Earlier quoted context omitted.
>It's a bit counter intuitive, but the best way to lower the cost of housing for the poor is to build more housing for the upper middle class and up. They will trade up houses which will increase the supply of used houses driving down their price The problem is that housing in any location is not a closed system with fixed demand. It is an open system in which increased supply can generate increased demand. When you…
>upper middle class and up people who previously decided to live further away over paying the extreme rent costs move in, the population grows, and the price break never trickles down to the poor people in the city It does because the poor people move into the housing that the upper middle class vacated. Population growth is an independent confounding factor. In other words, housing cost can still go up due to popula…
That only works if the system is closed. If housing in the bay area goes down in price, you get people moving in from New York, LA, Boston, Austin, etc who previously avoided the area due to costs. Do you just ship off those poor people to those vacated homes hundred or thousands of miles away?
>Population growth is an independent confounding factor. In other words, housing cost can still go up due to population growth but they would go up less if the new luxury housing is built.
This is of course true. The question is just will building new luxury housing increase population growth to an extent that swallows the whole price break before it ever flows down to the bottom of the market?
>But you can't. You have high fixed costs like land, hook ups to the city utilities, architect work, plumbing, electrical, permits, and HVAC.
The reason housing in the bay area is so high has nothing to do with fixed material costs or else housing everywhere would be that astronomical. The reason housing is so high is because demand is high and the supply of land is limited. Land is the primary costs. You fight that by building vertically. The higher the building, the lower the marginal cost of land for each unit and therefore things become more affordable. But like I said in my first post, this doesn't happen if everything is left up to the market because it isn't the way to be most profitable, so the government would need to be involved to incentivize this.