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The Folk Economics of Housing

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Re: The Folk Economics of Housing

#151

Post by margalabargala »

stego-tech wrote: post #101
jeremyjh wrote: post #68

Earlier quoted context omitted.

Building a new house and renting the old one absolutely does increase the supply of housing.

Again, on paper it does. But paper often neglects reality. A reality where it can be more profitable to simply hold the land rather than lease out the home on it. Where a constructive loss can improve tax savings. Where the intent is to have it vacant for some other perceived use or gain - like a vacation home, AirBnB rental, Pied-a-terre, or just letting the structure languish until it can be condemned and bypass re…

All that means is, that building one unit of housing and selling it means that the pool of available housing is increased by less than one unit. It does not mean that the available housing supply did not change, or decreased.

So if building one unit of housing increases the housing supply by 0.7 units on average or whatever, then the same logic applies, just overbuild by 30%.

Re: The Folk Economics of Housing

#152

Post by amanaplanacanal »

stego-tech wrote: post #136
jeremyjh wrote: post #117

Earlier quoted context omitted.

Do you realize your argument boils down to “increasing supply doesn’t reduce housing cost because we don’t increase the supply”?

Yes, because unlike every single detractor here I’m not distilling a complex argument full of nuance into a “1+1=2” baby-splaining session. Let me put it into simple numbers the detractors can understand: I build ten homes in a market that needs a hundred. I price them affordably because I’m not an asshole and understand there’s a crisis. * Statistically speaking, 25% of those homes will be bought by PE or REITs. I c…

Don't those other five now become more rental stock though? This is still 10 homes that didn't exist before, as 5 owner occupied, and 5 new rental properties.

Sounds like a great outcome! Let's do that some more.

Re: The Folk Economics of Housing

#153

Post by Dig1t »

SoftTalker wrote: post #13

I think that what contributes to this view is that new construction always seems to be at the high end of the market. This makes sense, it doesn't cost the builder a lot more to build a $500k house than to build a $250k house, and building two $250k houses will take twice the time and close to twice the costs. So builders/developers are going to build what is most profitable, which is the most expensive houses that t…

>and building two $250k houses will take twice the time and close to twice the costs

Building densely is actually more profitable, there’s already incentive to build as densely as possible for developers. Adding an extra story and creating a duplex, triplex, etc doesn’t cost much more and means you can sell multiple more units. Building as tall as possible and getting more units into the same footprint is almost always more profitable than just building one single family house.

The problem is that zoning limits what type of building is allowed to be built on a site. Who controls zoning? Existing homeowners that already live in the area, so of course they are going to make sure that new builds are low-density, as it impacts them less (parking, traffic) and keeps their home values high.

Source: I tried to build dense housing myself and was stymied by zoning.

Re: The Folk Economics of Housing

#154

Post by bryanlarsen »

WarOnPrivacy wrote: post #145
bryanlarsen wrote: post #62

Earlier quoted context omitted.

how does renting out old stock not increase supply? Renting and buying are relatively fungible. People buy fewer houses when renting is cheaper.

> how does renting out old stock not increase supply? Raw and overall housing numbers can be misleading by their nature. That is, they can be technically true while being false for many/most people. Declaration: Housing supply is increased! Actuality: Increase is only in homes for >$100k income earners. The declaration is true for >$100k. It is not true for most Past that, there is a challenge in tossing around $250k…

It's still an increase. Rich people always have a house. If they can buy a rich person house it means they aren't outbidding normal people for non-luxury housing.

Re: The Folk Economics of Housing

#155

Post by amanaplanacanal »

stego-tech wrote: post #123
whall6 wrote: post #92

Earlier quoted context omitted.

Is this housing that they are purchasing just being sat on? I would think that these are being purchased to be rented out (thereby still increasing housing supply), not just held. Homes are depreciating assets.

In the sunbelt, they buy it, jack up rents, evict tenants, and basically turbocharge being a slumlord until they find new buyers for more than what they paid. Due to supply constraints, they often succeed in this process (which repeats under new landlords) multiple times before the market becomes too pricey and further increases aren’t tolerated (which is why organization is on the rise - the rent is too damn high fo…

Sounds like they need more housing stock. At some point, if you keep building, it will no longer be profitable for speculators to do that.

Re: The Folk Economics of Housing

#156

Post by PaulHoule »

SoftTalker wrote: post #13

I think that what contributes to this view is that new construction always seems to be at the high end of the market. This makes sense, it doesn't cost the builder a lot more to build a $500k house than to build a $250k house, and building two $250k houses will take twice the time and close to twice the costs. So builders/developers are going to build what is most profitable, which is the most expensive houses that t…

My take on it as a small landlord (have two houses on my farm, one has two rental units) is:

I don’t think a lot about the pricing of my rental units and I’m not quick to raise them but when some new development comes into town and puts up billboards with their eye-popping prices and runs ads in the paper and on web sites and on the radio I think “Gee…. I must be leaving money on the table because I could raise my rates 50% and it would still undercut what they’re advertising a lot”

Of course the money they are spending on advertising indicates that their pricing is aspirational and they may very well next year be telling the city that they can’t afford their property taxes because they can’t fill the units and might be telling their lenders the same in a few years.

In Ithaca we got “luxury housing for seniors” that was nuclear reactor late and they can’t fill

https://ithacavoice.org/2025/03/library-place-to-sell-at-a-l...

(Don’t seniors with money go to Florida?)

A few market rate projects had an affordable component which has been part of a surge which has taken a bite out of our homeless colony but it is now like that talking heads song where they’re “burning down the house”

https://ithacavoice.org/2025/08/inside-asteri/

My understanding is many “luxury” developments are shoddily built and not a good place to live

https://www.nytimes.com/2022/04/15/realestate/condo-defects-...

Re: The Folk Economics of Housing

#157

Post by seanmcdirmid »

wahern wrote: post #140
seanmcdirmid wrote: post #113

Earlier quoted context omitted.

> What is less obvious is that this still increase housing supply. It's not new affordable housing, but the people moving in to the new expensive houses are leaving their old houses, and the people who buy those are leaving their old houses, so eventually the price drops happen on the older, smaller homes at the bottom end of the market. Two things to think about when making this argument: * Older housing could have…

> Demand is induced by new supply. We accept this as a fact for highway construction. Induced demand is only a thing with highways because use of the highways is free; there's no counterveiling cost pressure unless and until traffic jams start forming. By definition induced demand doesn't exist where the market can set prices for using newly created resources. Closer to your point (if we stretch really hard) would be…

> So obviously Seattleites who oppose residential development should just promote more crime.

I knew the fent addicts on the D line in Ballard were good for something! But seriously, you know, there are two sure fire ways to lower housing prices: make the place a crappier place to live, or just get rid of jobs/economic activity. My dad was in Seattle working for Boeing after Vietnam, and got hit by the "will the last person to leave Seattle turn out the lights" Boeing bust. It is kind of like falling oil prices: you know, drilling more doesn't really affect the price of oil as much as reduced demand due to an economic recession.

> That's a collective action/free-rider problem, where the positive externalities of good public policies of one community are captured in part by other, cheating groups.

Isn't that the main problem? This is the main problem with progressivism at a local level: even if you are making the world a better place, you could be failing to improve your place (seeing no benefit for your money) or actually making it worse (seeing negative benefit for your money). How many of us are saints who are willing to sacrifice our own lives for the greater good?

Re: The Folk Economics of Housing

#158

Post by nis0s »

One problem that’s unaddressed is that there isn’t a house building, pricing and mortgage model for people making 50K or less.

One piece of data I’ve found is that 65% of Americans are homeowners (meaning American families, not rentals or investments), which is also about the percentage of Americans who make $50K or more per year (~68%).

For people with a middle class networth (not income, I mean networth, which is about ~1M-9M when compared with the top of US society), homeownership currently works as a wealth-building mechanism because of scarcity. There’s also the desire to live close to certain areas, but why not make more neighborhoods or areas worth living in?

Regardless, if the goal is to maintain scarcity for wealth building, then I think the scarcity mechanism will remain intact if homeownership is increased to a high rate while balancing the cost of materials and labor, and building houses specially for certain income levels, as mentioned already in other posts.

But no one seems to be doing materials innovation, or construction innovation. I don’t think 3D printing is there quite yet, and might be more expensive. Where’s the push on automating construction? Why not build with a genetically engineered bamboo that’s cheaper and more sustainable than wood? Seems materials innovation will help with both housing and sustainability goals.

Re: The Folk Economics of Housing

#160

Post by colonCapitalDee »

seanmcdirmid wrote: post #131
mediaman wrote: post #108

Earlier quoted context omitted.

This analogy seems confused. If someone in Chicago moves to Seattle, then our policy options are (1) no new condo in Seattle or (2) new condo in Seattle. Under policy 1, the new buyer from Chicago must outbid locals for the fixed housing supply; they will wind up buying older housing stock, which otherwise would have gone to existing local residents. Prices go up. With policy 2, the new entrant buys the new condo and…

> The entire question can be contained by the assumption that "there is someone new coming to Seattle" and whether it would be better to have a new condo unit to sell to them or have them compete for existing fixed stock. The whole bit about the Chicago housing market is a distractor, because it stays the same under either policy. Are you denying that induced demand is a thing for housing? That everyone who wants to…

I've never understood the induced demand argument. Yes, when goods get cheaper demand increases. Or, to put it another way, when we make our cities more affordable more people want to live there. What's the problem? Sure, induced demand means that the marginal increase of affordability is less than it may have been if demand remained constant, but a. affordability still increases, and b. the solution is just to keep adding more housing until things flatten off. I truly don't understand why this is controversial; do you not want people to have desirable things? The rational response to induced demand is "great, people actually want this. Build more".
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