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Good news - experimental verification of the law of supply and demand! I'm sure the analysis is welcome though and I hope policy makers try to learn from this.
by nemomarx 7mo ago
Good news - experimental verification of the law of supply and demand!
I'm sure the analysis is welcome though and I hope policy makers try to learn from this. We could densify most american cities quite a lot more.
- seanmcdirmid 7mo agoDevelopers not recouping their investment will discourage less housing in Austin in the future and it will become expensive again. A lot of our current housing shortages are from the build up in 2008 and an implosion of the entire industry (so that crafts people did not really exist for the next need for housing).
- standardUser 7mo agoIt's a balancing act. Build too much and developers make less money. Build too little and poverty and homelessness shoot up. Which side do you want to err on?
- nemomarx 7mo agoThey can recoup the investment with volume (especially apartments) I would think? Sell 10 houses at 2 million each or 30 at 1 million each or however it breaks down.
- seanmcdirmid 7mo agoTheir land, labor, and material costs aren’t trivial. If thy were pulling a 10-20% margin before, how will increasing volume (which increases costs) make it up?
- bryan_w 7mo agoThey reinvest that generous 10% to buy more tools and hire more talent to build 10x as many homes at 2%. Seems pretty straightforward to me
- atomicnumber3 7mo agoSo, do we just need to nationalize housing construction? If the free market apparently just can't handle it?
- seanmcdirmid 7mo agoMaybe? Obviously boom bust cycles that come from a free market are not very efficient.
- 0_____0 7mo agoPublic housing projects were and sort of still are a thing. Glass Amendment limits the number of units that can be produced but most areas are well below those limits and the larger issue is that there's no budget or political willpower for social housing projects right now.
- fragmede 7mo agoThere wasn't, but given the housing market right now, I don't know that there isn't.
- 0_____0 7mo agoMost blue metros in the US have a bad combination of high labor costs/low labor availability, high regulatory burden, wealthy conservative inhabitants who oppose construction, and working class people who are convinced that construction is gentrification. I've been racking my brain trying ti figure out what it looks like for US cities to pull out of the housing crisis, and I think it's either going to take about a generation, or there will be some catastrophic event (Great Depression II, WWIII) that changes the political landscape so drastically that nobody can really oppose housing anymore.
- matheweis 7mo agoIt’s not a free market construction issue at all, it’s a regulatory zoning and permitting issue. Read the article and the peer comments here; Austin’s boom came about from reducing regulatory constraints. Nationally remove the artificial restrictions and the supply side will fix itself.
- postflopclarity 7mo agojust because rents fell doesn't mean developers couldn't recoup their investment. 2008 was completely different.
- JumpCrisscross 7mo ago> Developers not recouping their investment Last time I did the back-of-the-envelope math, financing permitting delays in San Francisco added 10% to the cost of new housing [1]. (Note: not the cost of permitting. Just the cost of financing the delay.) This is deadweight loss that everyone in the transaction wins from eliminating. One could absolutely see lower prices and higher developer margins if this waste were cut. [1] https://news.ycombinator.com/item?id=38664780 https://news.ycombinator.com/item?id=38664780
- strbean 7mo ago> everyone in the transaction wins Nobody ever thinks of the poor banks!
- JumpCrisscross 7mo ago> Nobody ever thinks of the poor banks! I thought about that. But a bank would rather lend in lots of high-confidence, low-duration deals than a small number of high-margin deals. The only people who lose when housing is built are incoment landowners. Because prices go down.
- lo_zamoyski 7mo agoUsury-as-a-Service.
- thaumasiotes 7mo agoIt's always been a service.
- pclowes 7mo agoAt scale banks only win as a facilitator of economic growth. As the adage goes they can only 3-6-3 if someone is making at least 7. For the everyman banks not winning is catastrophic.
- nzeid 7mo agoWhat evidence is there that developers won't break even or profit? The demand is clearly there, it's a seller's market.
- pixl97 7mo agoNot so much any longer. The sales tap really turned off a while back and prices have been dropping a while here in Austin.
- amelius 7mo agoWhat if the people in power don't want prices to go down?
- cg5280 7mo agoThe problem isn’t the powers that be. A lot of regular homeowners fight new developments tooth and nail. And many blue states unfortunately give them a lot of tools to do so.
- JumpCrisscross 7mo ago> A lot of regular homeowners fight new developments Which is self interested. The paradox is renters being turned against their own interests by large landlords pitching anti-gentrification.
- lovecg 7mo agoDon’t know why this is being downvoted, that’s exactly right. One needs only to attend a local city meeting about any smallest step towards more development to see how the voters think.
- solid_fuel 7mo ago> A lot of regular homeowners fight new developments tooth and nail. In a system where those with more capitol have more power, homeowners are the powers that be. They're more likely to vote and have more money for discretionary spending - like donating to politicians.
- calvinmorrison 7mo agoPeople have been steered for decades into using their home as a vehicle for retirement. Of course they want to protecet it.
- solid_fuel 7mo agoI'm not blaming individual homeowners, there are very strong incentives for treating homes like retirement investments. It's an issue of policy, but we do have to address that it is also causing rent to rise and contributing to the homelessness crisis.
- mountainriver 7mo agoWe could but it’s not always just “good” to make things dense. My hometown has had a huge push to add more housing to make things more affordable. What happened? Rents went down for a couple years then right back up. Except now the city has a bunch of more soulless condos and is horribly congested. Sometimes preserving things and keeping them nice and simple even if it’s costs a bit of a premium is better.
- orangecat 7mo agoRents went down for a couple years then right back up. Except now the city has a bunch of more soulless condos and is horribly congested. So there were a bunch of people who wanted to live there and now can.
- triceratops 7mo agoNobody lives there anymore, it's too expensive. /s
- hunterpayne 7mo agoNote to the mods, /s is Reddit for sarcasm and this post is a good example of the psychology that leads to people support policies that increase housing costs even though they are designed to decrease housing costs.
- mountainriver 7mo agoYes there is a cost to things like a bunch of congestion, decrease of natural spaces and generally soulessness. To paint this as only good is an insane position
- ajross 7mo ago> now the city has a bunch of more soulless condos and is horribly congested The first bit is a taste thing; obviously lots of people view modern sprawl as "soulless" too. But the latter point is just plain wrong. Dense housing IMPROVES traffic congestion and shortens commutes, always, everywhere, markedly. And it's for a bleedingly obvious reason: pack people in closer together and they don't have to travel as far to get where they're going. QED. What you're imagining is some kind of fantasy hometown, which never increased in population and whose economy never developed. I mean, it's true. Forgotten ghost towns have very little traffic and quirky soulful architecture, c.f. Detroit. Everyone agrees that's a bad thing, though.
- pottertheotter 7mo agoI just hope that people remember this is just one factor affecting quality of life and making a city work. "Density at all costs" ignores a huge set of tradeoffs that are equally as damaging to a city. Things such as urban form, street experience, long-term adaptability, integration with existing fabric, economic resilience, etc. These are the things that make a city work in the long term. I’m a big proponent of building more housing. But a lot of it is being doing in very short sided ways that lead to huge externalities.
- CyberDildonics 7mo agoThings such as urban form, street experience, long-term adaptability, integration with existing fabric, economic resilience, etc. I have no idea what any of this is supposed to mean as a negative to people being able to walk around their neighborhood for essentials. It sounds like a classic vague "what about culture" argument that can't be explained.
- kristopolous 7mo agoNo it's not. It's 2 cherry picked data points with a sample size of 1 of a complex system with multiple confounding factors such as a pandemic You can look at other neighborhoods such as palms in Los Angeles, which has the most aggressive housing build out in all of California. Median rent has increased - sometimes more housing can create more demand
- mactrey 7mo agoDid rents in Palms go up because they built housing or because it's a great location in a city with increasing rent almost everywhere? Or in other words, is there any econometric evidence that building housing increased rents in Palms, or could we be confusing correlation with causation?
- kristopolous 7mo agoExactly. You can't just look at two data points in a system with hundreds of confounding variables, many of them unquantifiable and say "aha! This simple linear equation of supply and demand, that they teach in middle school, is correct!" That's not science, it's dogmatism