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Really? That’s fascinating because there’s an explosion of apartments in my metro and rents have went… up! So I’m sure in whatever fairytale Econ 101 world you

Really? That’s fascinating because there’s an explosion of apartments in my metro and rents have went… up! So I’m sure in whatever fairytale Econ 101 world you live in that’s the case, but not in the real world. The amount of housing deficit we have in the United States will never be aided by building more apartments.

DoughnutHole 3y ago
If the demand for housing increases faster than the supply increases then yes prices will still go up. They just go up less than they would if supply hadn’t increased. Even the cities in the US that are building aren’t building nearly fast enough.
- mlrtime 3y ago
  In desirable areas, the new buildings create new demand AND supply. It doesn't ever balance.
  - deleted 3y ago
    [deleted]
SamoyedFurFluff 3y ago
Wait. Im super confused. If building more housing doesn’t help with a lack of housing, what does? Genuinely asking. I know it’s more complicated than “just build housing bro” but I’ve never heard of a policy that says don’t build any new housing?!
- lumost 3y ago
  If the only places that get built are up-market. Then wherever they get built rents will rise… this makes it challenging to support blanket construction proposals unless you as an individual own, or can afford top-of-market rent.
  - SamoyedFurFluff 3y ago
    Then isn’t the solution still building more?? I’m so, so confused here!
    - lumost 3y ago
      Unfortunately, this is where micro and macro economics diverge. If you take the position that housing will likely always be underbuilt and any new construction in your area will lead to higher rents. Then supporting construction just means higher rent a for you - without any benefit. If we ever actually built enough, then as an individual you should be able to move to a better/cheaper apartment when new construction happens. This hasn't happened in the last 20+ years of urban development.
jvanderbot 3y ago
There may be a time delay for the effect to be felt. But more directly (excuse my directness) building a nice new apt building in your area may actually increase rent in your area. But it may decrease rent in other areas, as people move into your area. Weather is not climate, and your neighborhood is not "The Economy". And in general, we should expect rents to increase over time, but hopefully at a much slower rate as we build more.
- andrewmcwatters 3y ago
  This is as stupid as saying people aren’t traffic.
  - jvanderbot 3y ago
    I think there's a third party here that you're actually talking to, not me.
NikolaNovak 3y ago
>>The amount of housing deficit we have in the United States will never be aided by building more apartments Then... How? What are we missing? :) Also. We have to be careful of causation VS correlation VS confounding factors. I. E. If your area was undergoing gentrification and That's why developers built more apartments, that's the true explanation for rise in prices. And still those apartments in your area may have relieved pressure somewhere else! Going from one specific personal experience to global math is tempting but tricky.
ericd 3y ago
The thing you’re not seeing is a)how much pent-up demand there is. b)how many people are moving in daily. It might look like there’s a lot of housing going up, but if there were 1.5x that many households trying to move in during the same time period, it would still be getting bid up (and more roommate situations allowing higher bids - we used to share a 3BR 3 ways, but now we’re all making good money and have split into 3 homes). Most cities have been massively under building, compared to the number of new residents coming in, for a very long time. There’s been a tsunami of people moving from rural to urban areas, while residents have been resisting change. You’re not going to fix that with 10 new towers per year.
amyres 3y ago
There's a fallacy going on with this kind of anecdote (observing both increases in housing and increases in pricing concurrently), namely not being able to observe the counterfactual of NOT adding housing (but keeping all other socio-economic factors constant). What would go on with rent in that scenario? Yes, rents are going up today... but it's quite possible they would be going up MORE (on average) if the new housing wasn't being added. Unfortunately, not many Randomized Control Trials for housing economics. Housing developers are incentivized to select locations for projects that will serve increasing rents, increasing population, increasing incomes, etc. They spend a lot of effort on understanding demographic and economic trends. Projects are often 3-4 years from conception to delivery. The causal chain is essentially: Do Market Research -> Select Project Type/Location Expected to Outperform (Financially) -> Build Housing (Hopefully Where Rents Go Up) -> Make $$. The observed concurrency of More Housing and Higher Rents is actually a "Thesis Proven Correct" thing from the perspective of the investors, lenders, etc. But the causality (more housing CAUSES higher rents) isn't quite as simple as outside observers sometimes think it is. FWIW, there are real problems with having most of the housing creation/provision mediated through this profit motive. Developers stop producing housing once the profit expectations decrease to the point that capital is expected to achieve higher returns in other asset classes (capital is mobile, it will flee the asset class if there are better opportunities elsewhere). This point of slowing/stopping housing creation (at the margin) is often far short of what most people would consider socially optimal. But that's the logic of capitalism. I'm simply approaching this more from a "how things are" perspective not a "how things should be" perspective. Disclosure: I'm a tech/stats/finance guy turned real estate developer

DoughnutHole 3y ago

If the demand for housing increases faster than the supply increases then yes prices will still go up. They just go up less than they would if supply hadn’t increased. Even the cities in the US that are building aren’t building nearly fast enough.

mlrtime 3y ago
In desirable areas, the new buildings create new demand AND supply. It doesn't ever balance.
- deleted 3y ago
  [deleted]

SamoyedFurFluff 3y ago

Wait. Im super confused. If building more housing doesn’t help with a lack of housing, what does? Genuinely asking. I know it’s more complicated than “just build housing bro” but I’ve never heard of a policy that says don’t build any new housing?!

lumost 3y ago
If the only places that get built are up-market. Then wherever they get built rents will rise… this makes it challenging to support blanket construction proposals unless you as an individual own, or can afford top-of-market rent.
- SamoyedFurFluff 3y ago
  Then isn’t the solution still building more?? I’m so, so confused here!
  - lumost 3y ago
    Unfortunately, this is where micro and macro economics diverge. If you take the position that housing will likely always be underbuilt and any new construction in your area will lead to higher rents. Then supporting construction just means higher rent a for you - without any benefit. If we ever actually built enough, then as an individual you should be able to move to a better/cheaper apartment when new construction happens. This hasn't happened in the last 20+ years of urban development.

jvanderbot 3y ago

There may be a time delay for the effect to be felt. But more directly (excuse my directness) building a nice new apt building in your area may actually increase rent in your area. But it may decrease rent in other areas, as people move into your area. Weather is not climate, and your neighborhood is not "The Economy". And in general, we should expect rents to increase over time, but hopefully at a much slower rate as we build more.

andrewmcwatters 3y ago
This is as stupid as saying people aren’t traffic.
- jvanderbot 3y ago
  I think there's a third party here that you're actually talking to, not me.

NikolaNovak 3y ago

>>The amount of housing deficit we have in the United States will never be aided by building more apartments Then... How? What are we missing? :) Also. We have to be careful of causation VS correlation VS confounding factors. I. E. If your area was undergoing gentrification and That's why developers built more apartments, that's the true explanation for rise in prices. And still those apartments in your area may have relieved pressure somewhere else! Going from one specific personal experience to global math is tempting but tricky.

ericd 3y ago

The thing you’re not seeing is a)how much pent-up demand there is. b)how many people are moving in daily. It might look like there’s a lot of housing going up, but if there were 1.5x that many households trying to move in during the same time period, it would still be getting bid up (and more roommate situations allowing higher bids - we used to share a 3BR 3 ways, but now we’re all making good money and have split into 3 homes). Most cities have been massively under building, compared to the number of new residents coming in, for a very long time. There’s been a tsunami of people moving from rural to urban areas, while residents have been resisting change. You’re not going to fix that with 10 new towers per year.

amyres 3y ago

There's a fallacy going on with this kind of anecdote (observing both increases in housing and increases in pricing concurrently), namely not being able to observe the counterfactual of NOT adding housing (but keeping all other socio-economic factors constant). What would go on with rent in that scenario? Yes, rents are going up today... but it's quite possible they would be going up MORE (on average) if the new housing wasn't being added. Unfortunately, not many Randomized Control Trials for housing economics. Housing developers are incentivized to select locations for projects that will serve increasing rents, increasing population, increasing incomes, etc. They spend a lot of effort on understanding demographic and economic trends. Projects are often 3-4 years from conception to delivery. The causal chain is essentially: Do Market Research -> Select Project Type/Location Expected to Outperform (Financially) -> Build Housing (Hopefully Where Rents Go Up) -> Make $$. The observed concurrency of More Housing and Higher Rents is actually a "Thesis Proven Correct" thing from the perspective of the investors, lenders, etc. But the causality (more housing CAUSES higher rents) isn't quite as simple as outside observers sometimes think it is. FWIW, there are real problems with having most of the housing creation/provision mediated through this profit motive. Developers stop producing housing once the profit expectations decrease to the point that capital is expected to achieve higher returns in other asset classes (capital is mobile, it will flee the asset class if there are better opportunities elsewhere). This point of slowing/stopping housing creation (at the margin) is often far short of what most people would consider socially optimal. But that's the logic of capitalism. I'm simply approaching this more from a "how things are" perspective not a "how things should be" perspective. Disclosure: I'm a tech/stats/finance guy turned real estate developer