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Jeff Kaufman
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New Empty Units January 25th, 2021
                   housing  [html]

Discussing housing policy in left-wing spaces I often run into an
argument which is, essentially "building more units doesn't help with
the housing shortage because so many will be bought by speculators
with no intention of living there." This view, however, implies
there's an excellent opportunity to get a ton of housing built at the
expense of these speculators, enough to bring down the cost of
housing and transfer enormous wealth from speculators to everyone
else.

Here's a recent example, Nathan Robinson writing in Current Affairs:

    There is no necessary economic reason why increasing the total
    number of housing units in a city helps make housing more
    affordable for poor residents. Consider the pencil towers. Let's
    say that in order to build one, an early 20th century building
    full of lower-middle class residents was purchased, the residents
    evicted, the building flattened. There were 30 single-family
    units in the old building. Our new pencil tower is 100 floors
    high and has 100 units. All of our pencil tower's units are full
    of state-of-the-art appliances and high-end fixtures, and cost
    $2,000,000 each. They are swiftly bought up, 20 by rich people
    who live in the city, 30 by rich people lured to the city by its
    new pencil tower, and 50 by rich people who have no intention of
    living in the city but think pencil tower condos are an asset
    worth owning in a swiftly-gentrifying city.

While I don't think this hypothetical is realistic, especially in its
proportions, I want to dig deeper into its implications. Let's say we
build this tower of 100 units, funded by rich people. Then we let
developers keep building, and get dozens or hundreds of towers like
this, each one with 3x the units there were before, and all at no
expense to the public. At some point, these "rich people who have no
intention of living in the city" will realize that their investment
units aren't so special after all, and the bubble will pop. Costs
will fall dramatically, since there will be far more "luxury" units
than people who can afford luxury prices.

What about the people who were living in the buildings before they
get rebuilt 3x bigger? Unfortunately, we are already losing cheap
housing quickly. Developers buy old cheap housing, gut it, and turn
it into fancy condos, all without increasing capacity. Building
taller is much more profitable, however, so if we let developers
build towers they'd do that instead.

Speculators who buy housing with no intention of living in it are
betting that we will continue to keep the supply of new housing
highly constrained and that housing prices will continue to climb.
Let's prove them wrong and take their money.

You can send people KN95s
-

Comment via: facebook, lesswrong, hacker news

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Jeff Kaufman
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