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Why developers seem to only build luxury housing (2018)

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Re: Why developers seem to only build luxury housing (2018)

#51

Post by thriftwy »

It's only you: in Russia developers build huge amounts of affordable housing (good mass transit availability, small/tiny units, high rise buildings) and get a lot of criticism for that.

Critics focusing on poor aesthetics of high/wide buildings, lack of greens and parking spaces, overload of civil infrastructure such as child care/schools. But it's quite obvious you can't have all of that taken care of and keep the existing price tag. Speaking of which, a basic studio apartment on the outskirts of SPb could cost you as few as 20k$ a few years back, especially if bought early in development cycle (which does carry some risks).

Re: Why developers seem to only build luxury housing (2018)

#52

Post by trident5000 »

eptcyka wrote: post #38
zbrozek wrote: post #23

Let's say I'm a developer and there's unmet demand at all price points. Obviously I build the highest-margin product until I've satisfied that demand. Then I move on to the second-highest-margin product until I've satisfied that demand. Anywhere that demand across the spectrum dramatically outstrips production capacity (e.g., anywhere in the Bay Area, where NIMBYism has made it nigh-impossible to build anything) what…

It'd be perfectly reasonable to mandate that for one high value luxury house, a developer has to build a certain number of affordable homes. I guess it'd be the nimbys that would try and prohibit such legislation.

These are the types of regulations that backfire with unintended consequences. Off the top of my head you're going to probably reduce the amount of home builders off the bat. Even if its just upper-end builders, less options at the top of the market will cause high end price increases and then buying down the ladder ultimately raising the price for all housing.

Re: Why developers seem to only build luxury housing (2018)

#53

Post by zbrozek »

eptcyka wrote: post #38
zbrozek wrote: post #23

Let's say I'm a developer and there's unmet demand at all price points. Obviously I build the highest-margin product until I've satisfied that demand. Then I move on to the second-highest-margin product until I've satisfied that demand. Anywhere that demand across the spectrum dramatically outstrips production capacity (e.g., anywhere in the Bay Area, where NIMBYism has made it nigh-impossible to build anything) what…

It'd be perfectly reasonable to mandate that for one high value luxury house, a developer has to build a certain number of affordable homes. I guess it'd be the nimbys that would try and prohibit such legislation.

Projects that don't pencil don't get built. Constraints are costs and reduce the number of projects that make sense. There is only one way out of our housing crisis and it's removing constraints to construction. The biggest of those constraints right now is zoning law and the planning approval process that it creates.

Re: Why developers seem to only build luxury housing (2018)

#54

Post by chrisseaton »

adhesive_wombat wrote: post #49
dazc wrote: post #27

Earlier quoted context omitted.

Elephant in the room being the 'help to buy subsidy'. Half the deposit needed for a new build rather than an old build. That said, I'm not sure I have much sympathy for these buyers. There is a new esatate near me where everyone is driving a newish car in the 30-50K price range?

I genuinely do not understand where the money comes from for the number of very new BMWs, Mercs, Audis and Range Rovers on the roads comes from. It seems way out of step with my impression of "normal" salaries (in the UK). I guess either it's a dangerous amount of finance or I'm just very underpaid. Not that's I'd buy a new car anyway, I'll let someone eat that five-digits depreciation thank you.

A lot of people get a new car as a company benefit. And you can get a new BMW from like £27k they aren't that expensive.

Re: Why developers seem to only build luxury housing (2018)

#55

Post by kokokoko1 »

I think we continue to ignore asset inflation in these discussions.

While there are obvious gaps and issues with physical construction and zoning, the real issue is that housing, and many other assets, have gone up way above inflation for the last 14 years. And the corrections do not wipe out enough of those gains.

If we never solve the asset inflation problem with real estate values, all others issues are ultimately moot.

Re: Why developers seem to only build luxury housing (2018)

#56

Post by tfigment »

acover wrote: post #34
trivialsoup wrote: post #9

Earlier quoted context omitted.

Sure but the new economy sedan is more expensive than the used economy sedan. According to this interpretation therefore, if you build a new house, and it is broadly similar to houses in the neighborhood in which you build it… it’s going to be expensive relative to its neighbors. It will perhaps be perceived as “luxury” despite just being new.

> If the land is valuable, and all you can build on it is a single-family home, why not build a very expensive single-family home? The article suggests changing zoning so triplex/fourplexes can be built. Even if they have marble countertops, they'd still be more affordable than a house. Currently, I can't build the housing version of a Camry.

I live in a townhouse. Its land efficient, i have a garage w/ storage its relatively affordable to houses. What i dont like are HOA fees and useless common expenses (the pool) and forced rules (only white curtains). The space 3 units take up is about one house in same neighborhood.

Re: Why developers seem to only build luxury housing (2018)

#57

Post by SilasX »

CalRobert wrote: post #3

There's a great reddit thread exploring much the same issues at https://www.reddit.com/r/LosAngeles/comments/6lvwh4/im_an_ar... Turns out, requiring little houses for cars be added on to every house for people gets expensive.

Ugh, I remember that one. Painful to read.

For an extra level of irony, where do wealthy Angelenos go for vacation? Paris, for its great, walkable neighborhoods that allow exactly what their city rabidly bans.

Re: Why developers seem to only build luxury housing (2018)

#58

Post by TacticalCoder »

h2odragon wrote: post #24

why don't more people act as their own architect / build more of their housing themselves? I'm coming from an attitude of "a house is a home , a machine to make the lives of my family easier and more comfortable", not "houses are an investment with incidental utility as shelter." Is it that many don't care about their house as a home?

> why don't more people act as their own architect / build more of their housing themselves?

In Europe at least legality of the process. I do a shitload of DIY in the home and so does my brother in his home. Fancy hotel-looking closet with lighting and whatnots? (this sure give a "luxury" feel): we got it. But I'm not allowed to build a house from scracth. I'd love to: my grandfather build a chalet all by himself in the fifties and that chalet still exists.

For the architect plans you kinda can do it yourself and then find an architect that'll adapt and sign the plans.

But the concrete, the electricity: you need stamps/approval from professional and the state does send people verifying that everything is kosher.

You can have the wall and electricity lay out and then do a lot yourself, but you now have the issue that the price you'll pay for "stuff" aren't the discounted prices the professionals do get.

Re: Why developers seem to only build luxury housing (2018)

#59

Post by gwbrooks »

eptcyka wrote: post #38
zbrozek wrote: post #23

Let's say I'm a developer and there's unmet demand at all price points. Obviously I build the highest-margin product until I've satisfied that demand. Then I move on to the second-highest-margin product until I've satisfied that demand. Anywhere that demand across the spectrum dramatically outstrips production capacity (e.g., anywhere in the Bay Area, where NIMBYism has made it nigh-impossible to build anything) what…

It'd be perfectly reasonable to mandate that for one high value luxury house, a developer has to build a certain number of affordable homes. I guess it'd be the nimbys that would try and prohibit such legislation.

That's called inclusionary zoning and exists in many large markets. There's no evidence that it broadly helps but it does further turn housing developme t into a political pawn.

https://www.mercatus.org/publications/urban-economics/inclus....

Re: Why developers seem to only build luxury housing (2018)

#60

Post by nabla9 »

The most counterintuitive fact about urban/housing economics: Only volume of new housing relative to demand matters. You solve housing crisis buy zoning high volume of apartments and the zoning is dense with good public infrastructure and transportation. That's all.

Research shows that if you build a new expensive apartment, it starts a avalanche of people moving and just 2-4 steps later someone with low income gets into a new apartment.

Background assumptions: no empty apartments (this can be fixed with tax) , no NIMBY limits for housing quantity or quality.

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