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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)

#81

Post by AnimalMuppet »

d1zzy wrote: post #79
AnimalMuppet wrote: post #68

Earlier quoted context omitted.

Not necessarily. There are things called "Veblen goods". For them, the demand rises as the price rises, because the higher price confers additional status. You pretty much have to be in prestige, luxury goods for this to happen, though, so it's (probably) not relevant to a discussion of entry-level housing.

That doesn't seem to apply in this case however. This article is talking about people paying >$1 mil for shitty shacks in Silicon Valley. It seems very hard to think of people buying those because it confers "status", actually, anecdotal evidence from my coworkers and I, we are ashamed of telling folks back home how much we payed or showing pictures of our new house.

I agree; I don't think it applies in this case either. I was merely pointing out that one small part of quotemstr's argument didn't hold.

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

#82

Post by pascalxus »

quotemstr wrote: post #6

That there was ever a debate at all is still astounding. Economics has fuzzy areas, but basic principles of supply and demand are very well-established. It's clearly nonsensical to imagine that we can simultaneously lower prices, limit supply, and allow for demand growth. The longevity of this bizarre idea demonstrates how strongly political ideas of how the world ought to work blind us to how the world does work. We…

I completely Agree. It's absolutely insane that people think limiting the supply of housing can actually decrease prices. And that this is happening in some of the most highly educated cities where degrees are handed out to nearly 50% of the population.

One big thing they don't understand. You MUST increase the supply, absolutely MUST. There's no other way, except to reduce the number of jobs in the area. Every single regulation, every single affordability requirement reduces the total amount that can be built.

I've heard this: People make the argument: well every new market rate housing goes to rich people. What they dont get, is, for each so called rich person who moves into that new development, a new house comes onto the market (their old residence) and that helps push down prices.

It's unthinkable that so many people are going homeless needlessly. We need to increase the supply all the way to point where housing becomes affordable to everyone. And, yes, it will take a long time and a lot of building, but It'll be worth it.

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

#83

Post by pash »

dredmorbius wrote: post #75
quotemstr wrote: post #6

That there was ever a debate at all is still astounding. Economics has fuzzy areas, but basic principles of supply and demand are very well-established. It's clearly nonsensical to imagine that we can simultaneously lower prices, limit supply, and allow for demand growth. The longevity of this bizarre idea demonstrates how strongly political ideas of how the world ought to work blind us to how the world does work. We…

To offer a very slim thread of credibility to the argument, there are cases in which supply and demand interact ... oddly. The canonical case is probably traffic: increasing highway capacity increases congestion. But, beyond the topical similarity, the cases fall apart. The situation with traffic involves only a small incremental cost being born by each driver, whilst in housing, the internalised costs are large. The…

Induced demand [0], if that’s the phenomenon you have in mind, does not mean that “increasing highway capacity increases congestion.” It just means that adding capacity increases usage of the road, often to the point that so many more drivers show up to use the expanded roadway that the improvements do nothing to reduce traffic delays.

There is no economic mystery in induced demand: it’s Economics 101 once you realize that drivers pay for their usage of roads in time, not money. So when a roadway is expanded, all else equal, the cost of driving on it falls—you’re no longer stuck in traffic; but the lower price (that is, travel time) increases demand for use of the road, just as low prices tend to increase demand in other markets. The result is that many more drivers use the expanded roadway, to the point that they bid the price, paid in time waiting in traffic, back up to previous equilibrium level.

(That said, there are ways in which building more roadways can increase congestion itself. Since land use is closely tied to access, building new highways can spur development in far-off areas, causing people to drive more than they otherwise would. There’s also a theoretical possibility that adding new roads can change the roadway topology in ways that cause people to change their routes in ways that create congestion.)

0. https://en.wikipedia.org/wiki/Induced_demand

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

#84

Post by slg »

OrwellianChild wrote: post #72
slg wrote: post #52

Earlier quoted context omitted.

While I agree with your general point, I think both you and the article are glossing over part of the debate. The opponents of adding market rate supply that I have seen aren't opposed to new supply in a vacuum. They are opposed to letting the market dictate the supply because the market usually creates supply at the top. The costs of buying land and building a mid-market building is not that much cheaper than buildi…

You're right that new construction favors luxury housing, but I don't agree that this inevitably leads to displacement of other residents. Most of the effects of "trickle-down housing" are seen in the same market as older buildings must lower rental prices as the condition/amenities age and compare poorly to the newer/nicer buildings. Individuals must move as new construction replaces an existing building, but there…

>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. The result is increased supply in the luxury market and decreased price in the luxury market. That decrease in price trickles down throughout the rest of the market. However at the bottom of the market the SRO supply has now dropped and the demand is now higher due to all the displaced residents. There are too many variables involved to say the trickle down effects will always outweigh the direct effects of removing the housing from the bottom of the market.

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

#85

Post by AnimalMuppet »

OrwellianChild wrote: post #78
Danihan wrote: post #67

Earlier quoted context omitted.

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..?

You wish to extend control of property beyond the borders of what they own outright?

But that happens all the time. Neighborhood zoning restrictions, restrictive covenants, homeowner association rules, and so on. So Danihan's position is, de facto, what the situation already is in many instances.

So: You wish to not allow any control of property by anyone other than the property owner? Are you sure you really want that?

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

#86

Post by hkmurakami »

kevinburke wrote: post #26
hkmurakami wrote: post #18

Earlier quoted context omitted.

Don't renters also have votes? If so then it's a matter of ratio and willingness to mobilize/fund efforts.

Renters vote but tend to be under-represented on City Councils and such because they are a) younger, b) have less money, c) move more often than people with homes. Renters don't vote as regularly as homeowners.

Sincere question: is this a bug or a feature?

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

#87

Post by quotemstr »

pash wrote: post #83
dredmorbius wrote: post #75

Earlier quoted context omitted.

To offer a very slim thread of credibility to the argument, there are cases in which supply and demand interact ... oddly. The canonical case is probably traffic: increasing highway capacity increases congestion. But, beyond the topical similarity, the cases fall apart. The situation with traffic involves only a small incremental cost being born by each driver, whilst in housing, the internalised costs are large. The…

Induced demand [0], if that’s the phenomenon you have in mind, does not mean that “increasing highway capacity increases congestion.” It just means that adding capacity increases usage of the road, often to the point that so many more drivers show up to use the expanded roadway that the improvements do nothing to reduce traffic delays. There is no economic mystery in induced demand: it’s Economics 101 once you realiz…

And it's this effect that prompts my strong support for tolling all roads. It's better for everyone to pay for scarce resources in money, not the awkward currency of time.

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

#88

Post by pascalxus »

quotemstr wrote: post #6

That there was ever a debate at all is still astounding. Economics has fuzzy areas, but basic principles of supply and demand are very well-established. It's clearly nonsensical to imagine that we can simultaneously lower prices, limit supply, and allow for demand growth. The longevity of this bizarre idea demonstrates how strongly political ideas of how the world ought to work blind us to how the world does work. We…

Part of the problem and the confusion is this: People have their rent controlled apartments here in SF at a tiny fraction of the "real" market rate. And, so when they see market rate housing going up (hamstringed by affordability requirements, driving prices even higher), they're seeing market rates that are much much higher than rent controlled rates. This causes them to believe that increasing supply actually increases rents. Here's the distinction: Increasing supply ONLY decreases market rate rents, it does nothing for the below market/rent ceiling prices, at least not until supply can be massively increased to point where it goes below the rent ceiling.

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

#89

Post by quotemstr »

hanoz wrote: post #80
quotemstr wrote: post #6

That there was ever a debate at all is still astounding. Economics has fuzzy areas, but basic principles of supply and demand are very well-established. It's clearly nonsensical to imagine that we can simultaneously lower prices, limit supply, and allow for demand growth. The longevity of this bizarre idea demonstrates how strongly political ideas of how the world ought to work blind us to how the world does work. We…

The problem the the "it's the supply and demand stupid" justification for high house prices is that it ignores the fact that on what's supposed to be the demand side we have a massive oversupply of borrowed-into-existence virtually free money.

Absolutely. It's ridiculously risky for the economy to give people million-dollar loans for shacks in East Palo Alto when we know that prices will decline once the Bay Area finally adopts sane development policies.

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

#90

Post by purplezooey »

A major part of the problem is that it costs too much to build. Too many construction entities living on cheap funny money and a supply shortage after the real estate crash that has still not rebounded. Why does it cost $200,000 to add a second story to a house, for example.
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