4 ms·

The underlying belief is that the market will provide, if only it were properly stimulated and enticed, but it is one unsupported by evidence. At no time since

The underlying belief is that the market will provide, if only it were properly stimulated and enticed, but it is one unsupported by evidence. At no time since the second world war has the private sector built at the rate now required, and usually it has fallen a long way short. Worth noting for folks who think that supply is the only problem. Similarly in my home of Vancouver the construction of towers has been constant for decades and prices have only skyrocketed in response. Certainly if you stopped building completely you'd eventually have a real problem, but the evidence is clear to me that you'll never reach the incredible supply levels that would cause prices to drop (why would builders do this anyway?). There is also what Ebenezer Howard, the inventor of garden cities, called the “unearned increment”, which is the uplift in value when land becomes available for housing. It was the basis on which postwar new towns were built. Currently it is being squandered – when the government, for example, relaxes planning constraints on certain properties, or makes it easier to convert offices or shops into homes they drench the lucky owners of such places in cash, without asking for much in return. Vancouver captures this. It goes toward community centres, the arts and increasingly housing. http://vancouver.ca/news-calendar/community-benefits-from-development-improving-neighbourhoods.aspx http://vancouver.ca/news-calendar/community-benefits-from-de...

Brakenshire 12y ago
> the evidence is clear to me that you'll never reach the incredible supply levels that would cause prices to drop (why would builders do this anyway?). It's the same as in any other market, people will carry on doing things while there is significant profit it in. A builder can only stop another builder by forming a cartel. Also, bear in mind that just because house prices have gone up as decent numbers of buildings have been put in place, it doesn't mean they wouldn't have gone up more if supply had been even more constrained. There probably is some self perpetuating element to house building - if prices are cheaper than they would otherwise be, more people would move to a city, so that means there is an effwct of supply creating more demand. But I think that occurs at the edges. Most people don't move city or in particular country for the house prices.
orangecat 12y ago
Similarly in my home of Vancouver the construction of towers has been constant for decades and prices have only skyrocketed in response. The cause and effect probably goes the other way. why would builders do this anyway? Why do gas stations lower prices when oil falls? If they don't, their competitors will.
- Tiktaalik 12y ago
  Yes the cause and effect goes the other way, I just mean to reinforce that the added supply didn't move the needle. Certainly prices would be higher if the buildings hadn't been built, but one wonders just how many buildings does one have to build to get prices to drop? Possibly it's an unrealistically high number.
jseliger 12y ago
Worth noting for folks who think that supply is the only problem. Similarly in my home of Vancouver the construction of towers has been constant for decades and prices have only skyrocketed in response. Orangecat's comment is appropriate: https://news.ycombinator.com/item?id=9207631 https://news.ycombinator.com/item?id=9207631 but I'll note too that Vancouver, like other cities, is probably substantially still underbuilding the market—which high prices reflect. Houston, on the other hand, is not doing that: http://marginalrevolution.com/marginalrevolution/2015/03/houston-v-california.html http://marginalrevolution.com/marginalrevolution/2015/03/hou... : Unlike most other big cities in America, Houston has no zoning code, so it is quick to respond to demand for housing and office space. Last year authorities in the Houston metropolitan area, with a population of 6.2m, issued permits to build 64,000 homes. The entire state of California, with a population of 39m, issued just 83,000. Which is why so many people are moving to Texas. http://www.bizjournals.com/austin/news/2014/12/23/big-tex-indeed-texas-added-more-residents-than-any.html?page=all http://www.bizjournals.com/austin/news/2014/12/23/big-tex-in... is one link.
- Tiktaalik 12y ago
  Vancouver may be underbuilding, but the point I am trying to make is that the amount you have to build to have a notable impact on price is probably a lot more than people think. I brought up Vancouver because I know that HN is very SF-oriented and there is extremely little development, and so people may be lured into thinking that's the only issue. In Vancouver I feel there's quite a bit of development, but the city faces the same issues. Similarly we see cities such as NYC and London where development is constant not being able to lower prices. It's not likely to be a problem that can be solved purely by the market providing supply. Supply is necessary but there are many other variables. Houston's endless sprawl is not technically emulatable for many cities and the design of the city is undesirable to many. I'm not sure it's an example that people would choose to follow.
- bbanyc 12y ago
  Although Houston doesn't have zoning, it does have development regulations in place that mimic the density restrictions of cities with zoning - lot sizes, parking minimums, etc. In effect the entire city is one big zone. http://www.slate.com/blogs/moneybox/2011/11/30/the_myth_of_zoning_free_houston.html http://www.slate.com/blogs/moneybox/2011/11/30/the_myth_of_z...
O____________O 12y ago
in my home of Vancouver the construction of towers has been constant for decades and prices have only skyrocketed in response. My friends in Vancouver have told me that many of the modern buildings only have something like a 35% year-round occupancy rate, and that they're largely owned by foreigners as summer homes.
nickstefan12 12y ago
The Vancouver market is probably out of wack due to foreign money looking for a place to park.

Brakenshire 12y ago

> the evidence is clear to me that you'll never reach the incredible supply levels that would cause prices to drop (why would builders do this anyway?). It's the same as in any other market, people will carry on doing things while there is significant profit it in. A builder can only stop another builder by forming a cartel. Also, bear in mind that just because house prices have gone up as decent numbers of buildings have been put in place, it doesn't mean they wouldn't have gone up more if supply had been even more constrained. There probably is some self perpetuating element to house building - if prices are cheaper than they would otherwise be, more people would move to a city, so that means there is an effwct of supply creating more demand. But I think that occurs at the edges. Most people don't move city or in particular country for the house prices.

orangecat 12y ago

Similarly in my home of Vancouver the construction of towers has been constant for decades and prices have only skyrocketed in response. The cause and effect probably goes the other way. why would builders do this anyway? Why do gas stations lower prices when oil falls? If they don't, their competitors will.

Tiktaalik 12y ago
Yes the cause and effect goes the other way, I just mean to reinforce that the added supply didn't move the needle. Certainly prices would be higher if the buildings hadn't been built, but one wonders just how many buildings does one have to build to get prices to drop? Possibly it's an unrealistically high number.

jseliger 12y ago

Worth noting for folks who think that supply is the only problem. Similarly in my home of Vancouver the construction of towers has been constant for decades and prices have only skyrocketed in response. Orangecat's comment is appropriate: https://news.ycombinator.com/item?id=9207631 https://news.ycombinator.com/item?id=9207631 but I'll note too that Vancouver, like other cities, is probably substantially still underbuilding the market—which high prices reflect. Houston, on the other hand, is not doing that: http://marginalrevolution.com/marginalrevolution/2015/03/houston-v-california.html http://marginalrevolution.com/marginalrevolution/2015/03/hou... : Unlike most other big cities in America, Houston has no zoning code, so it is quick to respond to demand for housing and office space. Last year authorities in the Houston metropolitan area, with a population of 6.2m, issued permits to build 64,000 homes. The entire state of California, with a population of 39m, issued just 83,000. Which is why so many people are moving to Texas. http://www.bizjournals.com/austin/news/2014/12/23/big-tex-indeed-texas-added-more-residents-than-any.html?page=all http://www.bizjournals.com/austin/news/2014/12/23/big-tex-in... is one link.

Tiktaalik 12y ago
Vancouver may be underbuilding, but the point I am trying to make is that the amount you have to build to have a notable impact on price is probably a lot more than people think. I brought up Vancouver because I know that HN is very SF-oriented and there is extremely little development, and so people may be lured into thinking that's the only issue. In Vancouver I feel there's quite a bit of development, but the city faces the same issues. Similarly we see cities such as NYC and London where development is constant not being able to lower prices. It's not likely to be a problem that can be solved purely by the market providing supply. Supply is necessary but there are many other variables. Houston's endless sprawl is not technically emulatable for many cities and the design of the city is undesirable to many. I'm not sure it's an example that people would choose to follow.
bbanyc 12y ago
Although Houston doesn't have zoning, it does have development regulations in place that mimic the density restrictions of cities with zoning - lot sizes, parking minimums, etc. In effect the entire city is one big zone. http://www.slate.com/blogs/moneybox/2011/11/30/the_myth_of_zoning_free_houston.html http://www.slate.com/blogs/moneybox/2011/11/30/the_myth_of_z...

O____________O 12y ago

in my home of Vancouver the construction of towers has been constant for decades and prices have only skyrocketed in response. My friends in Vancouver have told me that many of the modern buildings only have something like a 35% year-round occupancy rate, and that they're largely owned by foreigners as summer homes.

nickstefan12 12y ago

The Vancouver market is probably out of wack due to foreign money looking for a place to park.