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The end of the housing supply debate (maybe)

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Re: The end of the housing supply debate (maybe)

#51

Post by quotemstr »

cle wrote: post #41
jldugger wrote: post #30

Earlier quoted context omitted.

That's not the crazy part. The crazy part is arguing that building additional supply in response to that demand will _increase_ prices.

That's not all that crazy to me, I can imagine many scenarios where that could happen. The answer is, as always, "it depends". It depends on what you build, how you build it, where you build it, how it's perceived, the time interval across which you're measuring prices, etc. Price of stuff is way more nuanced than surface-level supply and demand. It all comes down to perception of value, and there are a LOT of factor…

It's not as contingent as you think. We normally model the supply curve as a line going up and to the right, indicating that price increases stimulate the creation of additional supply. The demand curve has the opposite slope and effect. These curves form an "effective field theory". They explain what's happening at a high level. In reality, supply and demand curves aren't necessarily linear, and at small scales, they can wiggle around a bit. This wiggling is where your "it depends" factors come into play.

It's disingenuous, however, to argue that this wiggling invalidates the crystal clear overall direction of the supply and demand curves or somehow invalidates the idea that the way to increase the amount of affordable housing is to increase the amount of housing.

Re: The end of the housing supply debate (maybe)

#52

Post by slg »

quotemstr wrote: post #6

That there was ever a debate at all is still astounding. Economics has fuzzy areas, but basic principles of supply and demand are very well-established. It's clearly nonsensical to imagine that we can simultaneously lower prices, limit supply, and allow for demand growth. The longevity of this bizarre idea demonstrates how strongly political ideas of how the world ought to work blind us to how the world does work. We…

While I agree with your general point, I think both you and the article are glossing over part of the debate. The opponents of adding market rate supply that I have seen aren't opposed to new supply in a vacuum. They are opposed to letting the market dictate the supply because the market usually creates supply at the top.

The costs of buying land and building a mid-market building is not that much cheaper than building a luxury building. This causes the free market to favor new higher price units which leads to other development that pushes out the previous residents. Sure, that new supply will trickle down and lead to more affordability throughout the whole market, but it can still lead to higher prices in that specific neighborhood due to gentrification. It is therefore a balancing act between the health of the whole market and the health of individual sub-markets within it.

Re: The end of the housing supply debate (maybe)

#53

Post by jogjayr »

sliverstorm wrote: post #21

This doesn't seem to address high end housing vs (unsubsidized) low end housing. Is a hundred new units with marble countertops as good, holistically, as a hundred with laminate? I think a lot of the opposition revolves around frustration with developers building luxury when the intent of the given policy was low or mid market units, combined with a belief that units targeted at the needy market segment would be the…

There are reasons for developers to prefer to build high-end housing over low-end housing.

1. City parking requirements drive up the cost of construction to the point that only luxury units would be profitable.

2. Land acquisition costs (referenced in the article) are high due to zoning laws, so developers prefer to build high-end housing to recoup those costs.

3. Labor costs the same no matter what you're building (beyond some extra for a marble installer or whatever). Labor cost is a function of cost-of-living in the area, which itself is proportional to housing costs. Since the cost of construction is high, a builder is going to build the highest-value product possible at that cost.

So really all the problems boil down to city regulations, zoning, and unaffordable housing creating more unaffordable housing.

"Trickle-down" is a dirty word in many circles but I think it does apply to a certain extent for housing. Today's luxury apartment is tomorrow's mid-market apartment. If I could get a better apartment than what I have for slightly more rent, I'd probably upgrade, but the difference is stupid high (nearly double). In turn, my current apartment would probably be rented by a middle-income earner if it was located somewhere other than Silicon Valley.

Re: The end of the housing supply debate (maybe)

#54

Post by quotemstr »

kevinburke wrote: post #23
hkmurakami wrote: post #16

Earlier quoted context omitted.

I don't think it ever truly was a debate over supply effects. I think the true debate is whether people agree or disagree on the desirability of more housing, and the "more supply won't help" argument was coopted by those who needed a more palatable argument than straight NIMBYism.

I can tell you 100% there is a debate over supply effects. There are many people (Peter Cohen, Causa Justa, Calle 24, some folks with red roses on Twitter, others) who show up at public comment in SF who believe that more market rate housing increases displacement and causes even higher prices.

The "debate" is likely a result of motivated reasoning. Humans do it all the time. 1. Decide to stake out a position A. 2. Think of reasons that A might be true. 3. Use these arguments to claim that anyone arguing !A is wrong. 4. Feel satisfied.

Re: The end of the housing supply debate (maybe)

#55

Post by timr »

quotemstr wrote: post #6

That there was ever a debate at all is still astounding. Economics has fuzzy areas, but basic principles of supply and demand are very well-established. It's clearly nonsensical to imagine that we can simultaneously lower prices, limit supply, and allow for demand growth. The longevity of this bizarre idea demonstrates how strongly political ideas of how the world ought to work blind us to how the world does work. We…

"That there was ever a debate at all is still astounding."

There never was. There are actual, valid debates around construction policy, however. Among them:

  1) should you prefer subsidized housing or market-rate?
  2) should you remove cheap, existing housing stock to make room for market-rate?
  3) does new construction lead to gentrification of affordable neighborhoods?
The article is explicit that the answer to #1 is probably "yes", and it's pretty clear that if you care about the affordability individual neighborhoods, the answers to 2 and 3 are "no" and "yes", respectively, because real estate is obviously not a commodity product. Lowering the mean rent figure for a city does not guarantee that low-income neighborhoods/people benefit from the trade.

Re: The end of the housing supply debate (maybe)

#56

Post by [deleted] »

RangerScience wrote: post #50

So, it sounds like: 1) Building any kind of more housing is beneficial 2) Building subsidized housing is more beneficial than market-rate housing This leaves me with two questions: 1) Does subsidized have double the effect because you can build twice as many? 2) Zoning laws seem to prevent cheap housing from being cost-effective for developers to build. If you made it possible to build cheap housing (in LA, maybe by…

[deleted]

Re: The end of the housing supply debate (maybe)

#57

Post by davidw »

sliverstorm wrote: post #42
davidw wrote: post #35

Earlier quoted context omitted.

Part of the "degradation" happens because we forgot that we can build up, as well as out, in much of the US https://www.strongtowns.org/journal/2015/1/7/americas-suburb...

I don't think we "forget", I think developers are after the quick buck and buyers are after most-sqft-per-dollar. Building up or down is more expensive.

Developers just build places for people to live and work. Like the house you live in. They could build a lot more in places like San Francisco and Palo Alto. Yes, it's a bit more expensive, but that's a pretty minimal component of the price at 2/3/4 stories.

The real problem that prevents building up and in is rampant NIMBYism.

Re: The end of the housing supply debate (maybe)

#58

Post by JauntyHatAngle »

quotemstr wrote: post #6

That there was ever a debate at all is still astounding. Economics has fuzzy areas, but basic principles of supply and demand are very well-established. It's clearly nonsensical to imagine that we can simultaneously lower prices, limit supply, and allow for demand growth. The longevity of this bizarre idea demonstrates how strongly political ideas of how the world ought to work blind us to how the world does work. We…

I think in some areas (cant speak for all) the debate is about whether other things are affecting the market in a way that should make them the approach to tackling affordability rather than purely worrying about supply.

This then becomes politicised and people paint broad brushes of each argument, one side arguing "its not about supply! Its about x policy!" and the other side arguing "Its about supply and demand!".

Both sides are extremes, when the answer may well lie somewhere along the line in the middle. Specifically, in Australia the debate is about whether the best way to tackle affordability is Supply/Demand or whether it is reducing incentives for investors (tax breaks for house investors). There are solid arguments on both "sides", but its pretty clear that housing supply plays a part in both solutions.. the real question is to what degree it has a bigger impact than changing government policy in this case.

Point is the overall reason/cause doesn't mean it's the only consideration and thinking of it that way can lead to dismissal of valid joined issues/solutions.

Re: The end of the housing supply debate (maybe)

#59

Post by ouid »

I said it before here, but the situation in oregon is fucked up more than normal. The state constitution limits the rate at which property taxes can be raised to 4% a year, provided no new construction occurs. Increasing housing supply is actually penalized here.

Re: The end of the housing supply debate (maybe)

#60

Post by hackits »

bhauer wrote: post #47
iandanforth wrote: post #36

I live in a very interesting area, across the street from me is a different city with housing costs roughly 10x the costs of mine. I am daily confronted with the absurdity of pricing of housing. In addition as I've watched rents around me rise, and anticipated my own rent rising, I wonder at the expectation that we should continually get less for more. My house isn't getting any newer after all. If my employer decide…

> my house ... for which I have been paying consistently for years If you are paying for it, not past-tense, then it's not technically your house . The apparently uneven market for real estate is shocking to buyers because of the variability of supply constraints, caused by geography but also in great measure by zoning regulation. The hackneyed refrain of "location, location, location" as the chief determinant of the…

There does come a tipping point that most land lords don't like to talk about. When interest rates go so low that the cost of owning your own home is cheaper than renting. This is including all the cost of maintenance, water rates, garbage collection, insurance, taxes, and also property tax's that come with it.

Do be careful when you decide to enter the market as choosing the wrong time can wipe out about 3-4 years savings within 2-3 months.

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