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What you say is true to an extent, but I think you're underestimating a couple of things. First, some real estate developers enjoy very good margins, particular

What you say is true to an extent, but I think you're underestimating a couple of things. First, some real estate developers enjoy very good margins, particularly those who purchase land, entitle the land and either build the improvements themselves or sell the land to someone who follows through with the construction. That is to say that even when prices/rents compress there tends to still be opportunity for developers (I'm not talking 2008-level price drops that are existential problems for the real estate market and the world at large). Also, when you cite "market forces" it suggests that the real estate market in the US is driven mostly by market forces, but it's highly regulated (zoning, building codes, etc.). As other commenters have pointed out, even in a declining market, if you removed some of the regulation you'd offset some of the drop in market prices thereby preserving the incentive for developers to build. Lastly, if you think we arrived where we are today because of market forces I think that's largely untrue. HCOL areas (seems like the entire country is turning into one of those!) have criminally under-built for decades and that hasn't been a market problem, but a regulatory problem. Now I'm not advocating for unlimited development so please don't read it that way, but the historical forces against building have been municipalities, on behalf of their politically-active residents, erecting countless impediments to development. If that were only true for a couple of years then we wouldn't have ended up where we are, but over decades the compounding effect of that reality is the single-biggest reason we're in the situation we're in. It is likewise going to take decades to address it so if the regulatory regime changes and stuff starts getting built and you still see rising prices that shouldn't be a surprise. Funny enough the more real estate developers going bankrupt the closer we'll be to affordable housing for all (ok, for "many" because all is likely never going to happen). Btw everything above assumes you actually believe that increased supply of housing (eventually!) decreases prices. I know you, ricky, don't believe that atm. Tons of people point to places like NYC as evidence that supply/demand doesn't work in desirable places, but, as Flavor Flav once said so well: don't believe the hype; even places like NYC have under-built for decades. Man I write long-winded comments on HN. This one is the worst by far, I think.

rickydroll 1y ago
The Substack article I linked in my previous post presents a compelling case for why and when builders stop building. Your position that we could fix that by removing regulations. I think that's not a wise course of action because many of the housing regulations are written in blood, and if you're going to eliminate regulations, you need to understand why they were there in the first place and how much blood is behind them. But even with regulations, developers don't care. see: https://www.youtube.com/@cyfyhomeinspections https://www.youtube.com/@cyfyhomeinspections. This bloke is a building inspector in Arizona, and he documents all the shortcomings and tricks that builders will use. You are right, I don't believe that increasing the supply of housing will decrease prices because housing is a financial instrument, and the whole system is so leveraged that it will fall apart if prices decline. One could claim that it fell apart in 2008. However, if you were to move housing out of the asset class, you would cause significant financial trauma to tens of millions of people. How would you make them whole? We have an example of oversupply not leading to price drops. Commercial real estate, such as storefronts and offices, continues to maintain a high price, even though a property has been idle for years. One would expect it to sell/lease for less due to the lack of demand, but it doesn't. The only thing I know that will decrease housing prices predictably or consistently is not maintaining the property. Let the property become worn, dysfunctional, and substandard. Some classes of landlords have made this an art form. My responses are always long-winded, but that's a side effect of using speech recognition. :-)
- bpt3 1y ago
  Things like the soundproofing regulation you are advocating for are written in blood? And there is no example of oversupply not leading to price drops in residential construction. See every existing city with population declines as an example, or what happens in areas with growth when the increase in housing units exceeds household growth.

rickydroll 1y ago

The Substack article I linked in my previous post presents a compelling case for why and when builders stop building. Your position that we could fix that by removing regulations. I think that's not a wise course of action because many of the housing regulations are written in blood, and if you're going to eliminate regulations, you need to understand why they were there in the first place and how much blood is behind them. But even with regulations, developers don't care. see: https://www.youtube.com/@cyfyhomeinspections https://www.youtube.com/@cyfyhomeinspections. This bloke is a building inspector in Arizona, and he documents all the shortcomings and tricks that builders will use. You are right, I don't believe that increasing the supply of housing will decrease prices because housing is a financial instrument, and the whole system is so leveraged that it will fall apart if prices decline. One could claim that it fell apart in 2008. However, if you were to move housing out of the asset class, you would cause significant financial trauma to tens of millions of people. How would you make them whole? We have an example of oversupply not leading to price drops. Commercial real estate, such as storefronts and offices, continues to maintain a high price, even though a property has been idle for years. One would expect it to sell/lease for less due to the lack of demand, but it doesn't. The only thing I know that will decrease housing prices predictably or consistently is not maintaining the property. Let the property become worn, dysfunctional, and substandard. Some classes of landlords have made this an art form. My responses are always long-winded, but that's a side effect of using speech recognition. :-)

bpt3 1y ago
Things like the soundproofing regulation you are advocating for are written in blood? And there is no example of oversupply not leading to price drops in residential construction. See every existing city with population declines as an example, or what happens in areas with growth when the increase in housing units exceeds household growth.