4 ms·

Housing is fungible. If you produce luxury housing, then that reduces pressure on existing upper-mid housing, and reducing pressure on upper-mid housing in tur

Housing is fungible. If you produce luxury housing, then that reduces pressure on existing upper-mid housing, and reducing pressure on upper-mid housing in turn reduces pressure on lower-mid housing, etc.

pests 3y ago
source?
- Analemma_ 3y ago
  https://escholarship.org/content/qt5d00z61m/qt5d00z61m.pdf https://escholarship.org/content/qt5d00z61m/qt5d00z61m.pdf is a PDF rounding up multiple observational studies confirming that new market-rate housing decreases rents in the nearby area. One of those (Mast 2019) specifically tracked individual persons to confirm that the mechanism of action is the wealthiest tenants moving into the new building and freeing up units in the slightly-older buildings, where slightly-less wealthy tenants then move in from even older buildings, etc., lowering rents all down the chain.
  - pests 3y ago
    Isn't this just trickle down housing? If the goal is to lower rents down the chain, why not just build more units at every price point? That way everyone, not just the wealthiest, will get new units and not be subjected to old stock in potentially older / worse neighborhoods.
    - Analemma_ 3y ago
      > If the goal is to lower rents down the chain, why not just build more units at every price point? Because zoning prevents that. This is a highly-idealized thought experiment, but imagine a housing market where there's demand for 100 luxury units, 100 cheaper semi-luxury units, 100 still-cheaper middle-class wage earner units, and 100 cheap working-class units. Then imagine that local zoning regulations will only permit 100 new units to be built, and more that that will prompt voter revolt. Which 100 units will be built? Only the luxury ones, obviously. Nobody's going to build cheaper units if it's a mutually-exclusive choice between building cheap ones and the expensive ones. Zoning is why you only see expensive new housing get built: it restricts how much can be built, so developers respond by only building that which gives them maximum returns. You know how quarterly sprint planning for software takes every feature request, orders them by priority, and then draws a line under how many man-hours worth of work your team can do? Developers do the same thing: they rank development proposals by profitability and then draw a cutoff line under what current zoning will let them do. Loosen these requirements and just let people supply the required demand, and you'll start seeing the units at every price point that you want.
crote 3y ago
Unfortunately a decent fraction of luxury housing isn't actually used to live in - it is viewed primarily as an investment. And luxury housing becoming available doesn't suddenly make it affordable to people living in mid-segment houses either.
- wkat4242 3y ago
  Yeah this sounds like Reagan's old trickle-down fallacy in a new coat of paint
- Analemma_ 3y ago
  The "decent fraction" is totally false. This is pretty much only true in Manhattan and London, and even then only among big flagship projects like 432 Park Ave. Everywhere else, new construction gets filled. It's completely fallacious to use one or two white elephant projects in one borough of NYC to talk about housing in general. Instead, use the multiple observational studies of multiple cities I posted below the sibling comment to confirm that new housing does empirically decrease rents.
redprince 3y ago
Who hasn't heard of the famous trickle down effect in housing... Where I live, building affordable housing for low and medium income is at the moment financially unattractive, so it isn't undertaken in the numbers required to meet projected demand. Offering luxury housing for the small segment of the population able to afford it, won't make a difference. https://www.reuters.com/markets/europe/german-housing-shortage-hits-highest-level-20-years-zia-2023-02-14/ https://www.reuters.com/markets/europe/german-housing-shorta... https://www.reuters.com/markets/europe/german-home-building-permits-plunge-industry-calls-stimulus-2023-09-18/ https://www.reuters.com/markets/europe/german-home-building-...
- sokoloff 3y ago
  Won't make any difference at all? Or won't make enough of a difference for you to care about (or to support) it? To the extent that someone in a less expensive form of housing vacates it to take newly built luxury housing, it seems like the marginal effect from that luxury unit existing is to increase the supply of total housing and of more moderately priced housing by exactly one unit. (To the extent that new luxury housing exclusively attracts outsiders to migrate into the city who otherwise wouldn't, it doesn't help. I doubt that this exclusivity holds.)
zuminator 3y ago
I get what you're trying to say but parenthetically that's not really what fungible means. Fungibility implies interchangeability. Every dollar is the same as every other dollar. Every gallon of water is the same as every other gallon of water. Luxury housing by definition is not fungible with low-cost housing. The concept you're trying to describe is called "filtering."[0] In any event, abundant housing is essential to filtering taking place. If there is scarcity, for example, if there's already a pent up demand for luxury units, then those units can be quickly occupied without anybody vacating the older units, and then the price won't go down. It might even go up if low-cost housing was torn down to make room for the luxury units. [0] https://en.wikipedia.org/wiki/Filtering_(housing) https://en.wikipedia.org/wiki/Filtering_(housing)
- aetherson 3y ago
  I suppose the technical term is that one house is substitutable for another house. But I think that the fungibility of housing -- while by no means perfect or absolute -- gets at the core of the concept. It's like when you target funds in a large organization. Yes, your $100 donation goes to, say, fund program X, but money is fungible and the org can just pull $100 of its general funds out of program X and put it in program Y. Housing is of course less perfectly fungible than dollars, but at the end of the day almost all units of housing house one (1) household, and that household needed somewhere to go, and using this unit of housing for this household frees up more housing for another household.

pests 3y ago

source?

Analemma_ 3y ago
https://escholarship.org/content/qt5d00z61m/qt5d00z61m.pdf https://escholarship.org/content/qt5d00z61m/qt5d00z61m.pdf is a PDF rounding up multiple observational studies confirming that new market-rate housing decreases rents in the nearby area. One of those (Mast 2019) specifically tracked individual persons to confirm that the mechanism of action is the wealthiest tenants moving into the new building and freeing up units in the slightly-older buildings, where slightly-less wealthy tenants then move in from even older buildings, etc., lowering rents all down the chain.
- pests 3y ago
  Isn't this just trickle down housing? If the goal is to lower rents down the chain, why not just build more units at every price point? That way everyone, not just the wealthiest, will get new units and not be subjected to old stock in potentially older / worse neighborhoods.
  - Analemma_ 3y ago
    > If the goal is to lower rents down the chain, why not just build more units at every price point? Because zoning prevents that. This is a highly-idealized thought experiment, but imagine a housing market where there's demand for 100 luxury units, 100 cheaper semi-luxury units, 100 still-cheaper middle-class wage earner units, and 100 cheap working-class units. Then imagine that local zoning regulations will only permit 100 new units to be built, and more that that will prompt voter revolt. Which 100 units will be built? Only the luxury ones, obviously. Nobody's going to build cheaper units if it's a mutually-exclusive choice between building cheap ones and the expensive ones. Zoning is why you only see expensive new housing get built: it restricts how much can be built, so developers respond by only building that which gives them maximum returns. You know how quarterly sprint planning for software takes every feature request, orders them by priority, and then draws a line under how many man-hours worth of work your team can do? Developers do the same thing: they rank development proposals by profitability and then draw a cutoff line under what current zoning will let them do. Loosen these requirements and just let people supply the required demand, and you'll start seeing the units at every price point that you want.

crote 3y ago

Unfortunately a decent fraction of luxury housing isn't actually used to live in - it is viewed primarily as an investment. And luxury housing becoming available doesn't suddenly make it affordable to people living in mid-segment houses either.

wkat4242 3y ago
Yeah this sounds like Reagan's old trickle-down fallacy in a new coat of paint
Analemma_ 3y ago
The "decent fraction" is totally false. This is pretty much only true in Manhattan and London, and even then only among big flagship projects like 432 Park Ave. Everywhere else, new construction gets filled. It's completely fallacious to use one or two white elephant projects in one borough of NYC to talk about housing in general. Instead, use the multiple observational studies of multiple cities I posted below the sibling comment to confirm that new housing does empirically decrease rents.

redprince 3y ago

Who hasn't heard of the famous trickle down effect in housing... Where I live, building affordable housing for low and medium income is at the moment financially unattractive, so it isn't undertaken in the numbers required to meet projected demand. Offering luxury housing for the small segment of the population able to afford it, won't make a difference. https://www.reuters.com/markets/europe/german-housing-shortage-hits-highest-level-20-years-zia-2023-02-14/ https://www.reuters.com/markets/europe/german-housing-shorta... https://www.reuters.com/markets/europe/german-home-building-permits-plunge-industry-calls-stimulus-2023-09-18/ https://www.reuters.com/markets/europe/german-home-building-...

sokoloff 3y ago
Won't make any difference at all? Or won't make enough of a difference for you to care about (or to support) it? To the extent that someone in a less expensive form of housing vacates it to take newly built luxury housing, it seems like the marginal effect from that luxury unit existing is to increase the supply of total housing and of more moderately priced housing by exactly one unit. (To the extent that new luxury housing exclusively attracts outsiders to migrate into the city who otherwise wouldn't, it doesn't help. I doubt that this exclusivity holds.)

zuminator 3y ago

I get what you're trying to say but parenthetically that's not really what fungible means. Fungibility implies interchangeability. Every dollar is the same as every other dollar. Every gallon of water is the same as every other gallon of water. Luxury housing by definition is not fungible with low-cost housing. The concept you're trying to describe is called "filtering."[0] In any event, abundant housing is essential to filtering taking place. If there is scarcity, for example, if there's already a pent up demand for luxury units, then those units can be quickly occupied without anybody vacating the older units, and then the price won't go down. It might even go up if low-cost housing was torn down to make room for the luxury units. [0] https://en.wikipedia.org/wiki/Filtering_(housing) https://en.wikipedia.org/wiki/Filtering_(housing)

aetherson 3y ago
I suppose the technical term is that one house is substitutable for another house. But I think that the fungibility of housing -- while by no means perfect or absolute -- gets at the core of the concept. It's like when you target funds in a large organization. Yes, your $100 donation goes to, say, fund program X, but money is fungible and the org can just pull $100 of its general funds out of program X and put it in program Y. Housing is of course less perfectly fungible than dollars, but at the end of the day almost all units of housing house one (1) household, and that household needed somewhere to go, and using this unit of housing for this household frees up more housing for another household.