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> Adding new housing units at any price point lowers housing costs in the area; This isn't really true in housing. Housing is not a market commodity, it's not

> Adding new housing units at any price point lowers housing costs in the area; This isn't really true in housing. Housing is not a market commodity, it's not priced primarily via supply or demand. Housing is priced based on comparables, quite literally, what is the most expensive thing that sold recently, and how close do we compare to that. In this way, building a fancy new condo building will literally raise prices, even if the number of people remain constant, and even if it "increases the number of the units in the area", because now pricing comparables will get to take the new condo's higher pricing into effect, and things like comparables and federal interest rates have a much higher effect on sales price than traditional supply or demand. To be clear, this is NOT an anti-build argument, we need more housing, the only way to get more is to build it. We just need to be mindful of the real-world consequences of it, new luxury condo construction creates a form of financial "pollution" into that area, and all nearby housing stock will absorb that pollution in higher prices. This is something anyone who cares about affordable housing needs to understand, and plan for.

bombcar 3y ago
Those are just how people work out the actual price to offer; that is almost orthogonal to the actual transaction that occurs. Because otherwise prices could never decline (because comparable could never decline) - but we know that price drops do occur. The biggest issue is that when prices are increasing year over year, it can be hard to tease out that "prices would have been X% higher instead of only Y% if Z, G, and B hadn't happened". Or another way to put it - if you overbuild; prices will drop, because nobody will buy/rent a crappier house/unit right next to a nicer one when both are on the market for the same price - the crappier one has to drop price until competitive, or sit empty. And sure, some people will allow it to sit empty for some time, but eventually carrying costs eat it alive.
runako 3y ago
> it's not priced primarily via supply or demand If you're going to make a claim this strong, you really should provide a better supporting argument. > new luxury condo construction creates a form of financial "pollution" One thing about "luxury" is it's another word for "exclusive." That is relevant because if you flooded an area with "luxury" housing, then the features that define "luxury" would have to change. One can easily see this has happened as buildings that were "luxury" in the 1960s are (unless they have undergone wholesale renovation) no longer considered "luxury." (Two of my favorite luxury amenities are indoor plumbing and A/C.) One can also observe this across American cities. Some "luxury" apartments in NYC are not very expensive in other cities, because the supply & demand are not as out of balance.
tptacek 3y ago
In addition to the strong arguments you've seen in my sibling comments, we know empirically from recent studies that this "financial pollution raising nearby prices" argument (paraphrasing you) is false. The opposite thing occurs. Which is what you'd expect from basic economics!

bombcar 3y ago

Those are just how people work out the actual price to offer; that is almost orthogonal to the actual transaction that occurs. Because otherwise prices could never decline (because comparable could never decline) - but we know that price drops do occur. The biggest issue is that when prices are increasing year over year, it can be hard to tease out that "prices would have been X% higher instead of only Y% if Z, G, and B hadn't happened". Or another way to put it - if you overbuild; prices will drop, because nobody will buy/rent a crappier house/unit right next to a nicer one when both are on the market for the same price - the crappier one has to drop price until competitive, or sit empty. And sure, some people will allow it to sit empty for some time, but eventually carrying costs eat it alive.

runako 3y ago

> it's not priced primarily via supply or demand If you're going to make a claim this strong, you really should provide a better supporting argument. > new luxury condo construction creates a form of financial "pollution" One thing about "luxury" is it's another word for "exclusive." That is relevant because if you flooded an area with "luxury" housing, then the features that define "luxury" would have to change. One can easily see this has happened as buildings that were "luxury" in the 1960s are (unless they have undergone wholesale renovation) no longer considered "luxury." (Two of my favorite luxury amenities are indoor plumbing and A/C.) One can also observe this across American cities. Some "luxury" apartments in NYC are not very expensive in other cities, because the supply & demand are not as out of balance.

tptacek 3y ago

In addition to the strong arguments you've seen in my sibling comments, we know empirically from recent studies that this "financial pollution raising nearby prices" argument (paraphrasing you) is false. The opposite thing occurs. Which is what you'd expect from basic economics!