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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

#351

Post by cuuupid »

bsder wrote: post #284
cuuupid wrote: post #261

Earlier quoted context omitted.

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…

> [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 Real estate is NOT supposed to be a good "investment" and only became so because the government started propping it up with bank bankstops, zoning, NIMBY, redlining, etc. If your pricing is working correctly, real-estate should be close to zero-sum. Austin,…

For nearly every homebuyer, a home is the largest purchase they will ever make and the bulk of their net worth. It needs to be a good long term investment that at least reasonably paces with inflation, otherwise you are losing money by buying a home and everyone has to rent and then you have feudalism with extra steps.

The good news is this is totally fine with keeping cost of living under control and overbuilding, because prices will go back up over time. Most people aren't going to own their home until the 30 year mark so it really is a much, much longer term investment than anything like overbuilding or other factors can reasonably affect.

The problem is really that people started seeing 2x-10x returns on homes and started treating that like the norm. That is not a 'good investment' that is a 'money printer,' and in most cases the government does not want to safeguard that behavior, but it's hard not to when those same people panic like crazy if their home only goes up 2% in value in a year or, god forbid, decreases in value for a year.

There is really no good solution to that mentality, if there really was one then Wall Street would have uncovered it ages ago to get more people into long term ETFs.

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

#352

Post by pclowes »

slg wrote: post #331
pclowes wrote: post #289

Earlier quoted context omitted.

In this case affordable housing nets out as a way to overcome policy barriers to market rate housing. So it actually makes the market freer. Many other implementations of affordable housing further raise the barrier and thus even if any is built it doesn’t help widespread housing affordability issues. Rent control is just another flavor of housing affordability policy that often (always?) backfires. Crime, social pea…

>In this case affordable housing nets out as a way to overcome policy barriers to market rate housing. So it actually makes the market freer. >Many other implementations of affordable housing further raise the barrier and thus even if any is built it doesn’t help widespread housing affordability issues. Can you be specific with what you mean here? Because this reads like a no true Scotsman argument that it doesn't co…

Affordable housing in a vacuum disincentivizes development and results in worse affordability.

Affordable housing used as an incentive or way to overcome other barriers to housing (density limits, height limits, zoning etc) that makes the market more “free” net is will produce more development.

You don’t need it for development but it can be used effectively depending on other policies. As with all things it depends on what policy makers are optimizing for. These are all tradeoffs. But affordable by itself all else equal limits developer upside and incentives less development meaning less supply and higher prices.

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

#353

Post by amarant »

terminalshort wrote: post #243
amarant wrote: post #197

Earlier quoted context omitted.

A fellow Swede I presume? It's extra silly cause I once parked in central Oslo and got the ticket mailed to my sthlm address. No fuss, no problem, super easy! We got a lot to learn from our neighbours....

Super easy unless you have moved recently, then you don't get the bill and end up years later in collections for the original amount plus a million late fees added on.

Nah it arrives electronically to kivra, which is like email except you log in with your social security number and it's only for "official business" like invoices and whatnot.

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

#354

Post by sgc »

adrianN wrote: post #343
sgc wrote: post #337

Earlier quoted context omitted.

That is a good idea that requires careful attention to make sure it has near-perfect execution. Because we do that, and they are called 'the projects'.

I'm under the impression that more supply=lower rents, even if execution is not perfect, but I'm not an economist.

Sure if that's all you care about, it will do that. At the price of making people's lives miserable due to substandard housing if it's done wrong. I said it's a good idea, let's just make sure we do it right.

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

#355

Post by eigen »

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 have very small margins, as little as 1%.

Looking at the Kroger 2024 Annual report shows that they have 22.3% gross margin . they pay dividends, had a stock buy back, etc so its entirely possible that they had a very low margin but gross margin seems to be similar to a home builder.

Sales $ 147,123

Merchandise costs $113,720

Rent, Depreciation, Amortization $655

Gross profit $32,748

for a gross margin of 32.7/147 = 22%

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

#356

Post by zugi »

komali2 wrote: post #262
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?

Maybe other real estate savvy people can help me understand this plus two other things I'm confused about in the housing crisis: 1. Houses are unaffordable for many Americans. To get houses to prices where they'd be affordable again would require a housing prices drop that would likely be, market-wide, significantly low enough to put a ton of people underwater on their mortgages. What is society/the government meant…

#1 is the symptom, #2 is the problem.

High levels of home ownership combined with "local control" and "democracy" enables the "haves" who already own homes to weaponize government to keep supply low and home values high. Zoning restrictions, building codes, taxes, and other government tools are brought to bear to support this. The "have nots" don't have a chance.

Austin seems to be a counter-example when they "instituted an array of policy reforms" in 2015 that showed great results. Sadly the key may be appealing to the greed of existing homeowners. Changing zoning to allow tall apartment buildings where single family dwellings once stood lets existing home owners make even more money by selling than they'd make by continuing to restrict supply. While it's sad if that's the only path to success, we'll have to take small successes where we can find them.

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

#357

Post by naravara »

sgc wrote: post #337
adrianN wrote: post #333

Earlier quoted context omitted.

There is the possibility that the government builds housing, since the government doesn't have to care about direct profits and can include the overall economic effects of affordable housing in its calculations. We don't expect much direct profits from roads either, but we keep building more and more of them.

That is a good idea that requires careful attention to make sure it has near-perfect execution. Because we do that, and they are called 'the projects'.

I’ve seen some housing projects around my city that are actually quite nice. They didn’t end up being shabby because they were built poorly. They were shabby because they were reserved for the very poor and, consequently, became extreme concentrations of poverty and crime. This makes people unwilling to invest in maintenance and continued improvement of their homes.

If the government just went on a building binge of housing to be sold at market rate, or even set an upper bound before qualifying to buy them at a middle class income, it’d work out fine. That’s basically how Singapore does it only they couple it with somewhat aggressive policies to encourage people to downsize their living situations once they’re empty nesting to free up family dwellings for people with families. We probably wouldn’t need to do that second part since we’re not a claustrophobic island, and could just count on natural turnover.

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

#358

Post by jltsiren »

CharlieDigital wrote: post #330
jltsiren wrote: post #272

Earlier quoted context omitted.

The underlying assumption is that laws will be changed when necessary. If it's not possible to do that, most issues probably can't be fixed. More fundamentally, this is related to the principle of subsidiarity that is occasionally popular in the EU. Everything the government does should be done by the lowest level that can reasonably do it. And to enable that, local and state governments should have sufficiently wide…

Laws are voted on by the people. And if the municipal elections are scoped to current residents , they will vote to not expand in almost every case. At the state level, we have housing laws that mandate ratios of affordable housing. Many townships faught this in court (and lost) because schools and infrastructure are capital projects. Bonds are secured today against some future tax base. Don't forget that developers…

People often vote to support new housing, as long as the entire system works reasonably well.

My solution was to widen the tax base to make the system work better.

The incentives around property taxes do not support significant new construction. If housing becomes more affordable, tax revenue per capita goes down, while local government spending stays the same or increases. Local governments should therefore not rely too much on property taxes.

Income taxes, on the other hand, are good. You are taxing things you want to grow, and you get more tax revenue when your policies are good to the people. Local governments might want to collect more income taxes and less property taxes.

When the demand for housing is high, zoning creates significant windfall to the landowner. Some of this windfall can be taxed to support infrastructure construction.

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

#359

Post by vasco »

nsnzjznzbx wrote: post #338
terminalshort wrote: post #224

Earlier quoted context omitted.

Because home builders don't make money by buying and selling houses, they make money by building them and selling them.

But building cost > sale value is possible. Or land ends up better value left as suburban house than developing up. Or they build where sale cost - build cost is maximized. I.e. different city. Governments need to build more housing. Make it bland so snobs can price discrimnate themselves to buy builders' homes. Why thrifts by the government home for value for money (and quality).

You think the government knows better how to identify land that is profitable than private builders? Why? Or is this one of those opinions based on "is OK for the state to pay for it because there's infinite money for my pet project"?

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

#360

Post by smcin »

gnopgnip wrote: post #319
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.

Dr Horton is the largest builder in the US. In q3 2025 they had a 21.8% gross margin.

Their gross margin is a lagging metric on houses they built 2/3 quarters ago, and applied for development permits ~4 quarters ago.

US homebuilder gross margins have been declining since 2023.

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