A lot more market-rate construction helps low-income renters more than subsidies • Hacker News Board

Re: A lot more market-rate construction helps low-income renters more than subsidies

#71

Post by twic » Tue, Mar 24, 2015, 7:31 PM UTC

brudgers wrote: post #39

As a result of its high housing costs, California has the highest real poverty rate in the country. California ranks 35th in terms of poverty rate. [1] The graph that follows the statement shows that California's poverty rate is higher than the US average. That's not an auspicious premise for quality economic reasoning. The constraint on housing prices in places like San Francisco is land cost. If developable land co…

> California ranks 35th in terms of poverty rate. [1]

I'm not sure how carefully you read the page you cite.

Firstly, that 35th is 35th from the bottom - which means that California has the 17th highest poverty rate amongst the 51 states and federal district of the USA.

Secondly, that rank is based on a definition of poverty based on income thresholds that do not vary across the country:

http://www.census.gov/hhes/www/poverty/about/overview/measur...

It therefore does not take into account geographical variations in the cost of living, such as housing. Since the whole point of the article is that California has a higher cost of housing, it is therefore not a useful measure in this context, or indeed at all. That's probably why, in 2010, the census bureau adopted a better metric, the Supplemental Poverty Measure:

http://www.census.gov/hhes/povmeas/methodology/supplemental/...

Helpfully, the 2012-2014 average of this measure is also tabulated on the page you cite, and if you sort the states and the district by that, you can see that California does indeed have the highest poverty rate in the country - 23.8%, just pipping Washington DC's 22.7%

Re: A lot more market-rate construction helps low-income renters more than subsidies

#72

Post by nulltype » Tue, Mar 24, 2015, 10:01 PM UTC

brudgers wrote: post #39

As a result of its high housing costs, California has the highest real poverty rate in the country. California ranks 35th in terms of poverty rate. [1] The graph that follows the statement shows that California's poverty rate is higher than the US average. That's not an auspicious premise for quality economic reasoning. The constraint on housing prices in places like San Francisco is land cost. If developable land co…

If I took a 500k plot of land and built a 100k house on it, why does it need to be priced at 1.5m?

Re: A lot more market-rate construction helps low-income renters more than subsidies

#73

Post by nulltype » Tue, Mar 24, 2015, 10:06 PM UTC

brudgers wrote: post #47

patio11 wrote: post #16

Earlier quoted context omitted.

No one ever explains those Examples: + Mission Street between 16th and Ceasar Chavez is a rail corridor. There was a proposal to limit this area to 8 story buildings. SF counterproposed and adopted a height limit which was on a per-property basis the lower of either a) what was presently built there or b) what city staff recommended, to preserve the character of the neighborhood. (Source: http://www.slate.com/blogs/m…

The proximate constraint on housing in your example is obsolescent uses [porn is free on the internet] that are occupying space in lieu of housing...three story development is dense when there is not significant open space devoted to automobiles. Going taller means higher per square foot construction costs and more automobile storage per square foot of land. Both drive up the cost of placing new dwelling units on the…

I'm not sure that buildings are priced at their construction costs in SF.

Re: A lot more market-rate construction helps low-income renters more than subsidies

#74

Post by nulltype » Tue, Mar 24, 2015, 10:15 PM UTC

bjourne wrote: post #51

patio11 wrote: post #16

Earlier quoted context omitted.

No one ever explains those Examples: + Mission Street between 16th and Ceasar Chavez is a rail corridor. There was a proposal to limit this area to 8 story buildings. SF counterproposed and adopted a height limit which was on a per-property basis the lower of either a) what was presently built there or b) what city staff recommended, to preserve the character of the neighborhood. (Source: http://www.slate.com/blogs/m…

Well, redeveloping existing areas is of course not as simple as building on unused land. From my limited research using Google Streetview, Mission Street looks like a charming neighborhood with many buildings worth preserving. What about south of San Francisco? Couldn't you build five story or higher apartment buildings there? Again, using Streetview, it looks like there are many newly built suburbs (or maybe they ar…

Well, SF has definitely chosen the "preserve" option. Of course, the result of that (in the face of increasing demand) is ridiculous prices.

Oddly enough south san francisco still seems to be fairly expensive, especially along the decent public transit lines. Assuming you're commuting to the city every day, you are trading say, an extra hour or two a day in commuting time for cheaper rent.

Re: A lot more market-rate construction helps low-income renters more than subsidies

#75

Post by brc » Wed, Mar 25, 2015, 1:06 AM UTC

icebraining wrote: post #22

seanmcdirmid wrote: post #14

Earlier quoted context omitted.

In an unrestricted free market, someone would just buy up all the property in a constrained space to corner the market. That has definitely happened before in robber baron days. And honestly, if I wanted to live in a cess pool like Houston, I would move there. Houses are cheap enough (comparatively) but it is a huge icky sprawl.

That has definitely happened before in robber baron days. I'm curious, has it really happened at a city level? Seems to me that it would get prohibitively expensive, since other owners would see the massive demand and push up the prices, but that's really just a supposition.

No.

There isn't anyone with enough money.

Just to by a simple suburban street takes millions and millions.

Even someone with the cash resources of Apple could maybe get one or two suburbs of San Francisco before the prices started rising fast and they priced themselves out.

Cornering a market happens periodically in small markets like commodity futures or stocks in a single company - and usually only for a brief period.

You could make the argument that you could 'buy' a government by buying all the available currency. Technically it's true but practically it's not. Who would want to own a monopoly in real estate anyway? People and businesses are sticky, but not stuck. If the rents got out of hand they'd just move.

Re: A lot more market-rate construction helps low-income renters more than subsidies

#76

Post by brc » Wed, Mar 25, 2015, 1:07 AM UTC

chii wrote: post #30

collyw wrote: post #15

That's kind of obvious is it not. Every time the UK government do something to "help first time buyers" it involves getting them into even more debt, and keeping the prices high. There are still the same number of properties around, and the same number of people competing for them. How can they honestly think this is helping in any way.

i think gov't are reluctant to introduce any policy that will cause housing prices to drop - a lot of "wealth" is locked in property, and should property prices drop, the on-paper measure of such wealth drops too (despite the fact that a house that's lived in is stable in it's "wealth" measured with utiliziation).

Sensible market release would cause markets to stagnate while new supply was introduced.

It would be impossible to build enough supply to overwhelm demand anyway if it is done realistically.

Re: A lot more market-rate construction helps low-income renters more than subsidies

#77

Post by brc » Wed, Mar 25, 2015, 1:09 AM UTC

seanmcdirmid wrote: post #14

brc wrote: post #13

Earlier quoted context omitted.

For a property owning corporation, it might not be the best thing. However, in a free market, there wouldn't be anything they could do about it. Competition is supposed to reduce the profits of any industry over time. Barriers to new construction is of course the problem. If you had to fill out a lot of paperwork and get government permission to build a tractor, and there was a shortage of tractors, the solution woul…

In an unrestricted free market, someone would just buy up all the property in a constrained space to corner the market. That has definitely happened before in robber baron days. And honestly, if I wanted to live in a cess pool like Houston, I would move there. Houses are cheap enough (comparatively) but it is a huge icky sprawl.

No, they wouldn't. They couldn't. Nobody has enough money.

Besides, you can you have a constrained space in a free market?

I'm dissapointed this type of thinking still pops up. The whole point of this article is to discuss increases in supply.

Re: A lot more market-rate construction helps low-income renters more than subsidies

#78

Post by brudgers » Wed, Mar 25, 2015, 1:11 AM UTC

nulltype wrote: post #72

brudgers wrote: post #39

As a result of its high housing costs, California has the highest real poverty rate in the country. California ranks 35th in terms of poverty rate. [1] The graph that follows the statement shows that California's poverty rate is higher than the US average. That's not an auspicious premise for quality economic reasoning. The constraint on housing prices in places like San Francisco is land cost. If developable land co…

If I took a 500k plot of land and built a 100k house on it, why does it need to be priced at 1.5m?

Construction value to land value ratios are conventional not "functional".

So you can bypass convention and build $100k worth of improvements. But once the property hits the market again, the economic odds favor a buyer coming along with $600k who puts in $1200k worth of additional improvements. And then the property is at $1.8 million. It's casino odds, so to speak.

The general term is "highest and best use" and that's where property heads over time. The real estate business naturally accelerates that process because there's usually more net revenue on $1.8million properties than $600k properties, but the amount of work required to develop and sell a property is roughly constant regardless of price, e.g. it's about as hard to get a building permit, secure financing, or close a sale for a $600k project as a $1.8million project.

Re: A lot more market-rate construction helps low-income renters more than subsidies

#79

Post by brc » Wed, Mar 25, 2015, 1:11 AM UTC

waltdisney wrote: post #44

icebraining wrote: post #22

Earlier quoted context omitted.

That has definitely happened before in robber baron days. I'm curious, has it really happened at a city level? Seems to me that it would get prohibitively expensive, since other owners would see the massive demand and push up the prices, but that's really just a supposition.

It worked for Walt Disney in Florida.

Not really. Walt Disney bought up a pile of unwanted swamp and made a company town. It doesn't even go close to 'cornering the market'. They just own a big chunk of land.

Re: A lot more market-rate construction helps low-income renters more than subsidies

#80

Post by brc » Wed, Mar 25, 2015, 1:13 AM UTC

brudgers wrote: post #39

As a result of its high housing costs, California has the highest real poverty rate in the country. California ranks 35th in terms of poverty rate. [1] The graph that follows the statement shows that California's poverty rate is higher than the US average. That's not an auspicious premise for quality economic reasoning. The constraint on housing prices in places like San Francisco is land cost. If developable land co…

Real poverty rate- measured by cost of essentials to income.

The static list measures by income - assuming that costs are the same across areas. Which isn't true.