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Only building more housing will make housing cheaper. It's remarkable how some cities will do literally anything but that, probably because they know it will w

by api 2y ago

Only building more housing will make housing cheaper. It's remarkable how some cities will do literally anything but that, probably because they know it will work and they're controlled by property owners.

mtts 2y ago
True, but while they're not building more housing at least in this case they're making it so the people who do have a house to live in don't have to contend with it being surrounded by hotels.
chasebank 2y ago
That's not true. You can heavily tax single family homes that are not owner occupied, for instance. This debate ends in the same way as always. It's a bit of everything. Nightly rentals, REITs, build more, yada yada yada...
- _yb2s 2y ago
  That would make buying houses cheaper, but would probably make housing in general more expensive- and less accessible to people that can’t get or afford a home loan. Ultimately if there is too much demand, nothing but more supply will make housing affordable.
  - rickydroll 2y ago
    More housing only slows the rate of housing inflation. Making housing affordable means raising wages or subsidizing rent so that worker rental costs 1/3 of their wages. "Affordable" housing is not a magic number; it's a ratio as defined by financial "experts." It's usually one-third of your net or gross income, depending on the advisor you talk to.
    - _yb2s 2y ago
      Supply and demand is the main factor that affects the price of anything. No amount of subsidies, wage changes, etc. will have any effect on a physical problem of having not enough houses for the population in an area. If you subsidize rent or raise wages that will further increase demand and make prices go even higher. Think of an extreme example- take a town with 20k families and only 10k houses. Now setup some program where many of those houses are part of an affordable housing program with a price cap. This changes basically nothing because only a few lucky people will get them, the rest will still be unhoused or move. This is literally the exact situation in most small USA west coast college towns like Davis- where the city government will do anything to make housing more affordable except construction- and we can see that none of it works. I was using the standard English language definition of the word affordable, which is qualitative and has no specific quantitative definition.
      - rickydroll 2y ago
        I was using the economist's definition of affordable housing, which is that only 1/3 of your income is consumed by housing. If a term isn't quantifiable, then it's useless for making plans. You are right that if there is a market where the scarcity is caused by insufficient supply, building more slow costs increases. But there is a point where the costs of the product cannot be cut anymore. The more you produce it will not be cheaper. Let's take another extreme example. Start with the city of 10,000 people. A developer razes the city center and rebuilds with very dense housing capable of housing 10,500 people. Is the cost of housing cheaper because of those extra 500 units? The answer is no; they would increase the cost of all the other units. Why? Someone has to pay for the materials, labor, and profit. If someone is not renting those units, the cost of creating those units is now spread among all the other units. The core question is how to lower the cost of the unit. Building more once you satisfy demand is not the answer. Building more expensive units frees up cheaper units if and only if enough people can afford them and move into them. But the cheaper units are not going to drop in cost. They will rent for at least the same price. It's important to acknowledge a couple of truisms. Demand for urban space will grow, and landlords will do everything to minimize expenses and maximize profits. There will never be enough housing to meet the demand. The question is how far behind demand is the housing production rate
solardev 2y ago
Even if more housing is built, I see some areas that are purposefully optimizing for short term rentability, meaning building luxury vacation homes in resort-like areas, instead of generic housing for the masses. More housing doesn't necessarily mean more affordable housing. And I don't even mean section 8, just units that two median wage earners (outside of tech) could potentially afford together.
- kccqzy 2y ago
  Not just that but I also resent the fact that many modern apartment buildings are "luxury" apartments that come with a gym, a pool, a coworking space, a garden and whatnot. I don't care about these amenities. Renting these places makes me think I'm wasting part of my rent on these amenities that I'll never use.
- alexpetralia 2y ago
  But actually, it does, because more housing supply (even on the high end) means fewer higher earners are forced to bid up generic housing for the masses. On the other hand, refusing to build any housing at all (for whatever the reason is: too unaffordable, too gentrified, too out-of-place) means those high earners will live in generic housing for the masses, and those places will be expensive.
johnrob 2y ago
There’s this tacit myth that it’s possible for the lower end homes to get cheaper while, simultaneously, the middle/high end homes continue their regular 6% (or more) YoY gains (on which owners’ financial health depends). I think this belief gives hope that affordability can improve even without new inventory. In reality, the entire stock (low to high) moves lock/step as if they are chained together. Gaps cannot exist because buyers will eagerly move a little up or down (in quality) based on pricing changes.
marcinzm 2y ago
A unit being used for short term rental may as well not exist.
majormajor 2y ago
If you want it cheaper - not just to make a dent in the curve - "building more housing" is no guarantee by itself. You need to actually outpace moneyed demand! Most of the places that are the most expensive are the ones that HAVE built the most housing in the past (look at density vs cost). And developments happen in order to increase value of land and demand for that land, so it's not necessarily trivial. (For instance: people with money go to new suburbs because the units of housing are larger and more upgraded; new in-city units are built that are larger and more upgraded than the old one -> some of those people want to move back. And hundreds of other little interplaying loops of human activity.)
- zemvpferreira 2y ago
  It's pretty trivial actually. You can'y just build 50 apartments and call it a day. You have to build way, way, way more housing. Is the scale of it complicated? Absolutely. But the solution itself is simple. Double the size of the city. Triple the size of the city. 10x the size of the city. Shenzhen can show you how it's done.
  - janalsncm 2y ago
    Shenzhen has some of the most expensive housing in China if not the world. Also, I agree more housing is necessary. But building more housing also risks induced demand. Cheaper houses encourages people to move to buy them. Therefore, we probably would need to also restrict demand, either with a hard limit (max properties you can own) or more likely with a soft limit (2nd property is taxed 2x, 3rd is taxed 3x etc).
0x5f3759df-i 2y ago
Somehow people can understand the supply and demand mechanics when it comes to banning Airbnb but suddenly that understanding disappears when it comes to building more supply.

by api 2y ago

mtts 2y ago

True, but while they're not building more housing at least in this case they're making it so the people who do have a house to live in don't have to contend with it being surrounded by hotels.

chasebank 2y ago

That's not true. You can heavily tax single family homes that are not owner occupied, for instance. This debate ends in the same way as always. It's a bit of everything. Nightly rentals, REITs, build more, yada yada yada...

_yb2s 2y ago
That would make buying houses cheaper, but would probably make housing in general more expensive- and less accessible to people that can’t get or afford a home loan. Ultimately if there is too much demand, nothing but more supply will make housing affordable.
- rickydroll 2y ago
  More housing only slows the rate of housing inflation. Making housing affordable means raising wages or subsidizing rent so that worker rental costs 1/3 of their wages. "Affordable" housing is not a magic number; it's a ratio as defined by financial "experts." It's usually one-third of your net or gross income, depending on the advisor you talk to.
  - _yb2s 2y ago
    Supply and demand is the main factor that affects the price of anything. No amount of subsidies, wage changes, etc. will have any effect on a physical problem of having not enough houses for the population in an area. If you subsidize rent or raise wages that will further increase demand and make prices go even higher. Think of an extreme example- take a town with 20k families and only 10k houses. Now setup some program where many of those houses are part of an affordable housing program with a price cap. This changes basically nothing because only a few lucky people will get them, the rest will still be unhoused or move. This is literally the exact situation in most small USA west coast college towns like Davis- where the city government will do anything to make housing more affordable except construction- and we can see that none of it works. I was using the standard English language definition of the word affordable, which is qualitative and has no specific quantitative definition.
    - rickydroll 2y ago
      I was using the economist's definition of affordable housing, which is that only 1/3 of your income is consumed by housing. If a term isn't quantifiable, then it's useless for making plans. You are right that if there is a market where the scarcity is caused by insufficient supply, building more slow costs increases. But there is a point where the costs of the product cannot be cut anymore. The more you produce it will not be cheaper. Let's take another extreme example. Start with the city of 10,000 people. A developer razes the city center and rebuilds with very dense housing capable of housing 10,500 people. Is the cost of housing cheaper because of those extra 500 units? The answer is no; they would increase the cost of all the other units. Why? Someone has to pay for the materials, labor, and profit. If someone is not renting those units, the cost of creating those units is now spread among all the other units. The core question is how to lower the cost of the unit. Building more once you satisfy demand is not the answer. Building more expensive units frees up cheaper units if and only if enough people can afford them and move into them. But the cheaper units are not going to drop in cost. They will rent for at least the same price. It's important to acknowledge a couple of truisms. Demand for urban space will grow, and landlords will do everything to minimize expenses and maximize profits. There will never be enough housing to meet the demand. The question is how far behind demand is the housing production rate

solardev 2y ago

Even if more housing is built, I see some areas that are purposefully optimizing for short term rentability, meaning building luxury vacation homes in resort-like areas, instead of generic housing for the masses. More housing doesn't necessarily mean more affordable housing. And I don't even mean section 8, just units that two median wage earners (outside of tech) could potentially afford together.

kccqzy 2y ago
Not just that but I also resent the fact that many modern apartment buildings are "luxury" apartments that come with a gym, a pool, a coworking space, a garden and whatnot. I don't care about these amenities. Renting these places makes me think I'm wasting part of my rent on these amenities that I'll never use.
alexpetralia 2y ago
But actually, it does, because more housing supply (even on the high end) means fewer higher earners are forced to bid up generic housing for the masses. On the other hand, refusing to build any housing at all (for whatever the reason is: too unaffordable, too gentrified, too out-of-place) means those high earners will live in generic housing for the masses, and those places will be expensive.

johnrob 2y ago

There’s this tacit myth that it’s possible for the lower end homes to get cheaper while, simultaneously, the middle/high end homes continue their regular 6% (or more) YoY gains (on which owners’ financial health depends). I think this belief gives hope that affordability can improve even without new inventory. In reality, the entire stock (low to high) moves lock/step as if they are chained together. Gaps cannot exist because buyers will eagerly move a little up or down (in quality) based on pricing changes.

marcinzm 2y ago

A unit being used for short term rental may as well not exist.

majormajor 2y ago

If you want it cheaper - not just to make a dent in the curve - "building more housing" is no guarantee by itself. You need to actually outpace moneyed demand! Most of the places that are the most expensive are the ones that HAVE built the most housing in the past (look at density vs cost). And developments happen in order to increase value of land and demand for that land, so it's not necessarily trivial. (For instance: people with money go to new suburbs because the units of housing are larger and more upgraded; new in-city units are built that are larger and more upgraded than the old one -> some of those people want to move back. And hundreds of other little interplaying loops of human activity.)

zemvpferreira 2y ago
It's pretty trivial actually. You can'y just build 50 apartments and call it a day. You have to build way, way, way more housing. Is the scale of it complicated? Absolutely. But the solution itself is simple. Double the size of the city. Triple the size of the city. 10x the size of the city. Shenzhen can show you how it's done.
- janalsncm 2y ago
  Shenzhen has some of the most expensive housing in China if not the world. Also, I agree more housing is necessary. But building more housing also risks induced demand. Cheaper houses encourages people to move to buy them. Therefore, we probably would need to also restrict demand, either with a hard limit (max properties you can own) or more likely with a soft limit (2nd property is taxed 2x, 3rd is taxed 3x etc).

0x5f3759df-i 2y ago

Somehow people can understand the supply and demand mechanics when it comes to banning Airbnb but suddenly that understanding disappears when it comes to building more supply.