[HN Gopher] New Empty Units
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New Empty Units
Author : luu
Score : 29 points
Date : 2021-01-30 03:55 UTC (1 days ago)
(HTM) web link (www.jefftk.com)
(TXT) w3m dump (www.jefftk.com)
| hamilyon2 wrote:
| The analysis is so obviously wrong, I can't imagine any of this
| is real.
|
| It assumes that rich entities will buy property at high prices in
| a soon-to-be buyer's market. That they will not calculate ROI,
| will not predict market collapse and will easily loose money. The
| opposite, of course, is true. ROI will be meticulously
| calculated, bubble will not form. Development companies, unamused
| by weak demand will stop building long before there will be lots
| of unaffordable, unsellable housing. Which might be good: market
| forces at work.
| shuckles wrote:
| The right way to understand Nathan, the author of the piece, is
| that - like many other rich kids of his class - they are
| disguising an aesthetic preference for cute old buildings with
| a material analysis which can justify that preference in light
| of their purported egalitarian values.
| jefftk wrote:
| _> The analysis is so obviously wrong_
|
| Are you talking about my analysis, or Nathan Robinson's (who
| I'm responding to)?
| imtringued wrote:
| There is a flaw in your argument. If there is no demand for
| extremely expensive luxury apartments none of them will be
| built. The brain knot of luxury apartments making housing
| unaffordable doesn't even come into play because no luxury
| housing will be built.
| makomk wrote:
| Yeah, as I recall we've seen this happen on the rare occasion
| cities built enough housing to cause the market to weaken. All
| the property companies stop building the moment it starts to
| happen because they know they're at risk of ending up with a
| load of housing they can only offload at a loss, and that can
| easily bankrupt them.
| Finnucane wrote:
| THe last time this actually happened, during the Great Bubble of
| the early 2000s, developers built as fast as they could sell, to
| anyone who could sign a a paper. It didn't matter if anyone
| intended to actually live in the buildings. Whole developments
| were built to stand empty. And when the bubble popped, indeed,
| prices crashed. Also, stock markets, banks, jobs, income.
| Foreclosures clogged the market. Corporate real-estate trusts
| hoovered up the excess housing to convert to rentals. They have
| not been exemplary landlords in the main. Have the poor benefited
| in any way from any of this? No, of course not.
| fingerlocks wrote:
| > Have the poor benefited in any way from any of this?
|
| Yeah, I lived in a sweet condo in downtown Seattle for a few
| hundreds bucks a month in rent during the early 00's crash.
| Being a poor college student at the time, and I'd say the price
| collapse was _awesome_ , esp compared to dorms or other
| dilapidated UW housing.
| [deleted]
| shuckles wrote:
| This presumes home building rates in the lead up to the GFC
| were unusually high, when in fact they were at a 50 year low:
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3569920
| Finnucane wrote:
| https://www.census.gov/construction/nrc/historical_data/inde.
| ..
| jeffbee wrote:
| This data at FRED is much easier to work with. As you
| should be able to see, there was nothing exceptionally high
| about new housing construction in the first part of the
| 2000s.
|
| https://fred.stlouisfed.org/graph/?g=AA2Q
| jeffbee wrote:
| What's scary is we now have whole entire generations of
| Americans who have never personally witnessed a functioning
| housing market, and this is the kind of junk they believe.
| navait wrote:
| I'm a YIMBY activist in my spare time. One criticism of my ideas
| I've seen is that building more housing in my city will attract
| more professionals to my city. Those people live in the new
| housing, not existing low income residents. I think this is
| because the shortage is so bad, and that these professionals
| would eventually displace residents no matter what.
| shuckles wrote:
| At least in San Francisco, over 80% of residents in new
| buildings lived in the city before moving in. I haven't heard a
| single induced demand argument which is actually borne out by
| reality.
|
| For the one in this article: the cities with housing crises
| have extremely low vacancy rates. And the drop in rents during
| the pandemic has been most substantial in new buildings. If
| supply was totally inelastic due to money laundering, that
| would not be the case.
| onlyrealcuzzo wrote:
| Land is priced at what the MAX a developer could make from
| developing the land.
|
| Short of completely changing everything about property
| development from the financing (artificially low rates),
| taxes (regressive), and development (zones) - there is no
| solution.
|
| If you could build more - someone would. You can't. And it's
| not like we can just change one thing. The entire market is
| forcing higher prices at every turn.
|
| 66% of the US is a homeowner, remember. Most people have an
| interest in NOT solving this problem.
| shuckles wrote:
| This is lazy analysis.
|
| 1. Lots of industrial inputs are priced based on value they
| provide the consumer. That's not what makes land special,
| and there are many mechanisms to have non-developers
| capture the value of land (cf. LVT, inclusionary zoning,
| impact fees).
|
| 2. Focus on developers is misplaced. There is no reason
| developers are structurally incapable of making their
| profits by building lots of units at low margins instead of
| a few units at high margins. The fact that 100% subsidized
| nonprofit developers deliver projects at nearly the same
| costs as for profit developers suggests that the drivers of
| costs are not developers themselves.
|
| 3. San Francisco is majority renter yet makes no local
| policy changes to alleviate the supply crisis. The
| incentives at play have a lot less to do with greedy
| developers than you describe.
|
| 4. Low interest rates can either manifest as lots of units
| offered at cost or high multiples on ownership vs rentals.
| Which one you get is a policy choice. I don't know what you
| mean by "artificially low" and how that's even relevant.
| imtringued wrote:
| Greedy developers don't want to drive the value of their
| existing properties up, they want to build more
| properties because that is an easy way to double or
| triple their money.
|
| Greedy owners of single family housing want to drive the
| value of their house up because they can't easily invest
| into a second home. A lot of them also love the idea of
| halting progress at all costs, even if it harms them or
| their children in the long run.
| jeffbee wrote:
| Housing developers aren't out there with 50-70% margins.
| Their net margins are usually well under 10%.
|
| The only people doubling and tripling their money are
| Boomers who bought houses with 1-2 years of saving
| ordinary wages, spent 40 years shouting down new
| construction in their towns, and now are sitting on
| millions of dollars of unearned returns.
| imtringued wrote:
| >One criticism of my ideas I've seen is that building more
| housing in my city will attract more professionals to my city.
|
| You mean all those people you built offices for? Why did you
| build offices for them if you didn't want them in your city?
| Ever though about that?
| imtringued wrote:
| After spending so much time on this topic I always came to the
| same conclusion. Even when I made the most extreme assumptions it
| didn't change the answer. Just build more housing or stop
| building too much commercial real estate. That's it.
|
| The truth is that Californians love expensive housing. They love
| having lots of jobs that attract people outside their city. They
| also love yelling at the people they desperately tried to
| attract. They love homeless people and want to support their drug
| problems. They never put themselves into the shoe of outsiders or
| even developers and care about nothing except their own selfish
| desires. That's what true greed looks like. It's in plain sight
| and until that greed is gone nothing will change.
| tumbleweeds wrote:
| I wouldn't say Californians love expensive housing. They love
| the speculative market which draws a good investment on their
| prior investment. Problem is it inevitably squeezes out all
| those people who cannot to pay market rate. Not for a house or
| an apartment. Where do they go? Suburbs nearest are already
| full, the periphery between aren't too far from being the next
| redeveloped arras. Some resort to commuting 2-3 hours each way
| since they can at least buy a cheaper home hours away and not
| infinitely pay rising rent. They do build "cheaper" houses in
| the exurbs so that helps some but the vacancies are filled by
| all others chasing the California lifestyle even if only
| temporary.
|
| One point to add is that it's pretty expensive to build in
| California. Even to fix an old house could incur 20-25% more
| due to retrofitting for earthquakes. Getting land and whatever
| property isn't cheap on top of doing anything further to it.
| I'm in the field and started wanting to do affordable housing
| but the pace at which it all moves is pushing me towards other
| paths. Say 3-5 years for 1,200 new units to get through various
| agencies and built on time, most of which are not meant to be
| affordable units. Can people put their struggles on pause in
| hopes of being lucky this round? Much as may be said to signal
| virtue, there is an obvious informal aversion living next to
| poor people.
|
| What made me laugh was when the City of Los Angeles was
| building those homeless shelters and still charging city fees.
| Way of the system, ok, but why would the city need to charge
| itself permitting fees? I feel there's a huge indifference to
| put only a facade of trying but at least it produces a few
| units at an astronomical cost to taxpayers. The are already
| paying for an annual budget half-owned by the police. Relevant
| point because a lot of cops and city workers don' live in the
| city either. They take their income and their future pensions
| elsewhere and the residents paying for these services get so
| little of those tremendous salaries reinvested back in their
| own communities.
|
| Greed will always be here. I don't see it changing either
| unfortunately.
| jeffrallen wrote:
| I'm suspicious of a plan to help the poor that depends on rich
| people making a bubble pop. Somehow the rich always manage to put
| their losses onto the poor.
| tormeh wrote:
| You're right, but for the wrong reasons. Aesthetics has always
| trumped economics when it comes to housing, and the speculators
| know this. The probability that this will change anytime soon
| is essentially zero. You're better off moving somewhere where
| they haven't fucked it up. I'd like to suggest Houston here,
| but there are still HOAs and similar stuff there.
| imtringued wrote:
| It's not an argument in favor of creating a bubble and letting
| it pop. The argument is that even in the most extreme scenario
| that building more housing will lower the cost of housing in
| the long term. Even expensive housing will make the rest of the
| housing market affordable.
| dan-robertson wrote:
| I don't think the idea is that there is a bubble or that there
| will be a pop. The OP is an argument _against_ the theory that
| new units are speculative investments that lie empty. The
| suggestion is that if that were the case then there would
| eventually be enough supply that prices would fall for new or
| existing stock. That feels appealing to me. It also feels
| reasonable that converting existing buildings to have more
| units would be beneficial for a city's poorer residents in
| general even if it's bad for those who are evicted: the people
| moving into the newer more expensive units would only increase
| demand (and therefore price) for the other older units if new
| units weren't available, pushing up prices for existing
| residents. I'm unconvinced by the idea that the rich will
| decide to move to a city based on whether or not there is a
| pencil tower.
|
| A counter argument I find compelling is that if people are
| buying property as a way of laundering money or stashing cash
| overseas then they may not care so much about the quality of
| the investment and that this breaks some of the assumptions
| about market efficiency.
| shuckles wrote:
| No the plan to help the poor is to build enough supply that
| there is housing for all who desire to live in a place. That
| aim is eminently possible, and to the extent some of those
| people need subsidies no matter what, becomes easier when you
| have a larger tax base.
|
| The only realistic plan to help poor people afford healthcare
| in the United States will necessarily tackle the enormously
| high costs. The opposition isn't narrowly "rich people" though
| but instead a wide range of above median income white collar
| industries.
| jeffbee wrote:
| We have a huge contingent of what I call vacancy truthers here in
| Berkeley and the rest of the Bay Area. Earlier this week a former
| candidate for city government was opining that new
| "gentrification tower" - actually tremendously expensive and not
| at all luxurious studio apartments in a 5 story building -- were
| all vacant! Look at all these available apartments!
|
| But these truthers simply never understand the numbers. In the
| first place they always underestimate the number of occupied
| apartments in a building. In the specific case there are 170
| apartments and 90 of them are already occupied. In the second
| place, they always underestimate normal vacancy rates. Zero is
| not a healthy vacancy rate. 10% is a healthy and normal vacancy
| rate in functioning markets. Finally, these people don't
| understand the process of leasing out a new building. It usually
| takes a full year to get to 90%. Again in the specific building I
| heard about, they only got their certificate of occupancy in
| September 2020, are already more than half occupied, and are
| leasing out at about 1 per day which is well ahead of the normal
| pace.
| jseliger wrote:
| Meanwhile the empirical work consistently shows what anyone
| familiar with supply and demand would expect: more units lowers
| overall cost: https://www.slowboring.com/p/induced-demand.
| shuckles wrote:
| The vacancy rate of permanent supportive housing units in San
| Francisco is 6%, which was higher than the vacancy rate of
| market rate housing. I guess that means there is no need to
| build more PSH? QED, suckers.
| smitty1e wrote:
| Those who do not understand Thomas Sowell[1] are doomed to wonder
| why reality never quite conforms to their conceits.
|
| [1] https://www.amazon.com/Basic-Economics-Thomas-
| Sowell/dp/0465...
| mnd999 wrote:
| I am not familiar with Thomas Sowell and realistically I'm not
| going to read his book to figure out why you cite him here.
| Could you at least give a hint?
| smitty1e wrote:
| Wisdom
| namenotrequired wrote:
| So, how and why does reality never quite conform to the
| concepts in the article?
| smitty1e wrote:
| The article outlines the conceited maps of man; the
| overarching conceit being: the territory can be conformed
| to some arbitrary map.
|
| Not unlike the counterintuitive way I am telling you the
| truth, a positive thing, and getting modded down for it
| in this thread in the most punk-tacular fashion.
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