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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)

#111

Post by slg »

OrwellianChild wrote: post #93
slg wrote: post #84

Earlier quoted context omitted.

>Individuals must move as new construction replaces an existing building, but there will be other units available to move to in a market that is actually allowing new construction I don't think the emphasized part is a given. There is likely no new construction at the bottom of the market for these displaced people to move into. For example, let's say a SRO hotel is torn down and a luxury condo goes up in its place.…

I'm going to replace SRO hotel with single-bedroom condominium in this case, as I'm not familiar with any modern cities that still allow the construction of SRO hotels... If that's the factor on which your argument hinges, we can talk about micro-housing and "apodments" separately... In every other instance, new luxury housing in a constrained market allows wealth individuals living in mid-range housing to move up. T…

The SROs aren't new construction, but there are still plenty of them around. The example I gave is simplified version of what is happening in downtown Los Angeles as neighborhoods like Little Tokyo and the Arts District are creeping into Skid Row displacing people in low income housing and worsening the areas homeless problem. Meanwhile the new construction in Downtown LA has the areas highest vacancy rates because the luxury market is already saturated. The supply never trickles down because the developer are optimizing for profit and they can see a greater profit with high rents at 85-90% occupancy than lower rents at 100% occupancy.

Here is the first news story I found on Google about the subject.

http://www.latimes.com/local/lanow/la-me-ln-skid-row-tower-2...

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

#112

Post by xenadu02 »

yermom wrote: post #66
quotemstr wrote: post #62

Earlier quoted context omitted.

See, that's the problem: anti-housing advocates have the wrong moral object in mind. There's no use caring about "neighborhoods". A neighborhood doesn't dream of owning a house one day. A neighborhood doesn't have kids that have to squeeze into a single bedroom. A neighborhood feels neither happy nor sad and doesn't care whether it's preserved. Interfering with the market almost always produces poor global outcomes,…

but developers want to build expensive housing unless they are incentivized otherwise. the margins are better that way. that's what the market gets you.

And when they do the value of existing housing is reduced as it must compete with that new luxury housing.

People who want to live in SF and have $10m to spend are going to live here. If you won’t let developers build luxury condos for them they’ll just buy a Victorian, Ellis-Act the tenants out, and remodel it back into a single-family home. There is literally nothing you can do to stop it.

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

#113

Post by xenadu02 »

The idea that a government - at any level - is going to fund enough subsidized housing to make even a tiny dent in the housing problem is completely laughable. Anyone proposing such nonsense isn’t serious about the problem in the least.

That’s what bugs me so much about so-called progressives who oppose more housing. There is no half-plausible scenario where SF or CA comes up with the hundred billion it would take to solve the bay area’s housing shortage.

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

#114

Post by TulliusCicero »

rayiner wrote: post #11

> . . it has become an article of faith that building market-rate housing raises rents, rather than lowers them. The logic of Econ 101 — that an increase in supply lowers price — is alien to many progressives, both in the Bay Area and around the country. Pretty much. I'm progressive on a lot of issues but many public-interest minded people are immune to economic realities. The example about subsidized versus market-r…

Exactly. Affordable, market-rate housing is just old housing that used to be luxury.

It's not that much different from cars. In the US, working class people can largely afford cars, they just buy used.

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

#115

Post by labcomputer »

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?

> 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?

Because no other market has fixed unit quotas set by the local government[1]. There's no rule about how many Lexuses and Corollas Toyota is allowed to build.

The dirty secret of the Bay Area housing market is that a lot of Lexus buyers have started buying Corollas because there aren't nearly enough Lexuses to go around. They can afford to pay Lexus prices for the Corolla, so they do.

But that means Corollas now cost as much as a Lexus. Corolla buyers can't afford that, so they start paying Corolla money for a Yaris. But now Yarises cost as much as Corollas. Yaris buyers can't afford that, so where does that leave them? They either take the bus or walk.

Building more Lexuses will stop the Lexus buyers from buying Corollas. Build enough, and you can even make this whole process run in reverse.

[1] Actually, there was. The US government threatened Japan with trade sanctions unless Japanese manufacturers agreed to voluntary export limits. So Toyota created the Lexus brand to sell more profitable cars within their alloted quota.

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

#116

Post by breischl »

JPKab wrote: post #108
leggomylibro wrote: post #63

Earlier quoted context omitted.

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 st…

I can absolutely believe that would happen. Also interesting to watch the debate around conditional removal of the parking requirements for new builds. You see people that complain about lack of affordable housing, but also demand a parking lot/structure for every new building - these things are in conflict.

I do understand the bitching & moaning. I remember, and miss, the days when there wasn't a standing jam on I-25 every single Saturday, you could show up at a trailhead later than 8 AM and actually find parking, or rent a nice apartment in Wash Park for $600. But then I'm an immigrant too, so I don't have much moral authority to tell the more-recent immigrants to GTFO.

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

#117

Post by empath75 »

x0x0 wrote: post #37
empath75 wrote: post #10

Earlier quoted context omitted.

It’s in this very article. What other outcome could happen?

People who would, instead of eg living in SF, have lived in Oakland, SSF, San Mateo etc instead move to SF and nothing changes and/or net increased rent results? Continuing to allow the peninsula to add jobs and dump its housing problem on SF obviously doesn't help priced out SF residents. And in SF, at least some of those higher end housing projects remove housing first. Nothing in economics says it's obvious withou…

If people who would have moved to Oakland, instead move to SF, wouldn't that lower rents in Oakland?

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

#118

Post by throwawaymsft »

OrwellianChild wrote: post #95
throwawaymsft wrote: post #14

Earlier quoted context omitted.

That new luxury housing makes a city more attractive and induces demand from outside. Adding new roads can make driving more attractive and worsen congestion. Not saying that’s what happens, but a simple supply/demand analysis (ceteris paribus) may not suffice.

No one has seen fit to build much luxury housing in Cleveland, OH lately, but what exists already (at rock-bottom prices) doesn't seem to be attracting much population from outside... Induced demand is definitely a thing for roads, but that demand is from fixed supply of people. In the roads case, it is counter-intuitive specifically because it causes the same number of people to drive more, on average. That dynamic…

I'd posit it's hard to know what the dynamic would be. Consider certain luxury goods (https://en.wikipedia.org/wiki/Veblen_good) where increasing the price increases the demand. (Conveniently, economists have a model and also a name for things that don't follow the model. The universe can be divided into bananas and non-bananas.)

Cleveland isn't a prestigious world-class city attractive to the wealthy, but if new luxury condos in a tier-1 city come online, it may induce demand from wealthy/speculators who would not otherwise have considered that city, or were picking between alternatives. (Investment, signaling/status-seeking, etc.)

Treated as an investment vehicle, increasing supply (e.g., having an IPO where no shares existed before) can unlock latent demand (people divert income into that investment and drive up the price). Perhaps housing needs to be modeled as a mix of investment, local demand for shelter, status symbol, tax haven, political baton (keeping existing homeowners above water), etc.

Again, not sure how housing actually behaves but it seems complex enough to defy my econ 101 understanding.

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

#119

Post by kevinburke »

malyk wrote: post #104
kevinburke wrote: post #65

Earlier quoted context omitted.

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 e…

By that logic destroying homes in the Mission would decrease demand, which makes no sense.

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

#120

Post by OrwellianChild »

slg wrote: post #111
OrwellianChild wrote: post #93

Earlier quoted context omitted.

I'm going to replace SRO hotel with single-bedroom condominium in this case, as I'm not familiar with any modern cities that still allow the construction of SRO hotels... If that's the factor on which your argument hinges, we can talk about micro-housing and "apodments" separately... In every other instance, new luxury housing in a constrained market allows wealth individuals living in mid-range housing to move up. T…

The SROs aren't new construction, but there are still plenty of them around. The example I gave is simplified version of what is happening in downtown Los Angeles as neighborhoods like Little Tokyo and the Arts District are creeping into Skid Row displacing people in low income housing and worsening the areas homeless problem. Meanwhile the new construction in Downtown LA has the areas highest vacancy rates because t…

Thanks for sharing the article - it's interesting to hear how other areas are reacting to similar situations (I'm in Seattle). I confess, though, that I don't fully understand the applicability of the downtown LA situation to the affordable housing debate. The article linked seems to lament the construction of units that the homeless on Skid Row can't afford, but that seems to be an untenable expectation in the first place. The basic logic still holds that if supply is constrained in downtown LA, the new luxury apartments in the Fashion District will relieve housing demand in the mid- and low-end for that neighborhood. It will be a net good for the area, all things considered.

The protesters in the article seem to conflate one kind of construction with the other: "The protesters say the city should house the neighborhood’s homeless people before it approves another big residential development in downtown Los Angeles."

Market-rate development is a process that can continue to take place while the city grapples with housing the homeless. They don't interfere with one another, since the market-rate construction is private enterprise.

The protesters, further, are falling victim to the same fallacy discussed in the original posted article here: "They also argued that hundreds of new market rate apartments will drive the neighborhood’s rents beyond the means of residents living “precariously” in nearby converted flophouses, hotels, tents and buildings."

The basics of trickle-down housing dynamics work strictly against the rising rents scenario being true. The pressure goes strictly the other way for the existing units in the neighborhood, which have new competition at the top end.

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