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Developers 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

Developers 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 8mo ago
It'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 8mo ago
They 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 8mo ago
  Their 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 8mo ago
    They 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
    - pixl97 8mo ago
      Taking on those liabilities is very risky when the next downturn happens and you're stuck with inventory.
    - estearum 8mo ago
      you should go into real estate development and make a fortune while solving a serious social problem for your country!
atomicnumber3 8mo ago
So, do we just need to nationalize housing construction? If the free market apparently just can't handle it?
- seanmcdirmid 8mo ago
  Maybe? Obviously boom bust cycles that come from a free market are not very efficient.
- 0_____0 8mo ago
  Public 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 8mo ago
    There wasn't, but given the housing market right now, I don't know that there isn't.
    - 0_____0 8mo ago
      Most 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 8mo ago
  It’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 8mo ago
just because rents fell doesn't mean developers couldn't recoup their investment. 2008 was completely different.
JumpCrisscross 8mo 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 8mo ago
  > everyone in the transaction wins Nobody ever thinks of the poor banks!
  - JumpCrisscross 8mo 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 8mo ago
    Usury-as-a-Service.
    - thaumasiotes 8mo ago
      It's always been a service.
    - pclowes 8mo ago
      At 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 8mo ago
What evidence is there that developers won't break even or profit? The demand is clearly there, it's a seller's market.
- pixl97 8mo ago
  Not so much any longer. The sales tap really turned off a while back and prices have been dropping a while here in Austin.

standardUser 8mo ago

It'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 8mo ago

They 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 8mo ago
Their 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 8mo ago
  They 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
  - pixl97 8mo ago
    Taking on those liabilities is very risky when the next downturn happens and you're stuck with inventory.
  - estearum 8mo ago
    you should go into real estate development and make a fortune while solving a serious social problem for your country!

atomicnumber3 8mo ago

So, do we just need to nationalize housing construction? If the free market apparently just can't handle it?

seanmcdirmid 8mo ago
Maybe? Obviously boom bust cycles that come from a free market are not very efficient.
0_____0 8mo ago
Public 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 8mo ago
  There wasn't, but given the housing market right now, I don't know that there isn't.
  - 0_____0 8mo ago
    Most 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 8mo ago
It’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 8mo ago

just because rents fell doesn't mean developers couldn't recoup their investment. 2008 was completely different.

JumpCrisscross 8mo 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 8mo ago
> everyone in the transaction wins Nobody ever thinks of the poor banks!
- JumpCrisscross 8mo 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 8mo ago
  Usury-as-a-Service.
  - thaumasiotes 8mo ago
    It's always been a service.
  - pclowes 8mo ago
    At 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 8mo ago

What evidence is there that developers won't break even or profit? The demand is clearly there, it's a seller's market.

pixl97 8mo ago
Not so much any longer. The sales tap really turned off a while back and prices have been dropping a while here in Austin.