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The end of the housing supply debate (maybe)

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Re: The end of the housing supply debate (maybe)

#101

Post by sliverstorm »

AnimalMuppet wrote: post #69
sliverstorm wrote: post #42

Earlier quoted context omitted.

I don't think we "forget", I think developers are after the quick buck and buyers are after most-sqft-per-dollar. Building up or down is more expensive.

Is it? Assume that land is expensive. If I build up, I can create a lot more units for the same land cost (at the probable price of higher building cost per unit). For some land price, there's probably an optimal height to build to that decreases total cost per unit.

Well, it really depends on where. When much of Silicon Valley was built, I believe land was not really that expensive, and that continues to be the case in many parts of the country.

Re: The end of the housing supply debate (maybe)

#102

Post by sliverstorm »

dredmorbius wrote: post #76
sliverstorm wrote: post #21

This doesn't seem to address high end housing vs (unsubsidized) low end housing. Is a hundred new units with marble countertops as good, holistically, as a hundred with laminate? I think a lot of the opposition revolves around frustration with developers building luxury when the intent of the given policy was low or mid market units, combined with a belief that units targeted at the needy market segment would be the…

From TFA: "Two market rate houses reduce displacement as much as one affordable house".

If you read TFA more closely, they clarify that "affordable house" is a euphemism for "subsidized house".

Re: The end of the housing supply debate (maybe)

#103

Post by sliverstorm »

jogjayr wrote: post #53
sliverstorm wrote: post #21

This doesn't seem to address high end housing vs (unsubsidized) low end housing. Is a hundred new units with marble countertops as good, holistically, as a hundred with laminate? I think a lot of the opposition revolves around frustration with developers building luxury when the intent of the given policy was low or mid market units, combined with a belief that units targeted at the needy market segment would be the…

There are reasons for developers to prefer to build high-end housing over low-end housing. 1. City parking requirements drive up the cost of construction to the point that only luxury units would be profitable. 2. Land acquisition costs (referenced in the article) are high due to zoning laws, so developers prefer to build high-end housing to recoup those costs. 3. Labor costs the same no matter what you're building (…

It's pretty obvious why luxury development is preferred; anybody, in any market, would prefer to make luxury units.

Yet no other market seems to operate by supplying only luxury units and depending on trickle down. Why are there Corollas, instead of just more Lexuses?

Re: The end of the housing supply debate (maybe)

#104

Post by malyk »

kevinburke wrote: post #65
quotemstr wrote: post #54

Earlier quoted context omitted.

The "debate" is likely a result of motivated reasoning. Humans do it all the time . 1. Decide to stake out a position A. 2. Think of reasons that A might be true. 3. Use these arguments to claim that anyone arguing !A is wrong. 4. Feel satisfied.

At least for the folks in the Mission, I think they see new market rate apartments going in, watch rent rising, and conclude the new housing is causing the rent increases.

Which they can probably pretty accurately say it is causing rent increases, albeit not directly. It goes something like this:

1.) New housing starts to get built 2.) The new residents demand safer/cleaner streets or just higher quality restaurants/cafes/etc. Or, sensing a market opportunity, those businesses move in themselves. 3.) Those things happen...and more 4.) More residents want to move in 5.) Prices for the existing housing stock increases 6.) New houses are built because there is demand 7.) go to 2.

QED: rents rise "because" new housing was built.

There definitely IS an equilibrium that will be reached, but a city like San Francisco has an almost unlimited supply of young and wealthy residents that think the suburbs are hell and want to live in a vibrant city.

So the fear of some people that oppose more housing is that the equilibrium point, even if you were very aggressively adding housing stock, would be way above what "normal" people would be able to pay.

So it's really a tough problem. yes, nimbyism is a thing. Yes more housing will eventually reduce prices (or reach a steady state), but the number of houses that need to be added may very well be unrealistic for any city and end up with rents just going ever higher pricing out all but the $200k/yr techies.

Re: The end of the housing supply debate (maybe)

#105

Post by kelnos »

sliverstorm wrote: post #21

This doesn't seem to address high end housing vs (unsubsidized) low end housing. Is a hundred new units with marble countertops as good, holistically, as a hundred with laminate? I think a lot of the opposition revolves around frustration with developers building luxury when the intent of the given policy was low or mid market units, combined with a belief that units targeted at the needy market segment would be the…

In a city like SF, it's very expensive to build housing, due in no small part to the city's ridiculous planning process. Developers try to offset this cost by building luxury housing, which will of course fetch a higher price when sold.

Re: The end of the housing supply debate (maybe)

#106

Post by kelnos »

sliverstorm wrote: post #103
jogjayr wrote: post #53

Earlier quoted context omitted.

There are reasons for developers to prefer to build high-end housing over low-end housing. 1. City parking requirements drive up the cost of construction to the point that only luxury units would be profitable. 2. Land acquisition costs (referenced in the article) are high due to zoning laws, so developers prefer to build high-end housing to recoup those costs. 3. Labor costs the same no matter what you're building (…

It's pretty obvious why luxury development is preferred; anybody, in any market, would prefer to make luxury units. Yet no other market seems to operate by supplying only luxury units and depending on trickle down. Why are there Corollas, instead of just more Lexuses?

SF already has plenty of "non luxury" housing that has been gobbled up for luxury prices, often displacing people who could normally afford such housing. The theory is that building more luxury housing will take pressure off the non-luxury stock.

I agree with that theory, but building more affordable and below-market housing (instead, or simultaneously) will likely have a faster, more positive effect.

Re: The end of the housing supply debate (maybe)

#107

Post by kelnos »

Danihan wrote: post #67
ouid wrote: post #61

Earlier quoted context omitted.

just build more housing.

Not everyone wants to live in a super over-populated / densely populated area... In general, more saturation of humans == more problems. People make fun of NIMBY, but at the end of the day who better to manage the neighborhood than the people who are already invested in it..?

> Not everyone wants to live in a super over-populated / densely populated area...

Then don't live in an urban center. That is the nature of cities, and given that land is a scarce, precious resource, it seems perfectly natural to me to not allow property ownership to be absolute and without strings.

Re: The end of the housing supply debate (maybe)

#108

Post by JPKab »

leggomylibro wrote: post #63
jjxw wrote: post #9

Earlier quoted context omitted.

It is perplexing to me why the burden of proof was ever placed on "increasing supply decreases prices" when the mechanism by which rent control + limiting construction is supposed to benefit anyone besides those already occupying those units is totally unclear. I don't even think it's "ought" vs "does" - it's more NIMBY interests being more ingrained into local politics allowing them to somehow gaslight everyone into…

Yeah, it's not about economics or politics at all. People who live in an area want policies that will benefit them at the expense of newcomers, full stop. And when you concentrate value and therefore power in those existing landowners to an extreme degree, you get a political feedback loop strong enough to overpower something as trivial as reality. After all, the market can stay irrational longer than you can stay so…

Here in the Denver area, we have a lot of people moving here for good jobs, strong economy, etc. The locals bitch and moan endlessly.

A lady the other night at a dinner party was, in the same conversation, complaining about the "high-density" (townhouses, but she acted as if they were high-rises) housing being built in the area, and moved on to whining about how her daughter was priced out of a home in the area.

I stopped myself.

Re: The end of the housing supply debate (maybe)

#109

Post by jogjayr »

sliverstorm wrote: post #103
jogjayr wrote: post #53

Earlier quoted context omitted.

There are reasons for developers to prefer to build high-end housing over low-end housing. 1. City parking requirements drive up the cost of construction to the point that only luxury units would be profitable. 2. Land acquisition costs (referenced in the article) are high due to zoning laws, so developers prefer to build high-end housing to recoup those costs. 3. Labor costs the same no matter what you're building (…

It's pretty obvious why luxury development is preferred; anybody, in any market, would prefer to make luxury units. Yet no other market seems to operate by supplying only luxury units and depending on trickle down. Why are there Corollas, instead of just more Lexuses?

> anybody, in any market, would prefer to make luxury units.

It really depends on the market. Builders aren't stupid. If there's no one willing or able to pay for granite countertops they won't spend the money putting them in. They will build luxury units if they are profitable, otherwise they'll build cheaper ones that they can let out. Alternatively you might get a building boom where everyone overbuilds luxury units and prices collapse. Either way, win-win for consumers.

> Yet no other market seems to operate by supplying only luxury units and depending on trickle down. Why are there Corollas, instead of just more Lexuses?

You have to consider:

1. It's easy to ramp up (and down) car production, but not so much for housing. If carmakers had restrictions on how many cars they could produce every year, there's a good chance they too would try to focus on the higher-margin market. But because they are allowed to build without restrictions, they produce something that's affordable to every segment. I'm not saying "build baby build" because real estate is different from cars. But the current regime in the Bay Area is way too far in the other direction. It's like the government saying no one can build any new cars at all for multiple decades. Software engineers making $200k/year would be driving 15-year-old Corollas with the hubcaps falling off and Bill Gates would have the only Tesla in private hands (I'm exaggerating obviously)

2. There actually is (in a way) trickle-down at work in the car market: used cars. Used cars add to the supply of cars on the market, keeping prices lower. A lot of used car buyers are lower-income people who may pay cash because they don't qualify for financing on a new car, or because it may be financially ruinous for them to go into debt on a depreciating asset.

3. Much of the intrinsic value in real estate is in the location and the land. Whereas for a car most of the intrinsic value is in the design, marketing, quality of parts, engineering etc. Where an apartment is located determines how much it will rent for to a much greater degree than the quality of the apartment (assuming basic livability standards are met). $700k will buy you a burned-out 1-bedroom house in San Francisco or 2 spacious 3-bedroom houses in suburban Houston. Why? Because of where these dwellings are located.

Re: The end of the housing supply debate (maybe)

#110

Post by jogjayr »

kelnos wrote: post #106
sliverstorm wrote: post #103

Earlier quoted context omitted.

It's pretty obvious why luxury development is preferred; anybody, in any market, would prefer to make luxury units. Yet no other market seems to operate by supplying only luxury units and depending on trickle down. Why are there Corollas, instead of just more Lexuses?

SF already has plenty of "non luxury" housing that has been gobbled up for luxury prices, often displacing people who could normally afford such housing. The theory is that building more luxury housing will take pressure off the non-luxury stock. I agree with that theory, but building more affordable and below-market housing (instead, or simultaneously) will likely have a faster, more positive effect.

But it's impossible to make affordable and below-market housing profitable unless the underlying issues, land acquisition costs and zoning, are addressed. That means the government will have to subsidize these units and they still won't be enough to meet demand. So only the lucky few who win the housing lottery will benefit. Everyone else (most lower-income people, middle-income renters overpaying for low-end housing) still loses out.

I'd prefer that we solved the problem for most people rather than just a lucky few. If people couldn't afford food because not enough farmland was available for reasons like "preserving the character of the area" (imagine that you can't truck food in from lower-cost locations in this scenario) you bet we'd find a way to start growing more food stat. No one would say "Well we'll just subsidize food for some people so fewer people will starve. But it's no use letting farmers farm because they'll just grow Kobe beef and avocados instead of wheat and corn".

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