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Building more housing does not reduce rents (longer-term). It increases them. Your _only_ option is to make smaller cities (and suburbs) more attractive. Sorr

Building more housing does not reduce rents (longer-term). It increases them. Your _only_ option is to make smaller cities (and suburbs) more attractive. Sorry. Harsh but true.

AnthonyMouse 2y ago
You're repeating propaganda from the people who want rents to stay high. The highest demand areas are high density areas. If you convert a medium density neighborhood to a high density neighborhood, the demand increases in that neighborhood, but the supply increases city-wide. The reason rents increase in that neighborhood is that even though rents in high density areas have gone down and rents in medium density areas have gone down, that specific neighborhood has gone from a medium density area to a high density area and that limited amount of construction by itself isn't enough to cause high density areas overall to cost less than medium density areas had. But notice what effect you're having on rents. The medium-density area had been $3000 units and high density units had been $4000. Now it's high density units, high density units city-wide have fallen to $3500, medium density units city-wide have fallen to $2600, the amount of housing stock has increased by thousands of new units, and you have people telling you that you've done something bad because the new $3500 units are more than the old $3000 units. Then you do it again in another neighborhood. $2600 medium density units get converted to high density units, high density units go from $3500 to $3000, medium density units fall to $2300. The high density units are now as cheap as the medium density units originally were, but you're again accused of increasing rents from $2600 to $3000. By the third time the high density units are now less than the medium density units originally were -- if you haven't already been assailed by local landlords using these arguments to prevent this from continuing -- but once again you're replacing $2300 medium density units with $2700 high density units and the claim is that you must be stopped to prevent rents from going up.
- motorest 2y ago
  > You're repeating propaganda from the people who want rents to stay high. I think you need to take a break and look at the real world. OP is right, and you don't understand it because you are oblivious to how things work in practice. The bulk of this sort of investment is focused on a gentrification strategy, where cheap residential buildings in low-income neighborhoods are bought to flip them to cater to a high-income market. Often, occupation density is also lowered as the number of apartments per floor is reduced so that the real estate investors can market larger, spacious apartments. The end result is that many low-income families are priced out of the market to make room to fewer high-income households. That's the reality of it. You call it propaganda, I call it ignorance.
  - AnthonyMouse 2y ago
    > The bulk of this sort of investment is focused on a gentrification strategy, where cheap residential buildings in low-income neighborhoods are bought to flip them to cater to a high-income market. Often, occupation density is also lowered as the number of apartments per floor is reduced so that the real estate investors can market larger, spacious apartments. What you're referring to is the type of construction which is allowed under the existing regulations -- increasing density is prohibited so the only way to profitably operate a construction company is to make the same number of units into more expensive ones. They don't convert a smaller number of units into a larger number of units because that's the thing they're not allowed to do, which is exactly the problem. Buying a 5-unit building and turning it into a 50-unit building would otherwise be quite profitable because you get to sell 10 times more units than you bought, which is profitable as long as the price of a unit is higher than the construction cost.
    - themgt 2y ago
      A lot of this stuff just comes off as highly abstract and ideological, banging the same one-note drum over and over and not listening. Have you ever been to Barcelona? It's a real place, not just an abstraction. Here's a good photo to get a sense: https://handluggageonly.co.uk/wp-content/uploads/2015/07/HandLuggageOnly-28.jpg https://handluggageonly.co.uk/wp-content/uploads/2015/07/Han... Here's an idealista link of properties for for sale: https://www.idealista.com/pt/point/venta-viviendas/41.39993/2.15955/13/mapa-google https://www.idealista.com/pt/point/venta-viviendas/41.39993/... A few things to point out is the city is already highly dense and meticulously planned (numbers suggest Barcelona has ~50% more people/sq km than NYC - it is far more densely populated than any city in the United States), and there's relatively a lot of property available for sale, but it's quite expensive if you're on a European salary. Arguably there's failed market clearing. And units are quite small by American standards, not at all something you can subdivide 5 units to 50 unless people are going to live in coffins. Final point is a large number of the cheaper properties will say "illegally occupied", because they have a (usually absentee/investor) owner who left the place empty and squatters have taken over who can't be evicted under Spanish law. It's a complex situation and many more pages could be written about it by people who are on the ground and have ideas, but this one-size-fits-all "just build more density!" solution, while often reasonable in the (globally bizarre) American context with lots of land, car culture, deserted crime-ridden downtowns, etc, is out of touch with the complexity of what's going on in Barcelona/Spain/Europe more broadly. And yes they could also just put up lots of 50 story steel skyscrapers to blot out Sagrada Familia, but then it would no longer be Barcelona.
- cyberax 2y ago
  > You're repeating propaganda from the people who want rents to stay high. OK. Give me an example of a city that has: 1. Growing population. 2. New dense construction. 3. Decreasing sale prices (or at least flat prices). I now have a real estate database for all the US real estate transactions since 1995, Japan since 2000, and for parts of Europe. I was not able to find such an example in this set for a city larger than 200k population. And I'm sorry, I'm struggling to understand the logic in your post. In reality, rents are not a good indicator short-term. They are too mercurial and are affected by transient effects. For example, rents in SF fell by 30% during the pandemic. And not as a result of new construction. If you want a more reliable indicator, you can look at 3-5 year sliding average for rents, or at sale prices.
  - AnthonyMouse 2y ago
    There is no expectation that population growth would coincide with decreasing sale prices. The premise is that new construction could allow population growth without a large long-term increase in price. And a still-growing population would expect to see at least a temporary price increase as new construction lags behind population growth. It isn't even expected that the long-term prices would be exactly flat, because higher density construction costs somewhat more (e.g. taller buildings have to be made of steel rather than wood), but you want that rather than demand permanently outstripping constrained supply to set the ceiling on the long-term price increase. > For example, rents in SF fell by 30% during the pandemic. And not as a result of new construction. SF had negative population growth during the pandemic. Prices reflect supply and demand, so you can also get them to go down by reducing demand, but that isn't typically the one you want. > And I'm sorry, I'm struggling to understand the logic in your post Suppose you have a method of alchemy that can convert an ounce of silver into a pound of gold and an ounce of bronze into a pound of silver. If you do it, the price of each ounce of the metal you converted has gone up, because it's now the more valuable type. People then say "why are you making the metal cost more when we want it to cost less"? But if you do it a lot, the overall market price of silver and gold come down, because every time you do it you're creating more and reducing their scarcity. > In reality, rents are not a good indicator short-term. In reality, everything always has a lot of confounders. For example, rents and new construction aren't independent variables -- when rents increase it will tend to cause a corresponding increase in new construction unless it's inhibited by something, and indeed high rent (i.e. demand in excess of supply) is the primary driver of new construction. So if you look for the places with new construction, of course they'll be the places with higher rent. But the conclusion shouldn't be that wet streets cause rain.
- dumbledoren 2y ago
  All of what you said applies to only places like the US or, maybe Russia or China that has enormous amounts of space to build. Europe is not like that. Texas is half the size of Entire Western Europe. Even worse, the Mediterranean is basically river basins that are squeezed in between mountain ranges and all the available space has already been built with at least 8-10 story buildings. There isn't more space to build even for the local population. Barcelona is one of the best examples. There is no way in hell there can be more space to build to meet the artificial demand that foreign investors are causing in their frenzy to make a quick buck.
  - AnthonyMouse 2y ago
    Why is a place with 8-10 story buildings unable to create more housing? Is there a law against 20 story buildings?
    - dumbledoren 2y ago
      First, the Mediterranean has scarce space and scarce reliable landscape that can support that kind of tall buildings, second, nobody has to turn their cities into Manhattan to be able to prevent American investors from gentrifying their own people.
- jjav 2y ago
  > You're repeating propaganda from the people who want rents to stay high. Ok. Can you please show which cities get cheaper and cheaper as the density gets higher and higher? Anywhere in the world? Ever? The densest city in the US is Manhattan, also the most expensive. This idea that building more density will decrease prices does not correlate with observed reality.
  - epistasis 2y ago
    Tokyo. It continually rebuilds, rents are affordable to people who work there. Manhattan does not build anymore, but people still want to live there, so it gets ever more expensive. Prices are merely an indication of how many people want something but can't get it. Your observations on density only apply is building is highly restricted to keep people out. And if building is suppressed everywhere, dense places will just be the indicator of future rises to come in less-dense and less-desirable places. Just as we have seen recently.
J_Shelby_J 2y ago
Literally the opposite happened in Austin when they allowed more housing. Prices went down.
- cyberax 2y ago
  Nope. Rents dropped because the _population_ in Austin dropped. It recovered to the 2019 level only the last year and is still below the peak 2020 level (stats are taken at Jan 1). 2019 - 978,763 2020 - 995,484 2021 - 964,177 2022 - 975,418 2023 - 979,882 For the same reason, the SF rents also dropped by 30% during the pandemic. And if you look at the surrounding Travis County (in TX), the population (and prices) there grew.

Building more housing does not reduce rents (longer-term). It increases them. Your _only_ option is to make smaller cities (and suburbs) more attractive. Sorry. Harsh but true.

AnthonyMouse 2y ago

You're repeating propaganda from the people who want rents to stay high. The highest demand areas are high density areas. If you convert a medium density neighborhood to a high density neighborhood, the demand increases in that neighborhood, but the supply increases city-wide. The reason rents increase in that neighborhood is that even though rents in high density areas have gone down and rents in medium density areas have gone down, that specific neighborhood has gone from a medium density area to a high density area and that limited amount of construction by itself isn't enough to cause high density areas overall to cost less than medium density areas had. But notice what effect you're having on rents. The medium-density area had been $3000 units and high density units had been $4000. Now it's high density units, high density units city-wide have fallen to $3500, medium density units city-wide have fallen to $2600, the amount of housing stock has increased by thousands of new units, and you have people telling you that you've done something bad because the new $3500 units are more than the old $3000 units. Then you do it again in another neighborhood. $2600 medium density units get converted to high density units, high density units go from $3500 to $3000, medium density units fall to $2300. The high density units are now as cheap as the medium density units originally were, but you're again accused of increasing rents from $2600 to $3000. By the third time the high density units are now less than the medium density units originally were -- if you haven't already been assailed by local landlords using these arguments to prevent this from continuing -- but once again you're replacing $2300 medium density units with $2700 high density units and the claim is that you must be stopped to prevent rents from going up.

motorest 2y ago
> You're repeating propaganda from the people who want rents to stay high. I think you need to take a break and look at the real world. OP is right, and you don't understand it because you are oblivious to how things work in practice. The bulk of this sort of investment is focused on a gentrification strategy, where cheap residential buildings in low-income neighborhoods are bought to flip them to cater to a high-income market. Often, occupation density is also lowered as the number of apartments per floor is reduced so that the real estate investors can market larger, spacious apartments. The end result is that many low-income families are priced out of the market to make room to fewer high-income households. That's the reality of it. You call it propaganda, I call it ignorance.
- AnthonyMouse 2y ago
  > The bulk of this sort of investment is focused on a gentrification strategy, where cheap residential buildings in low-income neighborhoods are bought to flip them to cater to a high-income market. Often, occupation density is also lowered as the number of apartments per floor is reduced so that the real estate investors can market larger, spacious apartments. What you're referring to is the type of construction which is allowed under the existing regulations -- increasing density is prohibited so the only way to profitably operate a construction company is to make the same number of units into more expensive ones. They don't convert a smaller number of units into a larger number of units because that's the thing they're not allowed to do, which is exactly the problem. Buying a 5-unit building and turning it into a 50-unit building would otherwise be quite profitable because you get to sell 10 times more units than you bought, which is profitable as long as the price of a unit is higher than the construction cost.
  - themgt 2y ago
    A lot of this stuff just comes off as highly abstract and ideological, banging the same one-note drum over and over and not listening. Have you ever been to Barcelona? It's a real place, not just an abstraction. Here's a good photo to get a sense: https://handluggageonly.co.uk/wp-content/uploads/2015/07/HandLuggageOnly-28.jpg https://handluggageonly.co.uk/wp-content/uploads/2015/07/Han... Here's an idealista link of properties for for sale: https://www.idealista.com/pt/point/venta-viviendas/41.39993/2.15955/13/mapa-google https://www.idealista.com/pt/point/venta-viviendas/41.39993/... A few things to point out is the city is already highly dense and meticulously planned (numbers suggest Barcelona has ~50% more people/sq km than NYC - it is far more densely populated than any city in the United States), and there's relatively a lot of property available for sale, but it's quite expensive if you're on a European salary. Arguably there's failed market clearing. And units are quite small by American standards, not at all something you can subdivide 5 units to 50 unless people are going to live in coffins. Final point is a large number of the cheaper properties will say "illegally occupied", because they have a (usually absentee/investor) owner who left the place empty and squatters have taken over who can't be evicted under Spanish law. It's a complex situation and many more pages could be written about it by people who are on the ground and have ideas, but this one-size-fits-all "just build more density!" solution, while often reasonable in the (globally bizarre) American context with lots of land, car culture, deserted crime-ridden downtowns, etc, is out of touch with the complexity of what's going on in Barcelona/Spain/Europe more broadly. And yes they could also just put up lots of 50 story steel skyscrapers to blot out Sagrada Familia, but then it would no longer be Barcelona.
cyberax 2y ago
> You're repeating propaganda from the people who want rents to stay high. OK. Give me an example of a city that has: 1. Growing population. 2. New dense construction. 3. Decreasing sale prices (or at least flat prices). I now have a real estate database for all the US real estate transactions since 1995, Japan since 2000, and for parts of Europe. I was not able to find such an example in this set for a city larger than 200k population. And I'm sorry, I'm struggling to understand the logic in your post. In reality, rents are not a good indicator short-term. They are too mercurial and are affected by transient effects. For example, rents in SF fell by 30% during the pandemic. And not as a result of new construction. If you want a more reliable indicator, you can look at 3-5 year sliding average for rents, or at sale prices.
- AnthonyMouse 2y ago
  There is no expectation that population growth would coincide with decreasing sale prices. The premise is that new construction could allow population growth without a large long-term increase in price. And a still-growing population would expect to see at least a temporary price increase as new construction lags behind population growth. It isn't even expected that the long-term prices would be exactly flat, because higher density construction costs somewhat more (e.g. taller buildings have to be made of steel rather than wood), but you want that rather than demand permanently outstripping constrained supply to set the ceiling on the long-term price increase. > For example, rents in SF fell by 30% during the pandemic. And not as a result of new construction. SF had negative population growth during the pandemic. Prices reflect supply and demand, so you can also get them to go down by reducing demand, but that isn't typically the one you want. > And I'm sorry, I'm struggling to understand the logic in your post Suppose you have a method of alchemy that can convert an ounce of silver into a pound of gold and an ounce of bronze into a pound of silver. If you do it, the price of each ounce of the metal you converted has gone up, because it's now the more valuable type. People then say "why are you making the metal cost more when we want it to cost less"? But if you do it a lot, the overall market price of silver and gold come down, because every time you do it you're creating more and reducing their scarcity. > In reality, rents are not a good indicator short-term. In reality, everything always has a lot of confounders. For example, rents and new construction aren't independent variables -- when rents increase it will tend to cause a corresponding increase in new construction unless it's inhibited by something, and indeed high rent (i.e. demand in excess of supply) is the primary driver of new construction. So if you look for the places with new construction, of course they'll be the places with higher rent. But the conclusion shouldn't be that wet streets cause rain.
dumbledoren 2y ago
All of what you said applies to only places like the US or, maybe Russia or China that has enormous amounts of space to build. Europe is not like that. Texas is half the size of Entire Western Europe. Even worse, the Mediterranean is basically river basins that are squeezed in between mountain ranges and all the available space has already been built with at least 8-10 story buildings. There isn't more space to build even for the local population. Barcelona is one of the best examples. There is no way in hell there can be more space to build to meet the artificial demand that foreign investors are causing in their frenzy to make a quick buck.
- AnthonyMouse 2y ago
  Why is a place with 8-10 story buildings unable to create more housing? Is there a law against 20 story buildings?
  - dumbledoren 2y ago
    First, the Mediterranean has scarce space and scarce reliable landscape that can support that kind of tall buildings, second, nobody has to turn their cities into Manhattan to be able to prevent American investors from gentrifying their own people.
jjav 2y ago
> You're repeating propaganda from the people who want rents to stay high. Ok. Can you please show which cities get cheaper and cheaper as the density gets higher and higher? Anywhere in the world? Ever? The densest city in the US is Manhattan, also the most expensive. This idea that building more density will decrease prices does not correlate with observed reality.
- epistasis 2y ago
  Tokyo. It continually rebuilds, rents are affordable to people who work there. Manhattan does not build anymore, but people still want to live there, so it gets ever more expensive. Prices are merely an indication of how many people want something but can't get it. Your observations on density only apply is building is highly restricted to keep people out. And if building is suppressed everywhere, dense places will just be the indicator of future rises to come in less-dense and less-desirable places. Just as we have seen recently.

J_Shelby_J 2y ago

Literally the opposite happened in Austin when they allowed more housing. Prices went down.

cyberax 2y ago
Nope. Rents dropped because the _population_ in Austin dropped. It recovered to the 2019 level only the last year and is still below the peak 2020 level (stats are taken at Jan 1). 2019 - 978,763 2020 - 995,484 2021 - 964,177 2022 - 975,418 2023 - 979,882 For the same reason, the SF rents also dropped by 30% during the pandemic. And if you look at the surrounding Travis County (in TX), the population (and prices) there grew.