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Austin’s surge of new housing construction drove down rents

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

#301

Post by mcmcmc »

narrator wrote: post #170
mcmcmc wrote: post #127

Earlier quoted context omitted.

> In California people are very scared of poor people because they tend to commit more crime and the justice system refuses to prosecute and imprision them, especially if they are criminally insane. Funny to read this when it’s common knowledge the rich commit so much tax evasion the IRS doesn’t bother investigating, and tech billionaires like Thiel are regularly abusing hard drugs and spewing unhinged theories about…

[flagged]

Ah yes, an ad hominem is an excellent way to deflect from reality. Thanks for your thoughtful reply.

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

#302

Post by triceratops »

mmooss wrote: post #280
triceratops wrote: post #247

Earlier quoted context omitted.

God forbid bad parts of town ever get good.

Good for whom? If it's good for the residents, that's great. If it's bad for the residents, who get driven out, but good for some developers and outside rich people - that's what gentrification is.

Unless all of the housing is owned by non-residents prior to gentrification, some residents always benefit from their neighborhood going upscale. Either through increased home values, allowing them to sell and improve their lives. Or because it's now a more pleasant area to live in.

Even renters in gentrifying areas may profit if housing construction outpaces population growth. Yes, they may have to move, but also the places they move to on their current budget may be nicer - because the people who can afford better have moved too.

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

#303

Post by cuuupid »

bluGill wrote: post #159
nomilk wrote: post #118

Dumb question, many cities suffer from extremely high property (i.e. land) prices. I understand the NIMBY barrier. But I don't understand why it isn't more common to simply.. start a new city. Especially in countries like Australia where property prices are sky high and alternative places for setting up a new city are abundant. Maybe internet connectivity was previously a barrier, but now.. starlink. I put this quest…

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

This is actually how you start a city though, you build a suburb and wait for it to grow into a city. This takes a really really long time so it's better to build near existing cities.

We don't observe this phenomenon occurring often in the modern day only because cities sprawl rapidly and so the evolution of the suburb becomes a borough of the existing city rather than a brand new city. Otherwise Brooklyn, Jersey City, Weehawken, etc. would all be considered new cities instead of being referred to as the NYC metro.

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

#304

Post by nout »

rconti wrote: post #11

Meanwhile, California is also trying to build housing near transit, but Menlo Park wants to preserve the character of downtown by preserving dirty, cracked, flat, surface-level parking lots like it's 1950.

Menlo Park people are pretending that they are Atherton.

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

#305

Post by estearum »

epistasis wrote: post #296
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…

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 asset…

> Yes really, that deeper understanding is exactly what is meant when somebody says "the cost to build is lower than the price.

It demonstrably is not what people understand it to mean to "the cost to build is lower than the price." The cost to build can be well below the sale price and development still be a totally uninvestable activity.

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

#306

Post by slg »

cuuupid wrote: post #269
slg wrote: post #249

Earlier quoted context omitted.

I'm not sure if you're intentionally changing the definition of "affordable housing" in an attempt to make the desire for it seem silly or if you genuinely don't know how the term is typically used. But what you're describing is generally referred to as "market-rate housing" and not "affordable housing".

Affordable housing = housing that regular people can afford The only silly thing here is that "low income housing" got rebranded as "affordable housing" and absolutely everything else got rebranded as "luxury homes" for political reasons. "Market-rate housing" is even sillier given that it is literally the opposite of what "affordable housing" policies dictate

I'm not going to debate what the definitions should be, I'll just say I don't think it is productive to join an existing conversation using terms with different definitions than everyone else uses. Defining all housing as inherently "affordable" makes the term meaningless and even if you disagree with the motivations behind the desire for "affordable housing", at least the term has meaning in the way it's typically used.

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

#307

Post by estearum »

epistasis wrote: post #286
estearum wrote: post #271

Earlier quoted context omitted.

> it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price. Right... my point is that the costs are not far below the eventual sales price. That's why construction is slowing down. And as mentioned several other times, it's actually not as simple as cost > sale price. It's margin > margin of alternative investments of similar scale and risk profile.

It was not clear that it was your point at all! Yes of course, gotta get your return on capital invested or the money goes elsewhere, probably into a REIT that invests in the existing assets and drives up prices even further. Because the demand for housing goes somewhere: either existing owners profit or the people building and alleviating the shortage profit. Every single municipality in the US I'm familiar with has…

How do you interpret "which compresses already-near-zero margin on real estate development" if not "the costs are already near the sale price?"

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

#308

Post by CharlieDigital »

slyall wrote: post #265
CharlieDigital wrote: post #101

Earlier quoted context omitted.

It is more complicated than that. A few years back when my youngest entered 1st grade, I attended some meetings where the superintendent talked about school expansions in the pipeline due to confirmed property development projects. Namely, when new housing is added, there are infrastructure considerations and corresponding expenses that translate to higher taxes . Civil planners have formulas for how much the student…

Except you get exactly the same opposition in places where schools are funded by a higher level of government and if anything you taxes will go down because they are now spread across more households.

I can't answer for different states and municipalities, but I know about mine and NJ based on how we had to expand every school in the district over the last 10 years.

These are big capital expenses. My property taxes have never gone down, even as my township has expanded.

Part of this is that taxes are calculated on assessed value. Where I'm at, assessed value is a combination of lot size + structural improvement. Tax bill is assessed value * rate. Assessments have never gone down. The more people want to move here, the more values go up, the more capital projects need to be undertaken before new tax payers are contributing. It may take years to build a new development, but the multi-million dollar budget to expand the school and staff up teachers has to happen in tandem, before the new tax base exists.

My lot is from the 70's. It's huge. New lots are significantly smaller. Townhouses and apartments are very dense. New development does not yield savings in taxes in practice unless it is commercial development.

A big piece of farmland contributes taxes, but requires little in services. Convert that 50 acres into 50 units and now you need much more services and infrastructure compared to the 50 acre farm.

You underestimate just how much schools and teachers cost. Those 50 units might add 50-100 students. Capital projects start even before the units finish to prevent overcrowded schools. Contracts are signed for garbage and snow removal if 5 of those units are occupied or 50.

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

#309

Post by epistasis »

FireBeyond wrote: post #232
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?

In my state, or in my capital city, you say this, but the real estate developers are generally the top 1% in town. If they're running on razor-thin margins, I'm not seeing it - I am seeing them on my Facebook (being friends with the wife of the mayor) doing things like taking their kids on vacation to the French Riviera, Switzerland, Tokyo, the Maldives... well, alongside the City's Planning Committee commisioners an…

Highly restrictive development rules, often sold as ways to stick it to those very rich developers, are precisely what make them so rich. Only those with huge amounts of capital to spend can make it through the gauntlet of the rules and have big enough asset portfolios to stay in the game. They can bank land for decades, speculating on the best time to take their profits, all while others live through shortages of housing and do not have access to that land.

Those very processes that make it hard to develop keep out the scrappy up-start competition, the contractors that could be building houses all over if they had enough lawyers/planners/specialists to help them get through the system.

Look, for example, at LA, which has super super restrictive rules on what can be developed where, and has huge amounts of discretion at the political level, so that NIMBYs can block what they want. The only people who can build housing are developers who bribe the politicians (there was a somewhat recent arrest in LA on this, involving literal bags of cash, by the FBI).

Having simple, straightforward rules that are completely objective is the only way to try to flatten out the playing field. However such rules get shot down by NIMBYs precisely because they don't want the shady developers profiting off apartments! It's all highly ironic.

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

#310

Post by triceratops »

TimorousBestie wrote: post #290
triceratops wrote: post #251

Earlier quoted context omitted.

If you invent a scenario where the mortgage is half the rent then buying is a no-brainer. Does that reflect reality?

Maybe not half, but it’s pretty common around here (generic midwestern city) for renting to be more expensive than a comparable mortgage. Many landlords seem to expect to pay their mortgage and property taxes and maintenance with the rental income, and still net a profit, if r/landlord is to be believed.

The profit is compensation for the risk. The mortgage and property taxes and maintenance are due no matter what - can't find a tenant, tenant doesn't pay, tenant flushes paper towels down the toilets every day etc etc.

If there was no profit there would be no landlords. Some might say that's great. But it would be a world with less flexibility, with fewer choices. Don't like your job and want to move? Split up with your partner and need someplace to live? Moved to a new city and don't know where you want to put down roots yet? At college for 4 years? Don't want to deal with house maintenance? "F** you, buy a house anyway". That's what we'd have if there was no rental housing.

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