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Under utilization can be measured as a factor of the vacancy rate; which influences both home pricing and rental pricing. Here in Canada, the desirable places

Under utilization can be measured as a factor of the vacancy rate; which influences both home pricing and rental pricing. Here in Canada, the desirable places to live all have relatively low vacancy rates for residential housing, and have for quite some time. Ie, it's rare to see cities with vacancy rates for apartments exceeding 3%, let alone a healthy 5%.[0] The CMHC estimates that by 2030 we will need 3.5M additional homes beyond the expected number to be produced.[1] The PBO has come up with similar numbers; roughly speaking, Canada needs to complete a new home every 50 seconds just to maintain current price levels. There's much gnashing of teeth up here over our housing crisis, and it's clear to me that it's a multi-factor concern[2]. While there simply exists much more demand than the supply can service, the reasons for low supply are many and complicated. There are the obvious zoning and infrastructure issues; we don't build for mid and high density nearly enough, and we rely too heavily on cars. There's the labour supply issue the politicians focus on. But most unnerving, to me, is the suggestion that we simply do not have the capacity to produce or source the raw materials necessary in construction. 0: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3410012701 https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=341001... 1: https://www.cmhc-schl.gc.ca/blog/2023/estimating-how-much-housing-we-need-by-2030 https://www.cmhc-schl.gc.ca/blog/2023/estimating-how-much-ho... 2: https://thoughtleadership.rbc.com/the-great-rebuild-seven-ways-to-fix-canadas-housing-shortage/ https://thoughtleadership.rbc.com/the-great-rebuild-seven-wa...

Retric 2y ago
Vacancy rates should be lower where the total inventory increases and people’s ability to predict the market increases. That’s also going to be places people want to live. Consider a city of 10 million people vs 1,000 small towns of 10k people. The variability for demand in those small towns is higher and vacancy rates can’t drop below zero. So some towns hit 0 while others might be 20%. But in a city if some apartment complex is full people just go to the apartment down the street.
- derlvative 2y ago
  This is a lot of mental gymnastics to pretend people don't need places to live. More people are born, hence more housing is needed.
  - suoduandao3 2y ago
    but it's not necessarily needed in dense urban centers. Plenty of laptop class people could secure housing in rural areas for a fraction of the cost of what they're paying now.
    - b112 2y ago
      One of the many things contributing to pricing, is that not enough road corridors are being built or widened. It's harder live further out, when traffic slowdowns extend commute time 10x. And governments love the idea that expensive roads can be waved away using environmentalism as an reason. Yet these same governments don't build fast transit either, and without fast amd efficient transit, trips take far far longer than a car. At this stage we should be building both, as we're that far behind.
      - hindsightbias 2y ago
        Why would the laptop class need to commute?
        b112 2y ago
        I didn't say they would. The point is, there is a move for 'dense urban areas'. Pack 'em in. Increase that housing density. Yet there is another way in North America, where there is often an endless bounty of space. Better transportation corridors. Better transportation corridors means that housing costs plateau, because it's just easier to drive 10 minutes more, 20 minutes more, than spend 4x for housing. That said, even the laptop class often does need to commute: * Many remote workers have to attend once a week, or more often. * People make lives, friends, contacts, have relatives in specific areas. * Every once in a while, you may need to go to "the city" for something important. Medical treatment or specialists, specialty products, etc. Not everything can be shipped, or is shipped. Anyhow, it seems you sort of missed the point, that is... the faster you can get into a city, the further you can live from the city and still be part of it. This reduces housing value close/in the city.
- bobthepanda 2y ago
  5pc is considered the healthy level of vacancy because some apartments are always free as people move in and out. It’s similar to how totally full employment is actually a sign of a labor shortage.
  - Retric 2y ago
    Sure but on average Americans move once every ~7 years on average. A 5% vacancy rate would be ~4.2 months between owners/tenants which seems unnecessarily high. Most apartment complexes I was at could turn them over in a few weeks if someone wanted to move in. So 5% would seemingly represent a significant economic inefficiency. 3% may represent local shortages as Santa Monica is more desired than West Adams etc. So increasing availability in undesirable places may not reduce rents in general.
    - bobthepanda 2y ago
      The 5% is a sliding window. Some of those have just opened up, some of those are about to close at any given time. And it also represents all buildings, from super in demand complexes to slower moving listings, and is a rule of thumb that also aggregates seasonal differences. In aggregate, 5-7% seems to be a sweet spot where landlords can find tenants in a reasonable amount of time and tenants are not scrambling to send out a dozen applications a week.
      - Retric 2y ago
        I moved around a lot and the majority of the time I signed a lease it was 1+ months out for an apartment that was still occupied. Having some availability right now is definitely beneficial as stuff can happen, but current housing stock just wasn’t what I was looking at basically ever. Though I agree less desirable locations should definitely increase the average, as should purchases vs rentals etc. It’s just 3% is already including a lot of mandatory time from cleaning, painting walls, replacing carpets, etc. So prices could fall heavily at a sustained 4% long before you hit the 5-7% range.
        2y ago
materielle 2y ago
Why is the vacancy rate so low in desirable neighborhoods? Is it that there isn’t enough housing period, in the entire country. Or is it is people and investments abandoning rural areas in favor of a handful of city neighborhoods? I’m also curious if those vacancy rates can be / have incentive to be gamed by the homeowners, or otherwise don’t paint a very accurate picture. I lived in a wealthy part of NYC for a while, and my apartment faced a courtyard on the interior of the block. As a result, I could see into the windows of 100s of apartments of 3 adjacent buildings. Only maybe like 5 out of 100s of apartments consistently had someone living in them. This reflects my feeling on the street: the streets were empty, especially given the relative density of the apartment buildings. I know this is anecdotal evidence, but everyone I know that lives in NYC has the same observation. I wish scientists and experts would take these concerns seriously and research by this gap in perception and the reported vacancy rate is so different.
- ch4s3 2y ago
  > Only maybe like 5 out of 100s of apartments consistently had someone living in them. I would be highly surprised if this were true. I lived in NYC for year and the myth of tons of empty units is pernicious and just won't die. There has been a TON of research on this topic and it all points to there being a huge shortage of housing in the city. As a percentage of total housing stock vacant units make up a fraction of a fraction of a percent.
  - the_mar 2y ago
    Anecdotally, my apartment building has 0% vacancy rate. And a newer building across the street has at least 10 apartments vacant for the most of the year. Anecdotally, i know quite a few boomers that own multiple properties (>3) in manhattan, some of which they rent some of which they keep vacant for when they want to come to the city I feel like at least some % of apartments in the city are visibly vacant most of the time because they are just part time homes for the wealthy.
    - ch4s3 2y ago
      The research for this does account for pied-à-terres, which do exist in some number but are a tiny fraction of he total and mainly exist in a handful of Manhattan neighborhoods. There are only about 10K of these in NYC[1] which is 0.27% of the 3,644,000 total housing units in the city. This just doesn't seem like a real problem when the rental vacancy rate is shockingly 1.4%[2] (of the 2,183,064 total rental units). [1] https://www.brickunderground.com/buy/what-is-a-nyc-pied-a-terre-bricktionary https://www.brickunderground.com/buy/what-is-a-nyc-pied-a-te... [2] https://www.nyc.gov/site/hpd/news/007-24/new-york-city-s-vacancy-rate-reaches-historic-low-1-4-percent-demanding-urgent-action-new#/0 https://www.nyc.gov/site/hpd/news/007-24/new-york-city-s-vac...

Retric 2y ago

Vacancy rates should be lower where the total inventory increases and people’s ability to predict the market increases. That’s also going to be places people want to live. Consider a city of 10 million people vs 1,000 small towns of 10k people. The variability for demand in those small towns is higher and vacancy rates can’t drop below zero. So some towns hit 0 while others might be 20%. But in a city if some apartment complex is full people just go to the apartment down the street.

derlvative 2y ago
This is a lot of mental gymnastics to pretend people don't need places to live. More people are born, hence more housing is needed.
- suoduandao3 2y ago
  but it's not necessarily needed in dense urban centers. Plenty of laptop class people could secure housing in rural areas for a fraction of the cost of what they're paying now.
  - b112 2y ago
    One of the many things contributing to pricing, is that not enough road corridors are being built or widened. It's harder live further out, when traffic slowdowns extend commute time 10x. And governments love the idea that expensive roads can be waved away using environmentalism as an reason. Yet these same governments don't build fast transit either, and without fast amd efficient transit, trips take far far longer than a car. At this stage we should be building both, as we're that far behind.
    - hindsightbias 2y ago
      Why would the laptop class need to commute?
      - b112 2y ago
        I didn't say they would. The point is, there is a move for 'dense urban areas'. Pack 'em in. Increase that housing density. Yet there is another way in North America, where there is often an endless bounty of space. Better transportation corridors. Better transportation corridors means that housing costs plateau, because it's just easier to drive 10 minutes more, 20 minutes more, than spend 4x for housing. That said, even the laptop class often does need to commute: * Many remote workers have to attend once a week, or more often. * People make lives, friends, contacts, have relatives in specific areas. * Every once in a while, you may need to go to "the city" for something important. Medical treatment or specialists, specialty products, etc. Not everything can be shipped, or is shipped. Anyhow, it seems you sort of missed the point, that is... the faster you can get into a city, the further you can live from the city and still be part of it. This reduces housing value close/in the city.
bobthepanda 2y ago
5pc is considered the healthy level of vacancy because some apartments are always free as people move in and out. It’s similar to how totally full employment is actually a sign of a labor shortage.
- Retric 2y ago
  Sure but on average Americans move once every ~7 years on average. A 5% vacancy rate would be ~4.2 months between owners/tenants which seems unnecessarily high. Most apartment complexes I was at could turn them over in a few weeks if someone wanted to move in. So 5% would seemingly represent a significant economic inefficiency. 3% may represent local shortages as Santa Monica is more desired than West Adams etc. So increasing availability in undesirable places may not reduce rents in general.
  - bobthepanda 2y ago
    The 5% is a sliding window. Some of those have just opened up, some of those are about to close at any given time. And it also represents all buildings, from super in demand complexes to slower moving listings, and is a rule of thumb that also aggregates seasonal differences. In aggregate, 5-7% seems to be a sweet spot where landlords can find tenants in a reasonable amount of time and tenants are not scrambling to send out a dozen applications a week.
    - Retric 2y ago
      I moved around a lot and the majority of the time I signed a lease it was 1+ months out for an apartment that was still occupied. Having some availability right now is definitely beneficial as stuff can happen, but current housing stock just wasn’t what I was looking at basically ever. Though I agree less desirable locations should definitely increase the average, as should purchases vs rentals etc. It’s just 3% is already including a lot of mandatory time from cleaning, painting walls, replacing carpets, etc. So prices could fall heavily at a sustained 4% long before you hit the 5-7% range.
      - 2y ago

materielle 2y ago

Why is the vacancy rate so low in desirable neighborhoods? Is it that there isn’t enough housing period, in the entire country. Or is it is people and investments abandoning rural areas in favor of a handful of city neighborhoods? I’m also curious if those vacancy rates can be / have incentive to be gamed by the homeowners, or otherwise don’t paint a very accurate picture. I lived in a wealthy part of NYC for a while, and my apartment faced a courtyard on the interior of the block. As a result, I could see into the windows of 100s of apartments of 3 adjacent buildings. Only maybe like 5 out of 100s of apartments consistently had someone living in them. This reflects my feeling on the street: the streets were empty, especially given the relative density of the apartment buildings. I know this is anecdotal evidence, but everyone I know that lives in NYC has the same observation. I wish scientists and experts would take these concerns seriously and research by this gap in perception and the reported vacancy rate is so different.

ch4s3 2y ago
> Only maybe like 5 out of 100s of apartments consistently had someone living in them. I would be highly surprised if this were true. I lived in NYC for year and the myth of tons of empty units is pernicious and just won't die. There has been a TON of research on this topic and it all points to there being a huge shortage of housing in the city. As a percentage of total housing stock vacant units make up a fraction of a fraction of a percent.
- the_mar 2y ago
  Anecdotally, my apartment building has 0% vacancy rate. And a newer building across the street has at least 10 apartments vacant for the most of the year. Anecdotally, i know quite a few boomers that own multiple properties (>3) in manhattan, some of which they rent some of which they keep vacant for when they want to come to the city I feel like at least some % of apartments in the city are visibly vacant most of the time because they are just part time homes for the wealthy.
  - ch4s3 2y ago
    The research for this does account for pied-à-terres, which do exist in some number but are a tiny fraction of he total and mainly exist in a handful of Manhattan neighborhoods. There are only about 10K of these in NYC[1] which is 0.27% of the 3,644,000 total housing units in the city. This just doesn't seem like a real problem when the rental vacancy rate is shockingly 1.4%[2] (of the 2,183,064 total rental units). [1] https://www.brickunderground.com/buy/what-is-a-nyc-pied-a-terre-bricktionary https://www.brickunderground.com/buy/what-is-a-nyc-pied-a-te... [2] https://www.nyc.gov/site/hpd/news/007-24/new-york-city-s-vacancy-rate-reaches-historic-low-1-4-percent-demanding-urgent-action-new#/0 https://www.nyc.gov/site/hpd/news/007-24/new-york-city-s-vac...