Its wild how the solution to housing costs is really just:
Build more housing. Keep law and order.
No it doesn’t need to be “affordable”. Yes rent control is a terrible idea.
Just build more housing.
Note: that the US already has plenty of housing and housing costs basically go up in areas of low crime relative to economic opportunity. If you build housing, but allow crime to rise, you have wasted everybody’s time.
It’s a difficult problem not because we don’t know the simple solutions (supply and demand). It’s difficult because the people who have the majority vote also typically own the houses and they obviously don’t want the prices to go down. This is not just speaking about the US, many countries are facing this issue
Why would you produce more bread, milk, eggs as prices fall? You would of course wait for the next-pig cycle - when the starving masses pay any price to you.
The answer- essentials can never be a non-government interferring market. This can be by creating artifical oversupply by buying up oversupply for foreign aid or bio fuels(food production).
In the case of housing, this is by having the goverment continually construct housing.
I'm confused by this objection, if you draw a stereotypical supply and demand curve, you can see how prices settle to an equilibrium point. Of course reality has more complications, but I think your objection is 95% answered by a supply and demand curve. You keep building houses when it is profitable. You stop when it is not. This naturally keeps everything in balance.
I have struggled to understand why houses don't get built and land sits idle for years. I can only assume that it's significantly more complicated. I'm not trying to excuse the complications. I guess if the house prices are forecast to go up, you build some houses, but not all that you can because the longer you wait, the higher the profit will be on the ones you start later. If house prices are going down, even if it's profitable when you start, you're not likely to build houses because you might be left holding houses that will sell at a lower margin. If there was a tax on unused land, that might skew things towards building more even if prices are declining, but I'm sure there are lots of views on that.
Some would say that housing is a right (while acknowledging the need for housing construction and its workers and supplies to be paid for) and that it should be funded somehow, even if the free marker profit becomes negative during certain periods. Like any market manipulation, the question then would be how to intervene to keep housing construction going when construction isn't profitable, while not fomenting corruption in the industry.
Housing where? Is housing for me in Malibu a human right? There's plenty of places to live in Texas for basically nothing.
I'm honestly trying to take this seriously, but I really can't square the problem of location and utility. On of the reasons why West Virginia has such a low homeless rate is just that mobile homes and manufactured housing is pretty much legal in many areas around the state. One of the reasons why California is so expensive is that those types of inexpensive housing options are effectively illegal statewide.
> There's plenty of places to live in Texas for basically nothing.
What are the employment options there? If I move to a cheap house somewhere where there are no jobs for me, I just moved somewhere where I cant afford.
Again, I'm not trying to be difficult here, but "where" is "somewhere." There are jobs in Austin, San Antonio, Kerrville, Marfa, and El Paso. They might not all be for me, but they exist in all these places. Where you live and what your commute is, again, is not exactly something that's particularly trivial to define. At what point should I start looking in San Antonio rather than Austin?
These are hard questions. This is what I mean when I ask whether I have a right to housing in Malibu? At what point should I be expected to just move to East LA?
At the end of the day, housing in Austin is relatively inexpensive. There are real options below $300K. Living in SF, it's pretty astounding that that's even possible within the city limits, much less at reasonable commuting distances.
I certainly think incentivizing subsidized low income housing is worthwhile, and I think even incentivizing builders to just target the low income price points is also worthwhile. I just think that focusing on subsidizing the lowest income folks, rather than letting markets actually work for most people has been shown to trivially fail in CA where I live at actually accomplishing anything. A lot of "ugly" 5-over-1's have been built in Austin, and it's working to keep the place affordable for working class people. I'm absolutely fine with that.
... but your own housing isn't any form of basic human right, its a luxury all around the world and always has been. Now I completely understand folks who come out of uni and see the salaries (sans faangs and generally devs and few other lucky positions), the prices and the emotions of missing out come easily.
But it isn't a right, just because you would like it. Same as I don't have a right to a car at price I would like, just because I live, by my choice, in rural environment close to nature. I desperately need one though for work commute, shopping, taking kids to school etc so thats as non-optional as accommodation to existence of my family. I can either suck up car's actual prices, move whole family so I don't need it or do similar choices in life to tackle that.
But car ain't a right. Same as your own accommodation, of course not a modest small apartment but a house, ideally close to work, amenities, schools, and costing peanuts. Literally what everyone else wants. Or am I incorrect in your expectations? Because if yes, its easy to accept cheap remote small old properties, those aren't expensive for above-average earners at all, anywhere.
The Universal Declaration of Human Rights, Article 25.1:
> Everyone has the right to a standard of living adequate for the health and
well-being of himself and of his family, including food, clothing, housing
and medical care and necessary social services, and the right to security
in the event of unemployment, sickness, disability, widowhood, old age or
other lack of livelihood in circumstances beyond his control.
Positive rights and negative rights. Societies can and often do guarantee rights that place an obligation on society and others to fulfill. In the US, we have a right to emergency medical care regardless of ability to pay. We have a right to a fair trial and representation. In NYC, the city is obligated to provide shelter for the homeless. Some thing that should be more universal. Not all questions can be answered by me right now.
If a minority has most of the wealth then the equilibrium supply may include a lot of supply of second homes, very large homes on large plots for the rich, properties sold at a premium based on how much they can extract from renters, and even investment properties occupied by nobody whilst still having insufficient small basic homes and dense housing.
Capital that could be invested in better serving the bottom half has to compete not only with the use of those resources to further enrich the rich but other investment opportunities.
There is more than enough land for everyone, and rich people aren't really competing for the kind of housing that poor people are competing for, e.g. smaller plots with smaller homes. The demand of the rich does not eliminate demand of the poor, so the market produces different kinds of housing for different clientele.
Think about it this way: assume you supply all the housing to all the rich people. Then there still remains untapped demand of others that can be fulfilled by further production of homes for those specific people.
This story fails when land becomes restricted, which is exactly what zoning laws cause. Zoning is a big harm to the poor.
> rich people aren't really competing for the kind of housing that poor people are competing for, e.g. smaller plots with smaller homes.
This disregards basic geometry. Sure, in some rare situations you only have one small plot of land surrounded by existing construction or natural boundaries. But, in the majority of cases, you have one large plot of land, and you can either construct one big house on it, 5 smaller houses, 10 small houses, or 200 apartments in a block. The rich are absolutely competing for this lot with the poor.
And as inequality goes up, the rich can even start contemplating buying up surrounding properties, tearing down construction, and transforming a small plot into a much larger one.
Given the choice between being homeless and living in favelas, millions in Brazil have chosen to live in favelas.
The reality of zoning laws in Western countries is to provide a target for regulatory capture by the NIMBY crowd. With the result that we're systemically underbuilding housing, then wonder why we wound up with homelessness.
Favelas are a local optimum which systemically is very difficult to get out of and is a sign that the regulator is powerless. It's a great example of a market failure.
There's a couple of "ifs" there and the scenario seems implausible. If I look at the prime real estate in a city it tends to be a lot of skyscrapers rather than very large homes (with occasional exceptions like say a Buckingham Palace). But it looks like the economic equilibrium is lots of cheaper apartments rather than large homes for rich people.
> ... and even investment properties occupied by nobody ...
Not much of an investment. Something is wrong if that is happening, probably manifesting as a lack of supply. Otherwise what is the point of an "asset" that doesn't generate income, degrades over time and could easily be rented out at a profit rather than sitting unused?
Whatever scenario there is where it makes sense to have an empty property, assuming a sane policy backdrop, it'd always be better for the owner do what they were going to do anyway but also rent it out.
People don't want to rent those homes out because once you're doing so it's difficult to evict a long-term tenant. You just lose out a lot on flexibility - even if you try and manage that risk by leasing out housing e.g. on a yearly basis, landlord-tenant law often overrides that since there are strong ethical reasons for not evicting someone who has since come to treat that rental space as their home.
Short term rentals are better on that score: no one sensible forms a long-term expectation that they're going to live in an Airbnb that they've rented for a few days. (If you think short-term rentals are "bad" for the long-term market or have negative side-effects on the neighborhood, then tax them to manage that tradeoff. But banning them altogether is unconscionable and just leads to houses sitting empty and unused.)
If you want second homes to be used productively, just allow folks to list them on AirBnb for planned short-term rental. Long-term rentals are a total non-starter politically for second homes, since you obviously can't ethically throw out someone who regards that rental space as their home. But short-term is actually fine.
As for larger homes, people should be allowed to live in there as larger, extended family groups - a common pattern in non-Anglo cultures. Ban "single family" restrictions since they amount to unconscionable discrimination against such reasonable living arrangements.
Not sure I buy the premise. Austin has a household $133k median income with a $435k median home price. It’s very affordable.
But, to make Austin more affordable still, you make it less expensive to build so that it’s profitable to build. Typical regulations that do this are:
- Lower minimum sizing requirements
- open zoning
- raise height limits
- make sure you don’t have unwarranted restricted fire codes (some places have elevator stairwell requirements that are insane)
- make permitting easier or not required at all for some cases
- no min parking requirements
Pretty sure as good as Austin is, they could easily reduce the costs by up to 30% (there are parts of the country with 50% the cost per sq ft for new construction).
That means there’s an invisible hand keeping prices up, or basically that the market is not free enough. That’s caused most of the time due to excessive regulation.
Another reason is high demand in locations where offer is limited due to physical limitations. There’s always demand to live in Broadway, and offer can never catch up due to its physical limitations.
We are not talking about economic theory. We are talking about house prices. Time after time it has been seen that free-enough market can lower the prices to affordable levels.
The relative abundance of land compared to other factors of production is, in fact, such a proposition. But when land is restricted through zoning laws this stops holding true. In other words, we must eliminate restrictions on production for the benefit of all people, but particularly the poorest.
We don't need economic theory for that it's just common sense. Humanity has been erecting structures to live in for approximately our entire existence. The modern economy is mechanized. How could a wood frame structure or a small high rise possibly be unaffordable if the market is functional?
Stop and think for a second. Someone in good health with a willingness to DIY and a sufficiently flexible schedule can literally build their own house from the ground up. It's a substantial time investment but not actually as much as you might think. Housing isn't very resource intensive compared to the rest of the modern economy.
The only possibilities I can imagine to explain unaffordable housing are broken regulations, critical levels of resource exhaustion, natural or man made disaster, and gross economic dysfunction.
It's regulations. But before you call them broken, some of it is safety. Safety standards keep rising with technology and the economy as people can afford more. Same with cars. There's also zoning restrictions in some places designed to prevent slums by requiring large residences. I guess that's happening here too.
Also living standards, ancients houses are dead simple and today could probably be built with usd 5k-10k in a couple months. But most people wont accept a home with no electrity, no lights, no AC, no indoor plumming, etc.
The average person would need a MASSIVE investment in time to learn all the skills required in addition to investment in tools. Furthermore people won't lend joe random the funds required in the same fashion as they would for an actual finished house OR constructing a house via a contractor.
The invisible Hand may be monetary policy. The median household may simply no longer be able to afford the median home due to the continued wealth distribution shift brought on by interest rate targeting.
> That means there’s an invisible hand keeping prices up
Construction labor is quite expensive and so are the raw materials (and going up). Means there is a hard lower bound on cost and unfortunately it's not that cheap even if they built at zero profit (which nobody will).
In reality, those ideas do not apply to the housing market, esp. as there is no real competition; and because the demand is absolutely inelastic (if we are already applying in MBA-wording universe)
Also, that this is true you can see if you compare to housing markets which "are more free than the Australian"
- inelastic means the demand is more or less independet of the price; you can't "just stop renting & living" if prices are going up, your options to bypass are highly limited -> therefore its called >inelastic<
OP used the term incorrectly. The term was used by Smith to refer to the fact that in the market, order occurs by the alignment of incentives of different people without any central planner.
> That means there’s an invisible hand keeping prices up, or basically that the market is not free enough. That’s caused most of the time due to excessive regulation.
No. Why do you guys fall so easily for the "regulation" cliche?
The answer is far easier: unwillingness to invest.
Why are there investment funds willing to burn through tens of millions in stupid stuff like NFTs or pets.com, but investing $10m on a 5 story apartment building that can get you a solid RoI of 20% is frowned upon?
Why the investment funds have to build the houses? Houses has been built/funded from zero by the future owners since forever, either individually or through cooperatives. That way, "investors" don't need a positive ROI, and they happily lose money overall if they get a home.
I know some people that are currently "willing to invest" in buying a ship container or two and transform it into a house to get costs down. The problem? Regulations don't allow them to put the container in their own property.
Using a shipping container is almost always a stupid plan compared to just putting up some wood. As much as I want to make zoning more flexible, I'm not in a rush to change that particular regulation.
The invisible hand is zoning. There's plenty of investment available but you literally aren't allowed to build what would be useful in most cases.
Sure you're free to go out into the middle of nowhere and build all sorts of wild stuff but there's no market for that because that isn't actually what anyone wants. You can't blame the investors when what people actually want to pay for has effectively been outlawed.
there are many things you can do, but essentially you want to make it profitable for builders to make houses at a lower price point, or give the average person more money. Some approaches (not all of which I'm endorsing):
- reduce restrictions around planning / construction / etc (because it takes time and expertise to comply, both of which cost money)
- find a way to bring in cheaper labor, or make it possible for construction companies to hire the same labor at a lower price. Maybe a subsidy, maybe reduced taxes, maybe relaxed labor laws
- add a subsidy for homes
- make your citizens more wealthy, so the price is no longer above their means
- outsource construction to a place that can build it more cheaply (eg, prefab homes)
> - find a way to bring in cheaper labor, or make it possible for construction companies to hire the same labor at a lower price. Maybe a subsidy, maybe reduced taxes, maybe relaxed labor laws
It's far easier than that: just have your regional/local government finance urban renewal projects that increase occupation density. You can even tie the project to the expansion of a public transportation system.
Won't the market fill the gap? For example, in Indonesia, "standard size" houses are mostly out of reach for new buyers (young generations), so they build houses farther away and/or smaller.
Where does this happen, in presence of a reasonably free market?
I can only think of extremely land-limited places like Monaco and Gibraltar. Where the answer is "not everybody should live in Gibraltar".
But the US has a lot of land. So much land that it can afford wasting it on endless sprawl of single family homes, which is the least efficient way of providing housing. Most Asian megacities would not be able to exist if they had as strict zoning principles as the US has.
Maybe you should also think about barriers such as "bans on boarding houses". This is what messes with poor people the most. A room in a house full of rowdy individuals sucks, but it is still a room. Possibly you may spend just a year there, then find something better. A tent in an encampment of rowdy individuals is strictly worse on all accounts except cost, and bouncing back from that is harder.
Then your point is meaningless. I (GP) was also pointing out the same equilibrium mechanic. The specific point I was making is that all evidence points to the equilibrium (in the US and elsewhere) being at a point that does not make housing easily attainable, and so becomes a political liability.
"Go build homes [beyond equilibrium]" is not a solution
Which isn’t quite accurate as for example people prefer to move out of their parent’s homes while young adults but aren’t necessarily homeless if they don’t.
Basic housing is a necessity, but people also huge homes and 2nd homes etc. So housing policy should therefore be more complicated than simply subsidizing anything you can call housing. Capping the home mortgage tax deduction at ~median home prices for example is probably a better use of government funds.
That is the object of the sentence. He is asking who the subject is, in other words the thing or person that is doing the housing of the people. Is it the government? Is it you? I'm currently responsible for housing myself, which is annoying so I would prefer someone else take on this responsibility.
The difference is between buying and asset and producing an asset. Even if RAM costs are falling, it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price.
It's entirely different if you're buying the housing already built; there's no productive activity, you're just a rentier and do not benefit at all from falling housing prices.
The differences in interests between an asset holder and a productive builder are night and day.
> it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price.
Right... my point is that the costs are not far below the eventual sales price. That's why construction is slowing down.
And as mentioned several other times, it's actually not as simple as cost > sale price. It's margin > margin of alternative investments of similar scale and risk profile.
As someone who is not versed in real estate, I don't see why your comment and parent couldn't both be true. Is Dr Horton building homes in Austin? Are the margins in Austin pulling down their average margin? That could explain high profit while dissuading new construction in Austin.
*I don't know the answers to either of these questions, but of you do, that could provide some "proof" for either side of the argument, depending on what the answers are.
It was not clear that it was your point at all! Yes of course, gotta get your return on capital invested or the money goes elsewhere, probably into a REIT that invests in the existing assets and drives up prices even further. Because the demand for housing goes somewhere: either existing owners profit or the people building and alleviating the shortage profit.
Every single municipality in the US I'm familiar with has done everything they can to make it expensive to build and try to remove any profit margin from building. Which leads to capital moving towards piggybacking on the rentierism of the average homeowner, the people who control the policies that make it unaffordable to build.
Not all new houses sell. Some become shadow inventory, some take 5+ years to sell. If you drive around new developments you can measure the fraction.
IIRC, Mountain House (near Tracy, CA) in the 2008-2010 crash was an example of a large new development that did not initially sell and was in serious danger of going zombie, and not having the new schools that had been promised to people moving in.
There is a difference but not in the way you think. Producing an asset is just buying other assets and labor. The difference with buying an asset is that a part of the assets you bought for production is illiquid for a term of the production. Generally you can only sell unfinished construction at a huge discount during most of the stages. So producing an asset is as same as buying an asset but with a lockout period, when you cannot sell.
Or land ends up better value left as suburban house than developing up.
Or they build where sale cost - build cost is maximized. I.e. different city.
Governments need to build more housing. Make it bland so snobs can price discrimnate themselves to buy builders' homes. Why thrifts by the government home for value for money (and quality).
You think the government knows better how to identify land that is profitable than private builders? Why? Or is this one of those opinions based on "is OK for the state to pay for it because there's infinite money for my pet project"?
UK public housing is widely known for being shit. Unsafe, puts all the poor people together in a block. There's bunch of crime, and your kids will be likely to stay stuck there or go to jail due to bad influences.
Social housing should be sprinkled around it has been found. So nice example of what I was saying.
I would rather have more housing than less though. Government can build it at scale without worrying about profit.
And privately built appartment blocks are awful. One cracked in Sydney had to be evacuated. Concrete cancer and water ingress issues. It is concrete enshittification.
The Grenfell tower fire was caused by a renovation intended to improve thermal insulation.
The renovation project used an external thermal insulation system that failed to meet both the manufacturer's recommendation and building regulation requirements. The particular system was actually banned in the UK while it was installed.
Tell me why you believe this has anything to do with public housing.
Because government has a unique pricing advantage, they get additional value from the houses they build in the form of all the positive externalities and property tax revenue. So projects that wouldn't be profitable for private builders might still be worth it to the government. So it should be both.
They're just gonna pay builders a sum anyway so it's not like they need to shoulder the full upfront cost anyway.
Do you have example of another area the government has higher profit margins than private industry? I can't. And if I was going to think a government would build housing, it would be in places that are cheap and I could mass house a bunch of people, not in hip expensive cities which is what people want when they talk about this.
But surely soviet style huge blocks of tiny t0 apartments all stuck together is a dream...
Isn't the US example: Medicare/Medicaid? It has far less costs (i.e. more of the money spend ends up with patient care) and has a reasonably good reputation?
> Do you have example of another area the government has higher profit margins than private industry?
Public transit. Capturing enough money from fares is difficult, maybe impossible, but it's quite profitable if you can capture the value generated by the enabled economic activity and raised property values.
The same really goes for most infrastructure. There's a reason the government operates nearly all the roads. Also the fire departments and police stations
Yes and that reason is not because they are better at doing it profitably it's because they are commons that are wildly unprofitable to do well. If you let private industry build roads you'd have nice roads in cities and dirt in the rest of the country.
In this case what people want is the reverse. They want the government to build in Austin.
The government should be involved when market forces won't solve an issue, ie no market will make it profitable to send an ambulance to a town 3h away in the mountains. You don't need affordable housing in the center of Austin just because it's trendy though.
This is a government literally putting their money in private companies instead of using it themselves (for idk schools or infrastructure for their people instead of giving it to nvidia and tesla). It's the most literal illustration of "private" beats "public" investment. Not sure what point you tried to make.
Thats how supply demand works right? Its a stable equilibrium. When supply is low, prices rises to entice supply, supply increases to match demand, prices fall, the rate of increase of supply falls as well until supply approaches to meet demand. It prevents oversupply. If supply slips below demand again prices will rise to pull it back up
Theres no problem here. Thats how the system should work
To some degree yes. However, the problem I'm pointing to is that the equilibrium in several developed economies (esp US) seems to be at a level that makes housing unattainable for a huge number of people.
I.e. Probably due to Baumol's disease, there is no price at which it is both 1) profitable to invest in constructing new housing and 2) makes housing broadly attainable to people.
This is a problem. There are a lot of goods (like a platinum-bodied iPhone) that cannot achieve both (1) and (2). However, unlike all of these other goods, housing is a necessity with an extremely high floor on demand.
Of its still profitable to do so, considering opportunity costs for the capital, firms will continue to build. However, it's so expensive to build that these project wind up not becoming bankable very quickly. I think that's the underlying issue that needs to be addressed.
The problem is the cost of inputs. Classic Baumol's disease. We cannot escape Baumol's disease by just saying "hurrr durr just gotta get people to finance projects into a market with falling prices!"
It's not necessarily prices falling here but the profitability of [demand] at [price]. Like if prices fall 10% but demand rises 20%, you would want to build more housing.
This is the beauty of the free market because it guarantees three things:
[1] Real estate is generally a good investment and will hold value or appreciate in the long term, because supply will adjust to demand shocks to rescue values
[2] If people want to live somewhere, houses will be built for them to live there
[3] Real estate developers and construction are solid, safe businesses with great unit economics because building may decrease prices, but may still increase demand
It's when you constrain and restrict a market that players have to adjust and then you get crazy scenarios
If you live in a magical fairy world where supply and demand are fixed, sure. In the real world, prices going down 10% leads to a surge in demand, and so you can fill more of your units. This leads to either equal or increased revenue, for the same construction (flat cost), which actually yields higher margins. This is why developers are usually concerned with occupancy rates, and prices are more a concern for homeowners.
There are only really 3 scenarios where prices are low and demand is low:
[1] There is a dramatic surplus of supply, in which case if a developer is trying to build they've not done research and probably should not get financing
[2] There is some other factor (usually high crime) in which case again, developer should do their research, and the market is operating fine
[3] You are developing super early and operating within incentives offered by the city, usually tax abatements, which drive down the carrying cost and make it a better investment.
Also important to note that in scenario [3] a smart developer will slowly release inventory to restrict supply to meet demand, and as demand grows, release more inventory at the newly raised price, continuing to do so as long as the tax abatements advantage the strategy. This is common in successfully developed areas e.g. Jersey City, and is fine as long as broad scale collusion doesn't occur
> Grocery stores have very small margins, as little as 1%.
Looking at the Kroger 2024 Annual report shows that they have 22.3% gross margin . they pay dividends, had a stock buy back, etc so its entirely possible that they had a very low margin but gross margin seems to be similar to a home builder.
The net margin of around 1.5% seems more relevant: the gross margin is just the revenue minus the cost of good sold plus cost of transportation. The net margin is the money you have left after paying things like Rent, employee wages, electricity, taxes, interest on debt.
Grocery stores don't require millions to billions of dollars of capital to execute each new transaction.
So it's not the margin itself but actually the spread between the margin and what investors could get by investing in alternatives. Real estate investment opportunities are often measured by their advantage (measured in fractions of a percentage, .2% advantage being considered solid) over 10 Year Treasuries or S&P 500 returns.
Real estate developers do often actually lose money, but the more salient boundary condition is whether they can get financing for a project, where they have to clear a bar well above the "just make >$0" bar.
> Grocery stores don't require millions to billions of dollars of capital to execute each new transaction.
Neither do homebuilders, because homes don't cost millions to billions to build (high end custom homes can cost millions, but that's not what we're talking about here).
> So it's not the margin itself but actually the spread between the margin and what investors could get by investing in alternatives. Real estate investment opportunities are often measured by their advantage (measured in fractions of a percentage, .2% advantage being considered solid) over 10 Year Treasuries or S&P 500 returns.
Okay? So they have an advantage over alternatives, which means higher profits. And a .2% advantage is not considered solid, or meaningful in any way without a lot of missing context.
> Real estate developers do often actually lose money, but the more salient boundary condition is whether they can get financing for a project, where they have to clear a bar well above the "just make >$0" bar.
Many companies often lose money, due to incompetence or bad luck. The industry as a whole has very healthy margins.
Even a small (~10 home) development, of which we need hundreds of thousands, will require millions in financing. And as the development gets smaller and requires less financing, the economics get a bit worse due to ~fixed cost of land acquisition, development, and infrastructure/utilities.
> Many companies often lose money, due to incompetence or bad luck
One of those signs of incompetence or bad luck is building a bunch of new supply into a market with falling prices, in which case you will find yourself not among those with healthy margins ;)
It seems to me that the market will select for urban sprawl though which is a negative for society but has the highest margin. E.g. Houston suburbs, miles and miles of cheap to fab single family homes that turn it into a suburban hell scape where you have to drive everywhere.
I don't think the free market is giving the promises you say it is - supply isn't elastic for real estate if nobody's building because there's no margins. Demand can be anywhere really.
I like to look to Tokyo for an example. Small lots, extremely predictable regulations (that are still strict enough to ensure a safe living situation), fast approvals, mean it's much faster and easier to throw up an 8-10 story apartment than say downtown Austin, and so even today they keep doing it despite land in Tokyo being very expensive. And, no sprawl.
They can throw up 8-10 story apartments in Tokyo despite land being very expensive because they tear them down and rebuild them after 20-30 years. Also, Tokyo outside of a few areas isn't that tall, it is definitely dense, but 3-4 story tall building dense (those homes are also torn down and built anew ever 20-30 years, so construction buzzes in Tokyo).
It would be better if you considered new actual living capacity in Tokyo rather than just new constructions.
I've lived in Tokyo and Houston. Tokyo is infinitely more livable and the housing is still relatively affordable. In Houston even if you can get a new place it'll be clapboard garbage that's a one and a half hour drive from work.
Average home price in Tokyo is 1.5x that of Houston. Average wage in Houston is 1.5x that of Tokyo. So the data doesn't support your post unless you really really love sushi and arcades.
> [1] Real estate is generally a good investment and will hold value or appreciate in the long term, because supply will adjust to demand shocks to rescue values
Real estate is NOT supposed to be a good "investment" and only became so because the government started propping it up with bank bankstops, zoning, NIMBY, redlining, etc. If your pricing is working correctly, real-estate should be close to zero-sum.
Austin, in particular, had several nasty bust cycles where real estate prices tanked after overbuilding which is precisely what kept the cost of living under control. Alas, that is a thing of the past after 2008 when everybody realized that the federal government will backstop the banks "Real estate number must always go up! Brrrrr!"
For nearly every homebuyer, a home is the largest purchase they will ever make and the bulk of their net worth. It needs to be a good long term investment that at least reasonably paces with inflation, otherwise you are losing money by buying a home and everyone has to rent and then you have feudalism with extra steps.
The good news is this is totally fine with keeping cost of living under control and overbuilding, because prices will go back up over time. Most people aren't going to own their home until the 30 year mark so it really is a much, much longer term investment than anything like overbuilding or other factors can reasonably affect.
The problem is really that people started seeing 2x-10x returns on homes and started treating that like the norm. That is not a 'good investment' that is a 'money printer,' and in most cases the government does not want to safeguard that behavior, but it's hard not to when those same people panic like crazy if their home only goes up 2% in value in a year or, god forbid, decreases in value for a year.
There is really no good solution to that mentality, if there really was one then Wall Street would have uncovered it ages ago to get more people into long term ETFs.
> a home is the largest purchase they will ever make and the bulk of their net worth
That's bad and a central part of the problem.
I accept that my car is depreciating in value every year I own it, and but I need a car so I buy one. I don't need it to be a good long term investment, despite it being a major purchase.
The entire mindset of treating a family's home as being an investment class rival to bonds and equities is a relatively new phenomenon, and one that's clearly been detrimental to many.
> > a home is the largest purchase they will ever make and the bulk of their net worth
> That's bad and a central part of the problem.
Why? Or to ask in a different way, how could it not be?
For nearly all regular working people, there is nothing they will ever buy that costs more in labor and materials than a home. So of course it will be the most expensive purchase most people ever make. How could it not be?
It matters whether the margin is higher than other investment opportunities of similar scale and risk profile.
Already, the answer is very often no. In Austin, the answer will increasingly be no. That means people will not finance new construction, so if demand continues to grow it will outstrip supply and prices will go back up until the margin on new construction exceeds that of alternative investment opportunities of similar scale and risk profile.
Yes really, that deeper understanding is exactly what is meant when somebody says "the cost to build is lower than the price." If we're going to be pedantic, you're ignoring the huge amounts of uncertainty on costs that are inherent to any project, the amount of risk versus the expected profit.
And indeed that amount of uncertainty: will I be allowed to build eventually? How long will I have to pay interests on assets before I'm allowed to build? Can I actually build what's specified in code or will discretionary processes arbitrarily change what I'm allowed to do, 18 months into the project?
> Yes really, that deeper understanding is exactly what is meant when somebody says "the cost to build is lower than the price.
It demonstrably is not what people understand it to mean to "the cost to build is lower than the price." The cost to build can be well below the sale price and development still be a totally uninvestable activity.
I would expect the development of Austin to continue until market equilibrium and then pause. Decreasing margin does not mean equilibrium.
Obviously austin is not at equilibrium because we still have price data on developer activity and that would be near zero if developers couldn’t make returns given risk etc.
Your explanation of fluctuations in supply and demand are not very revelatory. Everything being in flux at all times is kind of an elementary fact of life.
It's clearly not elementary if people here believe that you can just keep building until prices collapse, and people will still keep building.
The question is whether the market achieves equilibrium at a point where 1) developers can get financing to build profitably, and 2) units can be sold at a broadly attainable price to the local market.
The answer appears to be no because the cost of inputs is so high. No one here is talking about directly reducing the cost of inputs. They believe that instead developers will just continue to build units that they sell at a loss, or at least investors will continue to invest in construction that returns less than the S&P 500 or 10 Year Treasuries (they won't).
There is the possibility that the government builds housing, since the government doesn't have to care about direct profits and can include the overall economic effects of affordable housing in its calculations. We don't expect much direct profits from roads either, but we keep building more and more of them.
Because "cheap" government housing has never been "high quality" in the history of the world. Those two properties are antithetical.
Humans don't have a ton of preferences for the electricity they consume or the water they drink, just that it exists. It's a commodity, so a good task for government. Housing is not an undifferentiated commodity and is subject to extreme variances in preference. Markets do differentiation and preference matching infinitely better.
Hence why Government housing always takes the form of a utilitarian blight on the community with giant towers of tiny apartments with tiny windows...doesn't matter if its communist Russia or the richest capitalist city on earth (NYC), all government housing results in the same outcome.
Assuming someone will chime in with some "halo" government housing project in the nordics that represents like 0.01% of the government stock there but socialists will use as propaganda. However, it's important to remember these are not cherry picked examples, they are median examples:
Not just government made housing but any housing. Housing market needs don't seem to have as much wide fragmentation as eg most of the Western world seems quite happy with suburb style housing and most asia seems content with apartment though aspiring to owning houses.
I am saying just like any other capitalist endeavour, where things that barely existed or were quite expensive many years ago eventually reached a point where both the price became so low and quality so good that it became a mindlesss thing eg sawblades. And housing for whatever reason has been an extremely anticapitalist market. Even if we take the exact same houses people want today, their execution seems far from optimized. Think of something like precutting all the timber and sheets at a factory and doing some light adjustment and fitting on site, developing new materials that are cheaper or easier to work with tools, etc there are countless angles of attack.
In optics for example, it was mostly this rather bespoke work by a few artisans and people back then might have said this needs a fine touch that can't be done on mass scale. And then Carl Zeiss emerged. I feel housing is in the pre Carl Zeiss era.
EDIT: Neither example looks bad to me. The russian looks denser but both look clean and well organized. It doesn't at all look like blight to me, any more than a grid of houses in a suburb does. It's clean and geometric just like rows of houses in suburbs. If you like one but have a problem with another, I think you are trying to get offended deliberately.
To be sure, are you asking if society does better when its people are homed vs. homeless? Because that seems like a question with an obviously-yes answer.
Because they don’t care about profits, they always end up overpaying and taking way longer time than necessary.
And who pays for that? The whole society: Either the government raises taxes, gets more in debt, or they print more money driving inflation up.
The most basic commodity, food, is a great example. The moment the government has ever step into controlling production of food, we’ve only seen subpar performance and starving people as a consequence. Ultimately killing millions (USRR, China, Korea…)
> The moment the government has ever step into controlling production of food, we’ve only seen subpar performance and starving people as a consequence.
You might be surprised to hear how heavily government directed and subsidized food production is in the USA.
That is a good idea that requires careful attention to make sure it has near-perfect execution. Because we do that, and they are called 'the projects'.
Sure if that's all you care about, it will do that. At the price of making people's lives miserable due to substandard housing if it's done wrong. I said it's a good idea, let's just make sure we do it right.
> At the price of making people's lives miserable due to substandard housing if it's done wrong.
I'm curious to see how Austin will do in the near future by that same metric. More people can afford a place that will let them pay rent, although now at least some of those people will be living in someone else's basement or garage. These may not be very nice places to live, but they may be all some people can afford.
They've also removed the regulation requiring a second way out of a burning 5 story building. Austin faces an increasing number of red flag warnings and has the 5th highest wildfire risk in the US. It remains to be seen what removing that second exit route will cost in the charred corpses of families.
Austin is also cutting corners on permitting which is great news if that was all needless red tape that can be rushed or skipped without cost, but if new apartments built today are (or soon become) deathtraps due to lax code enforcement that could be a major problem down the road.
Austin has already lowered rents which is great, but hopefully it was also done right and it doesn't result in more people being forced into substandard housing or increased deaths. As long as it doesn't, other cities should look into trying some of the same things Austin has done.
Not really? "The projects" are a consequence of a very specific approach to government housing construction.
There's an alternative approach which mirrors the public healthcare concept of "public option". Instead of restricting government housing to means tested individuals or specific low income populations, you develop a public competitor to drive prices down and to eat costs in regions where housing is needed but the economics just don't make sense yet.
i.e. the US Postal Service model. It works extraordinarily well as long as you don't repeatedly capture and handicap the org/agency (like has been done to the USPS). And even with the USPS despite being severely handicapped it still provides immense value by driving prices down while maintaining the essential service of last mile delivery.
A similar approach could be envisioned for a public construction agency.
Any program created by the US government can be captured and handicapped, like has been done to the USPS.
Also, the Postmaster General was on Capitol Hill today saying how this time next year the service won’t be able to afford delivering to all addresses in the US.
There are multiple city and state housing facilities in my area that are perfectly fine. They are not huge or luxurious but they're safe, clean, and well maintained.
When the options ar homelessness or subsidized housing, subsidized housing is absolutely the best option, which is backed up by decades of data.
"When the options ar homelessness or subsidized housing, subsidized housing is absolutely the best option, which is backed up by decades of data."
Not quite. That's only true if you are housing people who ended up homeless due to bankruptcy or similar reasons (lost jobs, medical issues, etc). If you have people who are homeless due to sever addiction, you just end up with more OD deaths. You have similar issues with people with sever mental illness.
The homeless are not a monolith and different parts of the population need different solution unless you really really don't give a f*ck about them.
I’ve seen some housing projects around my city that are actually quite nice. They didn’t end up being shabby because they were built poorly. They were shabby because they were reserved for the very poor and, consequently, became extreme concentrations of poverty and crime. This makes people unwilling to invest in maintenance and continued improvement of their homes.
If the government just went on a building binge of housing to be sold at market rate, or even set an upper bound before qualifying to buy them at a middle class income, it’d work out fine. That’s basically how Singapore does it only they couple it with somewhat aggressive policies to encourage people to downsize their living situations once they’re empty nesting to free up family dwellings for people with families. We probably wouldn’t need to do that second part since we’re not a claustrophobic island, and could just count on natural turnover.
This is how markets balance. When there is under supply prices go up and incentivize production. When there is oversupply production goes down. Prices converge on a small premium to the price of production.
it doesn't matter if prices are falling or rising, it only matters how the ROI of building compares to other investment opportunities
we can also make it cheaper to build. easing taxes on imported materials, bringing in more skilled labor, expediting permits, and even direct subsidies like tax breaks
> it doesn't matter if prices are falling or rising, it only matters how the ROI of building compares to other investment opportunities
Correct, which it basically doesn't in Austin, which is why construction is decelerating.
> we can also make it cheaper to build
Yep, this is the only structural solution. The "just add supply" runs into the problem of price equilibriums. The reality is the input costs of building housing basically guarantees that housing is hard-to-attain for any local market. We need to address the cost of inputs. Temporary reductions in price are temporary and the market will self-correct back to restrict supply (as we're seeing in Austin) until prices go back up to being hard-to-attain.
The prices may be falling, but if you can still make more profit (per unit time) building in Austin than elsewhere (due to less red tape or more local builders or whatever), building will occur.
To create artificial scarcity on a free market, it should be either a direct monopoly, or a giant cartel that includes every single developer and has mechanisms of punishing the outliers.
This is an empirical claim. It looks like new monthly permits are down from ~4k a month in 2021-2022 to ~3k a month. They're still up significantly from before 2020. The building boom has slowed but it's still elevated. Not particularly close to zeroing out.
Not to mention, Austin could just make it cheaper to build to offset lower sell prices. Gruber et al estimate permits are 50% of an LA home's price. Fix permitting and rent goes down 50% by your assumptions that developers build until margins are 0.
Assume austin is only half as bad as LA, a 25% rent decrease would be incredible
The point is that housing would be cheaper, not that it would become dirt cheap.
There are some inherent costs to new housing. Work of professionals involved, cost of materials, compliance with all technical regulations, some profit for the developer, connection to infrastructure. Let us mark this unavoidable cost by C. It is a component of the current prices.
Then there is the component N, which is deadweight cost caused by zoning and non-technical regulations. I am not saying that it should be 0, but it is in our interest that it is kept in check, maybe 20 per cent of C. As of now, in some places, it well may be 120 per cent of C, even though it is really hard to calculate.
This component of the final price directly enriches no one, it is pure friction caused by special interests of various parties that don't want to see any new housing either near them, or anywhere (landlord cartels that hate competition - indirect enrichment).
Even C is now a formidable figure. Modern homes are basically industrial robots, they are much more complicated from the inside than they were 100 years ago. But there isn't really a reason why they should be horribly expensive.
If as a regular office person you can buy a home for, say, 5x your annual income, it is not unaffordable. That is well, just normal. Not completely everyone is expected to own their home.
The problem is that nowadays, the multiplier in many places isn't 5x, but 10x or 12x. That is just way too much. And given that C cannot be easily massively reduced (unless some sort of massive robotization of construction work happens), you really need to attack N.
In my state, or in my capital city, you say this, but the real estate developers are generally the top 1% in town. If they're running on razor-thin margins, I'm not seeing it - I am seeing them on my Facebook (being friends with the wife of the mayor) doing things like taking their kids on vacation to the French Riviera, Switzerland, Tokyo, the Maldives... well, alongside the City's Planning Committee commisioners and their families...
Highly restrictive development rules, often sold as ways to stick it to those very rich developers, are precisely what make them so rich. Only those with huge amounts of capital to spend can make it through the gauntlet of the rules and have big enough asset portfolios to stay in the game. They can bank land for decades, speculating on the best time to take their profits, all while others live through shortages of housing and do not have access to that land.
Those very processes that make it hard to develop keep out the scrappy up-start competition, the contractors that could be building houses all over if they had enough lawyers/planners/specialists to help them get through the system.
Look, for example, at LA, which has super super restrictive rules on what can be developed where, and has huge amounts of discretion at the political level, so that NIMBYs can block what they want. The only people who can build housing are developers who bribe the politicians (there was a somewhat recent arrest in LA on this, involving literal bags of cash, by the FBI).
Having simple, straightforward rules that are completely objective is the only way to try to flatten out the playing field. However such rules get shot down by NIMBYs precisely because they don't want the shady developers profiting off apartments! It's all highly ironic.
Corruption isn't prevented by regulations; its enabled by regulations. That's the flaw in your thinking. If a market's only players are really rich, there are 2 possible reasons for that: 1) the market is really good and more players should be entering or 2) the market is highly regulated which prevents more players. Guess which happens a lot more than the other in RE development?
PS Most of the people who build houses aren't very rich, just the CEO/big boss who owns the entire company is. The other 99.9% of people are middle class/blue collar.
> just the CEO/big boss who owns the entire company is. The other 99.9% of people are middle class/blue collar
Yup. I did some IT integration work for a man who owned a local construction company and was very effectively vertically integrating it. In addition to their other work he'd buy land, personally, his company would build at cost prices, and his office staff first informally and then more formally became property managers.
Construction costs don't scale linearly with rent prices, it's a different market altogether that depends on regulation/worker supply/material costs/equipment/etc.
As long as construction costs remain below the value of the units all-in, there's profit motive for developers to build.
> As long as construction costs remain below the value of the units all-in, there's profit motive for developers to build.
Not true
Real estate development is extremely capital intensive and therefore it's a question of all-in cost of capital compared to other investment opportunities.
The opportunity cost has already factored that in. Unless you think cost calculations are arbitrarily forgetting to include certain costs for no reason?
> The problem is: why would you build more housing as prices fall?
Profitability is not black-and-white. Real estate investments can still be profitable if prices fall.
There are different types of real estate markets too. Working class homes in suburbs are not the same market as upper middle class apartments in an urban center.
A very interesting type of investment is high-density housing in catchment areas of new public transportation hubs. Those tend to be so profitable that they can even finance the investment in the public transportation service.
Maybe other real estate savvy people can help me understand this plus two other things I'm confused about in the housing crisis:
1. Houses are unaffordable for many Americans. To get houses to prices where they'd be affordable again would require a housing prices drop that would likely be, market-wide, significantly low enough to put a ton of people underwater on their mortgages. What is society/the government meant to do about that? Is it an insurmountable floor on how low we can get housing prices? That floor feels very close if so.
2. We've been promising the last five generations (or more) of Americans that a house is an Investment, capital I, an excellent place to keep your money. How do we overcome the political pressure to turn a house into a depreciating investment for the length of time required to get housing to be affordable again? What kind of politician would put their neck on the line to piss off every boomer and 75% of gen X and 30% of millennials, or whatever the house ownership distribution is?
There's a big difference between land prices and the building prices. When costs rise 5% per year for a house that's untouched, that's almost entirely the land price going up.
You can make housing cheaper by putting more houses on the same amount of land. In high cost areas, the price of land dominates the cost of housing.
Political pressure to change the investment nature of housing can come from various directions, for example establishing a land value tax, which eliminates the financial incentive to speculate on rising land prices by keeping people out of your area, redistributes all those unearned land rents to the population equally, as is only fair, and also results in a lot of people selling land to be redeveloped taht are otherwise hoarding it when the rest of society would be using it a lot better. Of course, in societies with high levels of land ownership, the voting public usually tries to vote away such extremely fair taxes.
Politically, we must stop prioritizing the views of homeowners at the local level. They already got their reward, massive unearned capital gains on their residence, there's no need to give them priority on land use over the general needs of society.
> Politically, we must stop prioritizing the views of homeowners at the local level. They already got their reward, massive unearned capital gains on their residence, there's no need to give them priority on land use over the general needs of society.
They are the majority of people in most areas, so it does make sense that they would be given priority in some ways.
The rest of your post is unsubstantiated vitriol, which isn't exactly convincing.
You quoted my vitriol to the homeowners, the rest is not vitriol, it's basic land economics.
> They are the majority of people in most areas, so it does make sense that they would be given priority in some ways.
In some ways sure. But in the ways that they are? Absolutely not, it's basic unfairness. The entire tax system is tilted in favor of home owners. We don't need to do that, we could make it more equal so that people with less wealth are not penalized.
It's not "basic land economics", it's your personal opinion about how things should be and whether you think current policies are fair.
The tax code does favor home ownership, because people want to support it. Less people will be able to afford their own home without that support, which seems to be the opposite of what you want.
High levels of home ownership combined with "local control" and "democracy" enables the "haves" who already own homes to weaponize government to keep supply low and home values high. Zoning restrictions, building codes, taxes, and other government tools are brought to bear to support this. The "have nots" don't have a chance.
Austin seems to be a counter-example when they "instituted an array of policy reforms" in 2015 that showed great results. Sadly the key may be appealing to the greed of existing homeowners. Changing zoning to allow tall apartment buildings where single family dwellings once stood lets existing home owners make even more money by selling than they'd make by continuing to restrict supply. While it's sad if that's the only path to success, we'll have to take small successes where we can find them.
I'd also rethink these questions under the assumption that incomes rise over time as the dollar reduces in purchasing power. The original premise was that due to inflation the cost you paid for a home would reduce your economic burden for housing. The slow and steady rise of inflation along with income would guarantee your loan to income ratio would improve.
The last few years have distorted this promise and I think some people have taken a more extreme view of the time window in the name of increased short-term profits.
All said the price you pay today being less of a burden over time was never meant to be a short-term profit motive in the discussion of homes as a economic safe haven.
That gets automatically decided by the market. That's the beauty of markets. They automatically solve the local knowledge problem. It takes a government to create a lack of housing.
Unless you want to build more sprawl-oriented social housing, you'd still need, in most American cities, to reform zoning codes and building codes (single stair and elevator reform) to get Vienna style social housing.
It's a "yes, and" problem though, mostly. Let the market build what it can, and if you want to pursue social housing, do that too - just don't let the perfect be the enemy of the good and delay the reforms while you try and put together all the social housing pieces.
No, you need a government agency which will build social housing.
Not once has the private sector ever been "encouraged" to build social housing with deregulation. The only reason it keeps getting touted as The Solution in the media is because deregulation would boost their profits.
The bottleneck is land, anyway. If you dont tax that enough or take it with eminent domain then you'll end up like San Francisco with absurdly low density housing and criminally high rents.
It’s worth noting that a major confounding factor is that, unlike most cities with a housing crisis, Vienna is well below its population peak and so does not need to build nearly as much housing
During that peak Vienna’s housing situation was infamously bad though. You’d have single rooms shared by multiple families and beds being used by multiple people on a timetable.
This comment is phrased as if the article is confirming these points when it either doesn't mention them or even directly refutes them. First there is no mention of either crime or rent control in the article. But more importantly, it states that "A key piece of Austin’s strategy has been to encourage the construction of affordable housing." So why are you concluding that affordable housing isn't needed?
The comment is phrased in the greater context of the public discussion about housing, in general. Not the specific information of the article.
You know, like how a discussion about war might reference the various recent wars that everyone knows about; it's not limited to just the content of the article.
But it didn't reference anything, it stated political opinions like they were confirmed facts, provided zero evidence to support those assertions, and completely ignored the ways in which the article provides counterevidence.
They aren't saying affordable housing isn't needed. Just that the method for making housing affordable shouldn't be trying to make the current housing supply cheaper.
And from this is where you get "rent-control is a terrible idea". Essentially: trying to artificially drive down housing prices in any way is generally inadvisable if you can just build more housing.
Sure that's technically an opinion, but it's one based in facts, and it certainly doesn't have "zero evidence".
Affordable housing is the only type of housing that will ever be built. Builders aren't so stupid as to build products that their customers can't buy. Government intervention is not needed.
I'm not sure if you're intentionally changing the definition of "affordable housing" in an attempt to make the desire for it seem silly or if you genuinely don't know how the term is typically used. But what you're describing is generally referred to as "market-rate housing" and not "affordable housing".
Affordable housing = housing that regular people can afford
The only silly thing here is that "low income housing" got rebranded as "affordable housing" and absolutely everything else got rebranded as "luxury homes" for political reasons.
"Market-rate housing" is even sillier given that it is literally the opposite of what "affordable housing" policies dictate
I'm not going to debate what the definitions should be, I'll just say I don't think it is productive to join an existing conversation using terms with different definitions than everyone else uses. Defining all housing as inherently "affordable" makes the term meaningless and even if you disagree with the motivations behind the desire for "affordable housing", at least the term has meaning in the way it's typically used.
You are quite literally debating what the definition should be, because this is _not_ the existing definition of affordable housing, it is legally what OP is saying. "Affordable housing" is just when the household spends <= 30% of gross income on housing related costs. This is the definition used by the HUD and the same definition applied in policymaking.
What >you< are referring to and what it is conflated with by progressive policymakers is "low income housing" which imposes an AMI based restriction on the resident's income. This in turn means that 30% of their income is much lower and restricts the sticker price of the home.
In recent years, most 'affordable housing' policy has been advanced by progressives, who use that term for marketing purposes, whereas the actual policy primarily relates to 'low income housing' or even 'very low income housing.' This does not mean 'affordable housing' = 'low income housing', it just means the term 'affordable housing' is used in the title and the actual measures advanced are related to AMI and 'low income housing.'
There is no "progressive" definition, income level is not at all part of the definition. Per the universal legal definition of 'affordable housing,' if a home costs $1B but is occupied by Elon Musk, it would still be affordable because it is less than 30% of his gross income.
When you are dealing with income levels it is universally called 'low income housing,' and the HUD definition is already scaled to local income levels, the 'A' in AMI stands for 'Area.'
You are conflating marketing ('we need more affordable housing!') with policy ('low income housing')
It is productive to decline to use propaganda terms. If, every time someone says they support affirmative action they are asked if they support having higher standards for Asian applicants to medical school than for white applicants that’s good because forcing people to defend their support of racist policies reduces support for them. By the same token pointing out that affordable housing doesn’t mean housing people can afford, it means politician allocated housing paid for by the general taxpayer, reduces support. Reducing support for bad things is good.
Its also helpful to know that there is a specific (US) program called "affordable housing" that subsidizes rents for low income people. The economic effect of that program is to increase rents (but not home prices). This especially hits the working poor who make just a bit too much to have subsidized rents.
I like this reasoning. If there exists a person or organization that can afford to buy a thing then it is an affordable thing. Now this might sound like a tautology but that’s only because it is
Can you guess what the #1 source of wealth increase in the AA community has been over the last 20 years? That's right, grandma's house...guess where she lived.
That's not what gentrification is. Relevant to this article, I lived through the gentrification of large parts of Austin in the early 00s.
What happened was that good housing full of artists and musicians and other self-employed creatives began gentrifying, driving up property values, which drove up property taxes, which became unaffordable to the existing residents (who had owned their homes for a long time). Many (actually, most) of these artists had to sell and leave.
They often left for other cities. But hey at least the good houses everyone liked all got torn down to be replaced by McMansions for the influx of techbros.
Austin still has that slogan, "Keep Austin Weird." It failed. Austin isn't weird anymore. The University of Texas still is responsible for a lot of great stuff about Austin, but huge chunks of the city are just boring these days. There's certainly much less interesting culture happening. It's been airbnbified.
The existing residents (artists) made money by selling their appreciated houses. Those who could afford to remain were now in areas with less crime and poverty.
The new residents spent a ton of money to live in a place they themselves culturally diminished.
We should re-evaluate the winners and losers here.
I don't think many home owners got a price for their land that allowed them to buy a similar house elsewhere.
The world is far from an ideal model where what you get is what you deserve.
Note the history of the East Side power plant, which depressed property prices. Ditto, I-35 construction plans. The article says the plant will become a park now. After the new developers locked in purchases.
You see this business model everywhere. They buy up all the land around an industrial site, small airport, race track, pig farm that smells bad, etc, etc. Then they and their Karens lobby for rule changes that force that use out or make it non-competitive in the broader market. Then they develop the land.
Nothing will fix it until some case goes up to the supreme court and results in some sort of "they were there first the .gov can piss off" doctrine.
My heart breaks for those poor people whose houses became worth multiple times what they paid for them. A true tragedy. I would be devastated if my house became so valuable that the property taxes were more than I could afford.
> good housing full of artists and musicians and other self-employed creatives
It looks like - it might not be what you mean, but it looks like - you're saying 'good housing' is housing that has "artists and musicians and other self-employed creatives", as opposed to poor working people.
Many artists and self-employed creatives are themselves poor working people - making art is work (and so is marketing it to potential customers), and most artists are not lucky or successful enough to become wealthy doing it.
But yes, I think there is a sense in which people who are driven to create have some kind of ineffable, cultural capital that people without this drive do not have. So a neighborhood that is full of artists is more interesting, and therefore more valuable to spend time in, than one that isn't.
See the photo in the above East Side article. In the old neighborhood, people talked to the photographer because the front yards didn't have privacy fences.
Good for whom? If it's good for the residents, that's great. If it's bad for the residents, who get driven out, but good for some developers and outside rich people - that's what gentrification is.
Unless all of the housing is owned by non-residents prior to gentrification, some residents always benefit from their neighborhood going upscale. Either through increased home values, allowing them to sell and improve their lives. Or because it's now a more pleasant area to live in.
Even renters in gentrifying areas may profit if housing construction outpaces population growth. Yes, they may have to move, but also the places they move to on their current budget may be nicer - because the people who can afford better have moved too.
> increased home values, allowing them to sell and improve their lives
That also raises property taxes, making the neighborhood unaffordable and driving them out.
> it's now a more pleasant area to live in.
For new wealthy residents. People who have spent lifetimes there don't want everything to change and have their communities destroyed.
> Yes, they may have to move, but also the places they move to on their current budget may be nicer - because the people who can afford better have moved too.
These are theoretical and very general averages. The actual individuals often do not benefit. Being forced to move is not a mere inconvenience to your theory.
The alternative: new housing doesn't get built. Existing housing - including the "bad" neighborhood that isn't redeveloped for fear of "gentrification" - gets bid up to the moon. People who can't afford rent end up moving anyway and commuting from very far away, if they're lucky. Or they end up on the streets, if they aren't so lucky.
That isn't theoretical. I just described the SF Bay Area.
When people in NYC are driven out of their neighborhoods because of gentrification, they generally move down south. There isn’t some magical part of town that they can afford with their “current budget”
In this case affordable housing nets out as a way to overcome policy barriers to market rate housing. So it actually makes the market freer.
Many other implementations of affordable housing further raise the barrier and thus even if any is built it doesn’t help widespread housing affordability issues.
Rent control is just another flavor of housing affordability policy that often (always?) backfires.
Crime, social peace, and economic opportunity are very linked. A lot of house prices in urban areas are wildly distributed and often the increase cost is to buy distance and safety (often just a couple blocks) from high crime areas.
>In this case affordable housing nets out as a way to overcome policy barriers to market rate housing. So it actually makes the market freer.
>Many other implementations of affordable housing further raise the barrier and thus even if any is built it doesn’t help widespread housing affordability issues.
Can you be specific with what you mean here? Because this reads like a no true Scotsman argument that it doesn't count as "affordable housing" if it works. The article discusses the programs encouraging income-restricted units which seems like a classic affordable housing program. What specifically do you think is different in this case?
Affordable housing in a vacuum disincentivizes development and results in worse affordability.
Affordable housing used as an incentive or way to overcome other barriers to housing (density limits, height limits, zoning etc) that makes the market more “free” net is will produce more development.
You don’t need it for development but it can be used effectively depending on other policies. As with all things it depends on what policy makers are optimizing for. These are all tradeoffs. But affordable by itself all else equal limits developer upside and incentives less development meaning less supply and higher prices.
>Affordable housing used as an incentive or way to overcome other barriers to housing (density limits, height limits, zoning etc)
I'm not sure what type of affordable housing program doesn't meet this definition. They are almost always tied to incentives for developers, including sometimes in the form of a removal of other housing restrictions. Or are you specifically objecting to financial assistance on the renter/buyer side? Because I assumed the “it” in “it doesn’t need to be “affordable”” was referencing the new development.
See San Francisco. Also generally anywhere else where prices are rising and developers can’t develop and yet there are a lot of affordable housing policies. CA as a whole has mismanaged this so badly they have a net migration outflow.
Also removing other housing restrictions that ostensibly were put in there by constituents is a valid reason for constituents to oppose AH. They get called NIMBYs for this but if the local populace wanted more high density development then the density limits wouldnt be there to be excepted by AH
>Also generally anywhere else where prices are rising and developers can’t develop and yet there are a lot of affordable housing policies.
Like I said, the “it” in “it doesn’t need to be “affordable”” seemed like it was referencing the previous “Build more housing”, so situations in which nothing is built are different. If your original intent was that not all housing policy should be about affordable housing, then we agree. But I do think it's an important part of the solution.
> if the local populace wanted more high density development then the density limits wouldnt be there to be excepted by AH
If people didn't want housing there, it wouldn't be built. If they didn't want the exemptions to be codified, then they wouldn't be.
The only way your statement makes sense is if you restrict "local" to a sufficiently small subset of the people (a town? A block? One single address?), but in that case, a greater number of people within a greater definition of "local" seem to disagree.
If the state gifts a locality power to impose zoning restrictions, then the state can usually alter (or withdraw) that gift when it stops being beneficial to the people of the state, even if a small subset of those people living in that one locality don't like it.
Rent control is one of the best ideas, and it may be a civilizational, foundational idea.
Property ownership is at the very core of entrenched power, and the foundation of rent-seeking and wealth asymmetry.
If you look at even the Monarchs of long past - it wasn't their 'titles' that made them powerful - it was the economic rent that came along with the land ownership.
Even in more open market economies, property is still is basically long term economics lording over short term economics of wage earning workers.
Being able to kick someone out of their home almost arbitrary basically puts working class people at the 'total whims of the market' and it's one of the most disruptive concepts imaginable.
If we take the view that 'housing is about housing first - only about investment to the extent it does not disrupt housing' - then a different perspective takes shape.
Many Canadian provinces have 'basic rent controls' and it does not generally prevent new housing development.
If anything, providing 'housing stability' is probably the best way to create base prosperity, so those people can go out and spend on all the other things.
There might need to be some degree of leeway here and there for certain kinds of density challenges, but that can be had with rent control
There is almost unlimited land in North America to build on - if in one spot it's a bit difficult - build elsewhere.
If people want to have 'density' then incorporate an area and 'build density' in that area.
Also it does need to be 'affordable' but that can work with regulations.
Edit: our housing problems are about screwed up management, it's actually not even an ideological problem underneath. Like 'rent control' the way it is framed scares some people, but its literally province wide in Ontario, Quebec and it's a 'non issue' for new unit hinderance. Even the nimbyism stuff can be worked around: if people don't want high-rises next to them, it's their right, but there's a lot less opposition to 'mild density' especially if it fits in local cultural and aesthetic context. We can have our cake and it eat on housing. I think we invent ideological lenses because it's easier to frame 'narratives' than it is just weird policies, special circumstances, hiccups, different municipal things going on all at once.
It would be far more efficient to simply tax away all rent collected from land instead of grossly warping markets and creating terrible incentives for all involved.
The reason is that you can’t produce more land. Fixed supply will also warp economic markets and create terrible incentives (land speculation).
If you want the best solution, you implement a land value tax. If you want the 2nd best solution, tax property (Land + Building value). If you want the worst solution, implement rent control.
> it's the notion that 'homes are markets' that is 'warped'
A market in this case isn't a literal street market with vendors hawking their goods. The word "market" describes the relationship between people who have more than they need selling to people who need and would prefer to exchange their money (or vouchers etc.) to acquire it.
Housing can't not be a market anymore than food or labor could not be a market. It's like saying it's warped that water evaporates and becomes clouds and turns into precipitation. It's a word that describes one of the natural systems of how the world works.
Even in communist societies where the State owns all the land and all the housing and decides how to distribute it, you still have a State-owned-and-directed market between citizens who need housing and a State that has excess housing and provides it to citizens.
Rent control doesnt change the underlying fundamentals but it inhibits the ability of the ownership class from exploiting the working class based upon those fundamentals.
It will also provide immediate relief for struggling citizens, whereas a LVT or taxing property will take time to actually drive construction which will push down rents.
It's something local governments often have the authority to implement, unlike LVT.
A little mentioned fact: the highest rate of house building in new york (FAR FAR higher than today) coincided with by far the STRICTEST rent controls. Something to ponder next time somebody tells you that rent controls just stops homes from being built.
I think it's a matter of perspective maybe more than 'knowing what they are talking about'.
Like - seeing property as 'investment and ownership' vs 'places where people live' is sometimes pretty big gap. Especially when we've been grounded in 'mortgages and wealth creation' for regular middle class people.
Rent control and the underlying civilization power dynamics are kind of a subtle thing, I think most folks are going to just answer in terms of 'what is good for them'.
Rent control drives up rents, not down. Since rent control was enacted in SF, rents have increased by 15x in 45 years. That's 24% a year annualized over 45 years. Its similar for other places that enacted it.
Rarely in human history has a specific policy failed more spectacularly. Yet you still hear supposedly educated people advocate for it every year.
> Rent control drives up rents, not down. Since rent control was enacted in SF, rents have increased by 15x in 45 years.
A couple of things:
You're aware of the Californian property tax control? If you aren't, go read up on the 197X Proposition 13, as well as the ways even vaguely-savvy landowners can get around the "tax is reassessed when the property changes hands" rule. IMO, it's only fair that tenants get the same sort of price-increase-protection that landlords get. If the landlords get rid of Prop 13 and anything even remotely like it for the next fifty years, I'll be first in line to clamor for the removal of what passes for rent control in the few cities that have it.
Unless you -as a developer- especially request otherwise, SF's rent control only applies to buildings that were in existence back in 197X, when the ordinance was enacted. New units are not covered by rent control. It does not apply to any commercial buildings... just residential rentals. It also only controls the rate of rent increase until the unit is vacated. Once it's vacated, the landlord is free to charge whatever rent they wish.
Your story gets confounded by the fact that -for a variety of reasons- it's nearly impossible to build any new residential buildings in SF. When demand is met with a nearly zero increase in the supply, the cost of the thing being demanded tends to go up.
Rents are generally quite high in California, not just in SF. From [0]
2000 1990 1980 1970 1960 1950 1940
United States $602 $447 $243 $108 $71 $42 $27
California $747 $620 $283 $126 $79 $42 $27
Washington $663 $445 $254 $113 $71 $43 $22
Only a few cities in California have rent control [1], so that doesn't explain the fact that rents are high state-wide.
Though, it is more interesting to look at the numbers when adjusted to 2000's dollar. [2] I wonder if your "15x" figure is inflation-adjusted...
2000 1990 1980 1970 1960 1950 1940
United States $602 $571 $481 $415 $350 $257 $284
California $747 $792 $560 $484 $389 $256 $286
Washington $663 $569 $503 $434 $350 $263 $226
Rent control is the wrong solution to the right problem (ie affordable housing).
It creates all sorts of problems that wouldn't exist otherwise. For example, if you've been in a rent control house or apartment for 10+ years and are paying significantly less, what happens if you want to move? Or just need a bigger place? It's a huge impeediment to mobility and flexibility.
Also, you have an adversarial relationship with your landlord. They want you to leave so they can raise the rent. They'll skimp on maintenance, turn off the heat (even when it's illegal) and generally make your life miserable until you leave.
The solution to these problems is social housing, meaning the government becomes a significant supplier of affordable, quality housing. The very wealthy and the real estate industry don't want this however because it will decrease profits.
> Property ownership is at the very core of entrenched power,
In the literature, there is a distinction made between private property and personal property. I'm fine with people owning their own home if they want. That's personal property. Private property is when we allow people and corporations to hoard housing. I'm all for making it financiall punitive to own more than one house.
The problems that rent control creates are far smaller than the problems that exist without it.
To start - your 'very first example' is not even really 'a problem'.
'Without rent control' - you get kicked out of your abode every few years if your salary doesn't keep up with housing inflation. With rent control, you have the option of 'having a home; you decide when you want to leave (for the most part).
The answer to the 'second example', 'adversarial tenant/landlord' is that the theory doesn't line up with reality for the most part. Again - in most rent controlled areas this kind of stuff does not happen, especially if it's entrenched in the culture. It works well in a ton of housing markets like Quebec, Germany.
The primary concern about rent control limiting expansion ... just does not exist. It doesn't really impede new builds.
> 'adversarial tenant/landlord' is that the theory doesn't line up with reality
So disconnected from reality that it beggars belief.
Anytime you put two or more adult people into a relationship together and at least one person feels like they do not have the option to leave if things get bad (e.g. landlord feels like the tenant is wrecking the property but has no right to evict, tenant feels like landlord is not taking care of maintenance but feels pressured to stay due to artificially low rent), the result is toxic suffering.
> 'Without rent control' - you get kicked out of your abode every few years if your salary doesn't keep up with housing inflation.
Nope, you don't. You just do your best to foresee that outcome in advance before renting and pick a house you can afford. And if rents start to move against you, you plan to move out well in advance of getting "kicked out" by unaffordable prices. But that's actually easier than the status quo since no rent control means (1) lower rents overall for the same quality housing! and (2) everyone gets a home for the right price, there is no hidden privilege or lottery aspect to it. Of course it should be paired with higher property taxes or LVT so the rent itself isn't just value-capture by landlords, but that's politically doable. Just a matter of not picking the wrong political fight.
> To start - your 'very first example' is not even really 'a problem'.
Yes, it is. Anywhere with significant and strong rent control results in a large number of people who simply cannot move. Look, rent control is better than no rent control but it address the symptom not the problem. The real problem is that rents shouldn't significantly outpace inflation. In a better world, you should be able to easily move because you're not locked in to a below-market rent that you don't want to lose. And rents get more expensive because a whole bunch of people make sure that housing is an appreciating asset. It should be a depreciating asset.
> The answer to the 'second example', 'adversarial tenant/landlord' is that the theory doesn't line up with reality for the most part. Again - in most rent controlled areas this kind of stuff does not happen
You will not find in any American city, especially one with rent control, where tenants do not absolutely hate their landlords as the general rule. What are you smoking?
You may be implying it but you also need to make sure this new housing goes into the long term rental market, instead of being secondary residences or airbnbs. I've seen it happen first hand in my home town. That may not be a problem for Austin though.
Multiple things can be done at once. The policies you laid out are not mutually exclusive, and have different utility for different communities. But yes, fundamentally more housing is needed for growing populations. Conversions and rezoning are also important parts of the urban equation to “build more housing”, not just exurban McMansion developments.
It's possible to build more housing and have rent control. Rent control is the only thing allowing working class families to live a dignified life in the USA's most desirable cities. Land value tax and social housing are simply not politically feasible – rent control is.
That is simply not true in any way. Have you ever lived somewhere with rent control? Working class families who have members working jobs in rent controlled areas commute in from often over an hour outside of the city. There are only 3 types of people who live in those cities: those in public housing, upper middle class and wealthy. Their plumbers live in Tracy.
When you aren't building more housing, for whatever reason, rent control is the only thing that prevents domestic 'immigrants' into your city from making all the residents homeless.
Since cities can't stop migration into them, it's the only tool they have to protect their existing residents.
---
PS. If you believe in trial-by-combat for housing, why not a similar approach to border control? It's the same concept, open it all up and let the market decide whether your existence is worth it.
There are billions of honest, hard-working, capable people who will happily pay more than you for where you live, do your work for less pay than you're willing to accept, and would love to live... Wherever you currently feel entitled to live.
What gives you any right to deny the market from improving the welfare of your landlord and employer?
> Also why should cities prioritize protecting residents based on how long they've lived there? Everyone counts the same.
That's a great question. Why do countries prioritize existing citizens over all people who want to move into them? We are, after all, all the same. Two legs, two arms, just under a dozen fingers, most of us aren't destructive shitheads.
If we just let in anyone who wants to emigrate, you wouldn't be trapped in an apartment, or home, or city or life you were born into. You would always have the chance to 'upgrade' to one that's worse!
You're not emigrating anywhere, lol. Should I be treated like trash when I move from Bronx to Queens? How about SoHo to Tribeca? All US citizens have the same rights and every vote counts the same as every other vote.
Should Juan be treated like trash if he wants to move from Mexico City or Honduras to Queens?
Why should you deny him that mobility? Is he any worse a person than you are? Why does he have to jump through hoops and quotas and queues and all sorts of degrading, dehumanizing bullshit before he can do so?
Why?
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If your answer is 'because that's the law and because we can make him jump through all those hoops', that's the answer to why cities choose to protect people who are existing residents at the expense of people who aren't. Because it's the law and because they can, if you don't like it, tough, you are free to go somewhere else.
I guess I need to hear more about your seniority rules. If I leave in a city all my life and leave for a month, do I have to start over when I move back?
Not sure what your point is. My point is that the rules around rent exist to protect current residents of a city. Just like rules about immigration exist to protect current residents of a country.
If you think one of them is immoral and unfair, but the other isn't, you're the one who needs to square that cognitive dissonance - not me.
It sounds like you generally think economics should trump the welfare of existing residents. That's certainly a view, but a logical consequence of it is wide-open borders.
> you're the one who needs to square that cognitive dissonance - not me.
No, you are. You have imaginary rules about who should be protected in a city (based on seniority??) that nobody else is aware of and are certainly not following. It goes by things like age and net worth, and basically nobody gives a shit how long you've lived somewhere.
> You have imaginary rules about who should be protected in a city (based on seniority??)
Rent control is not imaginary (Any more than any other rules are), and yes, that is exactly how it functions, for the purpose that I have described.
It advantages senior occupants (Who are grandfathered into controlled rates), at the expense of junior ones, or ones who don't live there yet (Who are presented with inflated rates, for obvious economic reasons).
Well, build more housing and ensure the more housing is being bought by people who live in it or (if you don't find enough of those) by people who will rent it to them. Many problems occur when capital buys living space as an investment that needs to go up in value, since now there is an incentive to keep some scarcity.
And yet, if you dig through the various comments on HN over the years regarding SF housing costs the overwhelming conesus is more rent control. Sometimes, the most common sense solution turns out to be the correct one.
So pretty much everything you've said here is wrong.
Build more housing? In a place like Austin, you can just keep building out, basically. To a point. Eventually cities doing this reach a limit. Houston and Atlanta are pretty much at or beyond that limit.
And it's not that building low-density SFH housing is the most economic. It's simply the most subsidized. Every road, every parking space, every sewer pipe, every water pipe, every utility pole, every school, every hospital, every police station, every fire station... they all add factor in to the true cost of housing and the more spread out things are, the more expensive those things become. Taken to extremes, look at the billions Houston spends now to add just one more lane (because this one will totally solve traffic) on, say, the Katy Freeway or the ring roads.
Yes it does need to be affordable. NYC is the posterchild for this. Nothing that's getting built on billionaire's row will ever trickle down to being affordable housing. They build ultra-luxury housing because it's the most profitable and it does absolutely nothing for anyone else because these units are just ways for non-residents (mostly) to park wealth and not pay their fair share of taxes.
Rent control is the wrong solution for the right problem and it's typically American. By that I mean it forces the solution onto private landlords who are going to do everything possible to get out of those obligations and deliver subpar but compliant housing. And they'll demand tax breaks for it. When in fact the solution is for the government to supply a large chunk of the housing market ie social housing. But there's a pervasive and wrong idea that we can only solve problems in the private sector and that's nothing more than a wealth transfer from the government to the already-wealthy.
"Just build more housing". Yeah, and then you get Houston. Cities need to be planned. Cities require infrastructure. And one of the most important thing cities need is public transit infrastructure, something sadly lacking in virtually every American city.
The core to so many of these problems is that we need to stop treating housing as a speculative asset. Owning two or more houses should be incredibly difficult and expensive and should be taxed punitively. By this I mean the capital gains on non-primary residences should be 80% and property taxes should be significantly higher.
I dont understand your solution, houses are expensive because there are too few of them in desirable places (otherwise we have plenty). The govt becoming a command economy wrt to housing does not fix the supply. If the govt is just supposed to handle all the supply and demand aspects of housing well I have good news, there is a lot of very cheap housing in former Soviet Republics just not desirable housing.
Also taxing homeowners harder doesnt really solve the problem. CA has insane taxes, SF especially has a giant budget. They just waste it. I dont believe that once the govt raises taxes they will suddenly become efficient and competent.
The idea that the more spread things out the more expensive they are is sound theory. However in practice, per capita taxes in a city are often higher than the rural or suburban regions. One water main should serve more people in a city and its cost amortized across the population should be cheaper.
In practice, cities tend to have tons of programs that drive taxes up. They are free to do that, not necessarily bad, but also not efficient from a tax payer perspective.
There's no reason for houses to be as expensive as they are. They are expensive because we've created incentives to make them more expensive. This is because we treat houses as investments, allow people to hoard housing, build the wrong tyhpe of housing (because it's more profitable), allow non-residents to use housing to park wealth, etc. So voters vote in politicians who put up barriers to build more housing and to defeat any kind of public transit infrastructure even though it would absolutely benefit people who still want to drive (by removing people from the roads who don't). Why? Because taxes.
Housing should be for residents of that city to provide a utility: shelter. Not as an investment vehicle.
It simply doesn't have to be this way. The poster child for this is Vienna [1][2].
Increasing house prices are an illusion of wealth creation. Let's say you buy a house for $200k but over the years it goes up to $800k. But every house costs $800k so you still have only 1 housing unit's worth of wealth. You've simply increased the barrier for younger people to buy houses.
Put another way: increasing house prices are simply stealing from the next generation and that money is really going to the already-wealthy and, to a lesser extent, the old. Just look at the median age of homebuyers in the US, currently 59 [3].
You seem to know Houston; alas yes Austin was formerly surrounded by open spaces.
But let's not miss the point of the article. This is a right-ward shift of the supply curve. It means that the economics of building the next unit got cheaper. That's the point.
I've seen a lot of neighborhoods across the USA, and Austin making way for higher-density housing on urban corridors (Lamar) is like, duh, this is more live-able. There are new towers along rail and bus route, townhomes packed in, and behind the tree line it's now possible for some single-family lots to become duplexes or fourplexes. And rather than McMansion ugly, the new Austin residents are dressing those up to look pretty darn cool.
There is a lot more to be done to remove supply-side barriers in every city.
Also "Wipe out a whole boatload of techbros who artificially inflate prices". Nobody is talking about that part of the equation.
Austin was one of the places a lot of tech folks flocked to when everybody was working online. RTO and layoffs have wiped a lot of them out. I'd estimate almost 1/3 of the tech folks that were floating around last year are now in other cities.
There is affordable housing all over America. Get it through your head. It’s about nearness to the economic singularity that costs so much not the housing itself.
There isn't affordable housing in areas of opportunity. You can easily find cheap housing if you don't care about proximity to jobs or to good school districts.
Sounds easier to just outlaw investor from owning houses they don't live in themselves. Seems we can't really stop collusion, only real way to win there is to not make that possible in the first place.
Investors add to demand for housing. This will help drive up prices. And no, builders will not necessarily increase supply if they can realise increased margin of profit due to increased demand. We see that with RAM manufacturers. RAM suppliers constrain supply to boost margins. Same with house builders. The difference is people can go without RAM but everyone needs a place to live.
1) morally. Alice deserves it because her intention is more pure.
2) financially. Bob gets it, because he can pay more for it than alice.
Which choice above you make as a policy direction is a reflection of your world view. I'm voting for 2), but i can understand the POV of 1), even tho i disagree with it.
You are entirely missing the point. The correct answer is to build 2 houses. The problem with these policies is that they artificially restrict demand. If they didn't do that, nobody would have a problem with them.
> And here I thought people who want to live in houses add to demand for housing.
Desire is a necessary component in demand, but it also requires willingness at a given price point. If houses are selling for $1,000,000 and you only have $500,000 to spend, then no matter how much you dream every night about having a home, you are not a contributor to demand.
Counterpoint: houses sell for $1,000,000 because there are more people with $500,000 (and every other number less than $1,000,000) who want those houses than there are houses.
35% of Americans rent their homes. And they almost invariably rent from investors. Therefore if more than 35% of homes are owned by investors this drives down rent. If less than 35% are owned by investors rent goes up.
This logic assumes that 35% of Americans WANT to rent their home. Which seems odd to me, if only for financial reasons - why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it?
Maybe not half, but it’s pretty common around here (generic midwestern city) for renting to be more expensive than a comparable mortgage.
Many landlords seem to expect to pay their mortgage and property taxes and maintenance with the rental income, and still net a profit, if r/landlord is to be believed.
The profit is compensation for the risk. The mortgage and property taxes and maintenance are due no matter what - can't find a tenant, tenant doesn't pay, tenant flushes paper towels down the toilets every day etc etc.
If there was no profit there would be no landlords. Some might say that's great. But it would be a world with less flexibility, with fewer choices. Don't like your job and want to move? Split up with your partner and need someplace to live? Moved to a new city and don't know where you want to put down roots yet? At college for 4 years? Don't want to deal with house maintenance? "F** you, buy a house anyway". That's what we'd have if there was no rental housing.
The actual numbers might be more like rent $1400 vs mortgage $1000. After property taxes, insurance, and maintenance there might be $50 left. A handsome 3.5% profit, rising to maybe 6-7% if you include principal paydown. This is hardly a money-printing machine. It's a steady return for taking on some risk.
It changes a TON whether you pay 2x for renting or whether you pay 1.05x.
Renting has annoyances but it also has flexibility. A flat "more expensive" is staring at one tree and missing the whole forest of tradeoffs. Way more people would choose to spend $50/month for that flexibility versus $700/month.
> Substituting your numbers in for theirs doesn’t change much
You can buy a boat for $10 or rent one for $9. Assuming you really want a boat, would you buy or rent? Do my numbers reflect reality? Do they have a bearing on the choice you make?
?? How in the world is it splitting hairs to point out that those numbers don't make sense. It is directly relevant to the question of how many Americans want to rent. You don't need to be like this :(
> renting to be more expensive than a comparable mortgage.
that doesn't sound plausible. May be for a select few properties that are in some unique circumstance (e.g., the seller of the property would sell underpriced because they needed quick sale).
And often, in arguments like these, the rent is the rent, but the mortgage is purely the interest on the loan, and doesn't count the maintenance cost, and doesn't count the deposit required (which has a cost, ala the cost of capital). If you added up all these costs, it exceeds rent.
I fundamentally agree on statement that rents are more expensive than mortgages. As capital is involved and landlords want premium on capital.
Still, things can go either way. And well renting is lot more flexible and less risky. So there is really nothing wrong with that option existing. And many times it is the better pick of the two.
You do know that the posters on r/landlord are often selling services to landlords and thus have a financial incentive to make being a landlord seem attractive. Its a pretty safe assumption that reality isn't that rosy.
> why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it
Because the down payment you put into your purchased home could've been put into the stock market and grown faster than property values (this is historically true).
Because you don't want the headache of home maintenance.
Because in the 21st century, job stability doesn't exist so it's a big risk to buy a home fifteen minutes from your current job that might be an hour from your new job after you get fired so a CEO can get more golden parachutes.
Because you might have to change cities a year from now.
My wife and I rented for a long time because it was better than owning for us.
Agreed. It’s a classic fallacy to compare rent vs mortgage on a numbers to numbers basis. It’s classic example of not accounting for the total cost of ownership.
> 35% of Americans rent their homes. And they almost invariably rent from investors. Therefore if more than 35% of homes are owned by investors this drives down rent. If less than 35% are owned by investors rent goes up.
This only holds until the percentage owned by the investors becomes a monopolistic chunk. At that point the investors would rather leave some apartments empty rather than see rents go down.
> Its wild how the solution to housing costs is really just:
> Build more housing. Keep law and order.
Safety (law and order) increases housing costs, as you say. It's desireable on its own, but it does not solve housing cost. NYC is very safe and very expensive. Crime is way down in most of the US, and housing costs are much higher.
NYC is fairly high density. Has stopped building massive new skyscrapers and has water on two sides. It is also a tier 1 global city culturally AND economically. Its not really reasonable to expect to be affordable.
without rent control, what economic incentive do renters have to maintain law and order / invest in local community / be a good neighbor? any investment they make is captured by the landlord. in fact, they are incentivized to maintain their neighborhood in as much disrepair as they can stand, for fear of rent increases.
the little old lady living in a rent controlled apartment is a big part of why rents are high in that area: she was part of what made the community thrive. we would do well to compensate her for this.
But where do you draw the limit on moving the line in?
Do I get to demand affordable housing overlooking Central Park in NYC? Beachside in Malibu?
If you want large incentive for development at scale you need to allow developers to make fat margins or else you wont get too many of them. Yes you can use affordable housing to do that. Eg: in the article they got higher density and exceptions (aka “fat stacks”) for building affordable housing units.
This is all policy tradeoffs at the end of the day. Eg: a tent is not “housing”, why? Because of reasonable policy. Same thing with housing codes etc. All directionally wise/good. But at the same time you can have bad affordable housing policy.
I do think housing is elastic and a cities policies around that elasticity determines if they will thrive or stagnate.
No, it really is not that easy. Check out China, and read up on the Spanish housing crisis. "Just build more" works only sometimes, as demonstrated in those counter-examples. Housing is massive societal and sociological problem with no simple fix. Furthermore, in many circles, another proposal is to cut red tape. You know, housing in the US already is among the least affordable and lowest quality in the developed world. But some people really insist that going back to asbestos and lead pipes would make housing cheaper.
And don't get me wrong, asbestos and lead are wonderful construction materials. Cheap, durable, and high quality. It's just a shame it causes all sorts of health complications when we use them, right? I mean, it would definitely make housing cheaper, but also cause all kinds of health problems.
Your reply conflates “build more” with “build anything, anywhere, with no standards”, which is not what they wrote. China and Spain are not rebuttals to the basic supply point because both involved distorted credit, speculation, and overbuilding in the wrong places or segments, not healthy increases in broadly useful housing supply. The question is not whether supply is the only variable, but whether more homes, in places people actually want to live, puts downward pressure on prices and rents, and it does. That is just basic scarcity: when demand rises faster than housing stock, prices go up.
Keeping crime low matters too, because people pay a premium for safety, and high-crime areas often face weaker investment and worse long-term housing outcomes. And “cutting red tape” does not mean legalising asbestos or lead pipes, which is a straw man. It means reducing delays, exclusionary zoning, parking mandates, and other rules that limit safe housing production and raise costs for no good reason. Housing is absolutely a complex social problem, but complexity does not erase the role of supply. More safe housing plus safer neighbourhoods will not solve everything, but it is still one of the clearest ways to reduce pressure on rents and prices.
Meanwhile, California is also trying to build housing near transit, but Menlo Park wants to preserve the character of downtown by preserving dirty, cracked, flat, surface-level parking lots like it's 1950.
NIMBYism has never been about preserving neighborhood characteristic, or noise and traffic concerns. Menlo Park is not Big Sur. Sure, some concerns are reasonable and should be investigated, but most of the time they're bureaucratic distractions that's been weaponized by people who want to delay progress and protect their investment.
For most Americans, A house is their primary savings account, retirement plan, and probably where they keep majority of their wealth. We don't build new housing in old neighborhoods because it would de-value the investment of too many people. Until we can solve this problem (where people are incentivized to pull the ladder up behind them), we will always have housing shortages. It's just too profitable.
> For most Americans, A house is their primary savings account, retirement plan, and probably where they keep majority of their wealth.
If you allow for increases in density, that house (actually the land beneath it, but still.) becomes more valuable as it's redeveloped. So that American homeowner does benefit, by unlocking the upside of "evil gentrification" (or actually, density increase).
That can only happen if the higher density coincides with equal economic growth in the neighborhood. Otherwise, the higher density could result in a negative home valuation trend.
Given the above uncertainty, and higher density could result in more traffic, noise, crime, nymbys are likely taking the correction position for wealth preservation and quality of life.
"Traffic" doesn't come from higher density, it comes from zoning bans on mixed-use neighborhoods which force people to drive everywhere. The "crime" argument is especially silly: why assume that higher density only ever attracts criminals? Usually, having more people around is a positive.
A paper came out about this recently: The City as an Anti-
Growth Machine.
> Logan and Molotch's “urban growth machine” remains foundational in urban theory, describing how coalitions of landowners, developers, and politicians promote urban growth to raise land values. This paper argues that under financialized capitalism, the dynamics have inverted: asset appreciation now outweighs productive investment, and urban land is increasingly treated as a speculative asset.
I'm not sure why new housing devalues old housing. In my mind, higher density generally makes an area more desirable (e.g. because higher density enables more jobs, better infrastructure) and raises the value. Imagine as an extreme example and existing house in the middle of nowhere around which a metropolis is developed. Surely the value of the house, or at least the land it is built on, goes up, even though it loses its "cabin in the woods" appeal.
You think if there were modern highrises in Menlo Park a tiny 2BR shack next door would still sell for $2M? It’s a supply and demand issue, nothing more.
Yes, it would go way, way, way up because if there is a high rise next door someone wants to knock down the shack and put up another high rise, a commercial building, etc.
it's not that density per se drives down existing costs, but density almost always brings more housing stock to the market (unless they are simultanously tearing down housing elsewhere) and housing stock drives down the cost of housing, which is the point of the original article.
So if we take it as an assumption that density increases housing stock, there is lots of evidence that density drives down prices of existing land/home values.
Density is not going to drive down cost for the same kind of housing. A SFH is not the same as a smaller home on a denser plot, much less an apartment block in a high rise. So the SFH owner who pursues increased density does indeed benefit.
>For most Americans, A house is their primary savings account
This is true for California, where people (foolishly) rely on their home value as their retirement plan, which further incentivizes NIMBYism.
But in places like Texas (and other areas with affordable housing), the house is just treated as something you pay off to have a low housing cost in retirement. And your investments are your retirement+savings account.
I wasn’t trying to say one was better or not, just different. Californians wrap up a large amount of their retirement savings in their houses though, so keeping those home prices high is important to them and that’s a reason for stalling development.
I think Californians do, a lot of time, retire with a higher net worth. But most of them do that because they’re more relatively house-poor during their lives - they take out larger mortgages, and save more into their net worth.
As opposed to Texans, who have higher disposable income since they have smaller house payments. It’s less incentive to save so they may spend more.
So that’s a partial advantage to California - the expensive homes force a higher savings rate, naturally.
But, at retirement age, a lot of their net worth is tied up in their home. So to unlock a lot of those savings they need to move to a lower cost of living state like Arizona, Nevada, Florida, etc.
While the Texans can just stay in their paid-off house.
So yeah it’s just different.
Texans are just paying off their home throughout their life and staying in it. They have larger disposable income to go towards other stuff (kids, lifestyle) while Californians gotta pay that mortgage
It's not that they're "intuitively better" it's that prior generations of them have passes less insane state and local law and they're not at the tail end of a ~20yr industry boom so "pay down my house and cash out to somewhere cheaper" doesn't make sense as a retirement strategy for as many of them.
> If NIMBYs were primary motivated by making money the prudent thing to do would be to support unrestricted zoning and then develop or sell the lot.
That is highly dependent on what exactly is being built next to your home. Sure, if it's more luxury housing then it'll probably drive the value of your home up. If it's low-income housing then it probably won't. And what we need is more of the latter rather than the former.
> you can take out loans against the value of the equity but this isn’t particularly common.
It's because it's an investment, you're going to get the return once you finally sell your home. Only in a pinch if someone needs a large amount of money to start a business or pay for an emergency will they mortgage their house.
> And what we need is more of the latter rather than the former.
You just need to wait. The luxury housing that gets built today becomes low-income housing as it ages. There's no short-circuiting that process the way the incentives are set up, but you can drive down prices across the board by building more, even more luxury housing.
Case in point: my parents. Built a house in 1988 and they still live there. Two people in 3500 square feet. Four bathrooms and five bedrooms. Meanwhile, you need a family income of 3x the median to rent a townhouse 1/3rd the size nearby.
This is beyond ridiculous and it’s totally unsustainable.
Hate to be the bearer of bad news here, but the boomers will never die. Gen X will become the new boomers, and then the millennials after them. Individual people die, but interests stay the same.
Fundamentally as a society we need to stop treating housing as an investment. It is and should be a utility.
Suring property prices is a relatively new phenomenon (as in, post-WW2). The true origins of NIMBYism, at least in the US, is (you guessed it) racism. Long before segregation ended, and long after, there was economic segregation. Redlining [1], HOAs [2], the post-WW2 GI Bill [3], where highways were built [4][5], etc.
In fact this is a good rule of thumb: if you're ever confused why something is the way it is in the US, your first guess should pretty much always be "because racism".
To be fair it is not the city/elected officials who wants to retain the parking lots. The downtown redevelopment would probably make the city a lot of money.
It is the businesses around downtown who are pushing the save downtown campaign. I imagine the businesses contribute a fair chunk of revenue to the city now and have some influence .
Relative to say parts of Redwood City, or Palo Alto. Menlo park has a fair amount of student-ish 4 Unit lots, so it not all zoned SFU.
TBF a lot of the complaints are coming from businesses that are _probably_ renting. There is absolutely the chance that their business will go under due to construction disruptions before they can benefit from the increased foot traffic once the development is complete.
And, of course, once the development is complete, and the value of their land goes up, so too does their rent....
Menlo Park today has free and ample parking downtown. RWC is paid parking anywhere within few blocks of downtown, all the garages are paid, the garage on Jefferson Av charges more on Sundays. Same thing in San Mateo downtown.
To be fair, parking structures always look and feel pretty distopian.
I like the approach of making downtowns walkable and having a bit of parking at the periphery of downtown, along with good public transit. Encourages people to use public transit to get to town in the first place. Downtown residents can use transit or a zipcar or equivalent when the need to get out of town, instead of devoting a ton of space downtown for storing their cars.
Not sure if that approach is really practical, but if it can be made to work it is much nicer.
Well, in Menlo Park they're just flat surface parking lots, not even multi-story structures. The planned development is multi-story housing with parking underneath.
To be fair, I am boycotting the (similar) underground garage over at Springline because they're clearly made only for people in Range Rovers or whatever. They have those AWFUL ticket machines, set too far back (to avoid getting hit) and too high to access from a normal car.
The global capital of technology has absolute horrid infrastructure and is not on the forefront of any municipal technologies.
There's a big disconnect from people building new projects and local governance, and it's growing. When tech companies started even providing buses for their employees, because local government is too fractured and incapable of running needed bus routes, and can not coordinate across county and city borders, local activists were extremely upset that tech workers were not driving their personal cars and instead using environments-saving and traffic-reducing transit.
I would bill by ticket machine too if it was my job to collect money on the parking. I’m guessing that the amount of people who never pay is much higher than zero so it really only makes sense when you have such high throughput that the slowdown is detrimental (such as the Bay bridge).
Super easy unless you have moved recently, then you don't get the bill and end up years later in collections for the original amount plus a million late fees added on.
Nah it arrives electronically to kivra, which is like email except you log in with your social security number and it's only for "official business" like invoices and whatnot.
The reasons why the Bay Area is the global capital of technology are absolutely totally unrelated to the quality of infrastructure or the policies of local government there.
It’s mainly due to the state of US technological advancement decades ago when the whole thing got started, the general US-level business-friendly environment, and the presence of an extremely prestigious (especially in science and tech fields) university nearby.
The specific reason is that William Shockley's mother lived in Palo Alto. Stanford gets the credit but in reality it had nothing to do with the decision.
I park on the street for free. (The lot is also free in monetary cost, for the short windows I'd park there, but the hassle is larger than the hassle of finding street parking).
> They have those AWFUL ticket machines, set too far back (to avoid getting hit) and too high to access from a normal car.
Are you sure it's the ticket machines? Around here, the ticket machines have stayed the same, but it's now impossible to use them without stopping the car and getting out, because car manufacturers have decided I need eight inches of empty space between myself and the side of the car.
That eight inches is called "side impact protection" and, while it sucks to not be able to comfortably rest your arm on the window sill, it is pretty important to have in the event of an impact to the side.
> To be fair, parking structures always look and feel pretty distopian.
What a lot of the new buildings in Austin are doing is putting an attached garage directly behind a 4 + 1 mixed use development - the street-facing facade is the apartments and shops, and the garage is directly behind (and usually attached) to the apartments. You basically never see them.
Babies throw tantrums, your job as a parent is to not give in to their demands. But California has a weakened state government due to the governor's will-he-wont-he bid for higher office some time between now and 2092, he's afraid to make waves. If it were me I'd say: you need more housing. And if the fine people of Menlo Park say no, then let them maintain El Camino Real themselves. A home depot employee will be by to unlock the shovel cage for you shortly.
Menlo Park isn't comparable to Austin though - Austin's equivalent of Menlo Park would be a country club CDP in the Austin Hills like Rob Roy.
A better comparison would be ATX against San Jose.
Just like how the "rich" residents of Santa Clara county know that you want to live in Campbell, Los Gatos, Menlo Park, Los Altos, Loyola, etc, similarly rich Texans and Austinites live in the Hills.
The reality is the residents of Menlo Park and Rob Roy don't want your type, and in a lot of cases tend to be the same people as there aren't many places left where you can trail run, bike, eat Michelin star ramen, and not pay income tax.
Just because we make good money in tech, it doesn't make us "them". I highly recommend reading the works of Pierre Bourdieu with regards to cultural capital.
Menlo Park was never a "middle class" town. The 101 was always the (literal) redline.
The median household income is $210K [0] and it's the same demographic, unlike historically lower middle class but now upper middle class San Mateo [1].
A Menlo Park home address that is on the correct side of the 101 opens the same doors in the Bay that a Bel Air address does in Los Angeles or an Austin Hills address does in Austin.
Rich doesn't equal conspicuous, especially in the Bay Area - "Wealth is quiet, rich is loud, poor is flashy"
280 to El Camino is "oldish rich" (made their millions in the 1980s-2000s), the El Camino to 101 is "new rich" (made their millions in the 2000s-2010s), and 101 to Meta used to be a Samoan ghetto (literally, redlining was legal until the 60s and unofficially the norm until the 90s) until they were gentrified out.
The old money (rich before tech) to the West of 280 in Woodside and Portola Valley.
Yep! That's what I meant - Rob Roy, Westlake Hills, Barton Creek around the country clubs, and Lost Creek. Those are the equivalents of much of Menlo Park and Atherton, and I know of a number of people who lived in Menlo+Atherton and moved to those areas of Austin in order to front-run taxes in the run-up of some significant exits.
I'm with you, but many people still question this. Here's a recent pre-print paper that was in the news arguing that inequality, not lack of supply, is the real source of housing affordability: https://osf.io/preprints/socarxiv/95trz_v1
They are often happily blinded by ideology. Try to tell someone in Britain that wages have been seriously suppressed due to mass immigration and most of them will look at you like you’re stupid.
Housing and immigration are two areas where people just can't accept basic economics. You can see some olympic level mental gymnastics routines all over this comments section.
There was an article on HN front page a few months ago which stated(paraphrased) "building more housing to reduce prices is a right wing ideology that doesn't match reality" or some such. I'll reply here if I find it.
hn.algolia.com is a great search interface. I searched “housing” and top posts in the past year and didn’t see anything related to your quote on the first two pages. Maybe I need to search deeper.
Eh, people really need to be questioning econ 101 more often.
It's built upon untrue assumptions
- infinite buyers / sellers
- perfect information
- no switching / transaction costs
---
The article itself has 3 different year ranges provided so I'm not sure how you can use it as evidence. Plus overall the rent is still up by a lot since 93% - 4% is still at least 80%.
- Rents increase by 93% from 2010 to 2019
- Housing increase from 2015 to 2024 (this overlaps with when rents increased ...)
- the main input (land) is also an output, so when the price of the output goes up, so does the value of the input.
- economies of scale don't really work, due to the impracticality of transporting the good (houses) and fitting the good inside a machine (in house "factories", normal workers go inside the house and work on it by hand; not a lot changes compared to traditional construction)
- more supply in one area increases the value (and therefore demand) in that area, so it's not actually clear-cut whether building more would reduce the price more than it increases it, at first glance.
Ah yes, that 150 year old meme reflexively copy-pasta'd by internet commenters since the days of usenet to refute basic concepts like supply and demand.
"Lol economists are dumb they think humans are robots!"
No they don't. Sorry, we won't be throwing away an entire field of human endeavor based on a straw man caricature that isn't true.
We don't call physicists dumb and throw out their ideas because the real world isn't a perfect vacuum either. They know this, don't be silly.
There's loads of other inefficiencies as well. Moving is a huge hurdle. It's difficult to find housing that meets dozens of conditions, and even then you don't respond to supply + demand imagined equilibrium, you pay more or pay less to live near friends or family. It's something you only do a handful of times in your whole life. Trying to use the same analysis as for buying a can of beans is absurd. You might need to take econ 201 before you understand why econ 101 is wrong about housing.
Not really, it used to be the case that a full third of Americans moved every year. Obviously life is more complicated than econ 101, but it's also obvious that a current undersupply of housing is one of, if not the primary, drivers of home pricing. Admittedly other factors like the governments interference in the home loan space have also had large effects on the market over the last century.
Prices in massively inefficient markets do not follow the supply + demand equilibrium. Beer is not an inefficient market. You're doing the absurd comparison.
It's more correct to say supply and demand still drive the overall average, but in a high-friction market of unique items, every single case is still a unique case. It's not like moving wheat bushels or RAM chips. When they sell oil, they mix up all the oil from different producers in the same reservoir, in the same tanks. Electricity travels in the same wires. Housing is nothing like that.
So, if instead of installing a bunch of apps, setting up search filters, and refreshing browser tabs on my phone ever 15-30 minutes, then the instant something meets my parameters I immediately leave work and, if possible, make a deposit on a new place, I open an app and find 5000 places meeting my requirements, meet them when I'm not working and on my time, and tell them I like a different one better so I'll hold off before making a decision, makes no difference on the price?
I don't think this is simple econ 101. Yes with more houses we should expect lower prices, but also with high prices we should expect more houses produced. All that is econ 101, but that second econ 101 prediction isn't happening. I would guess that some will chalk it up to vaguely (though not necessarily wrong) jerks/idiots blocking it. Whether it's because nimbyers want to keep their home values (what we should expect from econ) or it's broken city politics, there are lots of things going on here. It's more complicated.
They also teach you about elasticity in econ 101. It's foolish and anti-intellectual to insist that the housing market has only two factors, while simultaneously condescending about your understanding of economics shows that you really don't understand economics, it's more about your ego.
> It's foolish and anti-intellectual to insist that the housing market has only two factors
Elasticitiy moderates the effect. It doesn't reverse it. Increasing housing supply decreases housing costs. A lot of people are venally or ideologically motivated against accepting this. Our housing crisis is a political choice. (Note: I'm a homeowner.)
This reminds of a fun fact I remember learning in university.
Elasticity is the relationship between demand and supply, and there are actually very rare instances where it can be negative (where demand increases with price).
Inelastic demand is when a good is demanded so much, that an increase in price has little affect on the total quantity (people still demand it, think like addictive substances)
So a perfectly inelastic product would be a straight line where any amount is demanded at any price.
So having the curve keep going it would get a positive slope, where higher price makes demand go up.
If I remember the example I was given was food during a famine. Supply is already low, but an additional pressure on price is the known shortage. The idea being that as the price goes up people see it as harder to get.
It’s been so long since I studied the subject so I might have gotten some things wrong here.
The terminology is actually split; sometimes they're called Giffen goods and sometimes they're called Veblen goods.
The two types have identical behavior, so there's no good reason to have two different names, but in concept Giffen goods are something poor people buy, while Veblen goods are something rich people buy.
(There is a difference if you're willing to look at responses to changes other than a change in the price of a good: if you give a household more money, it will increase consumption of Veblen goods, but decrease consumption of Giffen goods.)
The urban orthodoxy is around demand rationing. Supply-side arguments are incredibly new. The evidence cuts in one direction. (Unless we want a hukou system.)
Before moving to Europe, I always had this conception of Germany as being very good at organizing things, especially anything involving engineering. It doesn't take long to set this picture straight.
> From 2015 to 2024, Austin added 120,000 units to its housing stock—an increase of 30%
Compare that to the following [1]:
> The [...] government [...] intended to build 400,000 new homes annually, including at least 100,000 social housing units. This target was significantly missed from 2021 to 2024. In each year from 2021 to 2023, fewer than 300,000 new homes were built.
So, the city of Austin alone build on average 12,000 new housings each year, while all across Germany, they failed to build 300,000 new units. That's roughly a 1:25 ratio.
So, how much bigger is Germany than Austin, Texas? More than 80 times bigger.
Is that just because big projects don't scale linearly? I would think that that's definitely one factor. Also, I'm not convinced that economy of scale laws apply here, given that this is not one company building 300,000 houses.
But it does show a number of problems inherent in Germany's current situation: (a) shortage of skilled laborers; (b) high cost of labor; and (c) exorbitantly much red tape. These three points alone are among the most frequently cited factors that companies feel inhibit business, and it holds across disciplines.
Shortage of labor, high cost of labor and red tape are all consequences rather than causes. The cause is cultural. Property is the asset in much of the world and the value of property depends on limited supply. There's a disincentive to build more property, especially if you are a politician courting property owning voters.
In the U.K. people are indoctrinated from birth to believe that you work hard to save your money to buy a house and the value goes up so that you can retire with a valuable asset. Flooding the country with new property would completely upend that foundational part of U.K. culture.
If the governments of European countries wanted more property to be built, they could make it happen. The problem is, there is no appetite, they're walking a very fine line: more property must be built but property values cannot go down.
China is an extreme example (and has quality issues) but they have been building more than 10 million new homes per year for a long time, and now have tens of million of vacant homes that nobody wants to buy. That's a nightmare outcome for most Europeans who plan to retire on the value of their home.
The U.S. is fairly unique among western economies in that investing in the stock market has been a normal part of wealth building for the hoi polloi and while homes are important assets, they're not everything. In Europe, investing in the stock market is still novel, property is still the asset.
While it’s a different country my experience in Ireland and the Netherlands has been that there’s this bizarre contempt for builders. Like “I build homes and sell them to people for money” basically makes you satan incarnate. So housebuilding is bogged down in x% social, y% “affordable” (because apparently the goal of making all housing affordable by actually building enough is unthinkable) and very little gets built .
In Amsterdam the Green Party is celebrating making homes more affordable to buy…. By kicking out the people who were renting them. And they continue to say only 20% of developments can be market rate, aka for everyone. When you’re new to the city because you just got a job at booking.com or whatever you only can hope to get a flat in that 20% - the rest isn’t for the likes of you!
Both of you are really just beating around the bush of this whole issue in basically the same way as the very people you are complaining about, albeit at a different position. You both have a very elitist mentality towards this issue, i.e., “those peasants should move out of the way for superior people like me”, when what you are both describing is ironically failure of the privileged and powerful to understand what is causing the problems, conflicts, and tension; their own behaviors, actions, and mentalities.
Maybe the indigenous population you have contempt for wanting to preserve their communities and cultures don’t want your colonialist mindset of “those savages are not utilizing the land as I wish, so we can just overrule, overrun, and take it from them. How dare they not avert their eyes, for I have a job at booking.com or I go to UT/work at Oracle/Tesla.
It’s funny how you types never suggest that newcomers, i.e., colonizers, pay a high price for their colonization and that go to the indigenous, even if just to compensate them for the imposition and abuse. You always seem to insist on wanting to kick the indigenous from atop your high horse and demand they make way to your superiority as you abuse and exploit them. You’re not any different than any other past form of this colonist mentality, you want to steal from and abuse the indigenous.
I think it's funny how you think I would be "colonizing" the same neighborhood I literally grew up in.
I grew up in Austin. A bunch of people had kids there in the 1970's and 80's. More than where there before. So even if literally nobody had moved to Austin, there would still be a housing crisis without letting people build new housing.
Unsurprisingly, literally just letting the market respond to demand makes things more affordable for everyone. Yea, some people I don't like might move to Austin. They're probably not all bad. That's what multiculturalism is about.
Ah yes, the well-known "indigenous population" of the Netherlands, one of the highest-GDP places in the world at present and of course a country with its own actual colonialist past. Do you really think these "indigenous" noble savages can't afford to pay for their own rents on a market-rate basis? They're keeping outsiders away (unless they pay outsized luxury prices, of course) out of pure unchecked privilege, not for any kind of high-minded culture preservation.
>But it does show a number of problems inherent in Germany's current situation: (a) shortage of skilled laborers; (b) high cost of labor; and (c) exorbitantly much red tape. These three points alone are among the most frequently cited factors that companies feel inhibit business, and it holds across disciplines.
There are 9 billion people in the world, roughly half of them are perfectly capable of doing manual labor.
There is plenty of skilled labor, and the cost is frankly not that high, you just need to let them work.
Can we be serious here? There is one and only one cause of "high housing prices" and that is a political choice to make housing expensive.
Don't tell people what they can or can't do with their property.
Don't prevent people from being brought in to build stuff.
Do these 2 things and housing will be built if the price is truly high. Anything else is bullshit.
Like most other things, labor is highly regulated in Germany. You've got to understand that (from my experience as an outsider) it seems to be a country where it matters more what you are on paper (e.g., degrees, certifications, etc) than what you can actually do (e.g., practical experience). Not that the latter is not valued at all, but on the job market, it's often not sufficient.
Labor costs are determined by a lot of regulations - minimal wage, mandatory health insurance fees, mandatory pensions fees, etc. make labor costs in Germany much higher than the average in the West. So, it's all not that easy.
Sure, but it's not that easy. The swaths of new people need infrastructure and support: schools, hospitals, police, fire stations, roads, water, sewage, flood prevention, etc. That's a lot of money upfront. This is why most cities in the EU block many projects like these.
Also those people will saturate downtown making it lose its culture.
I'm always amazed at the American way of "just throw money at the problem".
No it's not. It's 2 cherry picked data points with a sample size of 1 of a complex system with multiple confounding factors such as a pandemic
You can look at other neighborhoods such as palms in Los Angeles, which has the most aggressive housing build out in all of California. Median rent has increased - sometimes more housing can create more demand
Did rents in Palms go up because they built housing or because it's a great location in a city with increasing rent almost everywhere?
Or in other words, is there any econometric evidence that building housing increased rents in Palms, or could we be confusing correlation with causation?
Exactly. You can't just look at two data points in a system with hundreds of confounding variables, many of them unquantifiable and say "aha! This simple linear equation of supply and demand, that they teach in middle school, is correct!"
The problem isn’t the powers that be. A lot of regular homeowners fight new developments tooth and nail. And many blue states unfortunately give them a lot of tools to do so.
People want to blame the 1% for massive wealth ineqality, but when it comes to unaffordable housing, a basic necessity of life, the villain is actually about 30% of the population that is rich enough to own homes, act like rentiers, and block access to neighborhoods and opportunities.
The greatest inequality difference is that between those with housing assets and those without. Yes the 1% are a problem but they are not the reason that young people can no longer afford housing without generational wealth, that's all due to the seemingly normal guy that's enforcing a class system based on home ownership versus non-ownership.
I think the majority of the electorate very much blame the people you're talking about. Who do you think progressives and MAGA refer to when talking about neoliberals? They're talking about the corporate class; those that care more about money but willing to play up useless culture war issues that impact small amounts of people.
> A lot of regular homeowners fight new developments tooth and nail.
In a system where those with more capitol have more power, homeowners are the powers that be. They're more likely to vote and have more money for discretionary spending - like donating to politicians.
I'm not blaming individual homeowners, there are very strong incentives for treating homes like retirement investments. It's an issue of policy, but we do have to address that it is also causing rent to rise and contributing to the homelessness crisis.
Don’t know why this is being downvoted, that’s exactly right. One needs only to attend a local city meeting about any smallest step towards more development to see how the voters think.
It is more complicated than that. A few years back when my youngest entered 1st grade, I attended some meetings where the superintendent talked about school expansions in the pipeline due to confirmed property development projects.
Namely, when new housing is added, there are infrastructure considerations and corresponding expenses that translate to higher taxes. Civil planners have formulas for how much the student population will grow based on the housing density/type.
Schools built on parcels based on 1970's population now have to expand to fit more students or the township has to find and acquire new land to build a new school.
That requires raising taxes for bonds. A new school is several million dollars and then hiring staff. NJ has a legal limit of 25:1 in elementary. Add 100 students and you add at least 4 teachers that have to be supported by taxpayers. Expand the lunchroom, build a new gym, purchase new computers, all the ways up the chain for the next 12 years.
If you ever look at your municipal tax bill, you will find that education is going to be the biggest expense by far.
On top of that, roads may need to be widened. New roads have to be built and maintained. Municipal staff may need to increase.
Some services may actually benefit from economies of scale (waste collection). Most will not.
Imagine you bought a house in 1970 (i.e. my development) and you were paying $1000 annual property taxes. Now your property taxes are $12000 because of the increased spend on infrastructure and increased assessed value. You're a retiree and you've paid taxes for 2 or 3 generations of students. You live on a fixed income and your property taxes are a higher and higher proportion of your income. What do you do? Mortgage the house to pay taxes to fund more growth?
The problem is exacerbated because obviously people want to go where the good schools are, where it's low crime, good infra, easy access to transportation. That drives demand and puts pressure on services while also raising taxes to pay to fund municipal bonds for growth.
End of the day, my personal belief is that housing is a right. But I can also see why middle class folks, retirees end up pushing back when they get the bill in the form of increased property taxes. I've lived in my house 10 years now and my taxes have gone up ~$3500 in that time. Every school in the township had to expand to meet population growth with the additional units. Sure, my home value went up as well, but I can't cash that out. I can't imagine how it feels for retirees that are living in a family home here.
This is a really well-thought out comment, and I agree with just about everything in it. One comment I'd like to call out for additional consideration is the comment on retirees being priced out due to rising property taxes.
In my experience, most retirees have more rooms/land than they can make productive use of. I feel that there should be some pressure for them to sell that property to families who can use it more productively. That's the stick, but I feel there needs to be a carrot, where builders are constructing homes that these retirees will be drawn to. There are retirement communities in the southern US like "The Villages" https://www.thevillages.com/, but as the population here ages, we need to build these everywhere so retirees can move into the communities that meet their needs without being forced to leave their cities.
> I feel that there should be some pressure for them to sell that property to families who can use it more productively.
I agree to extents. One lives in NY/NJ/CT because this is a big finance and pharma hub and it makes sense to live here while one works and eventually leave when that resource is no longer necessary.
But there's nuance here, too: families. My wife's side is a big Italian family. Everyone's here. What do you do if your grand kids are all here? How do you support your adult kids and help them achieve financial security? Or leave and secure your own? Neither is an easy choice.
> There are retirement communities...
There are here as well. The reason they work here, as far as I understand it, is that they count towards "affordable housing" units that are mandated by state law here in NJ. But I put that in quotes because these units in 55+ communities are often honestly still quite expensive, especially if you've already paid off your mortgage decades ago.
The real issue seems to be the top-heavy tax system that forces local governments to rely on property taxes. A local income tax would make them more capable of building and maintaining infrastructure, but that would require lowering taxes at higher levels. (Income taxes are superior to wealth taxes in the sense that income tends to correlate better with the ability to pay tax.)
If the demand for housing is high, zoning fees can also be used to make developers pay for the infrastructure upfront. If done properly, their impact on housing costs should be minimal, as they mostly extract some of the added value created by the zoning from the landowner.
> If the demand for housing is high, zoning fees can also be used to make developers pay for the infrastructure upfront...
It's not that simple because these often end up as legal battles and in some cases, there are laws already on the books at the state and municipal level that would have to be changed.
The developer for sure does not want to build a school and even if they build the school, they are not going to be paying for the teachers that are going to need to support the increased student body for every decade into the future; that's on the taxpayers.
The underlying assumption is that laws will be changed when necessary. If it's not possible to do that, most issues probably can't be fixed.
More fundamentally, this is related to the principle of subsidiarity that is occasionally popular in the EU. Everything the government does should be done by the lowest level that can reasonably do it. And to enable that, local and state governments should have sufficiently wide tax bases.
Laws are voted on by the people. And if the municipal elections are scoped to current residents, they will vote to not expand in almost every case.
At the state level, we have housing laws that mandate ratios of affordable housing. Many townships faught this in court (and lost) because schools and infrastructure are capital projects. Bonds are secured today against some future tax base.
Don't forget that developers and investors are voters too (and lobbyists) who are going to vote against the municipalities.
My point: it is a nuanced situation and not as simple as "Got mine FU" or "just build more". Build where? How do you pay for it fairly?
People often vote to support new housing, as long as the entire system works reasonably well.
My solution was to widen the tax base to make the system work better.
The incentives around property taxes do not support significant new construction. If housing becomes more affordable, tax revenue per capita goes down, while local government spending stays the same or increases. Local governments should therefore not rely too much on property taxes.
Income taxes, on the other hand, are good. You are taxing things you want to grow, and you get more tax revenue when your policies are good to the people. Local governments might want to collect more income taxes and less property taxes.
When the demand for housing is high, zoning creates significant windfall to the landowner. Some of this windfall can be taxed to support infrastructure construction.
I can't answer for different states and municipalities, but I know about mine and NJ based on how we had to expand every school in the district over the last 10 years.
These are big capital expenses. My property taxes have never gone down, even as my township has expanded.
Part of this is that taxes are calculated on assessed value. Where I'm at, assessed value is a combination of lot size + structural improvement. Tax bill is assessed value * rate. Assessments have never gone down. The more people want to move here, the more values go up, the more capital projects need to be undertaken before new tax payers are contributing. It may take years to build a new development, but the multi-million dollar budget to expand the school and staff up teachers has to happen in tandem, before the new tax base exists.
My lot is from the 70's. It's huge. New lots are significantly smaller. Townhouses and apartments are very dense. New development does not yield savings in taxes in practice unless it is commercial development.
A big piece of farmland contributes taxes, but requires little in services. Convert that 50 acres into 50 units and now you need much more services and infrastructure compared to the 50 acre farm.
You underestimate just how much schools and teachers cost. Those 50 units might add 50-100 students. Capital projects start even before the units finish to prevent overcrowded schools. Contracts are signed for garbage and snow removal if 5 of those units are occupied or 50.
- many new building being very ugly (side note: ugly buildings no matter how green get torn down and are this not as green as building that are beautiful)
- increasing density bringing increased crime
- increased density actually turning out to be less efficient on a per capita tax basis (this is always wild to me, cities should be spending much less per capita than rural areas but arent)
They are the ones who show up at local political fundraising galas and constantly report local issues influencing municipal/state priorities.
Although it's not just NIMBY. There's a million rules about building housing and developing land from zoning, environmental, indigenous, or social ends. Which are arguably luxury self-benefiting priorities for people who already own houses. Plus all the activists who think the government can both make development extremely expensive via endless rules while affording to fund mass government housing at the same time.
Well, it's easy! Just get the majority of voters to hate each other enough that it's a moral boundary to vote together on any law, effectively limiting any meaningful change.
After a few decades in California, I'm pretty sure there are no "people in power".
There are a lot of people with some power, which they use as they see fit. It all adds up to marginal and pseudo-random changes, as the state drifts toward... wherever it's going.
Trump explicitly said he wants to keep prices high [0]. This is the problem with a culture that views housing not as a need or a home, but as an investment. Pathological.
I just hope that people remember this is just one factor affecting quality of life and making a city work.
"Density at all costs" ignores a huge set of tradeoffs that are equally as damaging to a city. Things such as urban form, street experience, long-term adaptability, integration with existing fabric, economic resilience, etc. These are the things that make a city work in the long term.
I’m a big proponent of building more housing. But a lot of it is being doing in very short sided ways that lead to huge externalities.
Things such as urban form, street experience, long-term adaptability, integration with existing fabric, economic resilience, etc.
I have no idea what any of this is supposed to mean as a negative to people being able to walk around their neighborhood for essentials. It sounds like a classic vague "what about culture" argument that can't be explained.
We could but it’s not always just “good” to make things dense.
My hometown has had a huge push to add more housing to make things more affordable. What happened? Rents went down for a couple years then right back up. Except now the city has a bunch of more soulless condos and is horribly congested.
Sometimes preserving things and keeping them nice and simple even if it’s costs a bit of a premium is better.
Note to the mods, /s is Reddit for sarcasm and this post is a good example of the psychology that leads to people support policies that increase housing costs even though they are designed to decrease housing costs.
> now the city has a bunch of more soulless condos and is horribly congested
The first bit is a taste thing; obviously lots of people view modern sprawl as "soulless" too.
But the latter point is just plain wrong. Dense housing IMPROVES traffic congestion and shortens commutes, always, everywhere, markedly. And it's for a bleedingly obvious reason: pack people in closer together and they don't have to travel as far to get where they're going. QED.
What you're imagining is some kind of fantasy hometown, which never increased in population and whose economy never developed. I mean, it's true. Forgotten ghost towns have very little traffic and quirky soulful architecture, c.f. Detroit. Everyone agrees that's a bad thing, though.
If you want soul move to New Orleans. Meanwhile people need comfortable places to live that don't make them indentured servants for the rest of their lives. I'll take a neighborhood with walkability and density over an old drafty brick building with no grocery stores any day.
Developers not recouping their investment will discourage less housing in Austin in the future and it will become expensive again. A lot of our current housing shortages are from the build up in 2008 and an implosion of the entire industry (so that crafts people did not really exist for the next need for housing).
Last time I did the back-of-the-envelope math, financing permitting delays in San Francisco added 10% to the cost of new housing [1]. (Note: not the cost of permitting. Just the cost of financing the delay.)
This is deadweight loss that everyone in the transaction wins from eliminating. One could absolutely see lower prices and higher developer margins if this waste were cut.
I thought about that. But a bank would rather lend in lots of high-confidence, low-duration deals than a small number of high-margin deals. The only people who lose when housing is built are incoment landowners. Because prices go down.
They can recoup the investment with volume (especially apartments) I would think? Sell 10 houses at 2 million each or 30 at 1 million each or however it breaks down.
Their land, labor, and material costs aren’t trivial. If thy were pulling a 10-20% margin before, how will increasing volume (which increases costs) make it up?
Seems like a free market issue, any profit resulting from development is a free market issue. Your profit margins mean worse quality housing for people, and we can see what actual public housing programs look like with Singapore and Vienna where rents can typically cost less than 20% of median salaries:
As renown corporate welfare recipient Bezos would say: "your margin is [our] opportunity."
If the only thing stopping development is that rich developers want to make more money, then maybe we should get rid of the rich developers and let the public decide what to build. It couldn't be worse and it'd be 20-60% cheaper too.
> actual public housing programs look like with Singapore and Vienna where rents can typically cost less than 20% of median salaries
It could work, but both Singapore and Austria have less than 10 million people amd have a residency system where you just can't come in from the outside and get your subsidized housing in Vienna or Singapore. Singapore doesn't extend subsidized housing to its foreign residents, even permanent residents, and they make up 40% of the population!
Vienna is a bit better, as it applies it to all EU citizens who are resident in Austria, but you have to have lived at the same address there for 2 years, you just can't come in and claim one.
Did Austin really have any constraints holding it back? It’s still Texas. People still look at Houston as the canonical example of a city with no artificial constraints.
Public housing projects were and sort of still are a thing. Glass Amendment limits the number of units that can be produced but most areas are well below those limits and the larger issue is that there's no budget or political willpower for social housing projects right now.
Most blue metros in the US have a bad combination of high labor costs/low labor availability, high regulatory burden, wealthy conservative inhabitants who oppose construction, and working class people who are convinced that construction is gentrification.
I've been racking my brain trying ti figure out what it looks like for US cities to pull out of the housing crisis, and I think it's either going to take about a generation, or there will be some catastrophic event (Great Depression II, WWIII) that changes the political landscape so drastically that nobody can really oppose housing anymore.
It's a balancing act. Build too much and developers make less money. Build too little and poverty and homelessness shoot up. Which side do you want to err on?
Dumb question, many cities suffer from extremely high property (i.e. land) prices. I understand the NIMBY barrier. But I don't understand why it isn't more common to simply.. start a new city. Especially in countries like Australia where property prices are sky high and alternative places for setting up a new city are abundant. Maybe internet connectivity was previously a barrier, but now.. starlink.
I put this question to grok; its response:
> Unfortunately, Australia's legal, regulatory, financial, and practical systems make this extremely difficult (bordering on impossible at any meaningful scale).
Crazy that the reason we can't have an order-of-magnitude reduction in the cost of the most important thing people need (shelter) is not due to resource constraints, but man-made ones.
> Crazy that the reason we can't have an order-of-magnitude reduction in the cost of the most important thing people need (shelter) is not due to resource constraints, but man-made ones.
You say that as though reduction in cost of housing is a universal desire, but it isn't.
Suppose a couple of years ago you took a $500,000 loan to buy a $700,000 house, which you'll be paying off for the next 10 years. Would you like the market value of your house to decline substantially during that time?
If there's enough of the population bought into property, it won't be politically feasible to allow the value of homes to decline.
When the problem is particularly exacerbated, it's not even "I got mine", but rather, "I already went into eye-watering levels of debt and I'm still paying off the roof over my head."
> Suppose a couple of years ago you took a $500,000 loan to buy a $700,000 house, which you'll be paying off for the next 10 years. Would you like the market value of your house to decline substantially during that time?
No, but when your city proposes a "missing middle" plan, watch who all comes out of the woodwork to scream murder at their research that shows that the projected effect of doing so will lower property values in my town from an 11.5% YoY average increase to a "mere" 9% YoY increase. You'd have thought the city was suggesting executing grandmothers in the streets.
(I cannot personally complain, I put down 10% on my home purchase here in 2021 and was able to get out of PMI due to having 20% equity against appraised value 366 days later, while only making required payments.)
You can't start a new city. I city exists for all the things you can do. Your new city will have nothing to do because nobody lives there and there are no jobs to attract anyone to move.
that is why we build suburbs - they get anound this by being right next to a place with everything you want in a city
This is actually how you start a city though, you build a suburb and wait for it to grow into a city. This takes a really really long time so it's better to build near existing cities.
We don't observe this phenomenon occurring often in the modern day only because cities sprawl rapidly and so the evolution of the suburb becomes a borough of the existing city rather than a brand new city. Otherwise Brooklyn, Jersey City, Weehawken, etc. would all be considered new cities instead of being referred to as the NYC metro.
Sure you can. You just need enough land and money to start basic things like a post office, city hall, courthouse, roads, and a way to get power to the whole thing.
Starbase TX isn't a city in any sense other than a legal designation. It's a massive SpaceX industrial facility that has its own municipality similar to the way Disney World has one for its park.
It obviously wouldn't be successful on day one, and it would take some kind of exceptional pressure to jump start it, but these things have been done in the past in the US and have been done recently in China. Not arguing these were good things, but they have happened before.
Think back to the old "company towns". Lowell, Massachusetts, built for a textile mill. Hershey Pennsylvania, built around a chocolate factory. Fordlandia, Brazil, a rubber plantation town. All of these were essentially cities and towns planned out around a central industry.
Similar things happened with the ghost cities in China with several of the big notable ones eventually actually growing into real, functional cities.
Once again, these have all kinds of messy histories and I'm not saying they're all good ideas. But just pointing out, it can be done.
In this hypothetical, who is the individual or group of people that you envision would take the initiative to start a new city? What is their incentive to do so?
most people posting here are talking about california or texas - desert or near deserts where there isn't enough water.
however there are many places where there is more than enough water. East of the mississippi for example. other continents also have areas where there is plenty.
Why would you think that the same thing preventing density and new development in cities won’t stop your new city from growing before any building taller than 2 stories is built?
People move to where there is jobs and money. You can't build the housing first, in our society you need capitalists to invest into building businesses to make people want to move there. And because we have spent decades killing small business in favor of corporations, you need corporations to decide to build where there are no people and they have to pay a small short term premium to attract workers. Except corporations don't like doing that because it is a longer term investment and they are worried about next quarter's numbers and maximizing executive level bonuses which means short term planning.
China was dumping money into those cities for people to build businesses and paying people to move there though, it wasn't just the housing. So yes I agree it can work if you go beyond that, but not through applying capitalist principles first and foremost. If you tried to pay people to live in a specific city and pay them again to build a small local business in the US, people would go bonkers about communism and 99% of politicians and capitalist investors would spend every waking moment trying to stop it.
Please bear in mind when you discuss "rent control" in the USA you really do mean the version you see in your locale. The idea that rent control sui generis failed worldwide is (in my personal opinion) a stretch.
Public housing also has many models. State owned. State funded but via cooperatives. Part state. state assisted co-buy. There's lots of models and so it is also a bit bogus to talk as if public housing has one shape.
I don't like the tone of input here, there is jeering and name calling and ACKSHEWALLY type responses so I am not going to continue, I just wanted to say: don't forget the lessons learned in Austin may not extend world-wide.
Let's not trivialize this as being simply supply and demand. Let's pretend it's some new wild , relevation that is going to take the world by storm, so finally this generation can hope to someday have a home
>>> The city changed zoning regulations to allow construction of large apartment buildings, particularly near jobs and transit. In 2018, voters approved a $250 million bond measure to build and repair affordable housing. Permitting processes were reformed to speed development and reduce costs.
All three of the five things most economists say about house building - and each one will hit house owning voters hard making it hard to replicate.
If you are in your terminal home, then yes, selfishly one would want the value to go up. But if you ever plan on moving to another home, sure dropping prices mean you get less, but it also means you pay less for your next purchase.
If you are in your terminal home, you also want low prices until the week before you eventually sell your house, as Texas has a high property tax rate to make up for the lack of state income tax.
As a home owner I don't really care about number go up. I'd rather it go up than down, sure. But staying level would also suit me fine.
Going down might be nice, perhaps I could buy the neighbor's house and combine the lots and make a nice set of row houses ...
House go up being important is really only needed if I'm using it for leveraged appreciation and doing something like dragging the cash out like a piggy bank; but that's a tiger that will have to be dismounted eventually.
Really, I'd prefer not having policies that tend to push up housing prices or discourage people from moving, but here we are, those types of policies are common.
As a homeowner, I want cities to be livable and affordable for those who want or have to live there. I don't care if the value of my home changes one cent. It's honestly kind of useless, because it's not like I can sell the house and buy a nicer one. All the houses are more expensive so it's always going to be a lateral trade. It only helps if you sell and move to a lower cost of living area.
It's kind of a sham that we have been conditioned to treat housing as an investment. Housing is where people live, it shouldn't be a commodity to be hoarded.
You can arbitrage markets for retirement, which is largely why people want their home values to increase. Their home is another form of 401k, and those mortgage payments aren't going to the bank or a land loed, they're going to their future.
It's a minority of people who are ok never capitalizing on their home value.
I read it as presenting the reductionist side of the argument. Not saying that you personally believe it's good or right, only that it is what the majority of homeowners would think.
In that sense I agree with the current state of reality.
But what I am saying is that if we want to change that reality -- and it most certainly is possible to change -- it will take people rejecting the status quo. And there at least some of us who are already there.
As a home owner in Austin, I want my friends to be able to afford homes too and not feel like they have to move to have a yard and a family. Bring on the new construction.
As a former homeowner in Texas, I wanted the number to go down for lower property taxes. Taxes accounted for almost 1/3 of my monthly mortgage payments by the time I sold, and are a significant barrier to affordability of homes when values tend to vastly outstrip the rate of inflation leaving typical households struggling even with the homestead tax exemption.
The only people in the low income neighborhood I grew up in that could afford to weather this wave of out-of-state and investment banking homebuyers were those who were of retirement age and had their property taxes “frozen” at an affordable level.
Growth and fewer restrictions on what can be built makes your land more valuable. Apartment buildings in place of detached houses means rent prices can go down while land prices go up.
As a homeowner I have zero objections to apartments built near jobs and transit (which also means away from my house). I also don't think apartments directly compete with single family housing. Like, they do, but only in certain situations and at certain levels of occupancy and the economy.
I am strongly opposed to building homes in stupid places, worsening traffic or overburdening infrastructure. This is why I tend to strongly oppose ADUs. If you want to turn my neighborhood into a dense urban environment, fine, but buy my house and my neighbors' houses, bulldoze them, and build proper urban density.
I also have a lot of skepticism regarding our housing shortage. You can go find people making the same arguments about housing shortfalls in 2006(underbuilt for years, new family formation, prices will remain high...). But then something happened, and it wasn't that 10% of Americans suddenly died. Suddenly we had more homes than we needed. Why? Because housing demand is related to economics. Now that we're slowing down reproduction and kicking out or scaring off immigrants we're likely setting ourselves up for another round of oversupply. "Good!" Well, tell that to the soon to be unemployed home builders.
Anecdote: I lived in Austin from 2017 to 2021. My rent was always very cheap (my baseline is Brooklyn which I guess makes everything feel cheap. But my rent went up $50 for the first 3 years and then down $200 during Covid and I checked recently and my aptmnt is still the same price). Around the time I left everyone was buying up houses to rent and Airbnb. Very palpably felt the growing supply when it came to bnb's (the owners having a harder time competing for renters etc). It's hard not to be surprised in spite of the tremendous growth in that city
The solution to ALL cost of housing problems globally is this.
Everywhere you look, Australia, Canada, UK, EU this is just a massive issue for young professionals with long-term disastrous downstream political consequences, and yet, the solution is so simple but hardly ever implemented in these countries.
Just BUILD MORE HOUSING. Mass build everywhere. Vast amounts of land is available. Just build homes and apartments everywhere!
It's almost as though the well-known and proven method of building more housing works!
Similarly, the tested and proven solution to homelessness is providing housing up front. Don't have any requirements (employment, sobriety, etc) blocking housing. Those things are easier to achieve with a roof over your head.
Unfortunately, there's a lot of people -- especially further left -- who fight this kind of reasoning. They insist that the housing market is different, and that just building more private housing won't help.
No amount of evidence will convince these people, because they already made up their mind ahead of time: their ideology says the market can't help, so the market can't help, period. Any evidence to the contrary is a plot by billionaires or something.
Their core argument is that we could increase supply but choose not to, and that we should be maximizing supply (as an ethical and moral mandate, but that is not a tenant of capitalism really) because housing is an essential thing like food and water. FWIW we don't maximize food/water production either for various reasons, which would also drive food/water prices down.
Maximizing supply can mean other things than building like taxing unoccupied homes by large amounts making them unpalatable to own as a second (or higher) home, thus putting them back on the market. However these aren't all good because obviously our economy deals with more effects than just simple supply and demand, like maximizing the amount of loans given to people wanting housing regardless of the ability to repay is known to be a bad idea.
If you throttle the supply you can clearly control the price and the people you're talking about believe there is a concerted effort to control that supply. This can happen directly (choosing not to build as soon as land is available to build on) or indirectly (e.g. politics, mass media influencing people to vote to not increase supply).
What people generally hate is production of essentials not being maximized which would give us the actual lowest price, and maybe we as a society should be maximizing that supply to arrive at the lowest cost for a given house with given features.
And then the rebuttal to that is usually "tough shit lol" which is why people coming out with simple supply and demand replies are generally seen as derisive.
There's a lot of talking past each other on this issue. Sure there's probably clueless people out there, but a lot of left wing housing activists that are skeptical of free market housing liberalization understand very well economics and the benefits of housing supply, but are concerned about the time horizons involved and concrete near term impacts on low income residents.
It is of overall net benefit over the long term to raze a small three story walkup apartment and build something denser, overall increasing the amount of housing.
However, in the short term it's immediately quite (sometimes existentially) bad for affordability if existing affordable housing is destroyed and replaced by brand new (and thus inherently luxury) housing.
So accordingly we naturally see low income housing activists push back against some redevelopment and ask why development is not occurring in wealthy single family home areas where the amount of people impacted is less and class those that are not remarkably negatively impacted.
Personally I think the data shows that in general it is still really beneficial to build out as much housing as possible and avoid the negative impacts of a shortage, but I do think there are people validly pointing at a real problem of displacement.
> In December 2021, Austin’s median rent was $1,546, near its highest level ever and 15% higher than the U.S. median ($1,346). By January 2026, Austin’s median rent had fallen to $1,296, 4% lower than that of the U.S. overall ($1,353).
For comparison, in San Francisco December 2021, the median one bedroom was $2810. In San Francisco March 2026, it was $3597, an increase of 28%.
It is well known that there was a brief moment in time when people were abandoning San Francisco and “moving to Texas” (mostly Austin) that coincides when the rents peaked in Austin. I’d be not surprised if that was also the time when San Francisco rents were down.
We’re seeing a reversal in trend when SF is hot again and Austin is not. So not exactly a straightforward comparison. It could explain the SF-> Austin and back trend.
So we've got point in time comparisons between Austin and itself; the change in delta between Austin and a particular city known for restricting housing; and the change in delta between Austin and national median rents. They all support the idea that increasing supply tends to decrease costs, which by a massive coincidence is what basic economic theory suggests.
Of course, people can come up with an ad hoc explanation for why Austin's prices happened to decrease against each of those data points. But is there a single principled way to present the data that suggests increasing supply in Austin did not decrease costs?
Idk about rent, but even as of a year or two ago, Austin metro housing index was lower than its 2016 level. Rent following a similar trajectory wouldn't be super surprising to me.
Another part of this - higher interest rates really put the brakes on home values. We own a rental property and the home value has more or less been locked in since 2022. In our otherwise hot metro area, nobody has raised their rental rates on similar properties in 4 years.
It's a win-win for our tenants. Prices seem to be stable and there's no rush for them to lock down a house RIGHT NOW.
It's sure not good for my bottom line as a landlord for them to keep adding homes and keeping rates up. But it sure seems like a no brainer for society at large.
Any reasonable landlord/real estate investor will have planned for various results - if your rental empire depends on "rents go up" and can't handle a flat market, let alone a downturn, you're going to be in for a bad time.
A stable market is great; as you can find good deals with some sort of certainty, and focus on where you can actually build value (rehab, etc).
If you are smart, you throttle up investments just before a boom starts and throttle them back just before a boom ends. At least you try to up your margins during good times so you can survive bad times. The trick is keeping your talent employed during the bad times so they are trained up and still in the industry for good times. Stability is obviously preferable.
Same has been happening in Melbourne, Australia. The state government has basically steamrolled the boomers and allowed highrise construction next to existing train stations. Despite having huge population growth, rents are some of the most affordable in the country.
One of the things I like about the reporting in this Austin article, is they break down by building class.
In Melbourne I've never found a good source for this, only general averages; and my suspicions are that we just build shitboxes and claim the rent is lower on average, capturing something like shrinkflation rather than affordability.
I was apartment hunting in Melbourne in 2015 and I was appalled at the quality of most inner-city apartments. Tiny shoeboxes, no sunlight, paper thin walls.
At the time I didn't think they should have been allowed to be built. But looking back, they probably did keep a lid on rents. A bad roof over your head is better than no roof.
You should be able to identify properties and track them over time; and then even if you argue that "brand new condo" vs "same condo 10/20/30 years later" aren't directly comparable; well you can start to compare other metrics.
Has anyone also considered the possibility that Austin is just not that great? Like...those comparing it to the Bay area or a light weight NYC need their heads checked. Maybe people (like me) just realized it wasn't great and...left?
Why do people accept that supply/demand works in so many industries when the private market is allowed to flourish, but won't accept it for healthcare, education, etc?
When? Because we don't use market solutions for those things now. Those are two of the most manipulated markets in the US. They also are two of the three industries whose prices increased by more than inflation, everything else has gotten cheaper (inflation adjusted) over the last several decades. Those things are related.
Can it be also related to demand not catching up or even declining? If place is in high demand and prices go down shouldn't it cause even more people coming to it (compensating for a possible price change). (Note: not an expert on this, I'm just curious how it really works - besides obvious thing: more supply -> price goes down).
> Can it be also related to demand not catching up or even declining?
The Austin metro area's population has been monotonically increasing [1]. Increasing housing supply decreases prices. If you want to reduce housing costs, flood the system with housing.
the problem in sf is building is incredibly expensive, and projects that have been planned, land acquired, are simply sitting as empty lots because developers don’t have the money.
interest rates for construction loans, reduced funding, labor and material costs, all contribute to the amount of housing built.
there is a bond being debated in the ca senate now that will help by giving loans for construction.
I'll admit ignorance here, but I've been skeptical of the claim that new construction drives rents down. What I actually see is: a luxury apartment building goes up, surveys the market, and sets its rents 30% higher for the privilege of living in a new building with a gym for dogs or ball pit or whatever. Then the older buildings say, "Well, we can raise our rents 20% and still be the best deal in town," and so on.
Maybe if you flood the market with 30% more housing units like Austin you get the Econ 101 effect. On the other hand, apartment owners realized intentional vacancy is a profitable strategy, which alone seems to defy that basic interpretation.
what you're neglecting to consider is what would have happened if someone moved to Austin (say a wealthy person from SF) and that expensive new apartment didn't exist.
The mechanism by which new construction drives down rents is that people that need a new apartment are in less competition with existing residents in older worse apartment buildings.
So the newcomer from SF moves into the expensive new apartment, which means that there's less competition for decades old apartments, which means that when one of those is vacated there is less price appreciation on that product.
If there is a scarcity of apartments what happens is that when a decades old apartment is vacant it is filled by a wealthy newcomer and the landlord increases the rent accordingly.
> a luxury apartment building goes up, surveys the market, and sets its rents 30% higher for the privilege of living in a new building with a gym for dogs or ball pit or whatever. Then the older buildings say, "Well, we can raise our rents 20% and still be the best deal in town," and so on.
I think that might not be the right cause and effect relationship. The actual cause is increased demand. This creates both the increased pricing of existing stock and an incentive to build new stock.
In my neighborhood in NYC, I've also observed that rents increased after luxury apartments were built here. In fact my landlord cited the increased median rent in the neighborhood as a reason to raise my rent.
My understanding of the situation is that luxury apartments do indeed gentrify neighborhoods (i.e. they increase the local rent and drive displacement of locals that can't keep up with those rent increases).
However, across the entire city, it slightly eases rent pressure by providing additional housing supply.
So, like you mentioned, if you get enough housing across many neighborhoods, you can drive down rents. Otherwise, that luxury complex in your neighborhood might only be helping ease rent pressure in other neighborhoods.
"In fact my landlord cited the increased median rent in the neighborhood as a reason to raise my rent."
Your landlord lied to you to get you to pay the increase. You had little choice because finding a cheaper apartment probably wasn't possible/desirable and you probably didn't want to argue with him in front of the rent board. Understandable but that doesn't mean your landlord's explanation has any validity.
There were a ton of apartments built in lower-cost areas outside of the urban center as well - the Parmer area (near the new Apple campus), the Tech Ridge area near I-35, and out by the airport and Tesla factory as a few examples. It wasn't only high-end, lots of mid-level stuff was built too.
Your scenario is simply describing a massive under-supply problem, and mis-attributing causality for price increases.
If the older buildings are able to raise prices 20% with no increase in vacancies after the new build, the new build not coming in would mean those older buildings rent would be bid up more than 20%.
The people moving in who could have afforded the 30% more expensive luxury units will just have to pick from the older units and outbid lower income people for spots in this low supply, growing city (under no other scenario could you crank up rent on aging stock 20% without losing to competing landlords).
> I've been skeptical of the claim that new construction drives rents down.
It can, but not in isolation.
It requires a couple additional variables such as population demand (rate of growth of Austin has reduced since the COVID boom [0]), existing stock (Texas had a building boom and bust in the 1980s [1] that decoupled it's housing market from the rest of the US), and a shift from buying to renting.
That said, the peers I have who work in professional real estate (not realators - as in actual MDs for REITs or multi-generational landlord families whose parents went to school with Governers and Mayors) are starting to shift away from real estate to equities because of headaches around succession planning and reduced margins.
What is ending up happening is megacap REITs like Equity Residential, Essex, Avalon, etc are buying out older groups, taking stakes in new developments, and shifting away from selling condos to perpetually leasing. At their size they can afford to have significant amounts of unleased units becuase they would have made up the cost via higher rent on leased units, tactically building high margins condos and SFHs in high appreciation geographies, or loss harvesting in order to subsidize commercial buildouts like data centers.
Naively saying only construction will reduce prices is false, and if the consolidation aspect is not solved (and sadly, it won't be) it would only lead to an even worse situation.
Additionally, these are hyperlocal problems and what may work for Austin may require significant retooling for Chicago.
Or...maybe...Austin just isn't that great? Maybe (just maybe) a lot of people (myself included) woke up one day and was like "why are we doing this?" and moved somewhere better?
Austin is not what people pretend. Same with Denver or SLC.
There are no tier 2 cities. Its like countries. There are first world, and third world. And thats it.
Is it simply normal supply and demand? They had massive surge of prices that made construction more profitable so after a time lag, building boom happened, bringing prices back to the average long-term trend.
If some place becomes 'affordable', its economy suffers because good people don't like living in places where housing is affordable - they move out.
Hey, here's a good way to improve 'housing affordability' locally: dumb down schools. People with cash will move out and prices will fall. Something suggests me it's not the solution really lol.
Affordability is relative. System always balances itself on the level that barely over 50% of people can afford housing (because it's a democracy). There's no fixing to it unless one abolishes either democracy (so no one cares what people want and developers have a free roll building as much as they want), or market economy (when the Party provides housing as it pleases).
Interesting to see how building more housing in Austin actually lowered rents. The debate about rent control versus new construction is always thought-provoking.
Relevant: I just listened to an interview with Max Buchholz, US Berkeley assistant professor and the lead author of a new working paper titled "Inequality, Not Regulation, Drives America's Housing Affordability Crisis."
He says that building housing does bring prices down, but not very much. In his paper they argue that income inequality is a big driver of making housing unaffordable. (Not billionaires, but more those making more than the median income vs the rest) Because (among other reasons) those with higher income have leeway to spend more on housing versus those at the lower end of the income scale who can’t spend more on housing even if they get a raise.
This is nonsense. In every material good, the buying power of nearly everyone has increased in real terms over time, regardless of inequality. It's only in housing, with constrained supply, that inequality can drive up prices; and even in that case, it doesn't actually change the housing supply- if prices are high, that just means a lot of people who want to live there! Inequality doesn't reduce the number of houses.
Building a little reduces prices a little. Building a lot reduces prices a lot. If the prices are very high, then it's very profitable to build, so unless stopped by regulation, you will get a lot of building. Even if building merely keeps the price from going up as density increases, the value provided by living in an area goes up from agglomeration effects as it grows.
What this article says: *The median apartment rent in Austin has dropped X% over the past 5 years*
What this article does not say: *Apartments in Austin cost X% less to rent now than they did 5 years ago*
It's completely possible for the cost of the average apartment in a city to go down, while the cost of existing apartments increases. How does this happen? The enshittification of rentals. Units get smaller (apartments in Austin are shrinking), they get built near highways (air pollution), they lose amenities like parking, they pop up places where they previously weren't allowed (smaller ADUs, basement units, see article), they get subdivided (landlord throws up a wall and turns a large 1br into a cramped 2br).
If supply and demand were really working the way its heralds claim, then we'd see the price of existing units going down. This article offers no evidence that this is happening. I don't believe for a minute that it is.
Instead, it's the same story as always: your rents will keep going up. You can move somewhere cheaper and shittier if you want. The people who profit will congratulate themselves while decrying the thing they actually fear: rent control.
I mean… duh? Genuinely baffled at people struggling to understand this. When there’s more of a thing, it costs less. Which is good when that thing is essential, like housing.
Not sure the idea of housing being an asset which endlessly accrues value is good for anybody involved, long-term. Open to disagreement, though! I’m no economist.
I guess the confounding factor is that the population isn't fixed. Greater construction could result in population growth which cancels out the gains from greater supply. You'd have to build faster than population growth to lower prices. And generally developers aren't looking to do that.
Depends what the situation is, if the rents are absurdly high where you can undercut them and still profit then of course they would rather build more. If they are getting close to cost price, developers won't build more to lower it beyond that. At that point if you want to lower prices more you'd have to look at lowering the cost of construction.
Developers usually want to buy land, build house/apartment, and sell house/apartment.
They want to flow as much as possible - so if there are unlimited building spots you get a smattering of various options being built as they all find there niche.
If the building lots are rare, then they all will be built into the most expensive possibility.
If you try to take any local action that might lower housing prices or even keep them steady, you will likely be stymied by a large contingent of people that deny that new housing could ever raise rents.
The idea that supply and demand don't apply to housing is quite popular:
Even when it's not peer-reviewed and contradicts a ton of more serious research attempts, a bid of research which rarely gets popular press coverage.
It's like climate denialism, there's huge demand for denialist positions and very little research to back it up, so the press does not reflect the research.
People are quick to point out that induced demand exists - especially people that aren't fond of change.
Very broadly speaking, people mis-estimate effect sizes in economics by orders of magnitude. Induced demand is just their foothold to claim an effect exists, before they go about claiming the effect size they want to see.
How would induced demand work for housing? I understand it for say transit use or car travel or like Facebook visits, but when there's twice as much housing do I... buy another home? Buying extra houses as "an investment" in a culture that is hell bent on depreciating my investment by building more housing is one of those "r/WallStBets" crazy plays, if I'm wrong I will lose my shirt and everybody will laugh at me.
Also, even if that were a problem, which seems dubious, you can regulate it. Massive tax hikes for second and subsequent homes are a thing in some places.
I love induced demand. I'm going to use it to get rich - buy up some abandoned town somewhere, and then pay to run a 100 lane superhighway to it; induced demand means the town will fill up instantly and be hugely valuable!
It doesn’t work unless there is currently repressed demand for living in that abandoned town because not enough housing or other factors.
No one is complaining about a housing shortage today in buffalo which used to have twice as much housing stock as it does today, because the demand simply isn’t there now.
Exactly - induced demand is just a misnomer/misunderstanding. "Pent-up demand" would be a much better way to explain it - but that would reveal that at some point the demand ceases; even SF has some limit - once all 12 billion people live there, demand will level off.
Good analogy. I've always considered induced demand a bit of a fantasy.
New businesses the sprout up that market themselves certainly induce a bit of demand, but more lanes and stoplights doesn't exactly motivate people to want to go somewhere.
Yeah, and when we add lanes to roads, the average speeds increase and commutes get shorter. Right?
Also, if the government gives me $1 billion, then I'll be rich. But what happens if the government gives everyone $1 billion? Everyone will be rich, right?
... Your examples seem to undercut your point if I'm understanding what you're trying to say.
In your first example the "cost" in the form of traffic etc. was reduced so more people "buy" in the sense that they go on the road until you reach a new "cost" equilibrium. In practice that equilibrium is quite close to the original cost so it doesn't fix the issue traffic. But if that same number of people had driven before the high way expansion traffic would have been way worse; the cost would have been too high so they previously opted not to drive.
In your second example by increasing the supply of money the money ends up costing less; it becomes worthless due to inflation.
When there's more of a thing it cost less.
To be fair, building more housing can be like highway example. If there's tons of pent up demand of people looking to move somewhere increasing supply dramatically can fail to move the needle on cost because there's many marginal buyers who all have basically the same price. If you've got a million people who want to move somewhere and are all willing to pay up to 500k for a house the price of a house won't fall under 500k until you've built at least a million more homes.
> ... Your examples seem to undercut your point if I'm understanding what you're trying to say.
That perhaps you shouldn't assume that kindergarten-level theories always correctly describe complex markets?
> In your first example the "cost" in the form of traffic etc. was reduced so more people "buy" in the sense that they go on the road until you reach a new "cost" equilibrium.
So go on, do continue this line of thinking. You built more houses.... then what?
Yeah that’s induced demand and it’s a good thing for the economy.
The rents are supposed to reduce only temporarily. But the goal is to not reduce is permanently. The goal is to increase land utility. Building houses helps with that cause.
> Yeah that’s induced demand and it’s a good thing for the economy.
No, it's not good. It leads to nothing but urban decay.
That's how you get Tokyo with a crazy price bubble, while beautiful traditional houses decay into dust just 3-4 hours away.
> The rents are supposed to reduce only temporarily.
Except that they don't even decrease. If your population is growing, so is your rent. And it doesn't matter how much you build (for large enough cities).
Again, this is simple observable truth.
> The goal is to increase land utility. Building houses helps with that cause.
Yeah. The goal is social engineering to force people into shoebox-sized apartments, to be ruled by their benevolent masters.
That's also why we're getting a global pushback against it.
> No, it's not good. It leads to nothing but urban decay.
This is subjective and loaded. I don't see any concrete point you are making.
>Except that they don't even decrease. If your population is growing, so is your rent. And it doesn't matter how much you build (for large enough cities).
They did temporarily in Austin - 19% after accounting for inflation.
Overall, making a city like NYC is preferred for any country. Even if the prices are really high, it reflects the economic activity of that city. Why would a house cost ~$800k if the person living there won't make multiples of it with their wages?
> That's how you get Tokyo with a crazy price bubble
Are you really making an argument that rents in a place like Tokyo are not supported by real value creation? Are we supposed to all live in "beautiful, traditional" heritage houses? Those houses are often a luxury, and favored by the wealthy who can live with the resulting inconveniences. They're not a sustainable solution for the masses.
Anyone ever drive around Austin, its highways and its endless new construction of new superhighways, to the point that Google Maps is confused?
As annoying as NYC (and driving) are, there are downsides to unlimited housing and lack of zoning - as it turns out, the same states that do this sort of thing we all praise, are the same laissez-faire philosophies that oppose communal public transportation and walkable urban communities.
I would buy more complex arguments around housing price solutions if ALL housing price problems everywhere else hadn't been solved by building more housing
> what they didn't mention is that supply didn't impact rents until the large remigration back out of Austin
This has been studied to death. But just like soybean farmers in Idaho voting for tariffs on China it seems a category of urban renter is more wedded to ideology than self interest.
The Austin metro area's population is up [1][2]. Austin's GDP is up [3]. Migration per se doesn't explain a phenomenon that is robust across cities, countries and centuries.
2-3% is a margin of error compared to 20-40+% y/o/y growth. That means the influx ceased, some left, some had babies. Meanwhile housing was built.
Of course rents will crash if everyone anticipates 20-40% growth and it’s suddenly 0 . Let’s see in a few years if the pricing trend continues downward or upward.
If it’s downward, yes we’ve solved the rent problem by “building”. If it’s upward, as it has been, it’s not just about supply .
For reference, I moved to Austin in 2018, my rent for my apartment was about 1200/month. In 2022 (the year I left), my rent jumped suddenly to 1600/month despite new apartments near me, and all of the apartments I looked into had similar jumps. And anecdotally speaking my coworkers all reported similar massive rent spikes.
It feels more like this is associated with the tech industry cooling significantly in Austin so they can't get away with pricing bumps. This isn't to say new housing doesn't help, but it certainly didn't prevent me from getting fucked on rent.
Wow it's almost like the law of supply and demand is in fact accurate. Who would have thought basic economic 101 would be proven out? It's almost like when you allow supply to increase to meet demand the price equilibrium can move down. Shocking.
I say this with a bit of righteous anger though because the moronic democrats in California want to virtue signal about housing and homelessness but they make it downright as difficult and expensive as possible to increase housing supplies. The democrats in California have done nothing but make our problems worse, even as there are states we can look to with proven examples to solve our problems. Nope... more housing lotteries and BMR units will be required instead of just making it easier to actually build..
I'm with you and feel your anger. So tired of California's useless virtue signaling about housing and homelessness while no progress is made for decades. California, stop messing around and start living up to your virtue signals! It's infuriating to live in California, hear all day about caring about poor people, then do nothing at all for the bottom line and in fact endeavor to make it harder and discriminate against poor people as much as possible.
And then they'll act so surprised when the populists without a plan show up and win the national elections.
Sigh. NO it didn't. One fact of life: new construction does NOT lead to lower housing prices. Sad, but true.
So what did? Likely COVID. The _only_ way to decrease the housing prices is to decrease the population. As proven by countless cities, including the world's most liveable Copenhagen.
So does my prediction hold for Austin? Let's see.
Austin TX population in 2019 (ACS estimate, data series ACSDP1Y2019.DP05): 979263.
2021 (ACSDP1Y2021.DP05): 944658
2023 (ACSDP1Y2023.DP05): 979700.
2024 (ACSDP5Y2024.DP05): 979539.
So yep, my prediction holds true. The housing prices in Austin were stagnant because its population decreased during COVID and barely recovered to pre-COVID levels.
Want another prediction? Seattle's home prices will fall down, because its population is now (likely) decreasing. Not because of a rush of new construction. We'll see updated population released stats in April.
Edit: I sent a letter to the editor of Pew. We'll see if they have a shred of honesty (doubt it).
Edit 2: honest researchers take care to control for other factors before jumping to conclusions. For example, they could have found a comparable city that also had falling rents but _no_ significant new construction.
And hey, I did that. According to https://vitalsigns.mtc.ca.gov/indicators/asking-rents the rental price in SF was $4060 in 2019, and it fell to the low level $3319 in 2024 before starting to climb in 2025. Can you guess what was happening with its population?
> The population numbers you have reported are misleading because they use 5 year estimated numbers.
I specifically chose consistent data series. While each one of them can't represent the true population, they absolutely do illustrate the trend. The number you're quoting is from the Census, which only happens at 10 year intervals.
If you have better population estimates for these years that use the same consistent methodology, I'm all ears.
> Even if you were right, the rents fell down by more than 19% after accounting for inflation. I’m not sure what you are trying to say?
In SF rents fell even more. Without significant new construction.
> I specifically chose consistent data series. While each one of them can't represent the true population, they absolutely do illustrate the trend. The number you're quoting is from the Census, which only happens at 10 year intervals.
False. You are comparing 5 year estimates with 1 year estimates so it’s not consistent.
With SF I agree that it went down because of population but I’m not sure how that explains 19% reduction in rents in Austin with higher population.
So let's test my prediction, shall we? The 2025 data will be released in April. If my prediction holds, then the population figures for Austin will be nearly flat or falling.
I also made the same prediction for Seattle, its rents are now falling slightly. So its population will be decreasing.
> With SF I agree that it went down because of population but I’m not sure how that explains 19% reduction in rents in Austin with higher population.
As you see from my data, the consistent series up to 2023 indicated falling population. The 2024 data was the outlier.
I still don't see your point. The population increased in Austin while the rents decreased. Even if nearly flat, the rent fell down by ~19% in real terms.
Austin is not a success story. It is a treading water story, and an example of lying with statistics because most of where it's cheap to live in "Austin" literally wasn't Austin when these measurements start. They just literally redrew the lines in part to make this headline.
If you want a success story, look a Vienna. That's what actual community and housing looks like and its because of the exact opposite of what econ clowns on here believe, non-market housing.
The laws of supply and demand don't apply to housing in the Bay Area.
We need affordable housing, not more housing for rich people, made by rich developers. Just because my house is worth $3M and I have $3M in stock options doesn't mean I'm rich. I'm working class, I had to come back from paternity leave to log-in to Slack on my laptop every damn day, and tell Claude how to write this damn software!
Did you sign the petition to block the apartment building down the street? It would RUIN our neighborhood!!
As an aside, I am not part of the problem!! I care about poor people!!! I am a good person!!!!
Oh you want proof? Look at my front lawn: "In this house we believe black lives matter, science is real, love is love..."
Proof point 2: look at my Tesla! "I bought this Tesla before I knew Elon was crazy!"
Plus I voted for Kamala. I'm GOOD. People in Kansas are DUMB and BAD.
I feel like the economics around the Texas real estate markets are getting really twisted due to other factors.
The quality of construction in these new builds is generally very bad. If you compare a Texas home built in 2025 with one in 2015, I can guarantee you will find shocking differences once you pull back some of the drywall or have kids jumping around upstairs. I had a 2023 build for a year before I realized I had a hot potato situation on my hands and decided to bail.
The new builds used to command a premium, but in some communities the situation has completely inverted. Buyers are coming in and explicitly avoiding anything built in the new millennium. Information is flowing so much more freely around real estate and the unspoken bullshit scams prevalent within. We've now got home inspector influencers on TikTok showing first time homebuyers exactly what to look out for. We didn't have these kinds of information channels when I was shopping for my first home.
Its wild how the solution to housing costs is really just:
Build more housing. Keep law and order.
No it doesn’t need to be “affordable”. Yes rent control is a terrible idea.
Just build more housing.
Note: that the US already has plenty of housing and housing costs basically go up in areas of low crime relative to economic opportunity. If you build housing, but allow crime to rise, you have wasted everybody’s time.
There is a massive difference between rental prices and home ownership. There is a further difference apartment rentals and single family rentals.
Rented apartments are a commodity with features. Owned houses are fixed assets with different economic rules.
It’s a difficult problem not because we don’t know the simple solutions (supply and demand). It’s difficult because the people who have the majority vote also typically own the houses and they obviously don’t want the prices to go down. This is not just speaking about the US, many countries are facing this issue
New construction has already decelerated in Austin due to falling prices, which compresses already-near-zero margin on real estate development.
So yes, it really is "just build more housing." The problem is: why would you build more housing as prices fall?
Why would you produce more bread, milk, eggs as prices fall? You would of course wait for the next-pig cycle - when the starving masses pay any price to you.
The answer- essentials can never be a non-government interferring market. This can be by creating artifical oversupply by buying up oversupply for foreign aid or bio fuels(food production). In the case of housing, this is by having the goverment continually construct housing.
Sure, which is a different intervention than what's being discussed here.
I'm confused by this objection, if you draw a stereotypical supply and demand curve, you can see how prices settle to an equilibrium point. Of course reality has more complications, but I think your objection is 95% answered by a supply and demand curve. You keep building houses when it is profitable. You stop when it is not. This naturally keeps everything in balance.
I have struggled to understand why houses don't get built and land sits idle for years. I can only assume that it's significantly more complicated. I'm not trying to excuse the complications. I guess if the house prices are forecast to go up, you build some houses, but not all that you can because the longer you wait, the higher the profit will be on the ones you start later. If house prices are going down, even if it's profitable when you start, you're not likely to build houses because you might be left holding houses that will sell at a lower margin. If there was a tax on unused land, that might skew things towards building more even if prices are declining, but I'm sure there are lots of views on that.
Why would you build on a plot of land when the plot of land itself is already appreciating in value with you doing nothing to it
Building is risky and costly
Having an asset that appreciates on its own regardless of what you do with it is not
Holding costs of land are far from $0 in any major metropolitan area. Sitting on it involves its own form of risk.
Vacant land that's desirable is often held back from development due to zoning or infrastructure issues.
Some would say that housing is a right (while acknowledging the need for housing construction and its workers and supplies to be paid for) and that it should be funded somehow, even if the free marker profit becomes negative during certain periods. Like any market manipulation, the question then would be how to intervene to keep housing construction going when construction isn't profitable, while not fomenting corruption in the industry.
Housing where? Is housing for me in Malibu a human right? There's plenty of places to live in Texas for basically nothing.
I'm honestly trying to take this seriously, but I really can't square the problem of location and utility. On of the reasons why West Virginia has such a low homeless rate is just that mobile homes and manufactured housing is pretty much legal in many areas around the state. One of the reasons why California is so expensive is that those types of inexpensive housing options are effectively illegal statewide.
> There's plenty of places to live in Texas for basically nothing.
What are the employment options there? If I move to a cheap house somewhere where there are no jobs for me, I just moved somewhere where I cant afford.
>If I move to a cheap house somewhere
Again, I'm not trying to be difficult here, but "where" is "somewhere." There are jobs in Austin, San Antonio, Kerrville, Marfa, and El Paso. They might not all be for me, but they exist in all these places. Where you live and what your commute is, again, is not exactly something that's particularly trivial to define. At what point should I start looking in San Antonio rather than Austin?
These are hard questions. This is what I mean when I ask whether I have a right to housing in Malibu? At what point should I be expected to just move to East LA?
At the end of the day, housing in Austin is relatively inexpensive. There are real options below $300K. Living in SF, it's pretty astounding that that's even possible within the city limits, much less at reasonable commuting distances.
I certainly think incentivizing subsidized low income housing is worthwhile, and I think even incentivizing builders to just target the low income price points is also worthwhile. I just think that focusing on subsidizing the lowest income folks, rather than letting markets actually work for most people has been shown to trivially fail in CA where I live at actually accomplishing anything. A lot of "ugly" 5-over-1's have been built in Austin, and it's working to keep the place affordable for working class people. I'm absolutely fine with that.
You can always work full remote. Or maybe you're an elderly retiree.
... but your own housing isn't any form of basic human right, its a luxury all around the world and always has been. Now I completely understand folks who come out of uni and see the salaries (sans faangs and generally devs and few other lucky positions), the prices and the emotions of missing out come easily.
But it isn't a right, just because you would like it. Same as I don't have a right to a car at price I would like, just because I live, by my choice, in rural environment close to nature. I desperately need one though for work commute, shopping, taking kids to school etc so thats as non-optional as accommodation to existence of my family. I can either suck up car's actual prices, move whole family so I don't need it or do similar choices in life to tackle that.
But car ain't a right. Same as your own accommodation, of course not a modest small apartment but a house, ideally close to work, amenities, schools, and costing peanuts. Literally what everyone else wants. Or am I incorrect in your expectations? Because if yes, its easy to accept cheap remote small old properties, those aren't expensive for above-average earners at all, anywhere.
The Universal Declaration of Human Rights, Article 25.1:
> Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
So if I declare a right to immortality, then no one dies?
It's almost like those words are the product of useless bureaucrats, rather than an actual right.
Positive rights and negative rights. Societies can and often do guarantee rights that place an obligation on society and others to fulfill. In the US, we have a right to emergency medical care regardless of ability to pay. We have a right to a fair trial and representation. In NYC, the city is obligated to provide shelter for the homeless. Some thing that should be more universal. Not all questions can be answered by me right now.
If a minority has most of the wealth then the equilibrium supply may include a lot of supply of second homes, very large homes on large plots for the rich, properties sold at a premium based on how much they can extract from renters, and even investment properties occupied by nobody whilst still having insufficient small basic homes and dense housing.
Capital that could be invested in better serving the bottom half has to compete not only with the use of those resources to further enrich the rich but other investment opportunities.
There is more than enough land for everyone, and rich people aren't really competing for the kind of housing that poor people are competing for, e.g. smaller plots with smaller homes. The demand of the rich does not eliminate demand of the poor, so the market produces different kinds of housing for different clientele.
Think about it this way: assume you supply all the housing to all the rich people. Then there still remains untapped demand of others that can be fulfilled by further production of homes for those specific people.
This story fails when land becomes restricted, which is exactly what zoning laws cause. Zoning is a big harm to the poor.
> rich people aren't really competing for the kind of housing that poor people are competing for, e.g. smaller plots with smaller homes.
This disregards basic geometry. Sure, in some rare situations you only have one small plot of land surrounded by existing construction or natural boundaries. But, in the majority of cases, you have one large plot of land, and you can either construct one big house on it, 5 smaller houses, 10 small houses, or 200 apartments in a block. The rich are absolutely competing for this lot with the poor.
And as inequality goes up, the rich can even start contemplating buying up surrounding properties, tearing down construction, and transforming a small plot into a much larger one.
But zoning is required to maintain order. Nobody wants anybody to live in favelas.
As with everything the regulator needs to strike a balance to make the market work.
Given the choice between being homeless and living in favelas, millions in Brazil have chosen to live in favelas.
The reality of zoning laws in Western countries is to provide a target for regulatory capture by the NIMBY crowd. With the result that we're systemically underbuilding housing, then wonder why we wound up with homelessness.
Favelas are a local optimum which systemically is very difficult to get out of and is a sign that the regulator is powerless. It's a great example of a market failure.
Rich and poor alike are competing for scarce land near where people actually live and work.
There's a couple of "ifs" there and the scenario seems implausible. If I look at the prime real estate in a city it tends to be a lot of skyscrapers rather than very large homes (with occasional exceptions like say a Buckingham Palace). But it looks like the economic equilibrium is lots of cheaper apartments rather than large homes for rich people.
> ... and even investment properties occupied by nobody ...
Not much of an investment. Something is wrong if that is happening, probably manifesting as a lack of supply. Otherwise what is the point of an "asset" that doesn't generate income, degrades over time and could easily be rented out at a profit rather than sitting unused?
Whatever scenario there is where it makes sense to have an empty property, assuming a sane policy backdrop, it'd always be better for the owner do what they were going to do anyway but also rent it out.
People don't want to rent those homes out because once you're doing so it's difficult to evict a long-term tenant. You just lose out a lot on flexibility - even if you try and manage that risk by leasing out housing e.g. on a yearly basis, landlord-tenant law often overrides that since there are strong ethical reasons for not evicting someone who has since come to treat that rental space as their home.
Short term rentals are better on that score: no one sensible forms a long-term expectation that they're going to live in an Airbnb that they've rented for a few days. (If you think short-term rentals are "bad" for the long-term market or have negative side-effects on the neighborhood, then tax them to manage that tradeoff. But banning them altogether is unconscionable and just leads to houses sitting empty and unused.)
If you want second homes to be used productively, just allow folks to list them on AirBnb for planned short-term rental. Long-term rentals are a total non-starter politically for second homes, since you obviously can't ethically throw out someone who regards that rental space as their home. But short-term is actually fine.
As for larger homes, people should be allowed to live in there as larger, extended family groups - a common pattern in non-Anglo cultures. Ban "single family" restrictions since they amount to unconscionable discrimination against such reasonable living arrangements.
What do you do when that equilibrium point is hopelessly above what the average person can afford?
Not sure I buy the premise. Austin has a household $133k median income with a $435k median home price. It’s very affordable.
But, to make Austin more affordable still, you make it less expensive to build so that it’s profitable to build. Typical regulations that do this are: - Lower minimum sizing requirements - open zoning - raise height limits - make sure you don’t have unwarranted restricted fire codes (some places have elevator stairwell requirements that are insane) - make permitting easier or not required at all for some cases - no min parking requirements
Pretty sure as good as Austin is, they could easily reduce the costs by up to 30% (there are parts of the country with 50% the cost per sq ft for new construction).
That means there’s an invisible hand keeping prices up, or basically that the market is not free enough. That’s caused most of the time due to excessive regulation.
Another reason is high demand in locations where offer is limited due to physical limitations. There’s always demand to live in Broadway, and offer can never catch up due to its physical limitations.
> That means there’s an invisible hand keeping prices up, or basically that the market is not free enough.
Nowhere in the economic theory there is a proposition stating that prices should fall below affordable levels, given enough competition.
We are not talking about economic theory. We are talking about house prices. Time after time it has been seen that free-enough market can lower the prices to affordable levels.
Fair, but the thread has evolved into a discussion on the theory. We are definitely in the territory of theory when the invisible hand is mentioned.
I took "invisible hand" as a joke. The one with pattern : either (fairies/magic/invisible hand) or (sensible argument/observation here).
The relative abundance of land compared to other factors of production is, in fact, such a proposition. But when land is restricted through zoning laws this stops holding true. In other words, we must eliminate restrictions on production for the benefit of all people, but particularly the poorest.
We don't need economic theory for that it's just common sense. Humanity has been erecting structures to live in for approximately our entire existence. The modern economy is mechanized. How could a wood frame structure or a small high rise possibly be unaffordable if the market is functional?
Stop and think for a second. Someone in good health with a willingness to DIY and a sufficiently flexible schedule can literally build their own house from the ground up. It's a substantial time investment but not actually as much as you might think. Housing isn't very resource intensive compared to the rest of the modern economy.
The only possibilities I can imagine to explain unaffordable housing are broken regulations, critical levels of resource exhaustion, natural or man made disaster, and gross economic dysfunction.
It's regulations. But before you call them broken, some of it is safety. Safety standards keep rising with technology and the economy as people can afford more. Same with cars. There's also zoning restrictions in some places designed to prevent slums by requiring large residences. I guess that's happening here too.
Also living standards, ancients houses are dead simple and today could probably be built with usd 5k-10k in a couple months. But most people wont accept a home with no electrity, no lights, no AC, no indoor plumming, etc.
The average person would need a MASSIVE investment in time to learn all the skills required in addition to investment in tools. Furthermore people won't lend joe random the funds required in the same fashion as they would for an actual finished house OR constructing a house via a contractor.
The invisible Hand may be monetary policy. The median household may simply no longer be able to afford the median home due to the continued wealth distribution shift brought on by interest rate targeting.
> That means there’s an invisible hand keeping prices up
Construction labor is quite expensive and so are the raw materials (and going up). Means there is a hard lower bound on cost and unfortunately it's not that cheap even if they built at zero profit (which nobody will).
This is theoretical MBA101 speech:
In reality, those ideas do not apply to the housing market, esp. as there is no real competition; and because the demand is absolutely inelastic (if we are already applying in MBA-wording universe)
Also, that this is true you can see if you compare to housing markets which "are more free than the Australian"
The regulation is single family zoning. Zoning makes it impossible to stack high rise apartment buildings in the areas that people want to live in.
Of course demand is elastic.
Do you think, people will migrate to a city with an unaffordable housing (unaffordable for them)?
Unless you are living in North Korea, the competition is also there.
No, it is inelastic:
- inelastic means the demand is more or less independet of the price; you can't "just stop renting & living" if prices are going up, your options to bypass are highly limited -> therefore its called >inelastic<
The good ol' invisible hand;
Literally an appeal to ignorance.
"What else could it be?"
OP used the term incorrectly. The term was used by Smith to refer to the fact that in the market, order occurs by the alignment of incentives of different people without any central planner.
> That means there’s an invisible hand keeping prices up, or basically that the market is not free enough. That’s caused most of the time due to excessive regulation.
No. Why do you guys fall so easily for the "regulation" cliche?
The answer is far easier: unwillingness to invest.
Why are there investment funds willing to burn through tens of millions in stupid stuff like NFTs or pets.com, but investing $10m on a 5 story apartment building that can get you a solid RoI of 20% is frowned upon?
Why the investment funds have to build the houses? Houses has been built/funded from zero by the future owners since forever, either individually or through cooperatives. That way, "investors" don't need a positive ROI, and they happily lose money overall if they get a home.
I know some people that are currently "willing to invest" in buying a ship container or two and transform it into a house to get costs down. The problem? Regulations don't allow them to put the container in their own property.
Using a shipping container is almost always a stupid plan compared to just putting up some wood. As much as I want to make zoning more flexible, I'm not in a rush to change that particular regulation.
The invisible hand is zoning. There's plenty of investment available but you literally aren't allowed to build what would be useful in most cases.
Sure you're free to go out into the middle of nowhere and build all sorts of wild stuff but there's no market for that because that isn't actually what anyone wants. You can't blame the investors when what people actually want to pay for has effectively been outlawed.
there are many things you can do, but essentially you want to make it profitable for builders to make houses at a lower price point, or give the average person more money. Some approaches (not all of which I'm endorsing):
- reduce restrictions around planning / construction / etc (because it takes time and expertise to comply, both of which cost money)
- find a way to bring in cheaper labor, or make it possible for construction companies to hire the same labor at a lower price. Maybe a subsidy, maybe reduced taxes, maybe relaxed labor laws
- add a subsidy for homes
- make your citizens more wealthy, so the price is no longer above their means
- outsource construction to a place that can build it more cheaply (eg, prefab homes)
> - find a way to bring in cheaper labor, or make it possible for construction companies to hire the same labor at a lower price. Maybe a subsidy, maybe reduced taxes, maybe relaxed labor laws
It's far easier than that: just have your regional/local government finance urban renewal projects that increase occupation density. You can even tie the project to the expansion of a public transportation system.
Won't the market fill the gap? For example, in Indonesia, "standard size" houses are mostly out of reach for new buyers (young generations), so they build houses farther away and/or smaller.
Remove parking minimums and work to address inequality? If that the case in Austin though?
Where does this happen, in presence of a reasonably free market?
I can only think of extremely land-limited places like Monaco and Gibraltar. Where the answer is "not everybody should live in Gibraltar".
But the US has a lot of land. So much land that it can afford wasting it on endless sprawl of single family homes, which is the least efficient way of providing housing. Most Asian megacities would not be able to exist if they had as strict zoning principles as the US has.
Maybe you should also think about barriers such as "bans on boarding houses". This is what messes with poor people the most. A room in a house full of rowdy individuals sucks, but it is still a room. Possibly you may spend just a year there, then find something better. A tent in an encampment of rowdy individuals is strictly worse on all accounts except cost, and bouncing back from that is harder.
Sure, so long as the balance involves not housing people which is pretty sick and twisted
I never claimed the balance will occur at a point that I like. This is just math, it’s not a political stance. If you want more homes, go build homes.
Then your point is meaningless. I (GP) was also pointing out the same equilibrium mechanic. The specific point I was making is that all evidence points to the equilibrium (in the US and elsewhere) being at a point that does not make housing easily attainable, and so becomes a political liability.
"Go build homes [beyond equilibrium]" is not a solution
I don’t understand your sentence. What’s the subject of the verb “housing.”
I think the subject is perhaps an implied "you", "us", or "society". Here's how I read it:
Sure, so long as involves (you / us / society) not housing people which is pretty sick and twisted
The subject is “people”. Parent is suggesting that the equilibrium point of housing supply and demand naturally leaves some people unhoused.
Which isn’t quite accurate as for example people prefer to move out of their parent’s homes while young adults but aren’t necessarily homeless if they don’t.
Basic housing is a necessity, but people also huge homes and 2nd homes etc. So housing policy should therefore be more complicated than simply subsidizing anything you can call housing. Capping the home mortgage tax deduction at ~median home prices for example is probably a better use of government funds.
That is the object of the sentence. He is asking who the subject is, in other words the thing or person that is doing the housing of the people. Is it the government? Is it you? I'm currently responsible for housing myself, which is annoying so I would prefer someone else take on this responsibility.
Because home builders don't make money by buying and selling houses, they make money by building them and selling them.
This 1000x. Folks don’t get that the primary market != secondary market. Same as pre-IPO stock holder != IPO time buyer.
And... how is this relevant?
I'm not sure what you're trying to imply here. You should spell it out explicitly.
The difference is between buying and asset and producing an asset. Even if RAM costs are falling, it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price.
It's entirely different if you're buying the housing already built; there's no productive activity, you're just a rentier and do not benefit at all from falling housing prices.
The differences in interests between an asset holder and a productive builder are night and day.
> it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price.
Right... my point is that the costs are not far below the eventual sales price. That's why construction is slowing down.
And as mentioned several other times, it's actually not as simple as cost > sale price. It's margin > margin of alternative investments of similar scale and risk profile.
Dr Horton is the largest builder in the US. In q3 2025 they had a 21.8% gross margin.
As someone who is not versed in real estate, I don't see why your comment and parent couldn't both be true. Is Dr Horton building homes in Austin? Are the margins in Austin pulling down their average margin? That could explain high profit while dissuading new construction in Austin. *I don't know the answers to either of these questions, but of you do, that could provide some "proof" for either side of the argument, depending on what the answers are.
Their gross margin is a lagging metric on houses they built 2/3 quarters ago, and applied for development permits ~4 quarters ago.
US homebuilder gross margins have been declining since 2023.
It was not clear that it was your point at all! Yes of course, gotta get your return on capital invested or the money goes elsewhere, probably into a REIT that invests in the existing assets and drives up prices even further. Because the demand for housing goes somewhere: either existing owners profit or the people building and alleviating the shortage profit.
Every single municipality in the US I'm familiar with has done everything they can to make it expensive to build and try to remove any profit margin from building. Which leads to capital moving towards piggybacking on the rentierism of the average homeowner, the people who control the policies that make it unaffordable to build.
How do you interpret "which compresses already-near-zero margin on real estate development" if not "the costs are already near the sale price?"
Not all new houses sell. Some become shadow inventory, some take 5+ years to sell. If you drive around new developments you can measure the fraction.
IIRC, Mountain House (near Tracy, CA) in the 2008-2010 crash was an example of a large new development that did not initially sell and was in serious danger of going zombie, and not having the new schools that had been promised to people moving in.
There is a difference but not in the way you think. Producing an asset is just buying other assets and labor. The difference with buying an asset is that a part of the assets you bought for production is illiquid for a term of the production. Generally you can only sell unfinished construction at a huge discount during most of the stages. So producing an asset is as same as buying an asset but with a lockout period, when you cannot sell.
But building cost > sale value is possible.
Or land ends up better value left as suburban house than developing up.
Or they build where sale cost - build cost is maximized. I.e. different city.
Governments need to build more housing. Make it bland so snobs can price discrimnate themselves to buy builders' homes. Why thrifts by the government home for value for money (and quality).
You think the government knows better how to identify land that is profitable than private builders? Why? Or is this one of those opinions based on "is OK for the state to pay for it because there's infinite money for my pet project"?
Because I grew up in the UK and there is a fuckton of government housing from 60s and 70s. It is ugly but it is housing people.
Government doesn't need to make a profit due to taxation.
Hello https://cep.lse.ac.uk/_new/publications/abstract.asp?index=1...
UK public housing is widely known for being shit. Unsafe, puts all the poor people together in a block. There's bunch of crime, and your kids will be likely to stay stuck there or go to jail due to bad influences.
Social housing should be sprinkled around it has been found. So nice example of what I was saying.
I would rather have more housing than less though. Government can build it at scale without worrying about profit.
And privately built appartment blocks are awful. One cracked in Sydney had to be evacuated. Concrete cancer and water ingress issues. It is concrete enshittification.
[flagged]
Please don't introduce an isolated tragedy to engage in ideological battle.
Comments should get more thoughtful and substantive, not less, as a topic gets more divisive.
https://news.ycombinator.com/newsguidelines.html
> like the fine example of Grenfell tower
The Grenfell tower fire was caused by a renovation intended to improve thermal insulation.
The renovation project used an external thermal insulation system that failed to meet both the manufacturer's recommendation and building regulation requirements. The particular system was actually banned in the UK while it was installed.
Tell me why you believe this has anything to do with public housing.
Because government has a unique pricing advantage, they get additional value from the houses they build in the form of all the positive externalities and property tax revenue. So projects that wouldn't be profitable for private builders might still be worth it to the government. So it should be both.
They're just gonna pay builders a sum anyway so it's not like they need to shoulder the full upfront cost anyway.
Do you have example of another area the government has higher profit margins than private industry? I can't. And if I was going to think a government would build housing, it would be in places that are cheap and I could mass house a bunch of people, not in hip expensive cities which is what people want when they talk about this.
But surely soviet style huge blocks of tiny t0 apartments all stuck together is a dream...
Isn't the US example: Medicare/Medicaid? It has far less costs (i.e. more of the money spend ends up with patient care) and has a reasonably good reputation?
> Do you have example of another area the government has higher profit margins than private industry?
Public transit. Capturing enough money from fares is difficult, maybe impossible, but it's quite profitable if you can capture the value generated by the enabled economic activity and raised property values.
The same really goes for most infrastructure. There's a reason the government operates nearly all the roads. Also the fire departments and police stations
Likely the same for public schools and maybe universities. Having educated folks in your city increases productivity and revenues and incomes.
Yes and that reason is not because they are better at doing it profitably it's because they are commons that are wildly unprofitable to do well. If you let private industry build roads you'd have nice roads in cities and dirt in the rest of the country.
In this case what people want is the reverse. They want the government to build in Austin.
The government should be involved when market forces won't solve an issue, ie no market will make it profitable to send an ambulance to a town 3h away in the mountains. You don't need affordable housing in the center of Austin just because it's trendy though.
https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...
This is a government literally putting their money in private companies instead of using it themselves (for idk schools or infrastructure for their people instead of giving it to nvidia and tesla). It's the most literal illustration of "private" beats "public" investment. Not sure what point you tried to make.
Thats how supply demand works right? Its a stable equilibrium. When supply is low, prices rises to entice supply, supply increases to match demand, prices fall, the rate of increase of supply falls as well until supply approaches to meet demand. It prevents oversupply. If supply slips below demand again prices will rise to pull it back up
Theres no problem here. Thats how the system should work
To some degree yes. However, the problem I'm pointing to is that the equilibrium in several developed economies (esp US) seems to be at a level that makes housing unattainable for a huge number of people.
I.e. Probably due to Baumol's disease, there is no price at which it is both 1) profitable to invest in constructing new housing and 2) makes housing broadly attainable to people.
This is a problem. There are a lot of goods (like a platinum-bodied iPhone) that cannot achieve both (1) and (2). However, unlike all of these other goods, housing is a necessity with an extremely high floor on demand.
Of its still profitable to do so, considering opportunity costs for the capital, firms will continue to build. However, it's so expensive to build that these project wind up not becoming bankable very quickly. I think that's the underlying issue that needs to be addressed.
Correct -- this is what I'm pointing to.
The problem is the cost of inputs. Classic Baumol's disease. We cannot escape Baumol's disease by just saying "hurrr durr just gotta get people to finance projects into a market with falling prices!"
It's not necessarily prices falling here but the profitability of [demand] at [price]. Like if prices fall 10% but demand rises 20%, you would want to build more housing.
This is the beauty of the free market because it guarantees three things:
[1] Real estate is generally a good investment and will hold value or appreciate in the long term, because supply will adjust to demand shocks to rescue values
[2] If people want to live somewhere, houses will be built for them to live there
[3] Real estate developers and construction are solid, safe businesses with great unit economics because building may decrease prices, but may still increase demand
It's when you constrain and restrict a market that players have to adjust and then you get crazy scenarios
> Like if prices fall 10% but demand rises 20%
Not as a developer you wouldn't...
You already have razor thin margins. Prices going down 10% means you cannot get financing for your project.
Holding real estate is generally a good investment. Developing real estate actually is not.
> Real estate developers and construction are solid, safe businesses with great unit economics
No they are not lol
If you live in a magical fairy world where supply and demand are fixed, sure. In the real world, prices going down 10% leads to a surge in demand, and so you can fill more of your units. This leads to either equal or increased revenue, for the same construction (flat cost), which actually yields higher margins. This is why developers are usually concerned with occupancy rates, and prices are more a concern for homeowners.
There are only really 3 scenarios where prices are low and demand is low:
[1] There is a dramatic surplus of supply, in which case if a developer is trying to build they've not done research and probably should not get financing
[2] There is some other factor (usually high crime) in which case again, developer should do their research, and the market is operating fine
[3] You are developing super early and operating within incentives offered by the city, usually tax abatements, which drive down the carrying cost and make it a better investment.
Also important to note that in scenario [3] a smart developer will slowly release inventory to restrict supply to meet demand, and as demand grows, release more inventory at the newly raised price, continuing to do so as long as the tax abatements advantage the strategy. This is common in successfully developed areas e.g. Jersey City, and is fine as long as broad scale collusion doesn't occur
Can you define razor thin? Grocery stores have very small margins, as little as 1%.
Homebuilders make at least an order of magnitude more on a very expensive item.
> Grocery stores have very small margins, as little as 1%.
Looking at the Kroger 2024 Annual report shows that they have 22.3% gross margin . they pay dividends, had a stock buy back, etc so its entirely possible that they had a very low margin but gross margin seems to be similar to a home builder.
Sales $ 147,123
Merchandise costs $113,720
Rent, Depreciation, Amortization $655
Gross profit $32,748
for a gross margin of 32.7/147 = 22%
The net margin of around 1.5% seems more relevant: the gross margin is just the revenue minus the cost of good sold plus cost of transportation. The net margin is the money you have left after paying things like Rent, employee wages, electricity, taxes, interest on debt.
Grocery stores don't require millions to billions of dollars of capital to execute each new transaction.
So it's not the margin itself but actually the spread between the margin and what investors could get by investing in alternatives. Real estate investment opportunities are often measured by their advantage (measured in fractions of a percentage, .2% advantage being considered solid) over 10 Year Treasuries or S&P 500 returns.
Real estate developers do often actually lose money, but the more salient boundary condition is whether they can get financing for a project, where they have to clear a bar well above the "just make >$0" bar.
> Grocery stores don't require millions to billions of dollars of capital to execute each new transaction.
Neither do homebuilders, because homes don't cost millions to billions to build (high end custom homes can cost millions, but that's not what we're talking about here).
> So it's not the margin itself but actually the spread between the margin and what investors could get by investing in alternatives. Real estate investment opportunities are often measured by their advantage (measured in fractions of a percentage, .2% advantage being considered solid) over 10 Year Treasuries or S&P 500 returns.
Okay? So they have an advantage over alternatives, which means higher profits. And a .2% advantage is not considered solid, or meaningful in any way without a lot of missing context.
> Real estate developers do often actually lose money, but the more salient boundary condition is whether they can get financing for a project, where they have to clear a bar well above the "just make >$0" bar.
Many companies often lose money, due to incompetence or bad luck. The industry as a whole has very healthy margins.
Even a small (~10 home) development, of which we need hundreds of thousands, will require millions in financing. And as the development gets smaller and requires less financing, the economics get a bit worse due to ~fixed cost of land acquisition, development, and infrastructure/utilities.
> Many companies often lose money, due to incompetence or bad luck
One of those signs of incompetence or bad luck is building a bunch of new supply into a market with falling prices, in which case you will find yourself not among those with healthy margins ;)
It seems to me that the market will select for urban sprawl though which is a negative for society but has the highest margin. E.g. Houston suburbs, miles and miles of cheap to fab single family homes that turn it into a suburban hell scape where you have to drive everywhere.
I don't think the free market is giving the promises you say it is - supply isn't elastic for real estate if nobody's building because there's no margins. Demand can be anywhere really.
I like to look to Tokyo for an example. Small lots, extremely predictable regulations (that are still strict enough to ensure a safe living situation), fast approvals, mean it's much faster and easier to throw up an 8-10 story apartment than say downtown Austin, and so even today they keep doing it despite land in Tokyo being very expensive. And, no sprawl.
They can throw up 8-10 story apartments in Tokyo despite land being very expensive because they tear them down and rebuild them after 20-30 years. Also, Tokyo outside of a few areas isn't that tall, it is definitely dense, but 3-4 story tall building dense (those homes are also torn down and built anew ever 20-30 years, so construction buzzes in Tokyo).
It would be better if you considered new actual living capacity in Tokyo rather than just new constructions.
Why are you accrediting Houston to the free market rather than Tokyo?
Houston doesn't have zoning laws, Tokyo does.
Generally speaking, freer markets seem to lead to worse outcomes overall.
Have you seen Tokyo?
I've lived in Tokyo and Houston. Tokyo is infinitely more livable and the housing is still relatively affordable. In Houston even if you can get a new place it'll be clapboard garbage that's a one and a half hour drive from work.
Average home price in Tokyo is 1.5x that of Houston. Average wage in Houston is 1.5x that of Tokyo. So the data doesn't support your post unless you really really love sushi and arcades.
> [1] Real estate is generally a good investment and will hold value or appreciate in the long term, because supply will adjust to demand shocks to rescue values
Real estate is NOT supposed to be a good "investment" and only became so because the government started propping it up with bank bankstops, zoning, NIMBY, redlining, etc. If your pricing is working correctly, real-estate should be close to zero-sum.
Austin, in particular, had several nasty bust cycles where real estate prices tanked after overbuilding which is precisely what kept the cost of living under control. Alas, that is a thing of the past after 2008 when everybody realized that the federal government will backstop the banks "Real estate number must always go up! Brrrrr!"
For nearly every homebuyer, a home is the largest purchase they will ever make and the bulk of their net worth. It needs to be a good long term investment that at least reasonably paces with inflation, otherwise you are losing money by buying a home and everyone has to rent and then you have feudalism with extra steps.
The good news is this is totally fine with keeping cost of living under control and overbuilding, because prices will go back up over time. Most people aren't going to own their home until the 30 year mark so it really is a much, much longer term investment than anything like overbuilding or other factors can reasonably affect.
The problem is really that people started seeing 2x-10x returns on homes and started treating that like the norm. That is not a 'good investment' that is a 'money printer,' and in most cases the government does not want to safeguard that behavior, but it's hard not to when those same people panic like crazy if their home only goes up 2% in value in a year or, god forbid, decreases in value for a year.
There is really no good solution to that mentality, if there really was one then Wall Street would have uncovered it ages ago to get more people into long term ETFs.
> a home is the largest purchase they will ever make and the bulk of their net worth
That's bad and a central part of the problem.
I accept that my car is depreciating in value every year I own it, and but I need a car so I buy one. I don't need it to be a good long term investment, despite it being a major purchase.
The entire mindset of treating a family's home as being an investment class rival to bonds and equities is a relatively new phenomenon, and one that's clearly been detrimental to many.
> > a home is the largest purchase they will ever make and the bulk of their net worth
> That's bad and a central part of the problem.
Why? Or to ask in a different way, how could it not be?
For nearly all regular working people, there is nothing they will ever buy that costs more in labor and materials than a home. So of course it will be the most expensive purchase most people ever make. How could it not be?
As long as the cost to build housing is less than the revenue from selling it, why wouldn't you?
It's not like homebuilders in Austin flee for North Carolina when the margins shift slightly.
It doesn't matter whether prices are going up or down, it matters if the price is more than the cost to build.
No, not really.
It matters whether the margin is higher than other investment opportunities of similar scale and risk profile.
Already, the answer is very often no. In Austin, the answer will increasingly be no. That means people will not finance new construction, so if demand continues to grow it will outstrip supply and prices will go back up until the margin on new construction exceeds that of alternative investment opportunities of similar scale and risk profile.
Yes really, that deeper understanding is exactly what is meant when somebody says "the cost to build is lower than the price." If we're going to be pedantic, you're ignoring the huge amounts of uncertainty on costs that are inherent to any project, the amount of risk versus the expected profit.
And indeed that amount of uncertainty: will I be allowed to build eventually? How long will I have to pay interests on assets before I'm allowed to build? Can I actually build what's specified in code or will discretionary processes arbitrarily change what I'm allowed to do, 18 months into the project?
> Yes really, that deeper understanding is exactly what is meant when somebody says "the cost to build is lower than the price.
It demonstrably is not what people understand it to mean to "the cost to build is lower than the price." The cost to build can be well below the sale price and development still be a totally uninvestable activity.
I would expect the development of Austin to continue until market equilibrium and then pause. Decreasing margin does not mean equilibrium. Obviously austin is not at equilibrium because we still have price data on developer activity and that would be near zero if developers couldn’t make returns given risk etc.
I guess I don’t see where we disagree?
Your explanation of fluctuations in supply and demand are not very revelatory. Everything being in flux at all times is kind of an elementary fact of life.
It's clearly not elementary if people here believe that you can just keep building until prices collapse, and people will still keep building.
The question is whether the market achieves equilibrium at a point where 1) developers can get financing to build profitably, and 2) units can be sold at a broadly attainable price to the local market.
The answer appears to be no because the cost of inputs is so high. No one here is talking about directly reducing the cost of inputs. They believe that instead developers will just continue to build units that they sell at a loss, or at least investors will continue to invest in construction that returns less than the S&P 500 or 10 Year Treasuries (they won't).
There is the possibility that the government builds housing, since the government doesn't have to care about direct profits and can include the overall economic effects of affordable housing in its calculations. We don't expect much direct profits from roads either, but we keep building more and more of them.
That only makes sense if there is a positive externality from housing. Is there?
Why shouldn't housing, like any other goods, be as cheap as possible for as high quality as possible?
Because "cheap" government housing has never been "high quality" in the history of the world. Those two properties are antithetical.
Humans don't have a ton of preferences for the electricity they consume or the water they drink, just that it exists. It's a commodity, so a good task for government. Housing is not an undifferentiated commodity and is subject to extreme variances in preference. Markets do differentiation and preference matching infinitely better.
Hence why Government housing always takes the form of a utilitarian blight on the community with giant towers of tiny apartments with tiny windows...doesn't matter if its communist Russia or the richest capitalist city on earth (NYC), all government housing results in the same outcome.
Assuming someone will chime in with some "halo" government housing project in the nordics that represents like 0.01% of the government stock there but socialists will use as propaganda. However, it's important to remember these are not cherry picked examples, they are median examples:
[1] NYC government housing: https://www.brickunderground.com/sites/default/files/styles/...
[2] Russian government housing: https://i.redd.it/twz37r739xse1.jpeg
Not just government made housing but any housing. Housing market needs don't seem to have as much wide fragmentation as eg most of the Western world seems quite happy with suburb style housing and most asia seems content with apartment though aspiring to owning houses.
I am saying just like any other capitalist endeavour, where things that barely existed or were quite expensive many years ago eventually reached a point where both the price became so low and quality so good that it became a mindlesss thing eg sawblades. And housing for whatever reason has been an extremely anticapitalist market. Even if we take the exact same houses people want today, their execution seems far from optimized. Think of something like precutting all the timber and sheets at a factory and doing some light adjustment and fitting on site, developing new materials that are cheaper or easier to work with tools, etc there are countless angles of attack.
In optics for example, it was mostly this rather bespoke work by a few artisans and people back then might have said this needs a fine touch that can't be done on mass scale. And then Carl Zeiss emerged. I feel housing is in the pre Carl Zeiss era.
EDIT: Neither example looks bad to me. The russian looks denser but both look clean and well organized. It doesn't at all look like blight to me, any more than a grid of houses in a suburb does. It's clean and geometric just like rows of houses in suburbs. If you like one but have a problem with another, I think you are trying to get offended deliberately.
Of course, many.
To be sure, are you asking if society does better when its people are homed vs. homeless? Because that seems like a question with an obviously-yes answer.
Because they don’t care about profits, they always end up overpaying and taking way longer time than necessary.
And who pays for that? The whole society: Either the government raises taxes, gets more in debt, or they print more money driving inflation up.
The most basic commodity, food, is a great example. The moment the government has ever step into controlling production of food, we’ve only seen subpar performance and starving people as a consequence. Ultimately killing millions (USRR, China, Korea…)
> The moment the government has ever step into controlling production of food, we’ve only seen subpar performance and starving people as a consequence.
You might be surprised to hear how heavily government directed and subsidized food production is in the USA.
This is nonsense. Agricultural subsidies are the largest item in the EU budget. Nobody is starving in Europe
That is a good idea that requires careful attention to make sure it has near-perfect execution. Because we do that, and they are called 'the projects'.
I'm under the impression that more supply=lower rents, even if execution is not perfect, but I'm not an economist.
Sure if that's all you care about, it will do that. At the price of making people's lives miserable due to substandard housing if it's done wrong. I said it's a good idea, let's just make sure we do it right.
> At the price of making people's lives miserable due to substandard housing if it's done wrong.
I'm curious to see how Austin will do in the near future by that same metric. More people can afford a place that will let them pay rent, although now at least some of those people will be living in someone else's basement or garage. These may not be very nice places to live, but they may be all some people can afford.
They've also removed the regulation requiring a second way out of a burning 5 story building. Austin faces an increasing number of red flag warnings and has the 5th highest wildfire risk in the US. It remains to be seen what removing that second exit route will cost in the charred corpses of families.
Austin is also cutting corners on permitting which is great news if that was all needless red tape that can be rushed or skipped without cost, but if new apartments built today are (or soon become) deathtraps due to lax code enforcement that could be a major problem down the road.
Austin has already lowered rents which is great, but hopefully it was also done right and it doesn't result in more people being forced into substandard housing or increased deaths. As long as it doesn't, other cities should look into trying some of the same things Austin has done.
Is substandard housing worse than no housing?
Not really? "The projects" are a consequence of a very specific approach to government housing construction.
There's an alternative approach which mirrors the public healthcare concept of "public option". Instead of restricting government housing to means tested individuals or specific low income populations, you develop a public competitor to drive prices down and to eat costs in regions where housing is needed but the economics just don't make sense yet.
i.e. the US Postal Service model. It works extraordinarily well as long as you don't repeatedly capture and handicap the org/agency (like has been done to the USPS). And even with the USPS despite being severely handicapped it still provides immense value by driving prices down while maintaining the essential service of last mile delivery.
A similar approach could be envisioned for a public construction agency.
Any program created by the US government can be captured and handicapped, like has been done to the USPS.
Also, the Postmaster General was on Capitol Hill today saying how this time next year the service won’t be able to afford delivering to all addresses in the US.
There are multiple city and state housing facilities in my area that are perfectly fine. They are not huge or luxurious but they're safe, clean, and well maintained.
When the options ar homelessness or subsidized housing, subsidized housing is absolutely the best option, which is backed up by decades of data.
"When the options ar homelessness or subsidized housing, subsidized housing is absolutely the best option, which is backed up by decades of data."
Not quite. That's only true if you are housing people who ended up homeless due to bankruptcy or similar reasons (lost jobs, medical issues, etc). If you have people who are homeless due to sever addiction, you just end up with more OD deaths. You have similar issues with people with sever mental illness.
The homeless are not a monolith and different parts of the population need different solution unless you really really don't give a f*ck about them.
I’ve seen some housing projects around my city that are actually quite nice. They didn’t end up being shabby because they were built poorly. They were shabby because they were reserved for the very poor and, consequently, became extreme concentrations of poverty and crime. This makes people unwilling to invest in maintenance and continued improvement of their homes.
If the government just went on a building binge of housing to be sold at market rate, or even set an upper bound before qualifying to buy them at a middle class income, it’d work out fine. That’s basically how Singapore does it only they couple it with somewhat aggressive policies to encourage people to downsize their living situations once they’re empty nesting to free up family dwellings for people with families. We probably wouldn’t need to do that second part since we’re not a claustrophobic island, and could just count on natural turnover.
This is how markets balance. When there is under supply prices go up and incentivize production. When there is oversupply production goes down. Prices converge on a small premium to the price of production.
it doesn't matter if prices are falling or rising, it only matters how the ROI of building compares to other investment opportunities
we can also make it cheaper to build. easing taxes on imported materials, bringing in more skilled labor, expediting permits, and even direct subsidies like tax breaks
> it doesn't matter if prices are falling or rising, it only matters how the ROI of building compares to other investment opportunities
Correct, which it basically doesn't in Austin, which is why construction is decelerating.
> we can also make it cheaper to build
Yep, this is the only structural solution. The "just add supply" runs into the problem of price equilibriums. The reality is the input costs of building housing basically guarantees that housing is hard-to-attain for any local market. We need to address the cost of inputs. Temporary reductions in price are temporary and the market will self-correct back to restrict supply (as we're seeing in Austin) until prices go back up to being hard-to-attain.
The problem is it can't drive prices below what the free market would dictate?
Talk about praising with faint damns.
That sounds like they could use some deregulation to keep margins healthy.
The prices may be falling, but if you can still make more profit (per unit time) building in Austin than elsewhere (due to less red tape or more local builders or whatever), building will occur.
> already-near-zero margin on real estate development
Why is the margin so low when the prices are so high? Is it because the value of housing is already priced into the value of land?
> The problem is: why would you build more housing as prices fall?
Why would you want to? When you stop being able to sell more houses, that's the sign that you've built enough.
Why let private developers build at all? The market provides perverse incentive to not house everyone.
To create artificial scarcity on a free market, it should be either a direct monopoly, or a giant cartel that includes every single developer and has mechanisms of punishing the outliers.
How so?
Supply increases until the market reaches saturation. The question is why build more housing if the current supply is sufficient?
This is an empirical claim. It looks like new monthly permits are down from ~4k a month in 2021-2022 to ~3k a month. They're still up significantly from before 2020. The building boom has slowed but it's still elevated. Not particularly close to zeroing out.
The data is here: https://fred.stlouisfed.org/series/AUST448BPPRIVSA.
Not to mention, Austin could just make it cheaper to build to offset lower sell prices. Gruber et al estimate permits are 50% of an LA home's price. Fix permitting and rent goes down 50% by your assumptions that developers build until margins are 0.
Assume austin is only half as bad as LA, a 25% rent decrease would be incredible
Gruber's paper: https://evansoltas.com/papers/Permitting_SoltasGruber2026.pd...
The point is that housing would be cheaper, not that it would become dirt cheap.
There are some inherent costs to new housing. Work of professionals involved, cost of materials, compliance with all technical regulations, some profit for the developer, connection to infrastructure. Let us mark this unavoidable cost by C. It is a component of the current prices.
Then there is the component N, which is deadweight cost caused by zoning and non-technical regulations. I am not saying that it should be 0, but it is in our interest that it is kept in check, maybe 20 per cent of C. As of now, in some places, it well may be 120 per cent of C, even though it is really hard to calculate.
This component of the final price directly enriches no one, it is pure friction caused by special interests of various parties that don't want to see any new housing either near them, or anywhere (landlord cartels that hate competition - indirect enrichment).
Even C is now a formidable figure. Modern homes are basically industrial robots, they are much more complicated from the inside than they were 100 years ago. But there isn't really a reason why they should be horribly expensive.
If as a regular office person you can buy a home for, say, 5x your annual income, it is not unaffordable. That is well, just normal. Not completely everyone is expected to own their home.
The problem is that nowadays, the multiplier in many places isn't 5x, but 10x or 12x. That is just way too much. And given that C cannot be easily massively reduced (unless some sort of massive robotization of construction work happens), you really need to attack N.
In my state, or in my capital city, you say this, but the real estate developers are generally the top 1% in town. If they're running on razor-thin margins, I'm not seeing it - I am seeing them on my Facebook (being friends with the wife of the mayor) doing things like taking their kids on vacation to the French Riviera, Switzerland, Tokyo, the Maldives... well, alongside the City's Planning Committee commisioners and their families...
Highly restrictive development rules, often sold as ways to stick it to those very rich developers, are precisely what make them so rich. Only those with huge amounts of capital to spend can make it through the gauntlet of the rules and have big enough asset portfolios to stay in the game. They can bank land for decades, speculating on the best time to take their profits, all while others live through shortages of housing and do not have access to that land.
Those very processes that make it hard to develop keep out the scrappy up-start competition, the contractors that could be building houses all over if they had enough lawyers/planners/specialists to help them get through the system.
Look, for example, at LA, which has super super restrictive rules on what can be developed where, and has huge amounts of discretion at the political level, so that NIMBYs can block what they want. The only people who can build housing are developers who bribe the politicians (there was a somewhat recent arrest in LA on this, involving literal bags of cash, by the FBI).
Having simple, straightforward rules that are completely objective is the only way to try to flatten out the playing field. However such rules get shot down by NIMBYs precisely because they don't want the shady developers profiting off apartments! It's all highly ironic.
Well you see, we clearly need to armor the parts of the planes that have bullet holes in them upon return!
I get what you mean, but I doubt corruption is good for building good housing
Corruption isn't prevented by regulations; its enabled by regulations. That's the flaw in your thinking. If a market's only players are really rich, there are 2 possible reasons for that: 1) the market is really good and more players should be entering or 2) the market is highly regulated which prevents more players. Guess which happens a lot more than the other in RE development?
PS Most of the people who build houses aren't very rich, just the CEO/big boss who owns the entire company is. The other 99.9% of people are middle class/blue collar.
> just the CEO/big boss who owns the entire company is. The other 99.9% of people are middle class/blue collar
Yup. I did some IT integration work for a man who owned a local construction company and was very effectively vertically integrating it. In addition to their other work he'd buy land, personally, his company would build at cost prices, and his office staff first informally and then more formally became property managers.
Huh? In Silicon Valley the objection is usually: even if we build more housing, prices won't fall.
So which way is it now?
Construction costs don't scale linearly with rent prices, it's a different market altogether that depends on regulation/worker supply/material costs/equipment/etc.
As long as construction costs remain below the value of the units all-in, there's profit motive for developers to build.
> As long as construction costs remain below the value of the units all-in, there's profit motive for developers to build.
Not true
Real estate development is extremely capital intensive and therefore it's a question of all-in cost of capital compared to other investment opportunities.
The opportunity cost has already factored that in. Unless you think cost calculations are arbitrarily forgetting to include certain costs for no reason?
> The problem is: why would you build more housing as prices fall?
Profitability is not black-and-white. Real estate investments can still be profitable if prices fall.
There are different types of real estate markets too. Working class homes in suburbs are not the same market as upper middle class apartments in an urban center.
A very interesting type of investment is high-density housing in catchment areas of new public transportation hubs. Those tend to be so profitable that they can even finance the investment in the public transportation service.
All you need is willingness to invest.
Maybe other real estate savvy people can help me understand this plus two other things I'm confused about in the housing crisis:
1. Houses are unaffordable for many Americans. To get houses to prices where they'd be affordable again would require a housing prices drop that would likely be, market-wide, significantly low enough to put a ton of people underwater on their mortgages. What is society/the government meant to do about that? Is it an insurmountable floor on how low we can get housing prices? That floor feels very close if so.
2. We've been promising the last five generations (or more) of Americans that a house is an Investment, capital I, an excellent place to keep your money. How do we overcome the political pressure to turn a house into a depreciating investment for the length of time required to get housing to be affordable again? What kind of politician would put their neck on the line to piss off every boomer and 75% of gen X and 30% of millennials, or whatever the house ownership distribution is?
There's a big difference between land prices and the building prices. When costs rise 5% per year for a house that's untouched, that's almost entirely the land price going up.
You can make housing cheaper by putting more houses on the same amount of land. In high cost areas, the price of land dominates the cost of housing.
Political pressure to change the investment nature of housing can come from various directions, for example establishing a land value tax, which eliminates the financial incentive to speculate on rising land prices by keeping people out of your area, redistributes all those unearned land rents to the population equally, as is only fair, and also results in a lot of people selling land to be redeveloped taht are otherwise hoarding it when the rest of society would be using it a lot better. Of course, in societies with high levels of land ownership, the voting public usually tries to vote away such extremely fair taxes.
Politically, we must stop prioritizing the views of homeowners at the local level. They already got their reward, massive unearned capital gains on their residence, there's no need to give them priority on land use over the general needs of society.
> Politically, we must stop prioritizing the views of homeowners at the local level. They already got their reward, massive unearned capital gains on their residence, there's no need to give them priority on land use over the general needs of society.
They are the majority of people in most areas, so it does make sense that they would be given priority in some ways.
The rest of your post is unsubstantiated vitriol, which isn't exactly convincing.
You quoted my vitriol to the homeowners, the rest is not vitriol, it's basic land economics.
> They are the majority of people in most areas, so it does make sense that they would be given priority in some ways.
In some ways sure. But in the ways that they are? Absolutely not, it's basic unfairness. The entire tax system is tilted in favor of home owners. We don't need to do that, we could make it more equal so that people with less wealth are not penalized.
It's not "basic land economics", it's your personal opinion about how things should be and whether you think current policies are fair.
The tax code does favor home ownership, because people want to support it. Less people will be able to afford their own home without that support, which seems to be the opposite of what you want.
#1 is the symptom, #2 is the problem.
High levels of home ownership combined with "local control" and "democracy" enables the "haves" who already own homes to weaponize government to keep supply low and home values high. Zoning restrictions, building codes, taxes, and other government tools are brought to bear to support this. The "have nots" don't have a chance.
Austin seems to be a counter-example when they "instituted an array of policy reforms" in 2015 that showed great results. Sadly the key may be appealing to the greed of existing homeowners. Changing zoning to allow tall apartment buildings where single family dwellings once stood lets existing home owners make even more money by selling than they'd make by continuing to restrict supply. While it's sad if that's the only path to success, we'll have to take small successes where we can find them.
I'd also rethink these questions under the assumption that incomes rise over time as the dollar reduces in purchasing power. The original premise was that due to inflation the cost you paid for a home would reduce your economic burden for housing. The slow and steady rise of inflation along with income would guarantee your loan to income ratio would improve.
The last few years have distorted this promise and I think some people have taken a more extreme view of the time window in the name of increased short-term profits.
All said the price you pay today being less of a burden over time was never meant to be a short-term profit motive in the discussion of homes as a economic safe haven.
That gets automatically decided by the market. That's the beauty of markets. They automatically solve the local knowledge problem. It takes a government to create a lack of housing.
Vienna built housing itself, with this housing it was possible to have cheap rents and keep rents from private investors down. https://en.wikipedia.org/wiki/Housing_in_Vienna
Unless you want to build more sprawl-oriented social housing, you'd still need, in most American cities, to reform zoning codes and building codes (single stair and elevator reform) to get Vienna style social housing.
It's a "yes, and" problem though, mostly. Let the market build what it can, and if you want to pursue social housing, do that too - just don't let the perfect be the enemy of the good and delay the reforms while you try and put together all the social housing pieces.
No, you need a government agency which will build social housing.
Not once has the private sector ever been "encouraged" to build social housing with deregulation. The only reason it keeps getting touted as The Solution in the media is because deregulation would boost their profits.
The bottleneck is land, anyway. If you dont tax that enough or take it with eminent domain then you'll end up like San Francisco with absurdly low density housing and criminally high rents.
It’s worth noting that a major confounding factor is that, unlike most cities with a housing crisis, Vienna is well below its population peak and so does not need to build nearly as much housing
Technically yes, but lol no. Population is about the same as at its peak and density (person/m2) was about four times that of today. https://de.wikipedia.org/wiki/Schlafg%C3%A4nger https://www.demokratiezentrum.org/wp-content/uploads/2022/10...
During that peak Vienna’s housing situation was infamously bad though. You’d have single rooms shared by multiple families and beds being used by multiple people on a timetable.
This comment is phrased as if the article is confirming these points when it either doesn't mention them or even directly refutes them. First there is no mention of either crime or rent control in the article. But more importantly, it states that "A key piece of Austin’s strategy has been to encourage the construction of affordable housing." So why are you concluding that affordable housing isn't needed?
The comment is phrased in the greater context of the public discussion about housing, in general. Not the specific information of the article.
You know, like how a discussion about war might reference the various recent wars that everyone knows about; it's not limited to just the content of the article.
But it didn't reference anything, it stated political opinions like they were confirmed facts, provided zero evidence to support those assertions, and completely ignored the ways in which the article provides counterevidence.
They aren't saying affordable housing isn't needed. Just that the method for making housing affordable shouldn't be trying to make the current housing supply cheaper.
And from this is where you get "rent-control is a terrible idea". Essentially: trying to artificially drive down housing prices in any way is generally inadvisable if you can just build more housing.
Sure that's technically an opinion, but it's one based in facts, and it certainly doesn't have "zero evidence".
https://www.brookings.edu/articles/what-does-economic-eviden...
That's a pretty generous interpretation that requires you to believe rent control and building housing are diametrically opposed to each other.
rent control dramatically decreases the incentives to build and in many cases makes it impossible (read uneconomic) to do so
Affordable housing is the only type of housing that will ever be built. Builders aren't so stupid as to build products that their customers can't buy. Government intervention is not needed.
I'm not sure if you're intentionally changing the definition of "affordable housing" in an attempt to make the desire for it seem silly or if you genuinely don't know how the term is typically used. But what you're describing is generally referred to as "market-rate housing" and not "affordable housing".
Affordable housing = housing that regular people can afford
The only silly thing here is that "low income housing" got rebranded as "affordable housing" and absolutely everything else got rebranded as "luxury homes" for political reasons.
"Market-rate housing" is even sillier given that it is literally the opposite of what "affordable housing" policies dictate
I'm not going to debate what the definitions should be, I'll just say I don't think it is productive to join an existing conversation using terms with different definitions than everyone else uses. Defining all housing as inherently "affordable" makes the term meaningless and even if you disagree with the motivations behind the desire for "affordable housing", at least the term has meaning in the way it's typically used.
You are quite literally debating what the definition should be, because this is _not_ the existing definition of affordable housing, it is legally what OP is saying. "Affordable housing" is just when the household spends <= 30% of gross income on housing related costs. This is the definition used by the HUD and the same definition applied in policymaking.
What >you< are referring to and what it is conflated with by progressive policymakers is "low income housing" which imposes an AMI based restriction on the resident's income. This in turn means that 30% of their income is much lower and restricts the sticker price of the home.
In recent years, most 'affordable housing' policy has been advanced by progressives, who use that term for marketing purposes, whereas the actual policy primarily relates to 'low income housing' or even 'very low income housing.' This does not mean 'affordable housing' = 'low income housing', it just means the term 'affordable housing' is used in the title and the actual measures advanced are related to AMI and 'low income housing.'
Those definitions aren't in conflict. The "progressive" definition is just the applied version of the "HUD" definition scaled to local income levels.
There is no "progressive" definition, income level is not at all part of the definition. Per the universal legal definition of 'affordable housing,' if a home costs $1B but is occupied by Elon Musk, it would still be affordable because it is less than 30% of his gross income.
When you are dealing with income levels it is universally called 'low income housing,' and the HUD definition is already scaled to local income levels, the 'A' in AMI stands for 'Area.'
You are conflating marketing ('we need more affordable housing!') with policy ('low income housing')
> There is no "progressive" definition
You seemed to disagree with that in your prior post, but I’m glad we can now agree that there is no point debating this then.
It is productive to decline to use propaganda terms. If, every time someone says they support affirmative action they are asked if they support having higher standards for Asian applicants to medical school than for white applicants that’s good because forcing people to defend their support of racist policies reduces support for them. By the same token pointing out that affordable housing doesn’t mean housing people can afford, it means politician allocated housing paid for by the general taxpayer, reduces support. Reducing support for bad things is good.
Its also helpful to know that there is a specific (US) program called "affordable housing" that subsidizes rents for low income people. The economic effect of that program is to increase rents (but not home prices). This especially hits the working poor who make just a bit too much to have subsidized rents.
I like this reasoning. If there exists a person or organization that can afford to buy a thing then it is an affordable thing. Now this might sound like a tautology but that’s only because it is
And yet, gentrification.
God forbid bad parts of town ever get good.
You mean make the non white parts white, right?
Can you guess what the #1 source of wealth increase in the AA community has been over the last 20 years? That's right, grandma's house...guess where she lived.
That's not what gentrification is. Relevant to this article, I lived through the gentrification of large parts of Austin in the early 00s.
What happened was that good housing full of artists and musicians and other self-employed creatives began gentrifying, driving up property values, which drove up property taxes, which became unaffordable to the existing residents (who had owned their homes for a long time). Many (actually, most) of these artists had to sell and leave.
They often left for other cities. But hey at least the good houses everyone liked all got torn down to be replaced by McMansions for the influx of techbros.
Austin still has that slogan, "Keep Austin Weird." It failed. Austin isn't weird anymore. The University of Texas still is responsible for a lot of great stuff about Austin, but huge chunks of the city are just boring these days. There's certainly much less interesting culture happening. It's been airbnbified.
My interpretation of your comment:
The existing residents (artists) made money by selling their appreciated houses. Those who could afford to remain were now in areas with less crime and poverty.
The new residents spent a ton of money to live in a place they themselves culturally diminished.
We should re-evaluate the winners and losers here.
Let's talk about the East Side.
https://www.austinmonthly.com/in-photos-what-gentrification-...
I don't think many home owners got a price for their land that allowed them to buy a similar house elsewhere.
The world is far from an ideal model where what you get is what you deserve.
Note the history of the East Side power plant, which depressed property prices. Ditto, I-35 construction plans. The article says the plant will become a park now. After the new developers locked in purchases.
You see this business model everywhere. They buy up all the land around an industrial site, small airport, race track, pig farm that smells bad, etc, etc. Then they and their Karens lobby for rule changes that force that use out or make it non-competitive in the broader market. Then they develop the land.
Nothing will fix it until some case goes up to the supreme court and results in some sort of "they were there first the .gov can piss off" doctrine.
My heart breaks for those poor people whose houses became worth multiple times what they paid for them. A true tragedy. I would be devastated if my house became so valuable that the property taxes were more than I could afford.
> good housing full of artists and musicians and other self-employed creatives
It looks like - it might not be what you mean, but it looks like - you're saying 'good housing' is housing that has "artists and musicians and other self-employed creatives", as opposed to poor working people.
Many artists and self-employed creatives are themselves poor working people - making art is work (and so is marketing it to potential customers), and most artists are not lucky or successful enough to become wealthy doing it.
But yes, I think there is a sense in which people who are driven to create have some kind of ineffable, cultural capital that people without this drive do not have. So a neighborhood that is full of artists is more interesting, and therefore more valuable to spend time in, than one that isn't.
See the photo in the above East Side article. In the old neighborhood, people talked to the photographer because the front yards didn't have privacy fences.
Good for whom? If it's good for the residents, that's great. If it's bad for the residents, who get driven out, but good for some developers and outside rich people - that's what gentrification is.
Unless all of the housing is owned by non-residents prior to gentrification, some residents always benefit from their neighborhood going upscale. Either through increased home values, allowing them to sell and improve their lives. Or because it's now a more pleasant area to live in.
Even renters in gentrifying areas may profit if housing construction outpaces population growth. Yes, they may have to move, but also the places they move to on their current budget may be nicer - because the people who can afford better have moved too.
> increased home values, allowing them to sell and improve their lives
That also raises property taxes, making the neighborhood unaffordable and driving them out.
> it's now a more pleasant area to live in.
For new wealthy residents. People who have spent lifetimes there don't want everything to change and have their communities destroyed.
> Yes, they may have to move, but also the places they move to on their current budget may be nicer - because the people who can afford better have moved too.
These are theoretical and very general averages. The actual individuals often do not benefit. Being forced to move is not a mere inconvenience to your theory.
The alternative: new housing doesn't get built. Existing housing - including the "bad" neighborhood that isn't redeveloped for fear of "gentrification" - gets bid up to the moon. People who can't afford rent end up moving anyway and commuting from very far away, if they're lucky. Or they end up on the streets, if they aren't so lucky.
That isn't theoretical. I just described the SF Bay Area.
When people in NYC are driven out of their neighborhoods because of gentrification, they generally move down south. There isn’t some magical part of town that they can afford with their “current budget”
In this case affordable housing nets out as a way to overcome policy barriers to market rate housing. So it actually makes the market freer.
Many other implementations of affordable housing further raise the barrier and thus even if any is built it doesn’t help widespread housing affordability issues.
Rent control is just another flavor of housing affordability policy that often (always?) backfires.
Crime, social peace, and economic opportunity are very linked. A lot of house prices in urban areas are wildly distributed and often the increase cost is to buy distance and safety (often just a couple blocks) from high crime areas.
>In this case affordable housing nets out as a way to overcome policy barriers to market rate housing. So it actually makes the market freer.
>Many other implementations of affordable housing further raise the barrier and thus even if any is built it doesn’t help widespread housing affordability issues.
Can you be specific with what you mean here? Because this reads like a no true Scotsman argument that it doesn't count as "affordable housing" if it works. The article discusses the programs encouraging income-restricted units which seems like a classic affordable housing program. What specifically do you think is different in this case?
Affordable housing in a vacuum disincentivizes development and results in worse affordability.
Affordable housing used as an incentive or way to overcome other barriers to housing (density limits, height limits, zoning etc) that makes the market more “free” net is will produce more development.
You don’t need it for development but it can be used effectively depending on other policies. As with all things it depends on what policy makers are optimizing for. These are all tradeoffs. But affordable by itself all else equal limits developer upside and incentives less development meaning less supply and higher prices.
>Affordable housing used as an incentive or way to overcome other barriers to housing (density limits, height limits, zoning etc)
I'm not sure what type of affordable housing program doesn't meet this definition. They are almost always tied to incentives for developers, including sometimes in the form of a removal of other housing restrictions. Or are you specifically objecting to financial assistance on the renter/buyer side? Because I assumed the “it” in “it doesn’t need to be “affordable”” was referencing the new development.
See San Francisco. Also generally anywhere else where prices are rising and developers can’t develop and yet there are a lot of affordable housing policies. CA as a whole has mismanaged this so badly they have a net migration outflow.
Also removing other housing restrictions that ostensibly were put in there by constituents is a valid reason for constituents to oppose AH. They get called NIMBYs for this but if the local populace wanted more high density development then the density limits wouldnt be there to be excepted by AH
>Also generally anywhere else where prices are rising and developers can’t develop and yet there are a lot of affordable housing policies.
Like I said, the “it” in “it doesn’t need to be “affordable”” seemed like it was referencing the previous “Build more housing”, so situations in which nothing is built are different. If your original intent was that not all housing policy should be about affordable housing, then we agree. But I do think it's an important part of the solution.
> if the local populace wanted more high density development then the density limits wouldnt be there to be excepted by AH
If people didn't want housing there, it wouldn't be built. If they didn't want the exemptions to be codified, then they wouldn't be.
The only way your statement makes sense is if you restrict "local" to a sufficiently small subset of the people (a town? A block? One single address?), but in that case, a greater number of people within a greater definition of "local" seem to disagree.
If the state gifts a locality power to impose zoning restrictions, then the state can usually alter (or withdraw) that gift when it stops being beneficial to the people of the state, even if a small subset of those people living in that one locality don't like it.
Rent control is one of the best ideas, and it may be a civilizational, foundational idea.
Property ownership is at the very core of entrenched power, and the foundation of rent-seeking and wealth asymmetry.
If you look at even the Monarchs of long past - it wasn't their 'titles' that made them powerful - it was the economic rent that came along with the land ownership.
Even in more open market economies, property is still is basically long term economics lording over short term economics of wage earning workers.
Being able to kick someone out of their home almost arbitrary basically puts working class people at the 'total whims of the market' and it's one of the most disruptive concepts imaginable.
If we take the view that 'housing is about housing first - only about investment to the extent it does not disrupt housing' - then a different perspective takes shape.
Many Canadian provinces have 'basic rent controls' and it does not generally prevent new housing development.
If anything, providing 'housing stability' is probably the best way to create base prosperity, so those people can go out and spend on all the other things.
There might need to be some degree of leeway here and there for certain kinds of density challenges, but that can be had with rent control
There is almost unlimited land in North America to build on - if in one spot it's a bit difficult - build elsewhere.
If people want to have 'density' then incorporate an area and 'build density' in that area.
Also it does need to be 'affordable' but that can work with regulations.
Edit: our housing problems are about screwed up management, it's actually not even an ideological problem underneath. Like 'rent control' the way it is framed scares some people, but its literally province wide in Ontario, Quebec and it's a 'non issue' for new unit hinderance. Even the nimbyism stuff can be worked around: if people don't want high-rises next to them, it's their right, but there's a lot less opposition to 'mild density' especially if it fits in local cultural and aesthetic context. We can have our cake and it eat on housing. I think we invent ideological lenses because it's easier to frame 'narratives' than it is just weird policies, special circumstances, hiccups, different municipal things going on all at once.
It would be far more efficient to simply tax away all rent collected from land instead of grossly warping markets and creating terrible incentives for all involved.
The reason is that you can’t produce more land. Fixed supply will also warp economic markets and create terrible incentives (land speculation).
If you want the best solution, you implement a land value tax. If you want the 2nd best solution, tax property (Land + Building value). If you want the worst solution, implement rent control.
Rent control is not 'warping markets' - it's the notion that 'homes are markets' that is 'warped' - that's the basis of the problem.
The workaround is to build more dwellings, and rc generally is not an inhibitor there.
Funny enough 'wealth taxes' may actually be the worst of tax of all - aka a double negative - like a double negative.
What we want to do is make it so that 'rich people get rich' not from rent-seeking but from real value creation.
RC of course is inhibitor. It lowers value of the house, which lowers builder's profit, which lowers number of new investments.
> it's the notion that 'homes are markets' that is 'warped'
A market in this case isn't a literal street market with vendors hawking their goods. The word "market" describes the relationship between people who have more than they need selling to people who need and would prefer to exchange their money (or vouchers etc.) to acquire it.
Housing can't not be a market anymore than food or labor could not be a market. It's like saying it's warped that water evaporates and becomes clouds and turns into precipitation. It's a word that describes one of the natural systems of how the world works.
Even in communist societies where the State owns all the land and all the housing and decides how to distribute it, you still have a State-owned-and-directed market between citizens who need housing and a State that has excess housing and provides it to citizens.
Almost nobody is using the word market as you are in your comment.
Who builds them? Private party. What’s their incentive? Making money.
It's not the 'building' that's the problem - it never wars.
It's property ownership this is the core problem.
It's a zero sum game, of no value creation and mostly just economic rent extraction.
It's the 'property problem' not the 'thing on it'.
We have no problem getting people to 'make stuff and sell it'.
Rent control doesnt change the underlying fundamentals but it inhibits the ability of the ownership class from exploiting the working class based upon those fundamentals.
It will also provide immediate relief for struggling citizens, whereas a LVT or taxing property will take time to actually drive construction which will push down rents.
It's something local governments often have the authority to implement, unlike LVT.
A little mentioned fact: the highest rate of house building in new york (FAR FAR higher than today) coincided with by far the STRICTEST rent controls. Something to ponder next time somebody tells you that rent controls just stops homes from being built.
> Rent control is one of the best ideas
It's funny how this question might have the greatest divergence in answer distribution between people who do and don't know what they're talking about
Other candidates are "is debt good" and "is property tax better or worse than income tax"
I think it's a matter of perspective maybe more than 'knowing what they are talking about'.
Like - seeing property as 'investment and ownership' vs 'places where people live' is sometimes pretty big gap. Especially when we've been grounded in 'mortgages and wealth creation' for regular middle class people.
Rent control and the underlying civilization power dynamics are kind of a subtle thing, I think most folks are going to just answer in terms of 'what is good for them'.
Rent control drives up rents, not down. Since rent control was enacted in SF, rents have increased by 15x in 45 years. That's 24% a year annualized over 45 years. Its similar for other places that enacted it.
Rarely in human history has a specific policy failed more spectacularly. Yet you still hear supposedly educated people advocate for it every year.
> Rent control drives up rents, not down. Since rent control was enacted in SF, rents have increased by 15x in 45 years.
A couple of things:
You're aware of the Californian property tax control? If you aren't, go read up on the 197X Proposition 13, as well as the ways even vaguely-savvy landowners can get around the "tax is reassessed when the property changes hands" rule. IMO, it's only fair that tenants get the same sort of price-increase-protection that landlords get. If the landlords get rid of Prop 13 and anything even remotely like it for the next fifty years, I'll be first in line to clamor for the removal of what passes for rent control in the few cities that have it.
Unless you -as a developer- especially request otherwise, SF's rent control only applies to buildings that were in existence back in 197X, when the ordinance was enacted. New units are not covered by rent control. It does not apply to any commercial buildings... just residential rentals. It also only controls the rate of rent increase until the unit is vacated. Once it's vacated, the landlord is free to charge whatever rent they wish.
Your story gets confounded by the fact that -for a variety of reasons- it's nearly impossible to build any new residential buildings in SF. When demand is met with a nearly zero increase in the supply, the cost of the thing being demanded tends to go up.
Rents are generally quite high in California, not just in SF. From [0]
Only a few cities in California have rent control [1], so that doesn't explain the fact that rents are high state-wide.Though, it is more interesting to look at the numbers when adjusted to 2000's dollar. [2] I wonder if your "15x" figure is inflation-adjusted...
[0] <https://www2.census.gov/programs-surveys/decennial/tables/ti...>[1] Costa-Hawkings prevents cities from even considering the adoption of the policy to level the playing field with Prop 13-subsidized landlords.
[2] <https://www2.census.gov/programs-surveys/decennial/tables/ti...>
Rent control is the wrong solution to the right problem (ie affordable housing).
It creates all sorts of problems that wouldn't exist otherwise. For example, if you've been in a rent control house or apartment for 10+ years and are paying significantly less, what happens if you want to move? Or just need a bigger place? It's a huge impeediment to mobility and flexibility.
Also, you have an adversarial relationship with your landlord. They want you to leave so they can raise the rent. They'll skimp on maintenance, turn off the heat (even when it's illegal) and generally make your life miserable until you leave.
The solution to these problems is social housing, meaning the government becomes a significant supplier of affordable, quality housing. The very wealthy and the real estate industry don't want this however because it will decrease profits.
> Property ownership is at the very core of entrenched power,
In the literature, there is a distinction made between private property and personal property. I'm fine with people owning their own home if they want. That's personal property. Private property is when we allow people and corporations to hoard housing. I'm all for making it financiall punitive to own more than one house.
The problems that rent control creates are far smaller than the problems that exist without it.
To start - your 'very first example' is not even really 'a problem'.
'Without rent control' - you get kicked out of your abode every few years if your salary doesn't keep up with housing inflation. With rent control, you have the option of 'having a home; you decide when you want to leave (for the most part).
The answer to the 'second example', 'adversarial tenant/landlord' is that the theory doesn't line up with reality for the most part. Again - in most rent controlled areas this kind of stuff does not happen, especially if it's entrenched in the culture. It works well in a ton of housing markets like Quebec, Germany.
The primary concern about rent control limiting expansion ... just does not exist. It doesn't really impede new builds.
> 'adversarial tenant/landlord' is that the theory doesn't line up with reality
So disconnected from reality that it beggars belief.
Anytime you put two or more adult people into a relationship together and at least one person feels like they do not have the option to leave if things get bad (e.g. landlord feels like the tenant is wrecking the property but has no right to evict, tenant feels like landlord is not taking care of maintenance but feels pressured to stay due to artificially low rent), the result is toxic suffering.
Why is right to evict tied to rent control? Seems irrelevant
"Pressure to stay" can certainly be alleviated, rent control all properties. Half measures do not necessarily solve half the problem.
> 'Without rent control' - you get kicked out of your abode every few years if your salary doesn't keep up with housing inflation.
Nope, you don't. You just do your best to foresee that outcome in advance before renting and pick a house you can afford. And if rents start to move against you, you plan to move out well in advance of getting "kicked out" by unaffordable prices. But that's actually easier than the status quo since no rent control means (1) lower rents overall for the same quality housing! and (2) everyone gets a home for the right price, there is no hidden privilege or lottery aspect to it. Of course it should be paired with higher property taxes or LVT so the rent itself isn't just value-capture by landlords, but that's politically doable. Just a matter of not picking the wrong political fight.
> To start - your 'very first example' is not even really 'a problem'.
Yes, it is. Anywhere with significant and strong rent control results in a large number of people who simply cannot move. Look, rent control is better than no rent control but it address the symptom not the problem. The real problem is that rents shouldn't significantly outpace inflation. In a better world, you should be able to easily move because you're not locked in to a below-market rent that you don't want to lose. And rents get more expensive because a whole bunch of people make sure that housing is an appreciating asset. It should be a depreciating asset.
> The answer to the 'second example', 'adversarial tenant/landlord' is that the theory doesn't line up with reality for the most part. Again - in most rent controlled areas this kind of stuff does not happen
You will not find in any American city, especially one with rent control, where tenants do not absolutely hate their landlords as the general rule. What are you smoking?
> our housing problems are about screwed up management, it's actually not even an ideological problem underneath
Broadly, our housing problems are bureaucratic in origin and I think bureaucracy is indeed an ideology.
You may be implying it but you also need to make sure this new housing goes into the long term rental market, instead of being secondary residences or airbnbs. I've seen it happen first hand in my home town. That may not be a problem for Austin though.
> Build more housing. Keep law and order.
At least the latter has been equated with fascism in recent years. That's why it's become such a problem.
>If you build housing, but allow crime to rise
Building enough housing that rents go down is the same thing as lowering crime so not much of an issue there.
Multiple things can be done at once. The policies you laid out are not mutually exclusive, and have different utility for different communities. But yes, fundamentally more housing is needed for growing populations. Conversions and rezoning are also important parts of the urban equation to “build more housing”, not just exurban McMansion developments.
in america, more density and more people always means more crime
It's possible to build more housing and have rent control. Rent control is the only thing allowing working class families to live a dignified life in the USA's most desirable cities. Land value tax and social housing are simply not politically feasible – rent control is.
That is simply not true in any way. Have you ever lived somewhere with rent control? Working class families who have members working jobs in rent controlled areas commute in from often over an hour outside of the city. There are only 3 types of people who live in those cities: those in public housing, upper middle class and wealthy. Their plumbers live in Tracy.
> Yes rent control is a terrible idea.
When you aren't building more housing, for whatever reason, rent control is the only thing that prevents domestic 'immigrants' into your city from making all the residents homeless.
Since cities can't stop migration into them, it's the only tool they have to protect their existing residents.
---
PS. If you believe in trial-by-combat for housing, why not a similar approach to border control? It's the same concept, open it all up and let the market decide whether your existence is worth it.
There are billions of honest, hard-working, capable people who will happily pay more than you for where you live, do your work for less pay than you're willing to accept, and would love to live... Wherever you currently feel entitled to live.
What gives you any right to deny the market from improving the welfare of your landlord and employer?
The problem is, rent control scares away developers and traps tenants in apartments that they've grown out of.
Also why should cities prioritize protecting residents based on how long they've lived there? Everyone counts the same.
> Also why should cities prioritize protecting residents based on how long they've lived there? Everyone counts the same.
That's a great question. Why do countries prioritize existing citizens over all people who want to move into them? We are, after all, all the same. Two legs, two arms, just under a dozen fingers, most of us aren't destructive shitheads.
If we just let in anyone who wants to emigrate, you wouldn't be trapped in an apartment, or home, or city or life you were born into. You would always have the chance to 'upgrade' to one that's worse!
You're not emigrating anywhere, lol. Should I be treated like trash when I move from Bronx to Queens? How about SoHo to Tribeca? All US citizens have the same rights and every vote counts the same as every other vote.
Should Juan be treated like trash if he wants to move from Mexico City or Honduras to Queens?
Why should you deny him that mobility? Is he any worse a person than you are? Why does he have to jump through hoops and quotas and queues and all sorts of degrading, dehumanizing bullshit before he can do so?
Why?
---
If your answer is 'because that's the law and because we can make him jump through all those hoops', that's the answer to why cities choose to protect people who are existing residents at the expense of people who aren't. Because it's the law and because they can, if you don't like it, tough, you are free to go somewhere else.
I guess I need to hear more about your seniority rules. If I leave in a city all my life and leave for a month, do I have to start over when I move back?
Not sure what your point is. My point is that the rules around rent exist to protect current residents of a city. Just like rules about immigration exist to protect current residents of a country.
If you think one of them is immoral and unfair, but the other isn't, you're the one who needs to square that cognitive dissonance - not me.
It sounds like you generally think economics should trump the welfare of existing residents. That's certainly a view, but a logical consequence of it is wide-open borders.
> you're the one who needs to square that cognitive dissonance - not me.
No, you are. You have imaginary rules about who should be protected in a city (based on seniority??) that nobody else is aware of and are certainly not following. It goes by things like age and net worth, and basically nobody gives a shit how long you've lived somewhere.
> You have imaginary rules about who should be protected in a city (based on seniority??)
Rent control is not imaginary (Any more than any other rules are), and yes, that is exactly how it functions, for the purpose that I have described.
It advantages senior occupants (Who are grandfathered into controlled rates), at the expense of junior ones, or ones who don't live there yet (Who are presented with inflated rates, for obvious economic reasons).
Well, build more housing and ensure the more housing is being bought by people who live in it or (if you don't find enough of those) by people who will rent it to them. Many problems occur when capital buys living space as an investment that needs to go up in value, since now there is an incentive to keep some scarcity.
And yet, if you dig through the various comments on HN over the years regarding SF housing costs the overwhelming conesus is more rent control. Sometimes, the most common sense solution turns out to be the correct one.
Hows that working for SF so far?
To be clear, I'm not advocating for rent control. :-)
So pretty much everything you've said here is wrong.
Build more housing? In a place like Austin, you can just keep building out, basically. To a point. Eventually cities doing this reach a limit. Houston and Atlanta are pretty much at or beyond that limit.
And it's not that building low-density SFH housing is the most economic. It's simply the most subsidized. Every road, every parking space, every sewer pipe, every water pipe, every utility pole, every school, every hospital, every police station, every fire station... they all add factor in to the true cost of housing and the more spread out things are, the more expensive those things become. Taken to extremes, look at the billions Houston spends now to add just one more lane (because this one will totally solve traffic) on, say, the Katy Freeway or the ring roads.
Yes it does need to be affordable. NYC is the posterchild for this. Nothing that's getting built on billionaire's row will ever trickle down to being affordable housing. They build ultra-luxury housing because it's the most profitable and it does absolutely nothing for anyone else because these units are just ways for non-residents (mostly) to park wealth and not pay their fair share of taxes.
Rent control is the wrong solution for the right problem and it's typically American. By that I mean it forces the solution onto private landlords who are going to do everything possible to get out of those obligations and deliver subpar but compliant housing. And they'll demand tax breaks for it. When in fact the solution is for the government to supply a large chunk of the housing market ie social housing. But there's a pervasive and wrong idea that we can only solve problems in the private sector and that's nothing more than a wealth transfer from the government to the already-wealthy.
"Just build more housing". Yeah, and then you get Houston. Cities need to be planned. Cities require infrastructure. And one of the most important thing cities need is public transit infrastructure, something sadly lacking in virtually every American city.
The core to so many of these problems is that we need to stop treating housing as a speculative asset. Owning two or more houses should be incredibly difficult and expensive and should be taxed punitively. By this I mean the capital gains on non-primary residences should be 80% and property taxes should be significantly higher.
I dont understand your solution, houses are expensive because there are too few of them in desirable places (otherwise we have plenty). The govt becoming a command economy wrt to housing does not fix the supply. If the govt is just supposed to handle all the supply and demand aspects of housing well I have good news, there is a lot of very cheap housing in former Soviet Republics just not desirable housing.
Also taxing homeowners harder doesnt really solve the problem. CA has insane taxes, SF especially has a giant budget. They just waste it. I dont believe that once the govt raises taxes they will suddenly become efficient and competent.
The idea that the more spread things out the more expensive they are is sound theory. However in practice, per capita taxes in a city are often higher than the rural or suburban regions. One water main should serve more people in a city and its cost amortized across the population should be cheaper.
In practice, cities tend to have tons of programs that drive taxes up. They are free to do that, not necessarily bad, but also not efficient from a tax payer perspective.
There's no reason for houses to be as expensive as they are. They are expensive because we've created incentives to make them more expensive. This is because we treat houses as investments, allow people to hoard housing, build the wrong tyhpe of housing (because it's more profitable), allow non-residents to use housing to park wealth, etc. So voters vote in politicians who put up barriers to build more housing and to defeat any kind of public transit infrastructure even though it would absolutely benefit people who still want to drive (by removing people from the roads who don't). Why? Because taxes.
Housing should be for residents of that city to provide a utility: shelter. Not as an investment vehicle.
It simply doesn't have to be this way. The poster child for this is Vienna [1][2].
Increasing house prices are an illusion of wealth creation. Let's say you buy a house for $200k but over the years it goes up to $800k. But every house costs $800k so you still have only 1 housing unit's worth of wealth. You've simply increased the barrier for younger people to buy houses.
Put another way: increasing house prices are simply stealing from the next generation and that money is really going to the already-wealthy and, to a lesser extent, the old. Just look at the median age of homebuyers in the US, currently 59 [3].
[1]: https://www.youtube.com/watch?v=41VJudBdYXY
[2]: https://www.theguardian.com/lifeandstyle/2024/jan/10/the-soc...
[3]: https://www.apolloacademy.com/median-age-of-all-us-homebuyer...
You seem to know Houston; alas yes Austin was formerly surrounded by open spaces.
But let's not miss the point of the article. This is a right-ward shift of the supply curve. It means that the economics of building the next unit got cheaper. That's the point.
I've seen a lot of neighborhoods across the USA, and Austin making way for higher-density housing on urban corridors (Lamar) is like, duh, this is more live-able. There are new towers along rail and bus route, townhomes packed in, and behind the tree line it's now possible for some single-family lots to become duplexes or fourplexes. And rather than McMansion ugly, the new Austin residents are dressing those up to look pretty darn cool.
There is a lot more to be done to remove supply-side barriers in every city.
> Just build more housing.
Also "Wipe out a whole boatload of techbros who artificially inflate prices". Nobody is talking about that part of the equation.
Austin was one of the places a lot of tech folks flocked to when everybody was working online. RTO and layoffs have wiped a lot of them out. I'd estimate almost 1/3 of the tech folks that were floating around last year are now in other cities.
There is affordable housing all over America. Get it through your head. It’s about nearness to the economic singularity that costs so much not the housing itself.
There isn't affordable housing in areas of opportunity. You can easily find cheap housing if you don't care about proximity to jobs or to good school districts.
You always come in with the useless comment. All that karma, so little value
What do you mean by "economic singularity"? If your goal is being near economic opportunity then Austin has plenty.
It’s not NYC or SF, but this suggests that those would be more affordable if they just built more housing.
It is not affordable if it is located somewhere with no job.
Congrats, you just figured out the point of the statement
You have to restrict investors buying up that newly built housing too.
Homes for people. Not investors.
No not really. You just have to restrict the same investor from buying all the housing in an area, and prevent investors from colluding on rents.
Sounds easier to just outlaw investor from owning houses they don't live in themselves. Seems we can't really stop collusion, only real way to win there is to not make that possible in the first place.
Investors add to demand for housing. This will help drive up prices. And no, builders will not necessarily increase supply if they can realise increased margin of profit due to increased demand. We see that with RAM manufacturers. RAM suppliers constrain supply to boost margins. Same with house builders. The difference is people can go without RAM but everyone needs a place to live.
> Investors add to demand for housing
And here I thought people who want to live in houses add to demand for housing.
Investors buy houses that people want to live in. If people don't want to live someplace, you won't see any investors there either.
1 house is built. Alice wants to own it to live in it. Bob wants to own it to rent it to Alice. 2 people want to own the house.
> 2 people want to own the house.
and so how do you decide who gets it?
1) morally. Alice deserves it because her intention is more pure.
2) financially. Bob gets it, because he can pay more for it than alice.
Which choice above you make as a policy direction is a reflection of your world view. I'm voting for 2), but i can understand the POV of 1), even tho i disagree with it.
You are entirely missing the point. The correct answer is to build 2 houses. The problem with these policies is that they artificially restrict demand. If they didn't do that, nobody would have a problem with them.
> The correct answer is to build 2 houses
the utopian answer is to build two houses. But we don't live in utopia.
The constraints faced today is real (paper or physical). You can't wish it away, and you can't say it's "easier" to just build two houses.
> And here I thought people who want to live in houses add to demand for housing.
Desire is a necessary component in demand, but it also requires willingness at a given price point. If houses are selling for $1,000,000 and you only have $500,000 to spend, then no matter how much you dream every night about having a home, you are not a contributor to demand.
Counterpoint: houses sell for $1,000,000 because there are more people with $500,000 (and every other number less than $1,000,000) who want those houses than there are houses.
How is that a counterpoint? It says the same thing with different words.
You said the person with 500k is not contributing to demand, they said the person with 500k is contributing to demand.
35% of Americans rent their homes. And they almost invariably rent from investors. Therefore if more than 35% of homes are owned by investors this drives down rent. If less than 35% are owned by investors rent goes up.
This logic assumes that 35% of Americans WANT to rent their home. Which seems odd to me, if only for financial reasons - why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it?
If you invent a scenario where the mortgage is half the rent then buying is a no-brainer. Does that reflect reality?
Maybe not half, but it’s pretty common around here (generic midwestern city) for renting to be more expensive than a comparable mortgage.
Many landlords seem to expect to pay their mortgage and property taxes and maintenance with the rental income, and still net a profit, if r/landlord is to be believed.
The profit is compensation for the risk. The mortgage and property taxes and maintenance are due no matter what - can't find a tenant, tenant doesn't pay, tenant flushes paper towels down the toilets every day etc etc.
If there was no profit there would be no landlords. Some might say that's great. But it would be a world with less flexibility, with fewer choices. Don't like your job and want to move? Split up with your partner and need someplace to live? Moved to a new city and don't know where you want to put down roots yet? At college for 4 years? Don't want to deal with house maintenance? "F** you, buy a house anyway". That's what we'd have if there was no rental housing.
Okay, so why were you asking if renting can be more expensive than buying? You seem to already know that it can be.
I said they were inventing fantasy scenarios.
The actual numbers might be more like rent $1400 vs mortgage $1000. After property taxes, insurance, and maintenance there might be $50 left. A handsome 3.5% profit, rising to maybe 6-7% if you include principal paydown. This is hardly a money-printing machine. It's a steady return for taking on some risk.
Ah, I see, you wanted to split hairs on the numbers. Fair enough.
It isn't splitting hairs. The numbers actually matter.
It’s at risk of becoming a fractal of splitting hairs. Substituting your numbers in for theirs doesn’t change much. It’s still more expensive to rent.
Kind of an unhelpful tangent to the discussion, really.
It changes a TON whether you pay 2x for renting or whether you pay 1.05x.
Renting has annoyances but it also has flexibility. A flat "more expensive" is staring at one tree and missing the whole forest of tradeoffs. Way more people would choose to spend $50/month for that flexibility versus $700/month.
> Substituting your numbers in for theirs doesn’t change much
You can buy a boat for $10 or rent one for $9. Assuming you really want a boat, would you buy or rent? Do my numbers reflect reality? Do they have a bearing on the choice you make?
?? How in the world is it splitting hairs to point out that those numbers don't make sense. It is directly relevant to the question of how many Americans want to rent. You don't need to be like this :(
> renting to be more expensive than a comparable mortgage.
that doesn't sound plausible. May be for a select few properties that are in some unique circumstance (e.g., the seller of the property would sell underpriced because they needed quick sale).
And often, in arguments like these, the rent is the rent, but the mortgage is purely the interest on the loan, and doesn't count the maintenance cost, and doesn't count the deposit required (which has a cost, ala the cost of capital). If you added up all these costs, it exceeds rent.
I fundamentally agree on statement that rents are more expensive than mortgages. As capital is involved and landlords want premium on capital.
Still, things can go either way. And well renting is lot more flexible and less risky. So there is really nothing wrong with that option existing. And many times it is the better pick of the two.
You do know that the posters on r/landlord are often selling services to landlords and thus have a financial incentive to make being a landlord seem attractive. Its a pretty safe assumption that reality isn't that rosy.
> why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it
Because the down payment you put into your purchased home could've been put into the stock market and grown faster than property values (this is historically true).
Because you don't want the headache of home maintenance.
Because in the 21st century, job stability doesn't exist so it's a big risk to buy a home fifteen minutes from your current job that might be an hour from your new job after you get fired so a CEO can get more golden parachutes.
Because you might have to change cities a year from now.
My wife and I rented for a long time because it was better than owning for us.
Agreed. It’s a classic fallacy to compare rent vs mortgage on a numbers to numbers basis. It’s classic example of not accounting for the total cost of ownership.
The numbers you are using are not common at all.
> 35% of Americans rent their homes. And they almost invariably rent from investors. Therefore if more than 35% of homes are owned by investors this drives down rent. If less than 35% are owned by investors rent goes up.
This only holds until the percentage owned by the investors becomes a monopolistic chunk. At that point the investors would rather leave some apartments empty rather than see rents go down.
See: all the current RealPage lawsuits
It really doesn't matter as long as someone is living in it.
> Its wild how the solution to housing costs is really just:
> Build more housing. Keep law and order.
Safety (law and order) increases housing costs, as you say. It's desireable on its own, but it does not solve housing cost. NYC is very safe and very expensive. Crime is way down in most of the US, and housing costs are much higher.
NYC is fairly high density. Has stopped building massive new skyscrapers and has water on two sides. It is also a tier 1 global city culturally AND economically. Its not really reasonable to expect to be affordable.
without rent control, what economic incentive do renters have to maintain law and order / invest in local community / be a good neighbor? any investment they make is captured by the landlord. in fact, they are incentivized to maintain their neighborhood in as much disrepair as they can stand, for fear of rent increases.
the little old lady living in a rent controlled apartment is a big part of why rents are high in that area: she was part of what made the community thrive. we would do well to compensate her for this.
And also expand the city line for what "Austin" is so you can include the cheaper, far from everything housing that you refuse to build.
Yes, it does need to be affordable, and a certain percentage of it needs to be non-market housing. Housing isn't an elastic commodity. Get real.
But where do you draw the limit on moving the line in?
Do I get to demand affordable housing overlooking Central Park in NYC? Beachside in Malibu?
If you want large incentive for development at scale you need to allow developers to make fat margins or else you wont get too many of them. Yes you can use affordable housing to do that. Eg: in the article they got higher density and exceptions (aka “fat stacks”) for building affordable housing units.
This is all policy tradeoffs at the end of the day. Eg: a tent is not “housing”, why? Because of reasonable policy. Same thing with housing codes etc. All directionally wise/good. But at the same time you can have bad affordable housing policy.
I do think housing is elastic and a cities policies around that elasticity determines if they will thrive or stagnate.
No, it really is not that easy. Check out China, and read up on the Spanish housing crisis. "Just build more" works only sometimes, as demonstrated in those counter-examples. Housing is massive societal and sociological problem with no simple fix. Furthermore, in many circles, another proposal is to cut red tape. You know, housing in the US already is among the least affordable and lowest quality in the developed world. But some people really insist that going back to asbestos and lead pipes would make housing cheaper.
And don't get me wrong, asbestos and lead are wonderful construction materials. Cheap, durable, and high quality. It's just a shame it causes all sorts of health complications when we use them, right? I mean, it would definitely make housing cheaper, but also cause all kinds of health problems.
Your reply conflates “build more” with “build anything, anywhere, with no standards”, which is not what they wrote. China and Spain are not rebuttals to the basic supply point because both involved distorted credit, speculation, and overbuilding in the wrong places or segments, not healthy increases in broadly useful housing supply. The question is not whether supply is the only variable, but whether more homes, in places people actually want to live, puts downward pressure on prices and rents, and it does. That is just basic scarcity: when demand rises faster than housing stock, prices go up.
Keeping crime low matters too, because people pay a premium for safety, and high-crime areas often face weaker investment and worse long-term housing outcomes. And “cutting red tape” does not mean legalising asbestos or lead pipes, which is a straw man. It means reducing delays, exclusionary zoning, parking mandates, and other rules that limit safe housing production and raise costs for no good reason. Housing is absolutely a complex social problem, but complexity does not erase the role of supply. More safe housing plus safer neighbourhoods will not solve everything, but it is still one of the clearest ways to reduce pressure on rents and prices.
Meanwhile, California is also trying to build housing near transit, but Menlo Park wants to preserve the character of downtown by preserving dirty, cracked, flat, surface-level parking lots like it's 1950.
NIMBYism has never been about preserving neighborhood characteristic, or noise and traffic concerns. Menlo Park is not Big Sur. Sure, some concerns are reasonable and should be investigated, but most of the time they're bureaucratic distractions that's been weaponized by people who want to delay progress and protect their investment.
For most Americans, A house is their primary savings account, retirement plan, and probably where they keep majority of their wealth. We don't build new housing in old neighborhoods because it would de-value the investment of too many people. Until we can solve this problem (where people are incentivized to pull the ladder up behind them), we will always have housing shortages. It's just too profitable.
> For most Americans, A house is their primary savings account, retirement plan, and probably where they keep majority of their wealth.
If you allow for increases in density, that house (actually the land beneath it, but still.) becomes more valuable as it's redeveloped. So that American homeowner does benefit, by unlocking the upside of "evil gentrification" (or actually, density increase).
That can only happen if the higher density coincides with equal economic growth in the neighborhood. Otherwise, the higher density could result in a negative home valuation trend.
Given the above uncertainty, and higher density could result in more traffic, noise, crime, nymbys are likely taking the correction position for wealth preservation and quality of life.
"Traffic" doesn't come from higher density, it comes from zoning bans on mixed-use neighborhoods which force people to drive everywhere. The "crime" argument is especially silly: why assume that higher density only ever attracts criminals? Usually, having more people around is a positive.
A paper came out about this recently: The City as an Anti- Growth Machine.
> Logan and Molotch's “urban growth machine” remains foundational in urban theory, describing how coalitions of landowners, developers, and politicians promote urban growth to raise land values. This paper argues that under financialized capitalism, the dynamics have inverted: asset appreciation now outweighs productive investment, and urban land is increasingly treated as a speculative asset.
https://doi.org/10.1111/anti.70145
I'm not sure why new housing devalues old housing. In my mind, higher density generally makes an area more desirable (e.g. because higher density enables more jobs, better infrastructure) and raises the value. Imagine as an extreme example and existing house in the middle of nowhere around which a metropolis is developed. Surely the value of the house, or at least the land it is built on, goes up, even though it loses its "cabin in the woods" appeal.
You think if there were modern highrises in Menlo Park a tiny 2BR shack next door would still sell for $2M? It’s a supply and demand issue, nothing more.
A tiny 2BDR shack next door that is worth $3M because of the 6000sqft lot it sits on _absolutely_ goes up in value when density increases.
Yes, it would go way, way, way up because if there is a high rise next door someone wants to knock down the shack and put up another high rise, a commercial building, etc.
I've never seen the evidence where density increases drive down existing land/home values.
it's not that density per se drives down existing costs, but density almost always brings more housing stock to the market (unless they are simultanously tearing down housing elsewhere) and housing stock drives down the cost of housing, which is the point of the original article.
So if we take it as an assumption that density increases housing stock, there is lots of evidence that density drives down prices of existing land/home values.
Density is not going to drive down cost for the same kind of housing. A SFH is not the same as a smaller home on a denser plot, much less an apartment block in a high rise. So the SFH owner who pursues increased density does indeed benefit.
Isn't the parent article basically evidence of this? Housing supply grew, and prices fell.
in fact, density increases the value, because the original plot can now be resold at a higher price for a hi-rise.
>For most Americans, A house is their primary savings account
This is true for California, where people (foolishly) rely on their home value as their retirement plan, which further incentivizes NIMBYism.
But in places like Texas (and other areas with affordable housing), the house is just treated as something you pay off to have a low housing cost in retirement. And your investments are your retirement+savings account.
I'm not from Texas or California but it doesn't intuitively feel true to me that Texans are better at investing and saving for retirement.
According to the first relevant search result I can find https://www.cnbc.com/select/average-retirement-savings-by-st... the retirement savings per dollar of median annual income in California is $1.44 and in Texas is $1.17
Do you think that's wrong? Or do you think it's a misleading statistic and doesn't contradict your belief?
I wasn’t trying to say one was better or not, just different. Californians wrap up a large amount of their retirement savings in their houses though, so keeping those home prices high is important to them and that’s a reason for stalling development.
I think Californians do, a lot of time, retire with a higher net worth. But most of them do that because they’re more relatively house-poor during their lives - they take out larger mortgages, and save more into their net worth.
As opposed to Texans, who have higher disposable income since they have smaller house payments. It’s less incentive to save so they may spend more.
So that’s a partial advantage to California - the expensive homes force a higher savings rate, naturally.
But, at retirement age, a lot of their net worth is tied up in their home. So to unlock a lot of those savings they need to move to a lower cost of living state like Arizona, Nevada, Florida, etc.
While the Texans can just stay in their paid-off house.
So yeah it’s just different.
Texans are just paying off their home throughout their life and staying in it. They have larger disposable income to go towards other stuff (kids, lifestyle) while Californians gotta pay that mortgage
It all depends on how those things are calculated. Are you including home value in retirement savings or not?
It's not that they're "intuitively better" it's that prior generations of them have passes less insane state and local law and they're not at the tail end of a ~20yr industry boom so "pay down my house and cash out to somewhere cheaper" doesn't make sense as a retirement strategy for as many of them.
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> If NIMBYs were primary motivated by making money the prudent thing to do would be to support unrestricted zoning and then develop or sell the lot.
That is highly dependent on what exactly is being built next to your home. Sure, if it's more luxury housing then it'll probably drive the value of your home up. If it's low-income housing then it probably won't. And what we need is more of the latter rather than the former.
> you can take out loans against the value of the equity but this isn’t particularly common.
It's because it's an investment, you're going to get the return once you finally sell your home. Only in a pinch if someone needs a large amount of money to start a business or pay for an emergency will they mortgage their house.
> And what we need is more of the latter rather than the former.
You just need to wait. The luxury housing that gets built today becomes low-income housing as it ages. There's no short-circuiting that process the way the incentives are set up, but you can drive down prices across the board by building more, even more luxury housing.
> It's because it's an investment
The home you live in isn't an investment; it's a store of wealth.
Many lives were ruined by thinking your primary home is an investment.
It’s going to take a SCOTUS decision overturning Ambler vs Euclid in my opinion.
We certainly will not see zoning reform until the Boomers die.
Case in point: my parents. Built a house in 1988 and they still live there. Two people in 3500 square feet. Four bathrooms and five bedrooms. Meanwhile, you need a family income of 3x the median to rent a townhouse 1/3rd the size nearby.
This is beyond ridiculous and it’s totally unsustainable.
Hate to be the bearer of bad news here, but the boomers will never die. Gen X will become the new boomers, and then the millennials after them. Individual people die, but interests stay the same.
Yeah, but the inverted pyramid demographics can’t last forever.
Fundamentally as a society we need to stop treating housing as an investment. It is and should be a utility.
Suring property prices is a relatively new phenomenon (as in, post-WW2). The true origins of NIMBYism, at least in the US, is (you guessed it) racism. Long before segregation ended, and long after, there was economic segregation. Redlining [1], HOAs [2], the post-WW2 GI Bill [3], where highways were built [4][5], etc.
In fact this is a good rule of thumb: if you're ever confused why something is the way it is in the US, your first guess should pretty much always be "because racism".
[1]: https://en.wikipedia.org/wiki/Redlining
[2]: https://www.furman.edu/fu/placing-furman/what-are-racially-r...
[3]: https://www.history.com/articles/gi-bill-black-wwii-veterans...
[4]: https://www.npr.org/2021/04/07/984784455/a-brief-history-of-...
[5]: https://www.bloomberg.com/news/articles/2017-07-09/robert-mo...
Yes. A lot of people are happy when housing prices rise, because it benefits them. But higher housing prices are worse for us as a society.
Similarly, higher gas prices benefit the gas industry but we shouldn't let that dictate policy.
: unfortunately, we somewhat do.
To be fair it is not the city/elected officials who wants to retain the parking lots. The downtown redevelopment would probably make the city a lot of money.
It is the businesses around downtown who are pushing the save downtown campaign. I imagine the businesses contribute a fair chunk of revenue to the city now and have some influence .
Relative to say parts of Redwood City, or Palo Alto. Menlo park has a fair amount of student-ish 4 Unit lots, so it not all zoned SFU.
TBF a lot of the complaints are coming from businesses that are _probably_ renting. There is absolutely the chance that their business will go under due to construction disruptions before they can benefit from the increased foot traffic once the development is complete.
And, of course, once the development is complete, and the value of their land goes up, so too does their rent....
It is just not rent that will go up.
Menlo Park today has free and ample parking downtown. RWC is paid parking anywhere within few blocks of downtown, all the garages are paid, the garage on Jefferson Av charges more on Sundays. Same thing in San Mateo downtown.
Menlo Park people are pretending that they are Atherton.
TIL Menlo Park claims to have a personality
To be fair, parking structures always look and feel pretty distopian.
I like the approach of making downtowns walkable and having a bit of parking at the periphery of downtown, along with good public transit. Encourages people to use public transit to get to town in the first place. Downtown residents can use transit or a zipcar or equivalent when the need to get out of town, instead of devoting a ton of space downtown for storing their cars.
Not sure if that approach is really practical, but if it can be made to work it is much nicer.
Well, in Menlo Park they're just flat surface parking lots, not even multi-story structures. The planned development is multi-story housing with parking underneath.
To be fair, I am boycotting the (similar) underground garage over at Springline because they're clearly made only for people in Range Rovers or whatever. They have those AWFUL ticket machines, set too far back (to avoid getting hit) and too high to access from a normal car.
Is the Bay Area really dealing with ticket machines? The global capital of technology? Just bill by plate or something.
The global capital of technology has absolute horrid infrastructure and is not on the forefront of any municipal technologies.
There's a big disconnect from people building new projects and local governance, and it's growing. When tech companies started even providing buses for their employees, because local government is too fractured and incapable of running needed bus routes, and can not coordinate across county and city borders, local activists were extremely upset that tech workers were not driving their personal cars and instead using environments-saving and traffic-reducing transit.
I got billed by plate at gravel parking lots in places in Iceland where there were probably more sheep nearby than human residents. Embarrassing.
I would bill by ticket machine too if it was my job to collect money on the parking. I’m guessing that the amount of people who never pay is much higher than zero so it really only makes sense when you have such high throughput that the slowdown is detrimental (such as the Bay bridge).
Or develop 12 competing apps that each only work in different lots.
A fellow Swede I presume?
It's extra silly cause I once parked in central Oslo and got the ticket mailed to my sthlm address. No fuss, no problem, super easy!
We got a lot to learn from our neighbours....
Super easy unless you have moved recently, then you don't get the bill and end up years later in collections for the original amount plus a million late fees added on.
Nah it arrives electronically to kivra, which is like email except you log in with your social security number and it's only for "official business" like invoices and whatnot.
No not a Swede at all this is funny! That was my experience parking in the Washington, DC area last year.
The reasons why the Bay Area is the global capital of technology are absolutely totally unrelated to the quality of infrastructure or the policies of local government there.
It’s mainly due to the state of US technological advancement decades ago when the whole thing got started, the general US-level business-friendly environment, and the presence of an extremely prestigious (especially in science and tech fields) university nearby.
The specific reason is that William Shockley's mother lived in Palo Alto. Stanford gets the credit but in reality it had nothing to do with the decision.
I don't know if that's a boycott, or just going some place you like better.
I park on the street for free. (The lot is also free in monetary cost, for the short windows I'd park there, but the hassle is larger than the hassle of finding street parking).
> They have those AWFUL ticket machines, set too far back (to avoid getting hit) and too high to access from a normal car.
Are you sure it's the ticket machines? Around here, the ticket machines have stayed the same, but it's now impossible to use them without stopping the car and getting out, because car manufacturers have decided I need eight inches of empty space between myself and the side of the car.
That eight inches is called "side impact protection" and, while it sucks to not be able to comfortably rest your arm on the window sill, it is pretty important to have in the event of an impact to the side.
Safety people: <Ruins cars>
Also safety people: "These goddamn consumers have started buying SUVs"
I'm not saying this is you the trend is pretty goddamn clear.
I liked it when my car could fit inside a parking space, personally.
> To be fair, parking structures always look and feel pretty distopian.
What a lot of the new buildings in Austin are doing is putting an attached garage directly behind a 4 + 1 mixed use development - the street-facing facade is the apartments and shops, and the garage is directly behind (and usually attached) to the apartments. You basically never see them.
They put it in the middle usually. It’s literally called the “Texas Doughnut” — a 5 over 1 surround a parking garage.
Ha, today I learned.
Babies throw tantrums, your job as a parent is to not give in to their demands. But California has a weakened state government due to the governor's will-he-wont-he bid for higher office some time between now and 2092, he's afraid to make waves. If it were me I'd say: you need more housing. And if the fine people of Menlo Park say no, then let them maintain El Camino Real themselves. A home depot employee will be by to unlock the shovel cage for you shortly.
Menlo Park isn't comparable to Austin though - Austin's equivalent of Menlo Park would be a country club CDP in the Austin Hills like Rob Roy.
A better comparison would be ATX against San Jose.
Just like how the "rich" residents of Santa Clara county know that you want to live in Campbell, Los Gatos, Menlo Park, Los Altos, Loyola, etc, similarly rich Texans and Austinites live in the Hills.
The reality is the residents of Menlo Park and Rob Roy don't want your type, and in a lot of cases tend to be the same people as there aren't many places left where you can trail run, bike, eat Michelin star ramen, and not pay income tax.
Just because we make good money in tech, it doesn't make us "them". I highly recommend reading the works of Pierre Bourdieu with regards to cultural capital.
Menlo Park has a higher population density than Austin...
The majority of it is not Bel Air...
> The majority of it is not Bel Air...
Menlo Park was never a "middle class" town. The 101 was always the (literal) redline.
The median household income is $210K [0] and it's the same demographic, unlike historically lower middle class but now upper middle class San Mateo [1].
A Menlo Park home address that is on the correct side of the 101 opens the same doors in the Bay that a Bel Air address does in Los Angeles or an Austin Hills address does in Austin.
Rich doesn't equal conspicuous, especially in the Bay Area - "Wealth is quiet, rich is loud, poor is flashy"
[0] - https://www.census.gov/quickfacts/fact/table/menloparkcityca...
[1] - https://www.census.gov/quickfacts/fact/table/sanmateocitycal...
Which side is the rich side?
280 to El Camino is "oldish rich" (made their millions in the 1980s-2000s), the El Camino to 101 is "new rich" (made their millions in the 2000s-2010s), and 101 to Meta used to be a Samoan ghetto (literally, redlining was legal until the 60s and unofficially the norm until the 90s) until they were gentrified out.
The old money (rich before tech) to the West of 280 in Woodside and Portola Valley.
South of 101
> opens the same doors in the Bay that a Bel Air address does in Los Angeles or an Austin Hills address does in Austin.
West Lake Hills perhaps (which is not technically Austin) - Austin Hills is not remotely prestigious.
> West Lake Hills perhaps
Yep! That's what I meant - Rob Roy, Westlake Hills, Barton Creek around the country clubs, and Lost Creek. Those are the equivalents of much of Menlo Park and Atherton, and I know of a number of people who lived in Menlo+Atherton and moved to those areas of Austin in order to front-run taxes in the run-up of some significant exits.
If you owned a 600sqm allotment in Menlo Park surely you'd want it to stay a parking lot and not become vibrant apartment blocks.
I don't expect Menlo Park to keep it character for long as Silicon Valley CEOs are fleeing the state.
So glad we don't need to re-write the first chapter of almost every economics 101 textbook!
it's crazy that people nowadays seriously question basic market pressure being a thing
I'm with you, but many people still question this. Here's a recent pre-print paper that was in the news arguing that inequality, not lack of supply, is the real source of housing affordability: https://osf.io/preprints/socarxiv/95trz_v1
The black pill about that story isn't that a (crappy) preprint exists, it's that it got coverage in the press and was viral on social sites.
Telling people lies that they want to believe has always been profitable.
They are often happily blinded by ideology. Try to tell someone in Britain that wages have been seriously suppressed due to mass immigration and most of them will look at you like you’re stupid.
Housing and immigration are two areas where people just can't accept basic economics. You can see some olympic level mental gymnastics routines all over this comments section.
Who are the people that “seriously question basic market pressure being a thing”? Am I missing something?
Just look through the comments on any post about housing or immigration and you will see hordes of them.
Every leftist European nimby party comes to mind.
There was an article on HN front page a few months ago which stated(paraphrased) "building more housing to reduce prices is a right wing ideology that doesn't match reality" or some such. I'll reply here if I find it.
hn.algolia.com is a great search interface. I searched “housing” and top posts in the past year and didn’t see anything related to your quote on the first two pages. Maybe I need to search deeper.
What I paraphrased wasn't in the article headline but inside the text, almost in passing.
The best I could find was a couple of comments from two years ago which have a similar theme.
https://news.ycombinator.com/item?id=39206707
Eh, people really need to be questioning econ 101 more often.
It's built upon untrue assumptions
- infinite buyers / sellers
- perfect information
- no switching / transaction costs
---
The article itself has 3 different year ranges provided so I'm not sure how you can use it as evidence. Plus overall the rent is still up by a lot since 93% - 4% is still at least 80%.
- Rents increase by 93% from 2010 to 2019
- Housing increase from 2015 to 2024 (this overlaps with when rents increased ...)
- Rents fell from 2021 to 2026 by 4%
Housing is also really weird:
- the main input (land) is also an output, so when the price of the output goes up, so does the value of the input.
- economies of scale don't really work, due to the impracticality of transporting the good (houses) and fitting the good inside a machine (in house "factories", normal workers go inside the house and work on it by hand; not a lot changes compared to traditional construction)
- more supply in one area increases the value (and therefore demand) in that area, so it's not actually clear-cut whether building more would reduce the price more than it increases it, at first glance.
First year economics doesn't ignore any of this. There's behavioral economics and microeconomics, for example.
That may be true recently but there was alot of effort required to unseat Homo economicus as the sole building block of economic theory.
Ah yes, that 150 year old meme reflexively copy-pasta'd by internet commenters since the days of usenet to refute basic concepts like supply and demand.
"Lol economists are dumb they think humans are robots!"
No they don't. Sorry, we won't be throwing away an entire field of human endeavor based on a straw man caricature that isn't true.
We don't call physicists dumb and throw out their ideas because the real world isn't a perfect vacuum either. They know this, don't be silly.
Yes, it describes human nature better than psychology. We can’t fight even knowing about it.
There's loads of other inefficiencies as well. Moving is a huge hurdle. It's difficult to find housing that meets dozens of conditions, and even then you don't respond to supply + demand imagined equilibrium, you pay more or pay less to live near friends or family. It's something you only do a handful of times in your whole life. Trying to use the same analysis as for buying a can of beans is absurd. You might need to take econ 201 before you understand why econ 101 is wrong about housing.
> It's difficult to find housing that meets dozens of conditions
Correct. That's why when there's more housing you're more likely to find what you need.
False. Even if you don't move, people move all the time and that moves the needle for everyone.
You need Econ 301 and stats 101 to see Econ 201 is wrong.
Not really, it used to be the case that a full third of Americans moved every year. Obviously life is more complicated than econ 101, but it's also obvious that a current undersupply of housing is one of, if not the primary, drivers of home pricing. Admittedly other factors like the governments interference in the home loan space have also had large effects on the market over the last century.
https://www.theatlantic.com/magazine/archive/2025/03/america...
“People like to drink certain kinds of beer” and “some people don’t drink beer often” are not arguments against supply and demand driving beer prices.
Prices in massively inefficient markets do not follow the supply + demand equilibrium. Beer is not an inefficient market. You're doing the absurd comparison.
It's more correct to say supply and demand still drive the overall average, but in a high-friction market of unique items, every single case is still a unique case. It's not like moving wheat bushels or RAM chips. When they sell oil, they mix up all the oil from different producers in the same reservoir, in the same tanks. Electricity travels in the same wires. Housing is nothing like that.
"they mix up all the oil from different producers in the same reservoir"
Only when avoiding sanctions, not normally. And housing does follow economic principles no matter how much you wish that wasn't so.
I'm not clear: does Econ 201 inform us as to how demand and supply are not related to price?
Yes, you learn why supply + demand curves do not actually describe many markets
So, if instead of installing a bunch of apps, setting up search filters, and refreshing browser tabs on my phone ever 15-30 minutes, then the instant something meets my parameters I immediately leave work and, if possible, make a deposit on a new place, I open an app and find 5000 places meeting my requirements, meet them when I'm not working and on my time, and tell them I like a different one better so I'll hold off before making a decision, makes no difference on the price?
it says "it's complicated".
the snark is quite rich when reading beyond the headline makes clear this was anything but a free market solution.
OP wasn't talking about free markets but supply and demand.
You should read again. The reforms made the market more free.
I don't think this is simple econ 101. Yes with more houses we should expect lower prices, but also with high prices we should expect more houses produced. All that is econ 101, but that second econ 101 prediction isn't happening. I would guess that some will chalk it up to vaguely (though not necessarily wrong) jerks/idiots blocking it. Whether it's because nimbyers want to keep their home values (what we should expect from econ) or it's broken city politics, there are lots of things going on here. It's more complicated.
They also teach you about elasticity in econ 101. It's foolish and anti-intellectual to insist that the housing market has only two factors, while simultaneously condescending about your understanding of economics shows that you really don't understand economics, it's more about your ego.
> It's foolish and anti-intellectual to insist that the housing market has only two factors
Elasticitiy moderates the effect. It doesn't reverse it. Increasing housing supply decreases housing costs. A lot of people are venally or ideologically motivated against accepting this. Our housing crisis is a political choice. (Note: I'm a homeowner.)
This reminds of a fun fact I remember learning in university.
Elasticity is the relationship between demand and supply, and there are actually very rare instances where it can be negative (where demand increases with price).
These are called Giffen goods.
https://en.wikipedia.org/wiki/Giffen_good
Explanation (that I remember)
Inelastic demand is when a good is demanded so much, that an increase in price has little affect on the total quantity (people still demand it, think like addictive substances)
So a perfectly inelastic product would be a straight line where any amount is demanded at any price.
So having the curve keep going it would get a positive slope, where higher price makes demand go up.
If I remember the example I was given was food during a famine. Supply is already low, but an additional pressure on price is the known shortage. The idea being that as the price goes up people see it as harder to get.
It’s been so long since I studied the subject so I might have gotten some things wrong here.
> These are called Giffen goods.
The terminology is actually split; sometimes they're called Giffen goods and sometimes they're called Veblen goods.
The two types have identical behavior, so there's no good reason to have two different names, but in concept Giffen goods are something poor people buy, while Veblen goods are something rich people buy.
(There is a difference if you're willing to look at responses to changes other than a change in the price of a good: if you give a household more money, it will increase consumption of Veblen goods, but decrease consumption of Giffen goods.)
Cool! Thanks!
> A lot of people are venally or ideologically motivated against accepting this.
That’s the story of the last 10 years among certain types that keep regurgitating obviously wrong concepts.
> That’s the story of the last 10 years
The urban orthodoxy is around demand rationing. Supply-side arguments are incredibly new. The evidence cuts in one direction. (Unless we want a hukou system.)
The parent comment never claimed that the housing market only has two factors. You’re arguing against a strawman of your own creation.
Before moving to Europe, I always had this conception of Germany as being very good at organizing things, especially anything involving engineering. It doesn't take long to set this picture straight.
> From 2015 to 2024, Austin added 120,000 units to its housing stock—an increase of 30%
Compare that to the following [1]:
> The [...] government [...] intended to build 400,000 new homes annually, including at least 100,000 social housing units. This target was significantly missed from 2021 to 2024. In each year from 2021 to 2023, fewer than 300,000 new homes were built.
So, the city of Austin alone build on average 12,000 new housings each year, while all across Germany, they failed to build 300,000 new units. That's roughly a 1:25 ratio.
So, how much bigger is Germany than Austin, Texas? More than 80 times bigger.
Is that just because big projects don't scale linearly? I would think that that's definitely one factor. Also, I'm not convinced that economy of scale laws apply here, given that this is not one company building 300,000 houses.
But it does show a number of problems inherent in Germany's current situation: (a) shortage of skilled laborers; (b) high cost of labor; and (c) exorbitantly much red tape. These three points alone are among the most frequently cited factors that companies feel inhibit business, and it holds across disciplines.
[1] https://www.wsws.org/en/articles/2025/08/20/vmjm-a20.html
Shortage of labor, high cost of labor and red tape are all consequences rather than causes. The cause is cultural. Property is the asset in much of the world and the value of property depends on limited supply. There's a disincentive to build more property, especially if you are a politician courting property owning voters.
In the U.K. people are indoctrinated from birth to believe that you work hard to save your money to buy a house and the value goes up so that you can retire with a valuable asset. Flooding the country with new property would completely upend that foundational part of U.K. culture.
If the governments of European countries wanted more property to be built, they could make it happen. The problem is, there is no appetite, they're walking a very fine line: more property must be built but property values cannot go down.
China is an extreme example (and has quality issues) but they have been building more than 10 million new homes per year for a long time, and now have tens of million of vacant homes that nobody wants to buy. That's a nightmare outcome for most Europeans who plan to retire on the value of their home.
The U.S. is fairly unique among western economies in that investing in the stock market has been a normal part of wealth building for the hoi polloi and while homes are important assets, they're not everything. In Europe, investing in the stock market is still novel, property is still the asset.
While it’s a different country my experience in Ireland and the Netherlands has been that there’s this bizarre contempt for builders. Like “I build homes and sell them to people for money” basically makes you satan incarnate. So housebuilding is bogged down in x% social, y% “affordable” (because apparently the goal of making all housing affordable by actually building enough is unthinkable) and very little gets built .
In Amsterdam the Green Party is celebrating making homes more affordable to buy…. By kicking out the people who were renting them. And they continue to say only 20% of developments can be market rate, aka for everyone. When you’re new to the city because you just got a job at booking.com or whatever you only can hope to get a flat in that 20% - the rest isn’t for the likes of you!
https://youtu.be/t05cFv02pzY
Both of you are really just beating around the bush of this whole issue in basically the same way as the very people you are complaining about, albeit at a different position. You both have a very elitist mentality towards this issue, i.e., “those peasants should move out of the way for superior people like me”, when what you are both describing is ironically failure of the privileged and powerful to understand what is causing the problems, conflicts, and tension; their own behaviors, actions, and mentalities.
Maybe the indigenous population you have contempt for wanting to preserve their communities and cultures don’t want your colonialist mindset of “those savages are not utilizing the land as I wish, so we can just overrule, overrun, and take it from them. How dare they not avert their eyes, for I have a job at booking.com or I go to UT/work at Oracle/Tesla.
It’s funny how you types never suggest that newcomers, i.e., colonizers, pay a high price for their colonization and that go to the indigenous, even if just to compensate them for the imposition and abuse. You always seem to insist on wanting to kick the indigenous from atop your high horse and demand they make way to your superiority as you abuse and exploit them. You’re not any different than any other past form of this colonist mentality, you want to steal from and abuse the indigenous.
I think it's funny how you think I would be "colonizing" the same neighborhood I literally grew up in.
I grew up in Austin. A bunch of people had kids there in the 1970's and 80's. More than where there before. So even if literally nobody had moved to Austin, there would still be a housing crisis without letting people build new housing.
Unsurprisingly, literally just letting the market respond to demand makes things more affordable for everyone. Yea, some people I don't like might move to Austin. They're probably not all bad. That's what multiculturalism is about.
Yes, we need to stop Amsterdam from being colonised by people from Groningen, I guess? I don’t understand what you’re getting at.
Ah yes, the well-known "indigenous population" of the Netherlands, one of the highest-GDP places in the world at present and of course a country with its own actual colonialist past. Do you really think these "indigenous" noble savages can't afford to pay for their own rents on a market-rate basis? They're keeping outsiders away (unless they pay outsized luxury prices, of course) out of pure unchecked privilege, not for any kind of high-minded culture preservation.
>But it does show a number of problems inherent in Germany's current situation: (a) shortage of skilled laborers; (b) high cost of labor; and (c) exorbitantly much red tape. These three points alone are among the most frequently cited factors that companies feel inhibit business, and it holds across disciplines.
There are 9 billion people in the world, roughly half of them are perfectly capable of doing manual labor.
There is plenty of skilled labor, and the cost is frankly not that high, you just need to let them work.
Can we be serious here? There is one and only one cause of "high housing prices" and that is a political choice to make housing expensive.
Don't tell people what they can or can't do with their property.
Don't prevent people from being brought in to build stuff.
Do these 2 things and housing will be built if the price is truly high. Anything else is bullshit.
Like most other things, labor is highly regulated in Germany. You've got to understand that (from my experience as an outsider) it seems to be a country where it matters more what you are on paper (e.g., degrees, certifications, etc) than what you can actually do (e.g., practical experience). Not that the latter is not valued at all, but on the job market, it's often not sufficient.
Labor costs are determined by a lot of regulations - minimal wage, mandatory health insurance fees, mandatory pensions fees, etc. make labor costs in Germany much higher than the average in the West. So, it's all not that easy.
High cost of labour is positive.
>Don't prevent people from being brought in to build stuff.
If housing is about supply and demand, surely the demand part matters too.
Sure, but it's not that easy. The swaths of new people need infrastructure and support: schools, hospitals, police, fire stations, roads, water, sewage, flood prevention, etc. That's a lot of money upfront. This is why most cities in the EU block many projects like these.
Also those people will saturate downtown making it lose its culture.
I'm always amazed at the American way of "just throw money at the problem".
Good news - experimental verification of the law of supply and demand!
I'm sure the analysis is welcome though and I hope policy makers try to learn from this. We could densify most american cities quite a lot more.
No it's not. It's 2 cherry picked data points with a sample size of 1 of a complex system with multiple confounding factors such as a pandemic
You can look at other neighborhoods such as palms in Los Angeles, which has the most aggressive housing build out in all of California. Median rent has increased - sometimes more housing can create more demand
Did rents in Palms go up because they built housing or because it's a great location in a city with increasing rent almost everywhere?
Or in other words, is there any econometric evidence that building housing increased rents in Palms, or could we be confusing correlation with causation?
Exactly. You can't just look at two data points in a system with hundreds of confounding variables, many of them unquantifiable and say "aha! This simple linear equation of supply and demand, that they teach in middle school, is correct!"
That's not science, it's dogmatism
What if the people in power don't want prices to go down?
The problem isn’t the powers that be. A lot of regular homeowners fight new developments tooth and nail. And many blue states unfortunately give them a lot of tools to do so.
People want to blame the 1% for massive wealth ineqality, but when it comes to unaffordable housing, a basic necessity of life, the villain is actually about 30% of the population that is rich enough to own homes, act like rentiers, and block access to neighborhoods and opportunities.
The greatest inequality difference is that between those with housing assets and those without. Yes the 1% are a problem but they are not the reason that young people can no longer afford housing without generational wealth, that's all due to the seemingly normal guy that's enforcing a class system based on home ownership versus non-ownership.
I think the majority of the electorate very much blame the people you're talking about. Who do you think progressives and MAGA refer to when talking about neoliberals? They're talking about the corporate class; those that care more about money but willing to play up useless culture war issues that impact small amounts of people.
> A lot of regular homeowners fight new developments tooth and nail.
In a system where those with more capitol have more power, homeowners are the powers that be. They're more likely to vote and have more money for discretionary spending - like donating to politicians.
People have been steered for decades into using their home as a vehicle for retirement. Of course they want to protecet it.
I'm not blaming individual homeowners, there are very strong incentives for treating homes like retirement investments. It's an issue of policy, but we do have to address that it is also causing rent to rise and contributing to the homelessness crisis.
> A lot of regular homeowners fight new developments
Which is self interested. The paradox is renters being turned against their own interests by large landlords pitching anti-gentrification.
Don’t know why this is being downvoted, that’s exactly right. One needs only to attend a local city meeting about any smallest step towards more development to see how the voters think.
It's typically local residents who fight this. There's a "fuck you, got mine" tendency to pull up the ladder once you've made it.
It is more complicated than that. A few years back when my youngest entered 1st grade, I attended some meetings where the superintendent talked about school expansions in the pipeline due to confirmed property development projects.
Namely, when new housing is added, there are infrastructure considerations and corresponding expenses that translate to higher taxes. Civil planners have formulas for how much the student population will grow based on the housing density/type.
Schools built on parcels based on 1970's population now have to expand to fit more students or the township has to find and acquire new land to build a new school.
That requires raising taxes for bonds. A new school is several million dollars and then hiring staff. NJ has a legal limit of 25:1 in elementary. Add 100 students and you add at least 4 teachers that have to be supported by taxpayers. Expand the lunchroom, build a new gym, purchase new computers, all the ways up the chain for the next 12 years.
If you ever look at your municipal tax bill, you will find that education is going to be the biggest expense by far.
On top of that, roads may need to be widened. New roads have to be built and maintained. Municipal staff may need to increase.
Some services may actually benefit from economies of scale (waste collection). Most will not.
Imagine you bought a house in 1970 (i.e. my development) and you were paying $1000 annual property taxes. Now your property taxes are $12000 because of the increased spend on infrastructure and increased assessed value. You're a retiree and you've paid taxes for 2 or 3 generations of students. You live on a fixed income and your property taxes are a higher and higher proportion of your income. What do you do? Mortgage the house to pay taxes to fund more growth?
The problem is exacerbated because obviously people want to go where the good schools are, where it's low crime, good infra, easy access to transportation. That drives demand and puts pressure on services while also raising taxes to pay to fund municipal bonds for growth.
End of the day, my personal belief is that housing is a right. But I can also see why middle class folks, retirees end up pushing back when they get the bill in the form of increased property taxes. I've lived in my house 10 years now and my taxes have gone up ~$3500 in that time. Every school in the township had to expand to meet population growth with the additional units. Sure, my home value went up as well, but I can't cash that out. I can't imagine how it feels for retirees that are living in a family home here.
This is a really well-thought out comment, and I agree with just about everything in it. One comment I'd like to call out for additional consideration is the comment on retirees being priced out due to rising property taxes.
In my experience, most retirees have more rooms/land than they can make productive use of. I feel that there should be some pressure for them to sell that property to families who can use it more productively. That's the stick, but I feel there needs to be a carrot, where builders are constructing homes that these retirees will be drawn to. There are retirement communities in the southern US like "The Villages" https://www.thevillages.com/, but as the population here ages, we need to build these everywhere so retirees can move into the communities that meet their needs without being forced to leave their cities.
But there's nuance here, too: families. My wife's side is a big Italian family. Everyone's here. What do you do if your grand kids are all here? How do you support your adult kids and help them achieve financial security? Or leave and secure your own? Neither is an easy choice.
There are here as well. The reason they work here, as far as I understand it, is that they count towards "affordable housing" units that are mandated by state law here in NJ. But I put that in quotes because these units in 55+ communities are often honestly still quite expensive, especially if you've already paid off your mortgage decades ago.The real issue seems to be the top-heavy tax system that forces local governments to rely on property taxes. A local income tax would make them more capable of building and maintaining infrastructure, but that would require lowering taxes at higher levels. (Income taxes are superior to wealth taxes in the sense that income tends to correlate better with the ability to pay tax.)
If the demand for housing is high, zoning fees can also be used to make developers pay for the infrastructure upfront. If done properly, their impact on housing costs should be minimal, as they mostly extract some of the added value created by the zoning from the landowner.
The developer for sure does not want to build a school and even if they build the school, they are not going to be paying for the teachers that are going to need to support the increased student body for every decade into the future; that's on the taxpayers.
The underlying assumption is that laws will be changed when necessary. If it's not possible to do that, most issues probably can't be fixed.
More fundamentally, this is related to the principle of subsidiarity that is occasionally popular in the EU. Everything the government does should be done by the lowest level that can reasonably do it. And to enable that, local and state governments should have sufficiently wide tax bases.
Laws are voted on by the people. And if the municipal elections are scoped to current residents, they will vote to not expand in almost every case.
At the state level, we have housing laws that mandate ratios of affordable housing. Many townships faught this in court (and lost) because schools and infrastructure are capital projects. Bonds are secured today against some future tax base.
Don't forget that developers and investors are voters too (and lobbyists) who are going to vote against the municipalities.
My point: it is a nuanced situation and not as simple as "Got mine FU" or "just build more". Build where? How do you pay for it fairly?
People often vote to support new housing, as long as the entire system works reasonably well.
My solution was to widen the tax base to make the system work better.
The incentives around property taxes do not support significant new construction. If housing becomes more affordable, tax revenue per capita goes down, while local government spending stays the same or increases. Local governments should therefore not rely too much on property taxes.
Income taxes, on the other hand, are good. You are taxing things you want to grow, and you get more tax revenue when your policies are good to the people. Local governments might want to collect more income taxes and less property taxes.
When the demand for housing is high, zoning creates significant windfall to the landowner. Some of this windfall can be taxed to support infrastructure construction.
Except you get exactly the same opposition in places where schools are funded by a higher level of government
and if anything you taxes will go down because they are now spread across more households.
I can't answer for different states and municipalities, but I know about mine and NJ based on how we had to expand every school in the district over the last 10 years.
These are big capital expenses. My property taxes have never gone down, even as my township has expanded.
Part of this is that taxes are calculated on assessed value. Where I'm at, assessed value is a combination of lot size + structural improvement. Tax bill is assessed value * rate. Assessments have never gone down. The more people want to move here, the more values go up, the more capital projects need to be undertaken before new tax payers are contributing. It may take years to build a new development, but the multi-million dollar budget to expand the school and staff up teachers has to happen in tandem, before the new tax base exists.
My lot is from the 70's. It's huge. New lots are significantly smaller. Townhouses and apartments are very dense. New development does not yield savings in taxes in practice unless it is commercial development.
A big piece of farmland contributes taxes, but requires little in services. Convert that 50 acres into 50 units and now you need much more services and infrastructure compared to the 50 acre farm.
You underestimate just how much schools and teachers cost. Those 50 units might add 50-100 students. Capital projects start even before the units finish to prevent overcrowded schools. Contracts are signed for garbage and snow removal if 5 of those units are occupied or 50.
It's just as much "change is scary" and "I like this as it is." It's a very human reaction.
I dont think its just that. Nimbys also see:
- many new building being very ugly (side note: ugly buildings no matter how green get torn down and are this not as green as building that are beautiful)
- increasing density bringing increased crime
- increased density actually turning out to be less efficient on a per capita tax basis (this is always wild to me, cities should be spending much less per capita than rural areas but arent)
They are the ones who show up at local political fundraising galas and constantly report local issues influencing municipal/state priorities.
Although it's not just NIMBY. There's a million rules about building housing and developing land from zoning, environmental, indigenous, or social ends. Which are arguably luxury self-benefiting priorities for people who already own houses. Plus all the activists who think the government can both make development extremely expensive via endless rules while affording to fund mass government housing at the same time.
Well, it's easy! Just get the majority of voters to hate each other enough that it's a moral boundary to vote together on any law, effectively limiting any meaningful change.
Over 60% of Americans are homeowners. In any functioning democracy, they ought to be the people in power.
That's the tyranny of the majority. This is not how a functioning democracy should behave.
https://en.wikipedia.org/wiki/Tyranny_of_the_majority
After a few decades in California, I'm pretty sure there are no "people in power".
There are a lot of people with some power, which they use as they see fit. It all adds up to marginal and pseudo-random changes, as the state drifts toward... wherever it's going.
Trump explicitly said he wants to keep prices high [0]. This is the problem with a culture that views housing not as a need or a home, but as an investment. Pathological.
[0] https://www.pbs.org/newshour/politics/watch-trump-says-he-wa...
I just hope that people remember this is just one factor affecting quality of life and making a city work.
"Density at all costs" ignores a huge set of tradeoffs that are equally as damaging to a city. Things such as urban form, street experience, long-term adaptability, integration with existing fabric, economic resilience, etc. These are the things that make a city work in the long term.
I’m a big proponent of building more housing. But a lot of it is being doing in very short sided ways that lead to huge externalities.
Things such as urban form, street experience, long-term adaptability, integration with existing fabric, economic resilience, etc.
I have no idea what any of this is supposed to mean as a negative to people being able to walk around their neighborhood for essentials. It sounds like a classic vague "what about culture" argument that can't be explained.
We could but it’s not always just “good” to make things dense.
My hometown has had a huge push to add more housing to make things more affordable. What happened? Rents went down for a couple years then right back up. Except now the city has a bunch of more soulless condos and is horribly congested.
Sometimes preserving things and keeping them nice and simple even if it’s costs a bit of a premium is better.
Rents went down for a couple years then right back up. Except now the city has a bunch of more soulless condos and is horribly congested.
So there were a bunch of people who wanted to live there and now can.
Nobody lives there anymore, it's too expensive. /s
Note to the mods, /s is Reddit for sarcasm and this post is a good example of the psychology that leads to people support policies that increase housing costs even though they are designed to decrease housing costs.
> now the city has a bunch of more soulless condos and is horribly congested
The first bit is a taste thing; obviously lots of people view modern sprawl as "soulless" too.
But the latter point is just plain wrong. Dense housing IMPROVES traffic congestion and shortens commutes, always, everywhere, markedly. And it's for a bleedingly obvious reason: pack people in closer together and they don't have to travel as far to get where they're going. QED.
What you're imagining is some kind of fantasy hometown, which never increased in population and whose economy never developed. I mean, it's true. Forgotten ghost towns have very little traffic and quirky soulful architecture, c.f. Detroit. Everyone agrees that's a bad thing, though.
more soulless condos
If you want soul move to New Orleans. Meanwhile people need comfortable places to live that don't make them indentured servants for the rest of their lives. I'll take a neighborhood with walkability and density over an old drafty brick building with no grocery stores any day.
Developers not recouping their investment will discourage less housing in Austin in the future and it will become expensive again. A lot of our current housing shortages are from the build up in 2008 and an implosion of the entire industry (so that crafts people did not really exist for the next need for housing).
> Developers not recouping their investment
Last time I did the back-of-the-envelope math, financing permitting delays in San Francisco added 10% to the cost of new housing [1]. (Note: not the cost of permitting. Just the cost of financing the delay.)
This is deadweight loss that everyone in the transaction wins from eliminating. One could absolutely see lower prices and higher developer margins if this waste were cut.
[1] https://news.ycombinator.com/item?id=38664780
> everyone in the transaction wins
Nobody ever thinks of the poor banks!
> Nobody ever thinks of the poor banks!
I thought about that. But a bank would rather lend in lots of high-confidence, low-duration deals than a small number of high-margin deals. The only people who lose when housing is built are incoment landowners. Because prices go down.
Usury-as-a-Service.
At scale banks only win as a facilitator of economic growth. As the adage goes they can only 3-6-3 if someone is making at least 7.
For the everyman banks not winning is catastrophic.
It's always been a service.
They can recoup the investment with volume (especially apartments) I would think? Sell 10 houses at 2 million each or 30 at 1 million each or however it breaks down.
Their land, labor, and material costs aren’t trivial. If thy were pulling a 10-20% margin before, how will increasing volume (which increases costs) make it up?
They reinvest that generous 10% to buy more tools and hire more talent to build 10x as many homes at 2%. Seems pretty straightforward to me
you should go into real estate development and make a fortune while solving a serious social problem for your country!
Taking on those liabilities is very risky when the next downturn happens and you're stuck with inventory.
So, do we just need to nationalize housing construction? If the free market apparently just can't handle it?
It’s not a free market construction issue at all, it’s a regulatory zoning and permitting issue.
Read the article and the peer comments here; Austin’s boom came about from reducing regulatory constraints.
Nationally remove the artificial restrictions and the supply side will fix itself.
Seems like a free market issue, any profit resulting from development is a free market issue. Your profit margins mean worse quality housing for people, and we can see what actual public housing programs look like with Singapore and Vienna where rents can typically cost less than 20% of median salaries:
https://www.youtube.com/watch?v=LVuCZMLeWko
As renown corporate welfare recipient Bezos would say: "your margin is [our] opportunity."
If the only thing stopping development is that rich developers want to make more money, then maybe we should get rid of the rich developers and let the public decide what to build. It couldn't be worse and it'd be 20-60% cheaper too.
> actual public housing programs look like with Singapore and Vienna where rents can typically cost less than 20% of median salaries
It could work, but both Singapore and Austria have less than 10 million people amd have a residency system where you just can't come in from the outside and get your subsidized housing in Vienna or Singapore. Singapore doesn't extend subsidized housing to its foreign residents, even permanent residents, and they make up 40% of the population!
Vienna is a bit better, as it applies it to all EU citizens who are resident in Austria, but you have to have lived at the same address there for 2 years, you just can't come in and claim one.
Did Austin really have any constraints holding it back? It’s still Texas. People still look at Houston as the canonical example of a city with no artificial constraints.
Public housing projects were and sort of still are a thing. Glass Amendment limits the number of units that can be produced but most areas are well below those limits and the larger issue is that there's no budget or political willpower for social housing projects right now.
There wasn't, but given the housing market right now, I don't know that there isn't.
Most blue metros in the US have a bad combination of high labor costs/low labor availability, high regulatory burden, wealthy conservative inhabitants who oppose construction, and working class people who are convinced that construction is gentrification.
I've been racking my brain trying ti figure out what it looks like for US cities to pull out of the housing crisis, and I think it's either going to take about a generation, or there will be some catastrophic event (Great Depression II, WWIII) that changes the political landscape so drastically that nobody can really oppose housing anymore.
Maybe? Obviously boom bust cycles that come from a free market are not very efficient.
We already have that. They're called "housing projects".
What evidence is there that developers won't break even or profit? The demand is clearly there, it's a seller's market.
Not so much any longer. The sales tap really turned off a while back and prices have been dropping a while here in Austin.
just because rents fell doesn't mean developers couldn't recoup their investment. 2008 was completely different.
It's a balancing act. Build too much and developers make less money. Build too little and poverty and homelessness shoot up. Which side do you want to err on?
Dumb question, many cities suffer from extremely high property (i.e. land) prices. I understand the NIMBY barrier. But I don't understand why it isn't more common to simply.. start a new city. Especially in countries like Australia where property prices are sky high and alternative places for setting up a new city are abundant. Maybe internet connectivity was previously a barrier, but now.. starlink.
I put this question to grok; its response:
> Unfortunately, Australia's legal, regulatory, financial, and practical systems make this extremely difficult (bordering on impossible at any meaningful scale).
Crazy that the reason we can't have an order-of-magnitude reduction in the cost of the most important thing people need (shelter) is not due to resource constraints, but man-made ones.
> Crazy that the reason we can't have an order-of-magnitude reduction in the cost of the most important thing people need (shelter) is not due to resource constraints, but man-made ones.
You say that as though reduction in cost of housing is a universal desire, but it isn't.
Suppose a couple of years ago you took a $500,000 loan to buy a $700,000 house, which you'll be paying off for the next 10 years. Would you like the market value of your house to decline substantially during that time?
If there's enough of the population bought into property, it won't be politically feasible to allow the value of homes to decline.
Always comes back to the good ol “fuck you, I got mine.”
When the problem is particularly exacerbated, it's not even "I got mine", but rather, "I already went into eye-watering levels of debt and I'm still paying off the roof over my head."
> Suppose a couple of years ago you took a $500,000 loan to buy a $700,000 house, which you'll be paying off for the next 10 years. Would you like the market value of your house to decline substantially during that time?
No, but when your city proposes a "missing middle" plan, watch who all comes out of the woodwork to scream murder at their research that shows that the projected effect of doing so will lower property values in my town from an 11.5% YoY average increase to a "mere" 9% YoY increase. You'd have thought the city was suggesting executing grandmothers in the streets.
(I cannot personally complain, I put down 10% on my home purchase here in 2021 and was able to get out of PMI due to having 20% equity against appraised value 366 days later, while only making required payments.)
You can't start a new city. I city exists for all the things you can do. Your new city will have nothing to do because nobody lives there and there are no jobs to attract anyone to move.
that is why we build suburbs - they get anound this by being right next to a place with everything you want in a city
This is actually how you start a city though, you build a suburb and wait for it to grow into a city. This takes a really really long time so it's better to build near existing cities.
We don't observe this phenomenon occurring often in the modern day only because cities sprawl rapidly and so the evolution of the suburb becomes a borough of the existing city rather than a brand new city. Otherwise Brooklyn, Jersey City, Weehawken, etc. would all be considered new cities instead of being referred to as the NYC metro.
Sure you can. You just need enough land and money to start basic things like a post office, city hall, courthouse, roads, and a way to get power to the whole thing.
See Starbase, Texas
Starbase TX isn't a city in any sense other than a legal designation. It's a massive SpaceX industrial facility that has its own municipality similar to the way Disney World has one for its park.
It obviously wouldn't be successful on day one, and it would take some kind of exceptional pressure to jump start it, but these things have been done in the past in the US and have been done recently in China. Not arguing these were good things, but they have happened before.
Think back to the old "company towns". Lowell, Massachusetts, built for a textile mill. Hershey Pennsylvania, built around a chocolate factory. Fordlandia, Brazil, a rubber plantation town. All of these were essentially cities and towns planned out around a central industry.
Similar things happened with the ghost cities in China with several of the big notable ones eventually actually growing into real, functional cities.
Once again, these have all kinds of messy histories and I'm not saying they're all good ideas. But just pointing out, it can be done.
And you proved my point why you can't today.
In this hypothetical, who is the individual or group of people that you envision would take the initiative to start a new city? What is their incentive to do so?
Water. You need clean water to grow a city. There isn't much of that to spread around anymore.
most people posting here are talking about california or texas - desert or near deserts where there isn't enough water.
however there are many places where there is more than enough water. East of the mississippi for example. other continents also have areas where there is plenty.
Except in the oceans, and near the oceans
You can, but it is damn difficult.
https://www.volts.wtf/p/is-the-brand-new-city-in-california
Why would you think that the same thing preventing density and new development in cities won’t stop your new city from growing before any building taller than 2 stories is built?
You might enjoy the novel A Town Like Alice by Nevil Shute.
People move to where there is jobs and money. You can't build the housing first, in our society you need capitalists to invest into building businesses to make people want to move there. And because we have spent decades killing small business in favor of corporations, you need corporations to decide to build where there are no people and they have to pay a small short term premium to attract workers. Except corporations don't like doing that because it is a longer term investment and they are worried about next quarter's numbers and maximizing executive level bonuses which means short term planning.
You could build all the housing first in China until recently…
China was dumping money into those cities for people to build businesses and paying people to move there though, it wasn't just the housing. So yes I agree it can work if you go beyond that, but not through applying capitalist principles first and foremost. If you tried to pay people to live in a specific city and pay them again to build a small local business in the US, people would go bonkers about communism and 99% of politicians and capitalist investors would spend every waking moment trying to stop it.
There is no shortage of cheaper existing cities in Australia, but everyone wants to live in Sydney, Brisbane, Melbourne and Perth.
The existing smaller cities just slowly wither.
Existing homeowners of the capitals have little interest in real estate prices dramatically dropping - would you?
Please bear in mind when you discuss "rent control" in the USA you really do mean the version you see in your locale. The idea that rent control sui generis failed worldwide is (in my personal opinion) a stretch.
Public housing also has many models. State owned. State funded but via cooperatives. Part state. state assisted co-buy. There's lots of models and so it is also a bit bogus to talk as if public housing has one shape.
I don't like the tone of input here, there is jeering and name calling and ACKSHEWALLY type responses so I am not going to continue, I just wanted to say: don't forget the lessons learned in Austin may not extend world-wide.
Let's not trivialize this as being simply supply and demand. Let's pretend it's some new wild , relevation that is going to take the world by storm, so finally this generation can hope to someday have a home
>>> The city changed zoning regulations to allow construction of large apartment buildings, particularly near jobs and transit. In 2018, voters approved a $250 million bond measure to build and repair affordable housing. Permitting processes were reformed to speed development and reduce costs.
All three of the five things most economists say about house building - and each one will hit house owning voters hard making it hard to replicate.
But none the less a triumph of common sense :-)
If you are in your terminal home, then yes, selfishly one would want the value to go up. But if you ever plan on moving to another home, sure dropping prices mean you get less, but it also means you pay less for your next purchase.
If you are in your terminal home, you also want low prices until the week before you eventually sell your house, as Texas has a high property tax rate to make up for the lack of state income tax.
> and each one will hit house owning voters hard making it hard to replicate
In a negative way?
As a home owner I don't really care about number go up. I'd rather it go up than down, sure. But staying level would also suit me fine.
Going down might be nice, perhaps I could buy the neighbor's house and combine the lots and make a nice set of row houses ...
House go up being important is really only needed if I'm using it for leveraged appreciation and doing something like dragging the cash out like a piggy bank; but that's a tiger that will have to be dismounted eventually.
As a homeowner, I want number to go up.
These things push against that.
Really, I'd prefer not having policies that tend to push up housing prices or discourage people from moving, but here we are, those types of policies are common.
> As a homeowner, I want number to go up.
Which is myopic.
As a homeowner, I want cities to be livable and affordable for those who want or have to live there. I don't care if the value of my home changes one cent. It's honestly kind of useless, because it's not like I can sell the house and buy a nicer one. All the houses are more expensive so it's always going to be a lateral trade. It only helps if you sell and move to a lower cost of living area.
It's kind of a sham that we have been conditioned to treat housing as an investment. Housing is where people live, it shouldn't be a commodity to be hoarded.
You can arbitrage markets for retirement, which is largely why people want their home values to increase. Their home is another form of 401k, and those mortgage payments aren't going to the bank or a land loed, they're going to their future.
It's a minority of people who are ok never capitalizing on their home value.
So you are saying you are a reactionary? Did you even try to read my entire comment?
I read it as presenting the reductionist side of the argument. Not saying that you personally believe it's good or right, only that it is what the majority of homeowners would think.
In that sense I agree with the current state of reality.
But what I am saying is that if we want to change that reality -- and it most certainly is possible to change -- it will take people rejecting the status quo. And there at least some of us who are already there.
As a home owner in Austin, I want my friends to be able to afford homes too and not feel like they have to move to have a yard and a family. Bring on the new construction.
What do you think the big paragraph at the end meant to convey?
As a former homeowner in Texas, I wanted the number to go down for lower property taxes. Taxes accounted for almost 1/3 of my monthly mortgage payments by the time I sold, and are a significant barrier to affordability of homes when values tend to vastly outstrip the rate of inflation leaving typical households struggling even with the homestead tax exemption.
The only people in the low income neighborhood I grew up in that could afford to weather this wave of out-of-state and investment banking homebuyers were those who were of retirement age and had their property taxes “frozen” at an affordable level.
Growth and fewer restrictions on what can be built makes your land more valuable. Apartment buildings in place of detached houses means rent prices can go down while land prices go up.
As a homeowner I have zero objections to apartments built near jobs and transit (which also means away from my house). I also don't think apartments directly compete with single family housing. Like, they do, but only in certain situations and at certain levels of occupancy and the economy.
I am strongly opposed to building homes in stupid places, worsening traffic or overburdening infrastructure. This is why I tend to strongly oppose ADUs. If you want to turn my neighborhood into a dense urban environment, fine, but buy my house and my neighbors' houses, bulldoze them, and build proper urban density.
I also have a lot of skepticism regarding our housing shortage. You can go find people making the same arguments about housing shortfalls in 2006(underbuilt for years, new family formation, prices will remain high...). But then something happened, and it wasn't that 10% of Americans suddenly died. Suddenly we had more homes than we needed. Why? Because housing demand is related to economics. Now that we're slowing down reproduction and kicking out or scaring off immigrants we're likely setting ourselves up for another round of oversupply. "Good!" Well, tell that to the soon to be unemployed home builders.
Anecdote: I lived in Austin from 2017 to 2021. My rent was always very cheap (my baseline is Brooklyn which I guess makes everything feel cheap. But my rent went up $50 for the first 3 years and then down $200 during Covid and I checked recently and my aptmnt is still the same price). Around the time I left everyone was buying up houses to rent and Airbnb. Very palpably felt the growing supply when it came to bnb's (the owners having a harder time competing for renters etc). It's hard not to be surprised in spite of the tremendous growth in that city
The solution to ALL cost of housing problems globally is this.
Everywhere you look, Australia, Canada, UK, EU this is just a massive issue for young professionals with long-term disastrous downstream political consequences, and yet, the solution is so simple but hardly ever implemented in these countries.
Just BUILD MORE HOUSING. Mass build everywhere. Vast amounts of land is available. Just build homes and apartments everywhere!
It's almost as though the well-known and proven method of building more housing works!
Similarly, the tested and proven solution to homelessness is providing housing up front. Don't have any requirements (employment, sobriety, etc) blocking housing. Those things are easier to achieve with a roof over your head.
You mean to tell me that increasing supply lowers price? Fascinating.
Unfortunately, there's a lot of people -- especially further left -- who fight this kind of reasoning. They insist that the housing market is different, and that just building more private housing won't help.
No amount of evidence will convince these people, because they already made up their mind ahead of time: their ideology says the market can't help, so the market can't help, period. Any evidence to the contrary is a plot by billionaires or something.
"It is difficult to get a man to understand something, when his salary* depends upon his not understanding it!" - Upton Sinclair
*Nothing changes if you replace "salary" with "financial interests". Or "social interests". Or other interest near & dear.
The populists on the right share a similar view, but mostly blame immigration.
Their core argument is that we could increase supply but choose not to, and that we should be maximizing supply (as an ethical and moral mandate, but that is not a tenant of capitalism really) because housing is an essential thing like food and water. FWIW we don't maximize food/water production either for various reasons, which would also drive food/water prices down.
Maximizing supply can mean other things than building like taxing unoccupied homes by large amounts making them unpalatable to own as a second (or higher) home, thus putting them back on the market. However these aren't all good because obviously our economy deals with more effects than just simple supply and demand, like maximizing the amount of loans given to people wanting housing regardless of the ability to repay is known to be a bad idea.
If you throttle the supply you can clearly control the price and the people you're talking about believe there is a concerted effort to control that supply. This can happen directly (choosing not to build as soon as land is available to build on) or indirectly (e.g. politics, mass media influencing people to vote to not increase supply).
What people generally hate is production of essentials not being maximized which would give us the actual lowest price, and maybe we as a society should be maximizing that supply to arrive at the lowest cost for a given house with given features.
And then the rebuttal to that is usually "tough shit lol" which is why people coming out with simple supply and demand replies are generally seen as derisive.
Food supply is most definitely maximized
> FWIW we don't maximize food production
We kinda do, through farm subsidies.
There's a lot of talking past each other on this issue. Sure there's probably clueless people out there, but a lot of left wing housing activists that are skeptical of free market housing liberalization understand very well economics and the benefits of housing supply, but are concerned about the time horizons involved and concrete near term impacts on low income residents.
It is of overall net benefit over the long term to raze a small three story walkup apartment and build something denser, overall increasing the amount of housing.
However, in the short term it's immediately quite (sometimes existentially) bad for affordability if existing affordable housing is destroyed and replaced by brand new (and thus inherently luxury) housing.
So accordingly we naturally see low income housing activists push back against some redevelopment and ask why development is not occurring in wealthy single family home areas where the amount of people impacted is less and class those that are not remarkably negatively impacted.
Personally I think the data shows that in general it is still really beneficial to build out as much housing as possible and avoid the negative impacts of a shortage, but I do think there are people validly pointing at a real problem of displacement.
Who would've thought?!
It's wild how the solution to housing is: stop the government from stopping housing from being built.
At a glance, I'm a bit skeptical. It looks like they're cherry picking the high point for rent (the COVID spike).
> "Rents fell. In December 2021, Austin’s median rent was $1,546, near its highest level ever and 15% higher than the U.S. median ($1,346)."
Of course having more housing should, all things equal, lower rent. But all things certainly weren't equal, especially during this time period.
> In December 2021, Austin’s median rent was $1,546, near its highest level ever and 15% higher than the U.S. median ($1,346). By January 2026, Austin’s median rent had fallen to $1,296, 4% lower than that of the U.S. overall ($1,353).
For comparison, in San Francisco December 2021, the median one bedroom was $2810. In San Francisco March 2026, it was $3597, an increase of 28%.
It is well known that there was a brief moment in time when people were abandoning San Francisco and “moving to Texas” (mostly Austin) that coincides when the rents peaked in Austin. I’d be not surprised if that was also the time when San Francisco rents were down.
We’re seeing a reversal in trend when SF is hot again and Austin is not. So not exactly a straightforward comparison. It could explain the SF-> Austin and back trend.
So we've got point in time comparisons between Austin and itself; the change in delta between Austin and a particular city known for restricting housing; and the change in delta between Austin and national median rents. They all support the idea that increasing supply tends to decrease costs, which by a massive coincidence is what basic economic theory suggests.
Of course, people can come up with an ad hoc explanation for why Austin's prices happened to decrease against each of those data points. But is there a single principled way to present the data that suggests increasing supply in Austin did not decrease costs?
Yeah this would be the interesting thing to try to normalize the data against somehow.
Here's a chart that presents some context:
https://www.reddit.com/r/texas/comments/1grxqur/the_austin_t...
This appears to be a correction to an unsustainable market.
If you just compare it to other cities you can see that Austin did much better in prices.
Idk about rent, but even as of a year or two ago, Austin metro housing index was lower than its 2016 level. Rent following a similar trajectory wouldn't be super surprising to me.
You haven't factored in Inflation.
Another part of this - higher interest rates really put the brakes on home values. We own a rental property and the home value has more or less been locked in since 2022. In our otherwise hot metro area, nobody has raised their rental rates on similar properties in 4 years.
It's a win-win for our tenants. Prices seem to be stable and there's no rush for them to lock down a house RIGHT NOW.
It's sure not good for my bottom line as a landlord for them to keep adding homes and keeping rates up. But it sure seems like a no brainer for society at large.
This balanced perspective on what’s good for someone personally vs what’s good for society at large is what’s missing from the world.
Any reasonable landlord/real estate investor will have planned for various results - if your rental empire depends on "rents go up" and can't handle a flat market, let alone a downturn, you're going to be in for a bad time.
A stable market is great; as you can find good deals with some sort of certainty, and focus on where you can actually build value (rehab, etc).
If you are smart, you throttle up investments just before a boom starts and throttle them back just before a boom ends. At least you try to up your margins during good times so you can survive bad times. The trick is keeping your talent employed during the bad times so they are trained up and still in the industry for good times. Stability is obviously preferable.
Certainly, that can't be true?
Increased supply lowered prices for the same levels of demand?
Seems unlikely.
Same has been happening in Melbourne, Australia. The state government has basically steamrolled the boomers and allowed highrise construction next to existing train stations. Despite having huge population growth, rents are some of the most affordable in the country.
One of the things I like about the reporting in this Austin article, is they break down by building class.
In Melbourne I've never found a good source for this, only general averages; and my suspicions are that we just build shitboxes and claim the rent is lower on average, capturing something like shrinkflation rather than affordability.
I was apartment hunting in Melbourne in 2015 and I was appalled at the quality of most inner-city apartments. Tiny shoeboxes, no sunlight, paper thin walls.
At the time I didn't think they should have been allowed to be built. But looking back, they probably did keep a lid on rents. A bad roof over your head is better than no roof.
You should be able to identify properties and track them over time; and then even if you argue that "brand new condo" vs "same condo 10/20/30 years later" aren't directly comparable; well you can start to compare other metrics.
Has anyone also considered the possibility that Austin is just not that great? Like...those comparing it to the Bay area or a light weight NYC need their heads checked. Maybe people (like me) just realized it wasn't great and...left?
Why do people accept that supply/demand works in so many industries when the private market is allowed to flourish, but won't accept it for healthcare, education, etc?
Because for-profit healthcare and higher ed have shown poor outcomes empirically?
When? Because we don't use market solutions for those things now. Those are two of the most manipulated markets in the US. They also are two of the three industries whose prices increased by more than inflation, everything else has gotten cheaper (inflation adjusted) over the last several decades. Those things are related.
Can it be also related to demand not catching up or even declining? If place is in high demand and prices go down shouldn't it cause even more people coming to it (compensating for a possible price change). (Note: not an expert on this, I'm just curious how it really works - besides obvious thing: more supply -> price goes down).
> Can it be also related to demand not catching up or even declining?
The Austin metro area's population has been monotonically increasing [1]. Increasing housing supply decreases prices. If you want to reduce housing costs, flood the system with housing.
[1] https://www.macrotrends.net/global-metrics/cities/22926/aust...
the problem in sf is building is incredibly expensive, and projects that have been planned, land acquired, are simply sitting as empty lots because developers don’t have the money.
interest rates for construction loans, reduced funding, labor and material costs, all contribute to the amount of housing built.
there is a bond being debated in the ca senate now that will help by giving loans for construction.
https://calmatters.org/politics/2026/01/2026-housing-agenda/
Did it actually drove down rents, OR did it only reduce the rate of yearly increasement?
:-)
I'll admit ignorance here, but I've been skeptical of the claim that new construction drives rents down. What I actually see is: a luxury apartment building goes up, surveys the market, and sets its rents 30% higher for the privilege of living in a new building with a gym for dogs or ball pit or whatever. Then the older buildings say, "Well, we can raise our rents 20% and still be the best deal in town," and so on.
Maybe if you flood the market with 30% more housing units like Austin you get the Econ 101 effect. On the other hand, apartment owners realized intentional vacancy is a profitable strategy, which alone seems to defy that basic interpretation.
what you're neglecting to consider is what would have happened if someone moved to Austin (say a wealthy person from SF) and that expensive new apartment didn't exist.
The mechanism by which new construction drives down rents is that people that need a new apartment are in less competition with existing residents in older worse apartment buildings.
So the newcomer from SF moves into the expensive new apartment, which means that there's less competition for decades old apartments, which means that when one of those is vacated there is less price appreciation on that product.
If there is a scarcity of apartments what happens is that when a decades old apartment is vacant it is filled by a wealthy newcomer and the landlord increases the rent accordingly.
> a luxury apartment building goes up, surveys the market, and sets its rents 30% higher for the privilege of living in a new building with a gym for dogs or ball pit or whatever. Then the older buildings say, "Well, we can raise our rents 20% and still be the best deal in town," and so on.
I think that might not be the right cause and effect relationship. The actual cause is increased demand. This creates both the increased pricing of existing stock and an incentive to build new stock.
In my neighborhood in NYC, I've also observed that rents increased after luxury apartments were built here. In fact my landlord cited the increased median rent in the neighborhood as a reason to raise my rent.
My understanding of the situation is that luxury apartments do indeed gentrify neighborhoods (i.e. they increase the local rent and drive displacement of locals that can't keep up with those rent increases).
However, across the entire city, it slightly eases rent pressure by providing additional housing supply.
So, like you mentioned, if you get enough housing across many neighborhoods, you can drive down rents. Otherwise, that luxury complex in your neighborhood might only be helping ease rent pressure in other neighborhoods.
"In fact my landlord cited the increased median rent in the neighborhood as a reason to raise my rent."
Your landlord lied to you to get you to pay the increase. You had little choice because finding a cheaper apartment probably wasn't possible/desirable and you probably didn't want to argue with him in front of the rent board. Understandable but that doesn't mean your landlord's explanation has any validity.
> if you flood the market with 30% more housing units like Austin you get the Econ 101 effect
According to TFA, it seems so.
Which is great, because it's further evidence that we should do the same thing everywhere.
> Then the older buildings say, "Well, we can raise our rents 20% and still be the best deal in town,"
They can only get away with that when there is a housing shortage.
There were a ton of apartments built in lower-cost areas outside of the urban center as well - the Parmer area (near the new Apple campus), the Tech Ridge area near I-35, and out by the airport and Tesla factory as a few examples. It wasn't only high-end, lots of mid-level stuff was built too.
Your scenario is simply describing a massive under-supply problem, and mis-attributing causality for price increases.
If the older buildings are able to raise prices 20% with no increase in vacancies after the new build, the new build not coming in would mean those older buildings rent would be bid up more than 20%.
The people moving in who could have afforded the 30% more expensive luxury units will just have to pick from the older units and outbid lower income people for spots in this low supply, growing city (under no other scenario could you crank up rent on aging stock 20% without losing to competing landlords).
> I've been skeptical of the claim that new construction drives rents down.
It can, but not in isolation.
It requires a couple additional variables such as population demand (rate of growth of Austin has reduced since the COVID boom [0]), existing stock (Texas had a building boom and bust in the 1980s [1] that decoupled it's housing market from the rest of the US), and a shift from buying to renting.
That said, the peers I have who work in professional real estate (not realators - as in actual MDs for REITs or multi-generational landlord families whose parents went to school with Governers and Mayors) are starting to shift away from real estate to equities because of headaches around succession planning and reduced margins.
What is ending up happening is megacap REITs like Equity Residential, Essex, Avalon, etc are buying out older groups, taking stakes in new developments, and shifting away from selling condos to perpetually leasing. At their size they can afford to have significant amounts of unleased units becuase they would have made up the cost via higher rent on leased units, tactically building high margins condos and SFHs in high appreciation geographies, or loss harvesting in order to subsidize commercial buildouts like data centers.
Naively saying only construction will reduce prices is false, and if the consolidation aspect is not solved (and sadly, it won't be) it would only lead to an even worse situation.
Additionally, these are hyperlocal problems and what may work for Austin may require significant retooling for Chicago.
[0] - https://www.bizjournals.com/austin/news/2026/01/28/austin-be...
[1] - https://www.nytimes.com/1986/09/14/business/john-connally-s-...
Or...maybe...Austin just isn't that great? Maybe (just maybe) a lot of people (myself included) woke up one day and was like "why are we doing this?" and moved somewhere better?
Austin is not what people pretend. Same with Denver or SLC.
There are no tier 2 cities. Its like countries. There are first world, and third world. And thats it.
Is it simply normal supply and demand? They had massive surge of prices that made construction more profitable so after a time lag, building boom happened, bringing prices back to the average long-term trend. If some place becomes 'affordable', its economy suffers because good people don't like living in places where housing is affordable - they move out.
Hey, here's a good way to improve 'housing affordability' locally: dumb down schools. People with cash will move out and prices will fall. Something suggests me it's not the solution really lol.
Affordability is relative. System always balances itself on the level that barely over 50% of people can afford housing (because it's a democracy). There's no fixing to it unless one abolishes either democracy (so no one cares what people want and developers have a free roll building as much as they want), or market economy (when the Party provides housing as it pleases).
This is democracy in action: give the people what they want (and need)!
Interesting to see how building more housing in Austin actually lowered rents. The debate about rent control versus new construction is always thought-provoking.
Relevant: I just listened to an interview with Max Buchholz, US Berkeley assistant professor and the lead author of a new working paper titled "Inequality, Not Regulation, Drives America's Housing Affordability Crisis."
He says that building housing does bring prices down, but not very much. In his paper they argue that income inequality is a big driver of making housing unaffordable. (Not billionaires, but more those making more than the median income vs the rest) Because (among other reasons) those with higher income have leeway to spend more on housing versus those at the lower end of the income scale who can’t spend more on housing even if they get a raise.
https://www.youtube.com/live/ai76174930Q?si=R-FYO86COepRADhE...
This is nonsense. In every material good, the buying power of nearly everyone has increased in real terms over time, regardless of inequality. It's only in housing, with constrained supply, that inequality can drive up prices; and even in that case, it doesn't actually change the housing supply- if prices are high, that just means a lot of people who want to live there! Inequality doesn't reduce the number of houses.
Building a little reduces prices a little. Building a lot reduces prices a lot. If the prices are very high, then it's very profitable to build, so unless stopped by regulation, you will get a lot of building. Even if building merely keeps the price from going up as density increases, the value provided by living in an area goes up from agglomeration effects as it grows.
This reads like some triumph but rent was up 100%+ from 2010, and it is merely back down 15%.
Even adjusting for inflation, and even if the measurement of inflation is decent, it would still need to go down by another 20%.
saved for later. exactly the kind of deep dive i was looking for
Germany could learn a lesson or two here...
You say progress, I say enshittification.
What this article says: *The median apartment rent in Austin has dropped X% over the past 5 years*
What this article does not say: *Apartments in Austin cost X% less to rent now than they did 5 years ago*
It's completely possible for the cost of the average apartment in a city to go down, while the cost of existing apartments increases. How does this happen? The enshittification of rentals. Units get smaller (apartments in Austin are shrinking), they get built near highways (air pollution), they lose amenities like parking, they pop up places where they previously weren't allowed (smaller ADUs, basement units, see article), they get subdivided (landlord throws up a wall and turns a large 1br into a cramped 2br).
If supply and demand were really working the way its heralds claim, then we'd see the price of existing units going down. This article offers no evidence that this is happening. I don't believe for a minute that it is.
Instead, it's the same story as always: your rents will keep going up. You can move somewhere cheaper and shittier if you want. The people who profit will congratulate themselves while decrying the thing they actually fear: rent control.
https://www.statesman.com/story/business/real-estate/2025/05...
No, plenty of indices use a "repeat-rent" methodology (comparing only prices changes across the same unit) to address the problem you describe.
They show Austin rents going down, eg Zillow's Observed Rent Index: https://www.zillow.com/research/data/
Similar phenomenon in several cities: https://substackcdn.com/image/fetch/$s_!vg94!,f_auto,q_auto:...
I mean… duh? Genuinely baffled at people struggling to understand this. When there’s more of a thing, it costs less. Which is good when that thing is essential, like housing.
Not sure the idea of housing being an asset which endlessly accrues value is good for anybody involved, long-term. Open to disagreement, though! I’m no economist.
I guess the confounding factor is that the population isn't fixed. Greater construction could result in population growth which cancels out the gains from greater supply. You'd have to build faster than population growth to lower prices. And generally developers aren't looking to do that.
Sure they are. What developer wouldn't rather rent out ten apartments for $2k/mo than two apartments for $4k/mo?
Depends what the situation is, if the rents are absurdly high where you can undercut them and still profit then of course they would rather build more. If they are getting close to cost price, developers won't build more to lower it beyond that. At that point if you want to lower prices more you'd have to look at lowering the cost of construction.
Developers usually want to buy land, build house/apartment, and sell house/apartment.
They want to flow as much as possible - so if there are unlimited building spots you get a smattering of various options being built as they all find there niche.
If the building lots are rare, then they all will be built into the most expensive possibility.
If you try to take any local action that might lower housing prices or even keep them steady, you will likely be stymied by a large contingent of people that deny that new housing could ever raise rents.
The idea that supply and demand don't apply to housing is quite popular:
https://www.jstor.org/stable/27397156
And the very few academic articles that try to refute housing supply lowering prices get a lot of press:
https://hellgatenyc.com/take-that-ezra-klein/
Even when it's not peer-reviewed and contradicts a ton of more serious research attempts, a bid of research which rarely gets popular press coverage.
It's like climate denialism, there's huge demand for denialist positions and very little research to back it up, so the press does not reflect the research.
People are quick to point out that induced demand exists - especially people that aren't fond of change.
Very broadly speaking, people mis-estimate effect sizes in economics by orders of magnitude. Induced demand is just their foothold to claim an effect exists, before they go about claiming the effect size they want to see.
How would induced demand work for housing? I understand it for say transit use or car travel or like Facebook visits, but when there's twice as much housing do I... buy another home? Buying extra houses as "an investment" in a culture that is hell bent on depreciating my investment by building more housing is one of those "r/WallStBets" crazy plays, if I'm wrong I will lose my shirt and everybody will laugh at me.
Also, even if that were a problem, which seems dubious, you can regulate it. Massive tax hikes for second and subsequent homes are a thing in some places.
I love induced demand. I'm going to use it to get rich - buy up some abandoned town somewhere, and then pay to run a 100 lane superhighway to it; induced demand means the town will fill up instantly and be hugely valuable!
It doesn’t work unless there is currently repressed demand for living in that abandoned town because not enough housing or other factors.
No one is complaining about a housing shortage today in buffalo which used to have twice as much housing stock as it does today, because the demand simply isn’t there now.
Exactly - induced demand is just a misnomer/misunderstanding. "Pent-up demand" would be a much better way to explain it - but that would reveal that at some point the demand ceases; even SF has some limit - once all 12 billion people live there, demand will level off.
Good analogy. I've always considered induced demand a bit of a fantasy.
New businesses the sprout up that market themselves certainly induce a bit of demand, but more lanes and stoplights doesn't exactly motivate people to want to go somewhere.
> When there’s more of a thing, it costs less.
Yeah, and when we add lanes to roads, the average speeds increase and commutes get shorter. Right?
Also, if the government gives me $1 billion, then I'll be rich. But what happens if the government gives everyone $1 billion? Everyone will be rich, right?
... Your examples seem to undercut your point if I'm understanding what you're trying to say.
In your first example the "cost" in the form of traffic etc. was reduced so more people "buy" in the sense that they go on the road until you reach a new "cost" equilibrium. In practice that equilibrium is quite close to the original cost so it doesn't fix the issue traffic. But if that same number of people had driven before the high way expansion traffic would have been way worse; the cost would have been too high so they previously opted not to drive.
In your second example by increasing the supply of money the money ends up costing less; it becomes worthless due to inflation.
When there's more of a thing it cost less.
To be fair, building more housing can be like highway example. If there's tons of pent up demand of people looking to move somewhere increasing supply dramatically can fail to move the needle on cost because there's many marginal buyers who all have basically the same price. If you've got a million people who want to move somewhere and are all willing to pay up to 500k for a house the price of a house won't fall under 500k until you've built at least a million more homes.
> ... Your examples seem to undercut your point if I'm understanding what you're trying to say.
That perhaps you shouldn't assume that kindergarten-level theories always correctly describe complex markets?
> In your first example the "cost" in the form of traffic etc. was reduced so more people "buy" in the sense that they go on the road until you reach a new "cost" equilibrium.
So go on, do continue this line of thinking. You built more houses.... then what?
Feel free to refer to my explanation: https://news.ycombinator.com/item?id=47433743 - as usual, downvoted by people who can't face the truth.
Your previous comment is misleading and incorrect.
Even then, I’m curious as to what point you were trying to make with the building roads thing.
Isn’t it a good thing that more roads are built even if induced demand is observed? More people are able to use the roads.
Come on, think about it.
You got more people into the place. Now more employers move in, as they have access to a bigger pool of employees. What's next?
Put yourself into the shoes of a real estate developer.
Yeah that’s induced demand and it’s a good thing for the economy.
The rents are supposed to reduce only temporarily. But the goal is to not reduce is permanently. The goal is to increase land utility. Building houses helps with that cause.
> Yeah that’s induced demand and it’s a good thing for the economy.
No, it's not good. It leads to nothing but urban decay.
That's how you get Tokyo with a crazy price bubble, while beautiful traditional houses decay into dust just 3-4 hours away.
> The rents are supposed to reduce only temporarily.
Except that they don't even decrease. If your population is growing, so is your rent. And it doesn't matter how much you build (for large enough cities).
Again, this is simple observable truth.
> The goal is to increase land utility. Building houses helps with that cause.
Yeah. The goal is social engineering to force people into shoebox-sized apartments, to be ruled by their benevolent masters.
That's also why we're getting a global pushback against it.
> No, it's not good. It leads to nothing but urban decay.
This is subjective and loaded. I don't see any concrete point you are making.
>Except that they don't even decrease. If your population is growing, so is your rent. And it doesn't matter how much you build (for large enough cities).
They did temporarily in Austin - 19% after accounting for inflation.
Overall, making a city like NYC is preferred for any country. Even if the prices are really high, it reflects the economic activity of that city. Why would a house cost ~$800k if the person living there won't make multiples of it with their wages?
> That's how you get Tokyo with a crazy price bubble
Are you really making an argument that rents in a place like Tokyo are not supported by real value creation? Are we supposed to all live in "beautiful, traditional" heritage houses? Those houses are often a luxury, and favored by the wealthy who can live with the resulting inconveniences. They're not a sustainable solution for the masses.
Anyone ever drive around Austin, its highways and its endless new construction of new superhighways, to the point that Google Maps is confused?
As annoying as NYC (and driving) are, there are downsides to unlimited housing and lack of zoning - as it turns out, the same states that do this sort of thing we all praise, are the same laissez-faire philosophies that oppose communal public transportation and walkable urban communities.
I would buy more complex arguments around housing price solutions if ALL housing price problems everywhere else hadn't been solved by building more housing
Austin is a good reminder that supply does matter — but also that it needs to be added at scale before people actually feel it.
Small incremental changes probably just get absorbed without visible impact on rents.
Supply glut aside... Quality of life down... Traffic up... Kind of makes sense rents are down. Density needs transit investment too
Supply glut aside... Quality of life down... Traffic up... Kind of makes sense rents are down.
“Great, now let’s see California…” - Patrick Bateman
Thats cool. Now do LA. Sorry but I want beaches and housing options.
what they didn't mention is that supply didn't impact rents until the large remigration back out of Austin
> what they didn't mention is that supply didn't impact rents until the large remigration back out of Austin
This has been studied to death. But just like soybean farmers in Idaho voting for tariffs on China it seems a category of urban renter is more wedded to ideology than self interest.
The Austin metro area's population is up [1][2]. Austin's GDP is up [3]. Migration per se doesn't explain a phenomenon that is robust across cities, countries and centuries.
[1] https://www.macrotrends.net/global-metrics/cities/22926/aust...
[2] https://en.wikipedia.org/wiki/Austin,_Texas#Demographics
[3] https://fred.stlouisfed.org/series/GDPALL48453
2-3% is a margin of error compared to 20-40+% y/o/y growth. That means the influx ceased, some left, some had babies. Meanwhile housing was built.
Of course rents will crash if everyone anticipates 20-40% growth and it’s suddenly 0 . Let’s see in a few years if the pricing trend continues downward or upward.
If it’s downward, yes we’ve solved the rent problem by “building”. If it’s upward, as it has been, it’s not just about supply .
show pop stats
I feel like there was something else at play.
For reference, I moved to Austin in 2018, my rent for my apartment was about 1200/month. In 2022 (the year I left), my rent jumped suddenly to 1600/month despite new apartments near me, and all of the apartments I looked into had similar jumps. And anecdotally speaking my coworkers all reported similar massive rent spikes.
It feels more like this is associated with the tech industry cooling significantly in Austin so they can't get away with pricing bumps. This isn't to say new housing doesn't help, but it certainly didn't prevent me from getting fucked on rent.
In other news: Water is wet. Still, it probably bears repeating. I'm sure some NIMBYs said more housing would drive up prices.
Water, still wet.
Wow it's almost like the law of supply and demand is in fact accurate. Who would have thought basic economic 101 would be proven out? It's almost like when you allow supply to increase to meet demand the price equilibrium can move down. Shocking.
I say this with a bit of righteous anger though because the moronic democrats in California want to virtue signal about housing and homelessness but they make it downright as difficult and expensive as possible to increase housing supplies. The democrats in California have done nothing but make our problems worse, even as there are states we can look to with proven examples to solve our problems. Nope... more housing lotteries and BMR units will be required instead of just making it easier to actually build..
I'm with you and feel your anger. So tired of California's useless virtue signaling about housing and homelessness while no progress is made for decades. California, stop messing around and start living up to your virtue signals! It's infuriating to live in California, hear all day about caring about poor people, then do nothing at all for the bottom line and in fact endeavor to make it harder and discriminate against poor people as much as possible.
And then they'll act so surprised when the populists without a plan show up and win the national elections.
Sigh. NO it didn't. One fact of life: new construction does NOT lead to lower housing prices. Sad, but true.
So what did? Likely COVID. The _only_ way to decrease the housing prices is to decrease the population. As proven by countless cities, including the world's most liveable Copenhagen.
So does my prediction hold for Austin? Let's see.
Austin TX population in 2019 (ACS estimate, data series ACSDP1Y2019.DP05): 979263.
2021 (ACSDP1Y2021.DP05): 944658
2023 (ACSDP1Y2023.DP05): 979700.
2024 (ACSDP5Y2024.DP05): 979539.
So yep, my prediction holds true. The housing prices in Austin were stagnant because its population decreased during COVID and barely recovered to pre-COVID levels.
Want another prediction? Seattle's home prices will fall down, because its population is now (likely) decreasing. Not because of a rush of new construction. We'll see updated population released stats in April.
Edit: I sent a letter to the editor of Pew. We'll see if they have a shred of honesty (doubt it).
Edit 2: honest researchers take care to control for other factors before jumping to conclusions. For example, they could have found a comparable city that also had falling rents but _no_ significant new construction.
And hey, I did that. According to https://vitalsigns.mtc.ca.gov/indicators/asking-rents the rental price in SF was $4060 in 2019, and it fell to the low level $3319 in 2024 before starting to climb in 2025. Can you guess what was happening with its population?
There are many mistakes here.
The population numbers you have reported are misleading because they use 5 year estimated numbers. The better estimate is 993,588.
The population actually grew from 2021.
Even if you were right, the rents fell down by more than 19% after accounting for inflation. I’m not sure what you are trying to say?
> The population numbers you have reported are misleading because they use 5 year estimated numbers.
I specifically chose consistent data series. While each one of them can't represent the true population, they absolutely do illustrate the trend. The number you're quoting is from the Census, which only happens at 10 year intervals.
If you have better population estimates for these years that use the same consistent methodology, I'm all ears.
> Even if you were right, the rents fell down by more than 19% after accounting for inflation. I’m not sure what you are trying to say?
In SF rents fell even more. Without significant new construction.
Why?
> I specifically chose consistent data series. While each one of them can't represent the true population, they absolutely do illustrate the trend. The number you're quoting is from the Census, which only happens at 10 year intervals.
False. You are comparing 5 year estimates with 1 year estimates so it’s not consistent.
With SF I agree that it went down because of population but I’m not sure how that explains 19% reduction in rents in Austin with higher population.
Sorry, misclicked on this one: 2024 (ACSDP5Y2024.DP05): 979539.
The 1Y series is indeed https://data.census.gov/table/ACSDP1Y2024.DP05?q=Austin,+TX at 993771. I believe this is a statistical outlier, and is not reflecting the true population.
So let's test my prediction, shall we? The 2025 data will be released in April. If my prediction holds, then the population figures for Austin will be nearly flat or falling.
I also made the same prediction for Seattle, its rents are now falling slightly. So its population will be decreasing.
> With SF I agree that it went down because of population but I’m not sure how that explains 19% reduction in rents in Austin with higher population.
As you see from my data, the consistent series up to 2023 indicated falling population. The 2024 data was the outlier.
I still don't see your point. The population increased in Austin while the rents decreased. Even if nearly flat, the rent fell down by ~19% in real terms.
How do you explain that?
how surprising, never would have seen that coming
Austin is not a success story. It is a treading water story, and an example of lying with statistics because most of where it's cheap to live in "Austin" literally wasn't Austin when these measurements start. They just literally redrew the lines in part to make this headline.
If you want a success story, look a Vienna. That's what actual community and housing looks like and its because of the exact opposite of what econ clowns on here believe, non-market housing.
The laws of supply and demand don't apply to housing in the Bay Area.
We need affordable housing, not more housing for rich people, made by rich developers. Just because my house is worth $3M and I have $3M in stock options doesn't mean I'm rich. I'm working class, I had to come back from paternity leave to log-in to Slack on my laptop every damn day, and tell Claude how to write this damn software!
Did you sign the petition to block the apartment building down the street? It would RUIN our neighborhood!!
As an aside, I am not part of the problem!! I care about poor people!!! I am a good person!!!!
Oh you want proof? Look at my front lawn: "In this house we believe black lives matter, science is real, love is love..."
Proof point 2: look at my Tesla! "I bought this Tesla before I knew Elon was crazy!"
Plus I voted for Kamala. I'm GOOD. People in Kansas are DUMB and BAD.
I feel like the economics around the Texas real estate markets are getting really twisted due to other factors.
The quality of construction in these new builds is generally very bad. If you compare a Texas home built in 2025 with one in 2015, I can guarantee you will find shocking differences once you pull back some of the drywall or have kids jumping around upstairs. I had a 2023 build for a year before I realized I had a hot potato situation on my hands and decided to bail.
The new builds used to command a premium, but in some communities the situation has completely inverted. Buyers are coming in and explicitly avoiding anything built in the new millennium. Information is flowing so much more freely around real estate and the unspoken bullshit scams prevalent within. We've now got home inspector influencers on TikTok showing first time homebuyers exactly what to look out for. We didn't have these kinds of information channels when I was shopping for my first home.