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"Developers are only building luxury houses!" is a symptom of supply being forcibly prevented from meeting demand. An unrestricted market on housing will build

"Developers are only building luxury houses!" is a symptom of supply being forcibly prevented from meeting demand. An unrestricted market on housing will build houses up and down the price spectrum. Now introduce an arbitrary cap on the number of houses which can be built. Which houses are the ones that get built? Obviously it will be the ones at the top of the spectrum: they are the most profitable, so that demand gets met first until it is either fulfilled or developers can't build anymore. Consider, if a car company was only allowed to build 100 cars per year, of course they would build only million-dollar hypercars. In order to profitably meet demand at the bottom end of the market, they need to be allowed to supply in large quantities.

duxup 2y ago
Isn't housing inherently limited by space, city's ability to plan / permit, and setup / install services? Even housing builders seem limited in their ability to build. I'm not sure an "unrestricted" market is a realistic or even desirable concept here.
hnthrow90348765 2y ago
>An unrestricted market on housing will build houses up and down the price spectrum. I don't know, it would seem land costs would make up a higher proportion of the total cost of small low-cost individual houses, and if that's true then you'll need to buy a lot more land and start running into people who won't sell or quote ridiculous land prices, which makes those builds unfeasible. My guess would be they'd still go for bulk, high density builds for low cost housing. The biggest issue there is that those are almost always apartment rentals which don't build wealth, which leads to less buying power further along in life, and that hurts demand for medium individual homes.
- cloverich 2y ago
  But to be clear homes only build wealth because they go up in price over time right? And this is due to the limited supply of housing in particular relative to our population. Previously, I had always assumed if mortgage payments and rent were comparable, then you'd come out ahead buying. But you need a down payment, and you need to borrow money to finance the home. So the real comparison is rent + no borrowed money + investing your down payment instead. Every calculator I use to do that, its very difficult to end up with more wealth buying than renting. UNLESS the home price goes up significantly after you purchase.

duxup 2y ago

Isn't housing inherently limited by space, city's ability to plan / permit, and setup / install services? Even housing builders seem limited in their ability to build. I'm not sure an "unrestricted" market is a realistic or even desirable concept here.

hnthrow90348765 2y ago

>An unrestricted market on housing will build houses up and down the price spectrum. I don't know, it would seem land costs would make up a higher proportion of the total cost of small low-cost individual houses, and if that's true then you'll need to buy a lot more land and start running into people who won't sell or quote ridiculous land prices, which makes those builds unfeasible. My guess would be they'd still go for bulk, high density builds for low cost housing. The biggest issue there is that those are almost always apartment rentals which don't build wealth, which leads to less buying power further along in life, and that hurts demand for medium individual homes.

cloverich 2y ago
But to be clear homes only build wealth because they go up in price over time right? And this is due to the limited supply of housing in particular relative to our population. Previously, I had always assumed if mortgage payments and rent were comparable, then you'd come out ahead buying. But you need a down payment, and you need to borrow money to finance the home. So the real comparison is rent + no borrowed money + investing your down payment instead. Every calculator I use to do that, its very difficult to end up with more wealth buying than renting. UNLESS the home price goes up significantly after you purchase.