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On its own higher housing density should lower land prices. All else equal land prices are both cause and effect of housing access. In the philosophical extre

by ty6853 1y ago

On its own higher housing density should lower land prices. All else equal land prices are both cause and effect of housing access. In the philosophical extreme, if zoning allowed infinite density you could stick a hong-kong style condo skyscraper for the entire population on 0.1 acres and the rest of the land would provide no additional housing utility pushing prices down to whatever the value it is as farmland/business/recreation. The housing value of surrounding land would plumet. Low land prices are indicative of less restrictive zoning. In more restrictive zoning that punishes building houses on small plots, land becomes more valuable because the land is the license to build a house. i.e. where I live I had to buy more land than I needed because without it I could not build my house, which drives up land prices (increased demand). The reason why california ADU increase parcel prices is because it prints an additional house license while being illegal to split it off. Otherwise you would be left with two cheaper parcels, although in sum they may be more expensive, but you would still pay less for enough land for license to print a house.

Ericson2314 1y ago
> On its own higher housing density should lower land prices. All else equal land prices are both cause and effect of housing access. > > In the philosophical extreme, if zoning allowed infinite density you could stick a hong-kong style condo skyscraper for the entire population on 0.1 acres and the rest of the land would provide no additional housing utility pushing prices down to whatever the value it is as farmland/business/recreation. The housing value of surrounding land would plumet. No I mean the land value of where the density is / right next to it. In your example, the land with the crazy tower / right next to it would be incredibly valuable. If other areas use land value, that's because the land value is being concentrated in/around the dense areas. When we talk about upzoning, we want to not only do less sprawl, but also increase overall population (growth will attract population). The exurbs will loose land value, but the cities will gain immense land value, and the suburbs will gain some land value too.
- ty6853 1y ago
  At the time of creating the condo the 0.1 acres would be substantial cheaper. If I have thousands or millions of acres to choose from and I can pick whatever 0.1 acres I want my demand for housing is 0.1 acres and the supply is still all the available land. Pushed to the mathematical limit the housing value of the land approaches zero for the land you buy for your hong kong condo, since demand is now near zero and supply far outstrips it. That is, the cost of the 0.1 acres to the developer is about the same as all the worthless for housing land surrounding it. Since a large portion housing is currently locked up in 30 year mortgages in a once in a lifetime COVID era near 0% loan that people will not give up for less than a king's ransom, we should be especially sensitive of price of land for new construction, and that will continue to be a dominant factor in rental costs and home prices.
  - Ericson2314 1y ago
    You talking about the average price of all land. I'm talking about the price of built-up land. We're not talking about the same thing. Land in Hong-Kong and Manhattan is more expensive. And arbitrarily tall tour makes its tiny neighborhood of land arbitrary valuable. Your also assuming housing demand is exogenous to land use — e.g. that everyone that would live in SF but can't afford it lives in Tracy. That's not true. If you make SF contain 3.5 million people, at Manhattan density, you better believe we'll not suck all the people out of Palo Alto or Oakland, but also increase demand in those areas. Fremont would have more demand but less so, Pleasanton in not sure, and the central valley exurbs less demand.
    - ty6853 1y ago
      Suppose Hong Kong and Manhattan rezoned and made it illegal for half the density there to exist. That is, for any given population, the demand for land would now be double. Would you expect land prices to go up or down as some portion of the ejected people try to maintain a footprint there?
      - Ericson2314 1y ago
        OK so under your though experiment we are chopping of too-tall buildings? I would expect unit prices to go up, but land prices to go down. There are ugly bidding wars as people try to stay, but also much less revenue per building as the number of units shrinks. The increase in per-unit rents will not be as great as the decrease in per-building units, and thus per-land revenues will go down, and the land will be less valuable. What actually happens depends a bit on the inequality makeup of society. In UWS / UES apartments are combined into a larger apartments more than people realize. That is somewhat similar to the zoning change, except it is market driven. At the same time, the fact that rich UES/UWSers live in apartments at all is clear evidence that the rich can afford less land than they can in the suburbs, and they are OK with this. There is a famous quote "a developed country is not one where the poor own cars, but the rich take public transportation". By the same token "a developed country is not one where the poor own houses, but the rich live in apartments". Density is very egalitarian in that higher densities allow masses of less-rich people to compete with richer people for land. Arguably the inequality-driven apartment-merging-during-housing shortage is downstream of having a housing shortage, and if Manhattan didn't in fact have stupid zoning constraints too (yes, I know!) we would not be seeing these apartment merges / bigger units would be accompanied by taller buildings so not net fewer units.

by ty6853 1y ago

Ericson2314 1y ago

> On its own higher housing density should lower land prices. All else equal land prices are both cause and effect of housing access. > > In the philosophical extreme, if zoning allowed infinite density you could stick a hong-kong style condo skyscraper for the entire population on 0.1 acres and the rest of the land would provide no additional housing utility pushing prices down to whatever the value it is as farmland/business/recreation. The housing value of surrounding land would plumet. No I mean the land value of where the density is / right next to it. In your example, the land with the crazy tower / right next to it would be incredibly valuable. If other areas use land value, that's because the land value is being concentrated in/around the dense areas. When we talk about upzoning, we want to not only do less sprawl, but also increase overall population (growth will attract population). The exurbs will loose land value, but the cities will gain immense land value, and the suburbs will gain some land value too.

ty6853 1y ago
At the time of creating the condo the 0.1 acres would be substantial cheaper. If I have thousands or millions of acres to choose from and I can pick whatever 0.1 acres I want my demand for housing is 0.1 acres and the supply is still all the available land. Pushed to the mathematical limit the housing value of the land approaches zero for the land you buy for your hong kong condo, since demand is now near zero and supply far outstrips it. That is, the cost of the 0.1 acres to the developer is about the same as all the worthless for housing land surrounding it. Since a large portion housing is currently locked up in 30 year mortgages in a once in a lifetime COVID era near 0% loan that people will not give up for less than a king's ransom, we should be especially sensitive of price of land for new construction, and that will continue to be a dominant factor in rental costs and home prices.
- Ericson2314 1y ago
  You talking about the average price of all land. I'm talking about the price of built-up land. We're not talking about the same thing. Land in Hong-Kong and Manhattan is more expensive. And arbitrarily tall tour makes its tiny neighborhood of land arbitrary valuable. Your also assuming housing demand is exogenous to land use — e.g. that everyone that would live in SF but can't afford it lives in Tracy. That's not true. If you make SF contain 3.5 million people, at Manhattan density, you better believe we'll not suck all the people out of Palo Alto or Oakland, but also increase demand in those areas. Fremont would have more demand but less so, Pleasanton in not sure, and the central valley exurbs less demand.
  - ty6853 1y ago
    Suppose Hong Kong and Manhattan rezoned and made it illegal for half the density there to exist. That is, for any given population, the demand for land would now be double. Would you expect land prices to go up or down as some portion of the ejected people try to maintain a footprint there?
    - Ericson2314 1y ago
      OK so under your though experiment we are chopping of too-tall buildings? I would expect unit prices to go up, but land prices to go down. There are ugly bidding wars as people try to stay, but also much less revenue per building as the number of units shrinks. The increase in per-unit rents will not be as great as the decrease in per-building units, and thus per-land revenues will go down, and the land will be less valuable. What actually happens depends a bit on the inequality makeup of society. In UWS / UES apartments are combined into a larger apartments more than people realize. That is somewhat similar to the zoning change, except it is market driven. At the same time, the fact that rich UES/UWSers live in apartments at all is clear evidence that the rich can afford less land than they can in the suburbs, and they are OK with this. There is a famous quote "a developed country is not one where the poor own cars, but the rich take public transportation". By the same token "a developed country is not one where the poor own houses, but the rich live in apartments". Density is very egalitarian in that higher densities allow masses of less-rich people to compete with richer people for land. Arguably the inequality-driven apartment-merging-during-housing shortage is downstream of having a housing shortage, and if Manhattan didn't in fact have stupid zoning constraints too (yes, I know!) we would not be seeing these apartment merges / bigger units would be accompanied by taller buildings so not net fewer units.