[HN Gopher] Market-rate housing will make your city cheaper
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Market-rate housing will make your city cheaper
Author : paulpauper
Score : 31 points
Date : 2024-03-25 17:01 UTC (6 hours ago)
(HTM) web link (www.noahpinion.blog)
(TXT) w3m dump (www.noahpinion.blog)
| mortify wrote:
| This sounds like the long way to say that increases supply lowers
| prices. It does address common criticisms of this approach,
| however. I feel like I'm missing something.
| JohnMakin wrote:
| Because the author's argument is presenting this discussion in
| a profoundly dishonest and unrealistic way, and glossing over
| in a single sentence or two very real phenomena like
| gentrification (here's some cherrypicked studies most readers
| will never click on - there you go folks, gentrification isn't
| real!).
|
| One example being - this isn't a zero sum game and rental
| markets don't behave like one. If someone builds an expensive
| condo, yes this increases supply of housing in the area, but in
| the event that prices increase all over the place due to
| cartel-like behavior (spoiler - this happens often), renters
| don't react by shopping around for a landlord that's beating
| out the price of his neighbors. For one, getting approved even
| to be a renter is difficult for many, so this level of
| flexibility/fluidity is unrealistic from the start, and two,
| people react to rental increases often by cutting costs in
| other areas or by doubling up the occupancy of the home (e.g.,
| getting a roommate), because the choice of where one decides to
| pay rent is far from a perfect or efficient market at all.
|
| This issue is _far_ more complicated than "it's supply and
| demand dummy" and usually this argument is presented by faux
| YIMBY's who intentionally or not are acting as astroturfs for
| the developers, who win out big in the end no matter what.
| choilive wrote:
| Why shouldn't developers be economically rewarded for
| supplying housing in an area that demands a large amount of
| housing?
|
| > renters don't react by shopping around for a landlord
| that's beating out the price of his neighbors
|
| Renters certainly shop around. What makes you think they
| don't?
|
| > approved even to be a renter is difficult for many, and
| two, people react often by cutting costs in other areas or by
| doubling up the occupancy of the home (e.g., getting a
| roommate).
|
| Yes, and both of those issues can be solved by increasing the
| supply of housing. If demand greatly outstrips supply,
| landlords can be as picky as they want on renters. If theres
| an excess of supply, they will be a bit looser.
| JohnMakin wrote:
| > Renters certainly shop around. What makes you think they
| don't?
|
| I never said they do not. I said that's not the typical
| reaction, because moving is very difficult and has a ton of
| financial and logistical hurdles for most households.
| "supply and demand, dummy" arguments around the housing
| market tend to conveniently wave away these costs in the
| same manner the author waved away gentrification.
| astrange wrote:
| > very real phenomena like gentrification
|
| He wrote a famous post years ago about gentrification
| prevention called "yuppie fishbowl theory".
|
| Gentrification is caused by blocking infill development that
| adds new units. That's what causes existing units to get
| replaced.
|
| > but in the event that prices increase all over the place
| due to cartel-like behavior (spoiler - this happens often)
|
| That doesn't happen, landlords cannot enforce a cartel and
| are not motivated to.
|
| Cartels are enforced in housing /by governments/ - they are
| what zoning laws are intended to do. And they're the only way
| it can happen because they have legal force. Upzoning an area
| is defeating a cartel.
| immibis wrote:
| Replacing units is what causes units to get replaced. We
| can look upstream of that to see why landlords choose to
| replace units (probably the reason you cited), but we
| shouldn't miss the trees for the forest either.
| choilive wrote:
| Unfortunately yes, because people don't understand basic
| supply/demand principles. It sounds like common sense/econ 101
| (which it is). But the proponents of low-income housing and
| rent controls don't seem to believe that increasing the supply
| of market rate housing decreases rents in the long term.
| pixl97 wrote:
| Most proponents of low-income housing I know of would like to
| vastly increase density and lower the number of SFH but the
| vast portion of the market and voters does not want that at
| all since it would lower their home value.
| immibis wrote:
| Are you sure they're talking about the long term?
| zachmu wrote:
| What you're missing is the incredibly vocal activist culture in
| cities like SF and Seattle, who demand that any new multi-
| family housing built include below-market-rate units. (These
| cities also typically extort new developments with expensive
| "link-up fees" but that's beyond the scope of the supply-and-
| demand issue).
|
| The obvious fact that these requirements make it harder for
| developments to pencil out and therefore decrease the amount of
| new units built will never, ever occur to these activists.
| cess11 wrote:
| The author forgot to explain why the housing equivalent of a
| "Lambo" should exist at all, let alone the "Lambo" itself.
|
| It's statistics employed to defend harshly hierarchical societies
| while claiming to care for the disadvantaged.
| zachmu wrote:
| It exists because someone wants it and is willing to pay for it
| and someone else is willing to sell it to them.
|
| What makes you think you have the right to stop either side of
| that transaction from engaging in it?
| cess11 wrote:
| I'm not religious, I don't believe in rights as given by gods
| or nature. I also don't believe either debt or money are
| necessary for a decent society.
| pixl97 wrote:
| Because we have a million different laws preventing people
| from buying and selling whatever they want. The libertarian
| utopia that many on HN thinks should exist, doesn't. If the
| right to stop it didn't exist, there would be far more
| apartments and dense housing in these places that are zoned
| SFH.
| astrange wrote:
| Because zoning laws in the US prevent apartment development but
| they don't prevent mansion development. (Aside from lot
| coverage rules.)
|
| There is no such thing as a luxury apartment though, so you
| don't have to worry about that.
| tmnvix wrote:
| In this whole debate around availability of housing nobody ever
| seems to think about what has happened to the proportion of
| dwellings used as a primary residence. Up or down? What would
| that tell us?
|
| Cheap credit, rapid price rises, and AirBnB and the like have
| created extra demand for 'investments'. Second homes, short term
| rentals, even good old fashioned land banking.
|
| We should pay more attention to what has been happening to the
| demand side of the supply and demand equation.
| anthonypasq wrote:
| this sort of stuff is barely a drop in the bucket, and savvy
| politicians consistently try and succeed in directing public
| complaints towards these types of scapegoats and away from the
| fact they have completely forgone the public interest in
| exchange for appeasing the de facto "landed gentry" who lucked
| their way into owning an expensive asset that they dont want to
| get rid of.
| tmnvix wrote:
| > this sort of stuff is barely a drop in the bucket
|
| Do you know this or is this your opinion?
|
| I know for a fact that in Melbourne the areas that experience
| the highest capital gains and are most 'in demand' as places
| to live also have the highest vacancy rates. 15% and higher
| vacancy rates in some inner city suburbs (as determined by
| water usage). Not intuitive if you think in terms of 'supply
| and demand 101'.
|
| Think about it in these terms. It used to cost you money to
| have a second home but since interest rates started a steady
| decline around 30 years ago the supply of new money that has
| gone into property means having a second home now makes you
| money via capital gains (even without generating income via
| long term rental). The advent of AirBnB and the like also
| mean owning a second home can be profitable where it once
| wasn't. Now, given that, surely more people will be doing
| this now, right?
|
| A suburb near me has around 2000 dwellings. About 50 are
| listed on AirBnB as 'entire homes'. That's 2.5%. A typical
| vacancy rate is 3% (not as measured above, but provided by
| real estate agents - i.e. that are available for rent). 2.5%
| starts looking very significant. And this is just AirBnB.
| There are other platforms involved. Not to mention land
| banked properties, second homes not listed for short term
| rental, etc. In short, the number of underutilised properties
| is significant and made worse in a booming market.
|
| Edit: Further evidence of the existence of underutilised
| properties. In NZ, when interest rates shot up at the start
| of 2022, the number of listings for both purchase and rental
| rose significantly (close to 50%). Where did these properties
| come from? A similar example could be seen in Ireland post
| GFC. There was a 'shortage', then financing became difficult
| and suddenly a surplus of rentals and homes for sale
| appeared. It was accepted that there was an oversupply and
| the preceding boom had led to overbuilding. As the market
| slowly improved over 15 years the surplus disappeared again
| to the point where rentals are very scarce in Ireland (but
| short term rentals are now abundant).
| astrange wrote:
| Vacancy rates going up is good for renters and bad for
| landlords. It's not possible for it to be any other way;
| you simply don't make money from /not/ renting a place,
| compared to renting it. It's like arguing that a grocery
| store is hoarding food because the shelves aren't empty.
|
| Ireland has never had an oversupply of houses in its
| history. A simple way to tell this is that the population
| of Ireland is still lower than it was in the 1800s; that's
| because all young Irish people move to America/Canada
| because they can't afford to live in Ireland.
|
| But that's still not the best metric to look at. The right
| thing to look at is price; if it's too high you don't have
| enough units. That is the only thing you need to know.
| Anything else is obfustication.
| dmz73 wrote:
| Quick Google search (since I just did have the same question
| few days ago) https://fred.stlouisfed.org/series/RHORUSQ156N
| tmnvix wrote:
| It's really hard to find data on this.
|
| The home ownership rate is not really a good proxy as it is a
| measure of occupied dwellings that have the owner as a
| resident (or at least that is the typical definition). Many
| non-owner occupied dwellings will be used as a primary
| residence too (e.g. long term rentals).
|
| As an aside, it's often used to claim that 2/3 of people own
| their own home, which is obviously not true as many people
| share a residence with the owner.
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