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This is only possibly correct in situations where you have a surplus of units and lots of vacancies. Any situation where the problem is a shortage of units thos
by snapplebobapple 3y ago
This is only possibly correct in situations where you have a surplus of units and lots of vacancies. Any situation where the problem is a shortage of units those two policies will make it worse by making the math of building more units look worse. What you actually need are policies that make it profitable to offer market units at lower prices profitably from many different suppliers to get both enough supply on the market as well as that supply being from enough different suppliers that they compete the prices down rather than abusing oligopoly market power to capture more profit for themselves.
Example policies:
- Get rid of most categories of residential zoning into one or two zones and have the least dense zone allow for high density while also allowing people to choose to build less dense (i.e. one zone that allows up to 80% lot coverage and six stories and one for more dense than that).
- Set tight turn around times for development and building permits and switch them from default not approved to default approved unless the city makes a valid case from a very short list of potential reasons. Basically make it impossible to not approve something very quickly that fits within the new zoning guidelines.
- Set tight timeline requirements for all construction inspections to keep the construction process moving.
- taxing land based on maximum allowed construction rather than what is there would making holding vacant land and not building way more costly, which should spur development. It would also make it dramatically cheaper to do assessments since all that will matter is lot square footage and general area for the purpose of assessment.
- Enforce antitrust law so that no one can own enough units in any area to have market power. If you want to be a large REIT you will need to diversify geographically.
There's a bunch more nuance to this than I have outlined above but this is turning into a novel already so I will end it here.
- pydry 3y ago>Any situation where the problem is a shortage of units those two policies will make it worse by making the math of building more units look worse. That doesn't make any economic sense whatsoever. Rent control on 3 units doesn't make it less profitable to build 6 if you can build 6. That would still make 6 lots of rent instead of 3. That equals more profit. It actually creates an incentive to build MORE units because with rent control and higher property taxes they won't make profits from building enormous luxury apartments that function as gold-bar-like store of value for people who have ungodly amounts of cash. Beware the construction industry propaganda - they want policies that boost their profits, NOT policies which will enforce the market discipline on them they need to make them build more units in a higher density. I can see from your response that you've picked some of it up...