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How much do construction costs matter to the price of housing?

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Re: How much do construction costs matter to the price of housing?

#21

Post by actuator »

jefftk wrote: post #14
actuator wrote: post #7

Earlier quoted context omitted.

London doesn't have this problem if I am not mistaken. But housing is very very expensive still. So much that a 3 bedroom 120sqm apartment can be more than 6 million dollars even outside Central London depending on the area.

In London, if someone purchased all the properties on a block could they level the block and build something 15 stories tall? No: it has lots of regulations that restrict construction. (Not saying that allowing this is necessarily good or bad, but it's definitely something London has)

Yes, this definitely wouldn't be allowed there in some areas but isn't this true for most cities. I am all for more housing. But all areas in a city don't need to be redeveloped with high rises.

Re: How much do construction costs matter to the price of housing?

#22

Post by francisofascii »

Mountain_Skies wrote: post #5

Thought for conversation: if you are able to work remote but still live in or near a major employment center, are you at least somewhat morally responsible for pricing out those who cannot work remote?

If you are judging morality based on, taking more than what you need or deserve, or squandering a gift, then maybe. But that would be a high bar. How much space you take up and how you interact in your neighborhood would factor in much more than your presence. For example, if you lived in the slums of the city, but was a net positive for the community and caused some gentrification, that certainly should not count against you. How about people who can walk to mass transit but don't use it? That would be similar.

Re: How much do construction costs matter to the price of housing?

#23

Post by zdragnar »

aurizon wrote: post #9

Low rates have created a mechanism where large amounts of housing are built by corporations and entrepreneurs for rent. Most of them borrowed market funds at 1% or even less, often on 100% credit, or ~~2-3% or less mortgages and built condos, houses and apartments. There was such a shortage that this drove up prices - yet since people needed a roof overhead, they were forced to pay 40-50% of household income for rent…

National company built subdivisions like you mention (often 80-200 homes each, all cookie cutter mini mcmansions) are popping up where I live, but there isn't a shortage of other options. People arent moving there "just to put a roof over their heads" as if it were a choice of last resort.

People are moving into them because they want to. Lower crime than the city, less lawn to maintain than the country, plenty of room indoors for the whole family during bad weather, looks posh (even if any craftsman would scoff at the crap construction).

I wouldn't ever buy one myself, but some people wouldn't have it any other way.

Re: How much do construction costs matter to the price of housing?

#24

Post by com2kid »

rabuse wrote: post #4

Almost nothing, especially with the cheap materials used in current modern construction (unless requiring some hurricane code; ex. South Florida). It's all due to zoning limitations, and homeowners voting in their own interests to keep the supply down, and values to rise.

> Almost nothing, especially with the cheap materials used in current modern construction

New construction requires higher quality electrical panels with fancier breakers, more GFCI outlets, and much, much, better insulation.

Builders have always used the cheapest materials they could get away with, and the cheapest labor they can hire. That has always been the case.

The old houses still around are the exception to the rule, not the norm.

Re: How much do construction costs matter to the price of housing?

#25

Post by orev »

The price (of anything) is determined by one thing alone: how much someone is willing to pay for it. That’s it. The cost of building is not relevant in any way to that. Nicer materials, better design, etc. can make people willing to pay more, but if it’s too much they won’t pay.

The only one who the cost of materials matters to is the builder. If it costs them more to build than they can sell it for (within whatever % profit margin they want), then they simply won’t build it.

Re: How much do construction costs matter to the price of housing?

#26

Post by Hemospectrum »

VikingCoder wrote: post #20

Going off on a tangent here: There's a sci-fi novel I want to write some time... You know how some countries have mandatory military service? Well, what if all of the "Essential" jobs, all had mandatory service? I want to do my own cherry-picking, selecting the "Essential" jobs, and especially those that are toilsome but that you can do with not a lot of training, and then do the math to see how many hours each able-…

You could approach this idea from the opposite direction: Put all essential jobs under military jurisdiction. There's real-world precedent illustrating some of the ways this would (and wouldn't) work.

Re: How much do construction costs matter to the price of housing?

#27

Post by someguydave »

Hemospectrum wrote: post #26
VikingCoder wrote: post #20

Going off on a tangent here: There's a sci-fi novel I want to write some time... You know how some countries have mandatory military service? Well, what if all of the "Essential" jobs, all had mandatory service? I want to do my own cherry-picking, selecting the "Essential" jobs, and especially those that are toilsome but that you can do with not a lot of training, and then do the math to see how many hours each able-…

You could approach this idea from the opposite direction: Put all essential jobs under military jurisdiction. There's real-world precedent illustrating some of the ways this would (and wouldn't) work.

>Put all essential jobs under military jurisdiction.

Under that scenario the relative fairness of paying for jobs to be done would be replaced with the relative unfairness of being friends with the right people in the "plumber corps" to fix your toliet.

Re: How much do construction costs matter to the price of housing?

#28

Post by dionidium »

timerol wrote: post #12
arcticbull wrote: post #3

It's a question of supply and demand. In areas with high supply or low demand, the price of housing approaches the cost of construction. In places with punitive zoning rules that forbid new construction, limiting supply, and have high demand (I'm looking at you, San Francisco) the price of housing dramatically exceeds the cost of construction.

In places with very high supply or very low demand, the price of housing can be far below the cost of construction, which comes with its own issues

The price can even go lower than the cost to remediate the property for residency. This is a bit of a tail risk. This has never happened to most U.S. neighborhoods, but the risk is not zero.

Getting loans to build on these lots is nearly impossible, which contributes to their continued decline.

Re: How much do construction costs matter to the price of housing?

#29

Post by munk-a »

Erik816 wrote: post #18
Mountain_Skies wrote: post #5

Thought for conversation: if you are able to work remote but still live in or near a major employment center, are you at least somewhat morally responsible for pricing out those who cannot work remote?

Nope. If you can afford to live on the waterfront and enjoy the view, but never use your boat, are you morally obligated to sell your house to someone who will be out there fishing or skiing every day? Land is bought and sold on an open market. Everyone can decide for themselves what is most important to them and what they can afford. One factor behind living in a major city is certainly easy access to in-person empl…

I dislike this particular example because waterfront views aren't necessarily tied to boat accessibility. I have relatives in Long Island that live five houses from a marina and have absolutely no water view what-so-ever, however they have exceedingly good access to their boat which they sail regularly. I like the gist of your argument but the specifics are pretty questionable to me and I'm struggling to think of a similar fair argument that doesn't also have the "under-utilizer" reaping some direct benefit from the same quality that the "proper-utilizer" would fully exercise. The easiest example for me to think of is public transit, a lot of people make no use of public transit for their work commute but still use it when going out for the evening or get a benefit from it through their children's usage. City nodes tend to specialize pretty efficiently, the fact that people who want to live near a movie theater often compete with people wanting to live near transit is due to the fact that those attributes aren't nearly as independent as you'd think. Theaters and entertainment venues in general tend to clump around good public transit accessibility. The waterfront view and the ability to easily fish are two different services, but they're supplied by the same object so it isn't particularly easy to separate the two[1].

1. I mean, unless you're talking about Boston in the 90's where the Charles was a pristine beautiful river that only an absolute madman would ever dare to fish on or some other similar pollution driven limitation of services... but that also shifts the original point since fisherman have no desire to live close to the Charles (and might actually be harmed by having to boat up and down the Charles every day when compared to living in Chelsea or Southie.

Re: How much do construction costs matter to the price of housing?

#30

Post by Scoundreller »

TheChaplain wrote: post #2

Prices on housing will not go down as long as people have access to money IMHO, and plenty are willing to pay up if it means 30-45 min less commute to work.

If non-gov investors had to provide the mortgages instead of the fed, that access to money would dry up.
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