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Lets make a car analogy: If you restrict a Japanese car seller to only export 10k cars to the USA, that car seller will inevitably export 10k luxury cars. The

by mahyarm 12y ago

Lets make a car analogy: If you restrict a Japanese car seller to only export 10k cars to the USA, that car seller will inevitably export 10k luxury cars. The reason why they do this is because the demand for luxury cars wont be exhausted by such small numbers. Once they can sell unrestricted, they will definitely go for the far more profitable median market cars, because they can sell far greater volume of them. If you want to prevent gentrification, you would allow massive density increases. The middle class out buy the rich in aggregate. This blog article gives a better overview of the concept: http://urbankchoze.blogspot.ca/2014/06/how-density-limits-bring-about.html http://urbankchoze.blogspot.ca/2014/06/how-density-limits-br...

timr 12y ago
It's a bad analogy. The car manufacturer's costs go down with scale, making low-margin, high-volume production an achievable business model. Real estate development costs don't really have economies of scale -- it costs a lot more to build skyscrapers, both in terms of construction costs, and in terms of land (rezone a parcel to increase height limits, and the cost of the land goes up to match the new use). Said another way: unlike cars, the fixed costs of real estate dominate the cost of the final product at all scales of "production".
- mahyarm 12y ago
  It's not about that, it's about manufacturers going for the low hanging fruit first if they are restricted to selling a small limited amount. These manufactures in my example have already gotten the economies of scale by developing for their local market, so on a marginal basis, it doesn't apply in this metaphor. On a cost basis, those unit construction costs are around $200k for a 3 bedroom 'family' condo vs. the $1 million that a condo would currently cost today in the SF bay area. Big difference and actually affordable for a $70k/yr annual income vs the $335k/yr income required for a $1million dollar condo.

by mahyarm 12y ago

timr 12y ago

It's a bad analogy. The car manufacturer's costs go down with scale, making low-margin, high-volume production an achievable business model. Real estate development costs don't really have economies of scale -- it costs a lot more to build skyscrapers, both in terms of construction costs, and in terms of land (rezone a parcel to increase height limits, and the cost of the land goes up to match the new use). Said another way: unlike cars, the fixed costs of real estate dominate the cost of the final product at all scales of "production".

mahyarm 12y ago
It's not about that, it's about manufacturers going for the low hanging fruit first if they are restricted to selling a small limited amount. These manufactures in my example have already gotten the economies of scale by developing for their local market, so on a marginal basis, it doesn't apply in this metaphor. On a cost basis, those unit construction costs are around $200k for a 3 bedroom 'family' condo vs. the $1 million that a condo would currently cost today in the SF bay area. Big difference and actually affordable for a $70k/yr annual income vs the $335k/yr income required for a $1million dollar condo.