOtherHobbes 3y ago

A non-trivial amount of "property" is speculation at best and concrete money laundering at worst, especially in the largest cities It's not supposed to saleable or rentable. But it does take up land that could be used for real housing. And it also drives up the perceived value - and price - of both rentals and outright buys. Rent control may or may not be a solution. But many of these schemes are run through shady shell companies, and aggressive enforcement of financial reporting and taxation would go some way to fixing the problem.

Schiendelman 3y ago
That's the case in any predictably supply restricted market. That behavior completely disappears if you don't restrict supply, because if people can build more housing, housing depreciates - and investors put their money somewhere else because they don't want to lose it.
- BytesAndGears 3y ago
  This is the key. You can’t have a vacant building charging ridiculous rent because of “speculation” while there are 10 similar buildings nearby that charge half the price and have tenants. No sane investor would fund that

wwweston 3y ago

And which developers are going to build past the point of diminishing marginal returns?

Schiendelman 3y ago
Assuming you are actually interested, there are three different things that happen here in housing. Keep in mind you're describing how any commodity continues to have a growing market; you'd just never ask this about consumer goods since you're not used to thinking about how LG or Kohler or Fisher-Price stay in business. 1) Developers want to continue in their business, so they cut costs. This means factory built components, vertical integration, the same things that cut costs in every other industry. Today they have no incentive to actually compete. 2) Without zoning, any privately held land becomes available for housing, so you see completely new business models. A developer builds an entire neighborhood from scratch, for instance - this is how many of our late 1800s / early 1900s neighborhoods happened, before zoning, and they're often some of the best walkable urban centers now. 3) New entrants bring innovative solutions at scale. Modular buildings explode. People come up with shit you cannot possibly think of today.
- wwweston 3y ago
  > you'd just never ask this about consumer goods since you're not used to thinking about how LG or Kohler or Fisher-Price stay in business. This is actually entirely backwards -- it's much more common for me to hear examples in informal conversation that show some understanding of how producers of household goods might want to avoid oversupply because it drives prices down and volume on smaller margins is a tough game, sometimes well worth the rewards, sometimes with its own undesirable consequences. I literally never hear this from anyone who talks about housing supply, to the point where I'd be willing to bet the majority of people talking about it online are only tangentially familiar with the concept of diminishing marginal returns at all and the other 90% it just never occurred to them it relates. > Today they have no incentive to actually compete. As long as you've got competition you have incentive to compete. Along with the incentive that cutting production costs in the world we have produces greater margins as surely as in some imagined counterfactual world where there's no zoning or something. > Without zoning Without zoning you might get out of having to account to a municipality, but nothing changes about the demand for different kinds of use in a given area or the economics of providing it. > Modular buildings explode. People come up with shit you cannot possibly think of today. because markets, right? Modular design and prefab have been a thing for decades. Where they have advantages, they should (and in some cases are) already thriving.

ryandrake 3y ago

> You can’t built a “$2k rental”. You can only build a rental that someone will pay for. Landlords are building luxury housing because it’s the only thing that’s profitable right now due to the immensely ridiculous laws that don’t help people. That's what I'm asking: Exactly which laws? Nobody seems to be specific.

antisthenes 3y ago
The combination of: 1. Land costs 2. Labor costs 3. Material costs 4. Zoning laws 5. Building codes For example some zoning laws have a height restrictions, which limits my development to 3-story buildings, when I would actually want to build a 5-story building For building codes, some would require me to put in $100 breakers, when I could do with simpler $20 breakers, etc. etc. for a LOT of items, which also feeds into the material costs. If you want more specifics than that - open up your county/city website and start reading. It's not up to HN to do the legwork for you.
- postalrat 3y ago
  You're wrong. Not going to do the legwork to show you how.
  - dang 3y ago
    OK, but please don't post unsubstantive comments here.
Schiendelman 3y ago
Lots of people are specific, but it's a HUGE set of laws, and they're slightly different in different places. Like if someone says to you "supply restrictions due to single family zoning", someone else will say "Well Houston doesn't have that", but Houston allows you to sue your neighbor if they cast a shadow on your property, so it's a different method that gets to the same result.
- afpx 3y ago

jjav 3y ago

> if we suddenly built a million “luxury” apartments in each major city How would you realistically "suddenly" build a million apartments? Is there enough labor in the country to do that? Enough land in each major city? A million is a lot. Some ddging suggests San Francisco has about ~400K housing units, is adding a million realistic? Let alone suddenly? > there would be a bit of competition for tenants But no builder will build apartments that might have to be rented at a loss if the bidding war takes prices too low.