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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

#531

Post by simoncion »

hunterpayne wrote: post #481
bluegatty wrote: post #394

Earlier quoted context omitted.

I think it's a matter of perspective maybe more than 'knowing what they are talking about'. Like - seeing property as 'investment and ownership' vs 'places where people live' is sometimes pretty big gap. Especially when we've been grounded in 'mortgages and wealth creation' for regular middle class people. Rent control and the underlying civilization power dynamics are kind of a subtle thing, I think most folks are g…

Rent control drives up rents, not down. Since rent control was enacted in SF, rents have increased by 15x in 45 years. That's 24% a year annualized over 45 years. Its similar for other places that enacted it. Rarely in human history has a specific policy failed more spectacularly. Yet you still hear supposedly educated people advocate for it every year.

> Rent control drives up rents, not down. Since rent control was enacted in SF, rents have increased by 15x in 45 years.

A couple of things:

You're aware of the Californian property tax control? If you aren't, go read up on the 197X Proposition 13, as well as the ways even vaguely-savvy landowners can get around the "tax is reassessed when the property changes hands" rule. IMO, it's only fair that tenants get the same sort of price-increase-protection that landlords get. If the landlords get rid of Prop 13 and anything even remotely like it for the next fifty years, I'll be first in line to clamor for the removal of what passes for rent control in the few cities that have it.

Unless you -as a developer- especially request otherwise, SF's rent control only applies to buildings that were in existence back in 197X, when the ordinance was enacted. New units are not covered by rent control. It does not apply to any commercial buildings... just residential rentals. It also only controls the rate of rent increase until the unit is vacated. Once it's vacated, the landlord is free to charge whatever rent they wish.

Your story gets confounded by the fact that -for a variety of reasons- it's nearly impossible to build any new residential buildings in SF. When demand is met with a nearly zero increase in the supply, the cost of the thing being demanded tends to go up.

Rents are generally quite high in California, not just in SF. From [0]

                        2000    1990    1980    1970    1960    1950    1940
  United States         $602    $447    $243    $108     $71     $42     $27
  California            $747    $620    $283    $126     $79     $42     $27
  Washington            $663    $445    $254    $113     $71     $43     $22
Only a few cities in California have rent control [1], so that doesn't explain the fact that rents are high state-wide.

Though, it is more interesting to look at the numbers when adjusted to 2000's dollar. [2] I wonder if your "15x" figure is inflation-adjusted...

                        2000    1990    1980    1970    1960    1950    1940
  United States         $602    $571    $481    $415    $350    $257    $284
  California            $747    $792    $560    $484    $389    $256    $286
  Washington            $663    $569    $503    $434    $350    $263    $226
[0] https://www2.census.gov/programs-surveys/decennial/tables/ti...>

[1] Costa-Hawkings prevents cities from even considering the adoption of the policy to level the playing field with Prop 13-subsidized landlords.

[2] https://www2.census.gov/programs-surveys/decennial/tables/ti...>

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

#532

Post by michaelmrose »

pinkmuffinere wrote: post #376
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?

I'm confused by this objection, if you draw a stereotypical supply and demand curve, you can see how prices settle to an equilibrium point. Of course reality has more complications, but I think your objection is 95% answered by a supply and demand curve. You keep building houses when it is profitable. You stop when it is not. This naturally keeps everything in balance.

If a minority has most of the wealth then the equilibrium supply may include a lot of supply of second homes, very large homes on large plots for the rich, properties sold at a premium based on how much they can extract from renters, and even investment properties occupied by nobody whilst still having insufficient small basic homes and dense housing.

Capital that could be invested in better serving the bottom half has to compete not only with the use of those resources to further enrich the rich but other investment opportunities.

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

#533

Post by michaelmrose »

fc417fc802 wrote: post #523
laserlight wrote: post #501

Earlier quoted context omitted.

> That means there’s an invisible hand keeping prices up, or basically that the market is not free enough. Nowhere in the economic theory there is a proposition stating that prices should fall below affordable levels, given enough competition.

We don't need economic theory for that it's just common sense. Humanity has been erecting structures to live in for approximately our entire existence. The modern economy is mechanized. How could a wood frame structure or a small high rise possibly be unaffordable if the market is functional? Stop and think for a second. Someone in good health with a willingness to DIY and a sufficiently flexible schedule can literal…

The average person would need a MASSIVE investment in time to learn all the skills required in addition to investment in tools. Furthermore people won't lend joe random the funds required in the same fashion as they would for an actual finished house OR constructing a house via a contractor.

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

#534

Post by Dylan16807 »

otherme123 wrote: post #511
locknitpicker wrote: post #479

Earlier quoted context omitted.

> That means there’s an invisible hand keeping prices up, or basically that the market is not free enough. That’s caused most of the time due to excessive regulation. No. Why do you guys fall so easily for the "regulation" cliche? The answer is far easier: unwillingness to invest. Why are there investment funds willing to burn through tens of millions in stupid stuff like NFTs or pets.com, but investing $10m on a 5 s…

Why the investment funds have to build the houses? Houses has been built/funded from zero by the future owners since forever, either individually or through cooperatives. That way, "investors" don't need a positive ROI, and they happily lose money overall if they get a home. I know some people that are currently "willing to invest" in buying a ship container or two and transform it into a house to get costs down. The…

Using a shipping container is almost always a stupid plan compared to just putting up some wood. As much as I want to make zoning more flexible, I'm not in a rush to change that particular regulation.

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

#535

Post by hunterpayne »

pocksuppet wrote: post #277
tkel wrote: post #215

Earlier quoted context omitted.

Prices in massively inefficient markets do not follow the supply + demand equilibrium. Beer is not an inefficient market. You're doing the absurd comparison.

It's more correct to say supply and demand still drive the overall average, but in a high-friction market of unique items, every single case is still a unique case. It's not like moving wheat bushels or RAM chips. When they sell oil, they mix up all the oil from different producers in the same reservoir, in the same tanks. Electricity travels in the same wires. Housing is nothing like that.

"they mix up all the oil from different producers in the same reservoir"

Only when avoiding sanctions, not normally. And housing does follow economic principles no matter how much you wish that wasn't so.

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

#536

Post by manquer »

rconti wrote: post #425
manquer wrote: post #191

Earlier quoted context omitted.

To be fair it is not the city/elected officials who wants to retain the parking lots. The downtown redevelopment would probably make the city a lot of money. It is the businesses around downtown who are pushing the save downtown campaign. I imagine the businesses contribute a fair chunk of revenue to the city now and have some influence . Relative to say parts of Redwood City, or Palo Alto. Menlo park has a fair amou…

TBF a lot of the complaints are coming from businesses that are _probably_ renting. There is absolutely the chance that their business will go under due to construction disruptions before they can benefit from the increased foot traffic once the development is complete. And, of course, once the development is complete, and the value of their land goes up, so too does their rent....

It is just not rent that will go up.

Menlo Park today has free and ample parking downtown. RWC is paid parking anywhere within few blocks of downtown, all the garages are paid, the garage on Jefferson Av charges more on Sundays. Same thing in San Mateo downtown.

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

#537

Post by foxglacier »

fc417fc802 wrote: post #523
laserlight wrote: post #501

Earlier quoted context omitted.

> That means there’s an invisible hand keeping prices up, or basically that the market is not free enough. Nowhere in the economic theory there is a proposition stating that prices should fall below affordable levels, given enough competition.

We don't need economic theory for that it's just common sense. Humanity has been erecting structures to live in for approximately our entire existence. The modern economy is mechanized. How could a wood frame structure or a small high rise possibly be unaffordable if the market is functional? Stop and think for a second. Someone in good health with a willingness to DIY and a sufficiently flexible schedule can literal…

It's regulations. But before you call them broken, some of it is safety. Safety standards keep rising with technology and the economy as people can afford more. Same with cars. There's also zoning restrictions in some places designed to prevent slums by requiring large residences. I guess that's happening here too.

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

#538

Post by sophrosyne42 »

estearum wrote: post #221
pclowes wrote: post #176

Its wild how the solution to housing costs is really just: Build more housing. Keep law and order. No it doesn’t need to be “affordable”. Yes rent control is a terrible idea. Just build more housing. Note: that the US already has plenty of housing and housing costs basically go up in areas of low crime relative to economic opportunity. If you build housing, but allow crime to rise, you have wasted everybody’s time.

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?

Supply increases until the market reaches saturation. The question is why build more housing if the current supply is sufficient?

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

#539

Post by chii »

hunterpayne wrote: post #513
chii wrote: post #432

Earlier quoted context omitted.

> 2 people want to own the house. and so how do you decide who gets it? 1) morally. Alice deserves it because her intention is more pure. 2) financially. Bob gets it, because he can pay more for it than alice. Which choice above you make as a policy direction is a reflection of your world view. I'm voting for 2), but i can understand the POV of 1), even tho i disagree with it.

You are entirely missing the point. The correct answer is to build 2 houses. The problem with these policies is that they artificially restrict demand. If they didn't do that, nobody would have a problem with them.

> The correct answer is to build 2 houses

the utopian answer is to build two houses. But we don't live in utopia.

The constraints faced today is real (paper or physical). You can't wish it away, and you can't say it's "easier" to just build two houses.

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

#540

Post by Sankozi »

laserlight wrote: post #501
tirant wrote: post #467

Earlier quoted context omitted.

That means there’s an invisible hand keeping prices up, or basically that the market is not free enough. That’s caused most of the time due to excessive regulation. Another reason is high demand in locations where offer is limited due to physical limitations. There’s always demand to live in Broadway, and offer can never catch up due to its physical limitations.

> That means there’s an invisible hand keeping prices up, or basically that the market is not free enough. Nowhere in the economic theory there is a proposition stating that prices should fall below affordable levels, given enough competition.

We are not talking about economic theory. We are talking about house prices. Time after time it has been seen that free-enough market can lower the prices to affordable levels.
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