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This article's position in this part strikes me as mostly rubbish: ... Housing affordability activists like to point out that most new construction is for luxu
by josephlord 13y ago
This article's position in this part strikes me as mostly rubbish:
... Housing affordability activists like to point out that most new construction is for luxury housing, meaning that supply of non-luxury units is not growing by very much. Others love to say that price declines have historically gone hand in hand with falling construction.
These arguments are both nonsense. The latter point gets causation the wrong way around; given an unexpected decline in demand due to financial crisis or other shocks prices fall and interest in new construction dries up until existing inventories are cleared. The former point misses the fundamental fungibility of housing. When new construction of luxury units lags, the very rich buy up older housing stock at exorbitant prices and pay to have them redone. You see this in London, for instance, where literally every house in the city is now being rehabilitated, including those that were rehabilitated last year. Residents have to actively shoo away the builders trying to erect scaffolding, on the assumption that the owners will be wanting an extra floor or two on their house. It is a headache. There is a team of wildcat subcontractors digging us a new wine cellar as we speak. The point is that if demand for high-end housing is not satisfied with new construction, that demand will flow to existing supply, putting upward pressure on prices right across the housing stock.
Yes the rich will buy older housing stock if they build new affordable housing rather than luxury housing but the affordable housing should be higher density producing more homes on the same land so there will still be affordable houses freed up even when the rich have displaced others into them.
- samstave 13y agoIm no economist, but ive observed two things in SF; there are a ton of new, high-end high-rise apartment buildings being built in SF right now. (See all the cranes) These will have high rents to pay for their high construction costs. All other rents will rise as well, because all owners will see what everything else costs and continue to charge ridiculous amounts for their spaces. The rents in SF right now are absolutely insane.
- fennecfoxen 13y ago> All other rents will rise as well, because all owners will see what everything else costs and continue to charge ridiculous amounts for their spaces. Don't be absurd. Owners are already well aware of the fact that there are rich Google engineers beating a path to their door, and are glad to charge said engineers as much as they think they can get away with. Additional housing is competition, and if they affect prices they will cause them to fall, as various Google engineers will have an alternative to Mission-district Victorians and other existing housing stock.
- samstave 13y agoHistory disagrees with your theory. I moved back to the bay area in 1997. There have been thousands upon thousands of new homes and apartments built since then. I have yet to see one drop in rental prices. Your statement only looks good on paper.
- krschultz 13y agoIf there are thousands of units built, but demand increases by tens of thousands, prices are not going to go down. NYC is building at a much faster pace than SF, but according to the census on the order of 300,000 people moved into the city between 2010 and 2013. That is exerting huge demand pressure on prices even with the new buildings going up. The only way for prices to go down would have been adding housing stock for more than that increase - which didn't happen.
- samstave 13y agoEXACTLY my point. Which invalidates FennecFox's comment where he said: "Additional housing is competition, and if they affect prices they will cause them to fall, as various Google engineers will have an alternative to Mission-district Victorians and other existing housing stock."
- jacobr1 13y agoThat is because even as supply rises, demand continues to increase above supply.
- malandrew 13y agoA lot of that new construction is for more office space. This city generally values creating more room for jobs than housing and that only makes the problem worse since the people filling those new work spaces are going to be looking to live near work.