Austin’s surge of new housing construction drove down rents • Hacker News Board

Re: Austin’s surge of new housing construction drove down rents

#291

Post by komali2 » Thu, Mar 19, 2026, 2:52 AM UTC

cuuupid wrote: post #261

estearum wrote: post #221

Earlier quoted context omitted.

New construction has already decelerated in Austin due to falling prices, which compresses already-near-zero margin on real estate development. So yes, it really is "just build more housing." The problem is: why would you build more housing as prices fall?

It's not necessarily prices falling here but the profitability of [demand] at [price]. Like if prices fall 10% but demand rises 20%, you would want to build more housing. This is the beauty of the free market because it guarantees three things: [1] Real estate is generally a good investment and will hold value or appreciate in the long term, because supply will adjust to demand shocks to rescue values [2] If people w…

It seems to me that the market will select for urban sprawl though which is a negative for society but has the highest margin. E.g. Houston suburbs, miles and miles of cheap to fab single family homes that turn it into a suburban hell scape where you have to drive everywhere.

I don't think the free market is giving the promises you say it is - supply isn't elastic for real estate if nobody's building because there's no margins. Demand can be anywhere really.

I like to look to Tokyo for an example. Small lots, extremely predictable regulations (that are still strict enough to ensure a safe living situation), fast approvals, mean it's much faster and easier to throw up an 8-10 story apartment than say downtown Austin, and so even today they keep doing it despite land in Tokyo being very expensive. And, no sprawl.

Re: Austin’s surge of new housing construction drove down rents

#292

Post by lotsofpulp » Thu, Mar 19, 2026, 2:54 AM UTC

estearum wrote: post #234

creato wrote: post #223

Earlier quoted context omitted.

It doesn't matter whether prices are going up or down, it matters if the price is more than the cost to build.

No, not really. It matters whether the margin is higher than other investment opportunities of similar scale and risk profile. Already, the answer is very often no. In Austin, the answer will increasingly be no. That means people will not finance new construction, so if demand continues to grow it will outstrip supply and prices will go back up until the margin on new construction exceeds that of alternative investme…

Your explanation of fluctuations in supply and demand are not very revelatory. Everything being in flux at all times is kind of an elementary fact of life.

Re: Austin’s surge of new housing construction drove down rents

#293

Post by triceratops » Thu, Mar 19, 2026, 2:54 AM UTC

KPGv2 wrote: post #267

triceratops wrote: post #247

Earlier quoted context omitted.

God forbid bad parts of town ever get good.

That's not what gentrification is. Relevant to this article, I lived through the gentrification of large parts of Austin in the early 00s. What happened was that good housing full of artists and musicians and other self-employed creatives began gentrifying, driving up property values, which drove up property taxes, which became unaffordable to the existing residents (who had owned their homes for a long time). Many (…

My interpretation of your comment:

The existing residents (artists) made money by selling their appreciated houses. Those who could afford to remain were now in areas with less crime and poverty.

The new residents spent a ton of money to live in a place they themselves culturally diminished.

We should re-evaluate the winners and losers here.

Re: Austin’s surge of new housing construction drove down rents

#294

Post by TimorousBestie » Thu, Mar 19, 2026, 2:54 AM UTC

terminalshort wrote: post #235

BenFranklin100 wrote: post #184

Earlier quoted context omitted.

It’s going to take a SCOTUS decision overturning Ambler vs Euclid in my opinion. We certainly will not see zoning reform until the Boomers die.

Hate to be the bearer of bad news here, but the boomers will never die. Gen X will become the new boomers, and then the millennials after them. Individual people die, but interests stay the same.

Yeah, but the inverted pyramid demographics can’t last forever.

Re: Austin’s surge of new housing construction drove down rents

#295

Post by terminalshort » Thu, Mar 19, 2026, 2:55 AM UTC

datsci_est_2015 wrote: post #207

muyuu wrote: post #77

Earlier quoted context omitted.

it's crazy that people nowadays seriously question basic market pressure being a thing

Who are the people that “seriously question basic market pressure being a thing”? Am I missing something?

Just look through the comments on any post about housing or immigration and you will see hordes of them.

Re: Austin’s surge of new housing construction drove down rents

#296

Post by epistasis » Thu, Mar 19, 2026, 2:56 AM UTC

estearum wrote: post #234

creato wrote: post #223

Earlier quoted context omitted.

It doesn't matter whether prices are going up or down, it matters if the price is more than the cost to build.

No, not really. It matters whether the margin is higher than other investment opportunities of similar scale and risk profile. Already, the answer is very often no. In Austin, the answer will increasingly be no. That means people will not finance new construction, so if demand continues to grow it will outstrip supply and prices will go back up until the margin on new construction exceeds that of alternative investme…

Yes really, that deeper understanding is exactly what is meant when somebody says "the cost to build is lower than the price." If we're going to be pedantic, you're ignoring the huge amounts of uncertainty on costs that are inherent to any project, the amount of risk versus the expected profit.

And indeed that amount of uncertainty: will I be allowed to build eventually? How long will I have to pay interests on assets before I'm allowed to build? Can I actually build what's specified in code or will discretionary processes arbitrarily change what I'm allowed to do, 18 months into the project?

Re: Austin’s surge of new housing construction drove down rents

#297

Post by estearum » Thu, Mar 19, 2026, 2:56 AM UTC

bpt3 wrote: post #279

estearum wrote: post #266

Earlier quoted context omitted.

> Like if prices fall 10% but demand rises 20% Not as a developer you wouldn't... You already have razor thin margins. Prices going down 10% means you cannot get financing for your project. Holding real estate is generally a good investment. Developing real estate actually is not. > Real estate developers and construction are solid, safe businesses with great unit economics No they are not lol

Can you define razor thin? Grocery stores have very small margins, as little as 1%. Homebuilders make at least an order of magnitude more on a very expensive item.

Grocery stores don't require millions to billions of dollars of capital to execute each new transaction.

So it's not the margin itself but actually the spread between the margin and what investors could get by investing in alternatives. Real estate investment opportunities are often measured by their advantage (measured in fractions of a percentage, .2% advantage being considered solid) over 10 Year Treasuries or S&P 500 returns.

Real estate developers do often actually lose money, but the more salient boundary condition is whether they can get financing for a project, where they have to clear a bar well above the "just make >$0" bar.

Re: Austin’s surge of new housing construction drove down rents

#298

Post by bluGill » Thu, Mar 19, 2026, 2:56 AM UTC

vel0city wrote: post #205

bluGill wrote: post #159

Earlier quoted context omitted.

You can't start a new city. I city exists for all the things you can do. Your new city will have nothing to do because nobody lives there and there are no jobs to attract anyone to move. that is why we build suburbs - they get anound this by being right next to a place with everything you want in a city

It obviously wouldn't be successful on day one, and it would take some kind of exceptional pressure to jump start it, but these things have been done in the past in the US and have been done recently in China. Not arguing these were good things, but they have happened before. Think back to the old "company towns". Lowell, Massachusetts, built for a textile mill. Hershey Pennsylvania, built around a chocolate factory.…

And you proved my point why you can't today.

Re: Austin’s surge of new housing construction drove down rents

#299

Post by datsci_est_2015 » Thu, Mar 19, 2026, 2:57 AM UTC

ivewonyoung wrote: post #241

datsci_est_2015 wrote: post #207

Earlier quoted context omitted.

Who are the people that “seriously question basic market pressure being a thing”? Am I missing something?

There was an article on HN front page a few months ago which stated(paraphrased) "building more housing to reduce prices is a right wing ideology that doesn't match reality" or some such. I'll reply here if I find it.

hn.algolia.com is a great search interface. I searched “housing” and top posts in the past year and didn’t see anything related to your quote on the first two pages. Maybe I need to search deeper.

Re: Austin’s surge of new housing construction drove down rents

#300

Post by estearum » Thu, Mar 19, 2026, 2:57 AM UTC

lotsofpulp wrote: post #292

estearum wrote: post #234

Earlier quoted context omitted.

No, not really. It matters whether the margin is higher than other investment opportunities of similar scale and risk profile. Already, the answer is very often no. In Austin, the answer will increasingly be no. That means people will not finance new construction, so if demand continues to grow it will outstrip supply and prices will go back up until the margin on new construction exceeds that of alternative investme…

Your explanation of fluctuations in supply and demand are not very revelatory. Everything being in flux at all times is kind of an elementary fact of life.

It's clearly not elementary if people here believe that you can just keep building until prices collapse, and people will still keep building.

The question is whether the market achieves equilibrium at a point where 1) developers can get financing to build profitably, and 2) units can be sold at a broadly attainable price to the local market.

The answer appears to be no because the cost of inputs is so high. No one here is talking about directly reducing the cost of inputs. They believe that instead developers will just continue to build units that they sell at a loss, or at least investors will continue to invest in construction that returns less than the S&P 500 or 10 Year Treasuries (they won't).