Let's say I'm a developer and there's unmet demand at all price points. Obviously I build the highest-margin product until I've satisfied that demand. Then I move on to the second-highest-margin product until I've satisfied that demand.
Anywhere that demand across the spectrum dramatically outstrips production capacity (e.g., anywhere in the Bay Area, where NIMBYism has made it nigh-impossible to build anything) what little production manages to happen will target the high end of the market.
You have to build enough to make satisfying demand at the bottom worth doing. Our regulations (onerous constraints to construction and land use) preclude that outcome.
In the book The Affordable City [0], this is illustrated with a really powerful analogy:
Every year in the United States, the Toyota motor company sells about 2 million regular Toyota cars and 300,000 expensive luxury Lexus cars. Suppose that we introduced a law that each motor company can only sell 300,000 cars a year. Which cars would Toyota continue to make?
Simple: Toyota would stop being a motor company. It would instead start 10 new motor companies, and a parts manufacturing supplier system for those motor companies, and keep controlling interest in those new companies.
More deeply, I don't understand how it's analogous. Why are companies prohibited from selling more than 300K cars? Is it because of too-high pollution (CO2 emissions, tire micro particles, etc.)? Is it because of a mass desire to switch to public transit systems? To stop having so many traffic deaths?
If so, then the laws will likely result in a ban on the total number of new cars, or at least higher import fees and higher tax rate. And these all shift the economics of what Toyota would produce.
As an unlikely case, if the laws were passed due to a mass movement against displays of wealth, such that private car ownership is frowned upon and luxury cars frequently get vandalized, then Toyota isn't going to make many Lexus sales at all.
You're choosing to interpret the analogy outside of the bounds implied by the argument it is supposed to relate to.
In which case the rebuttal to your argument is as simple as adding another arbitrary layer of assumptions that do not generalise, in order to restrict your use of arbitrary assumptions that do not generalise, e.g "the government will not allow that split, back to discussing the original scenario."
Precisely why the law should really say that making X affordable cars per year buys you right to sell 1 luxury car.
You actually want it more complicated than that, maybe something like for every dollar of affordability you sell (under $X), you earn the right to sell $0.10 worth of luxury.
There exists a market equilibrium (2 million regular cars, 300k luxury cars, in the Toyota analogy). You're proposing to construct a regulatory scheme to reach a different equilibrium. Why? What's wrong with the market equilibrium?
Toyota aren't constrained in how many cars they can make a year (well, more or less, and under normal circumstances), housing developers are much more constrained.
In a world (kind of like the one we live in right now...) where Toyota only had components to build 500k cars a year then they'll make 300k luxury cars and 200k regular cars and buying cheap low end cars becomes almost impossible.
If the market equilibrium in an unrestricted market is 2mil:300k, or roughly 6:1, regular to luxury cars then an argument could be made that regulations should be but in place to retain that market equilibrium even during a restricted market, assuming we believe it is important that everyone can own a car.
The restriction on the market is largely arbitrary - people “don’t wanna” let other people build apartments on land they own. The only real reason they do this is regulatory capture - if someone who owns land slows housing production on other people’s land, theirs is worth more.
You're proposing to construct a regulatory scheme to reach a different equilibrium. Why? What's wrong with the market equilibrium?
In the context of cars, arguably nothing.
In the original context of real estate, all kinds of things, because having somewhere to live is essential to quality of life and reserving more of the finite real estate available for development for a few luxury homes means a lot more regular homes that could house a lot more families can't be built there instead.
Who is going to organize said organization and deal with all the BS (petty and not) to make a livable wage, if they can do simpler and get the same, or do the same and get paid more?
A few will, but most won’t. The amount of risk to develop and the type of skills required are non trivial.
a livable wage is a really bad metric because the definition of living is extremely subjective. We had it right initially with market derived wages. This talk of living wages is keeping us from real discussions about market power abuse/monopsony/oligopsony situations in the labor market that would improve labor market efficiency a lot more than arguing over what a living wage is.
This line of reasoning is why systems collapse. You are proposing adding further regulation on top of a mountain of existing regulation without considering the problem is probably bottlenecks caused by existing regulation.
Like "earn a buck" in Wisconsin. The DNR is trying to manage the herd and keep the deer numbers in check. Before you can get a buck tag you first get a doe tag and must turn in a doe to get your buck tag.
I think part of what muddies the waters here is that there's so much speculation in the market. In some areas, particularly megacities, there are also a lot of ultrawealthy foreign investors buying up real estate in the U.S. and Canada to park/hide their fortunes. So you have lots of market participants who are not interested in buying a property for the purpose of living in it. And if you're building exclusively for the top bidder, then it will take some time before you get to actually housing the people who need it, and it may not be in areas that are convenient for them to live in.
It'd be perfectly reasonable to mandate that for one high value luxury house, a developer has to build a certain number of affordable homes. I guess it'd be the nimbys that would try and prohibit such legislation.
That's called inclusionary zoning and exists in many large markets. There's no evidence that it broadly helps but it does further turn housing developme t into a political pawn.
Projects that don't pencil don't get built. Constraints are costs and reduce the number of projects that make sense. There is only one way out of our housing crisis and it's removing constraints to construction. The biggest of those constraints right now is zoning law and the planning approval process that it creates.
It is unreasonable to mandate, as it invites unnecessary corruption and bureaucracy into what is and is not affordable (specifically the location aspect of it).
The only thing that should happen, if the goal is to lower prices, is increase supply and/or lower demand. The supply can be increased by simply changing zoning to allow for much denser residences.
If there’s a shortage of luxury housing. The wealthier demographics will buy cheaper housing stock displacing middle and low income. This is what happened in California.
Exactly, if you banned car companies from making more than 100,000 cars a year, you'd soon find that only rich people owned cars and all manufactured cars were luxury cars.
Then if you banned them from making luxury cars you'd still find that the rich bought all the new cars.
The fundamental fix is let car companies build more cars.
These are the types of regulations that backfire with unintended consequences. Off the top of my head you're going to probably reduce the amount of home builders off the bat. Even if its just upper-end builders, less options at the top of the market will cause high end price increases and then buying down the ladder ultimately raising the price for all housing.
This is way more complicated than you think. How do you define what a luxury house is, how do you define an affordable house, can the affordable house be sold to anyone, where does the affordable house need to be built?
Or we could simply make it legal and cheaper to build denser housing.
maybe I'm missing the big picture here, but I don't see why it's actually desirable to have a wide range of incomes within a specific neighborhood. poor people can't afford to shop at {expensive grocery store} or dine at {fancy restaurant}. and wealthy people generally don't want to shop or eat at the places their poor neighbors could afford. if you "urban plan" them into the same neighborhood, now you need two (or more) tiers of every type of business to serve all the residents. at best, everyone has fewer suitable choices of each. at worst (and more realistically imo), most of the businesses continue to serve the wealthier residents, and the less wealthy need to travel away from their "affordable home" to actually get their needs met.
Because you need people to fill a wide variety of jobs and roles, like teaching, transportation, retail, food service, sanitation, etc. that can’t be done remotely. Unless you are planning for those jobs to be equally lucrative as CEO of Megacorp, you can’t build a functional society without people from various socioeconomic strata. Some neighborhoods can get by with shoving off people in those roles to nearby locations, but commuting time and expense is a limiting factor.
I'm not proposing an entire city inhabited by a single income bracket. I'm talking about neighborhoods as much smaller areas, as a rough definition "all the places I can walk to in 10-15 minutes".
I think I see your point though. at a high level, the neighborhood composition could be optimized for everyone to walk to work (wide range of incomes), or for everyone to walk to everything outside work (narrow range of incomes), but not both. or there's the US suburb approach where no one can walk to anything.
imo, assuming you're reasonably connected to work by transit, quality of life maximized by the latter arrangement (homogeneous incomes at the lowest level of organization). even if it's a little inconvenient, I will figure out how to get to work everyday. outside of work, a little inconvenience is the difference between doing or not doing all kinds of spontaneous activities.
There's a big project in North Cambridge near the city line. The only easily accessible (i.e. walkable) supermarket is a... Whole Foods. Though that's probably the most common chain in Cambridge as a whole to be honest.
But with or without specific affordable housing areas do gentrify and long-term residents don't necessarily like it even if it results in a "better"/safer/etc. neighborhood.
You’re forcing private businesses to take on contracts that they may not want. Totally unreasonable.
The only way to do this is to zone things certain ways. For instance, pass a law that says any building in a certain area needs to be a certain height and contain n% affordable units.
> You’re forcing private businesses to take on contracts that they may not want. Totally unreasonable.
Regardless of how you feel about this, it can and does happen all the time. New residential highrises in Manhattan don't get approved unless they have a percentage of low-income units.
Indeed it happens all the time, especially in the NIMBYest of places (e.g., CA and NY). The results speak for themselves.
Are new residential high-rises getting built in Manhattan at a rate which is commensurate with demand and keeping prices stable? According to Redfin[0], housing prices there are up 12.9% YoY, exceeding general inflation and showing that the rate of construction is too low.
In CA, we've added additional burdens onto affordable housing which makes them more expensive than market rate housing. A report from UC Berkeley[1] says that regulatory constraints make 'affordable' units 7% more expensive to build than market-rate units. And of course CA has also made market-rate units more expensive to construct, further exacerbating the crisis[2].
This is unsustainable. On our current trajectory we will either needlessly sprawl our way into occupying all unincorporated land (because there's no Planning Department) in the entire country or we'll have tens of millions of people living in tents and camper vans.
I said that’s the better option in my comment. Then you aren’t forcing anything. Just adding levels to the project. But forcing other developments is the issue.
Helping people by lottery is terrible. Ten affordable homes are built when 1000 are needed. Those ten get all the benefits, everyone else gets nothing.
Or we could invest in better high density housing and more mass transit and get rid of the lottery nonsense.
Yes. In general, the more costs are added to supplying a product (such as housing), the more luxury versions of that supply are favored over cheap ones. Because the fixed overhead is a bigger fraction when building the "cheap" version,
Points #3 and #4 seem to be arguing that regulation is the problem here.
In the UK, developers aren't allowed to build a new development (of >5 [some areas] or >10 dwellings [everywhere]) without providing sufficient affordable housing. This is usually a mixture of shared ownership properties and affordable rent properties (which must be no more than 80% of market rent, incl charges) which must be built alongside the other dwellings.
Is this a thing in the United States? If not, why not?
> there is no epidemic of fire deaths in older buildings that are not equipped with state-of-the-art sprinkler systems
For someone from the UK, where we experienced the Grenfell tower tragedy just a few years ago - and where experts have testified that sprinklers would've absolutely helped to prevent fire deaths (https://www.bbc.co.uk/news/uk-england-london-41230521), this argument comes across as so short-sighted and stupid it's not even funny. Skimping on fire safety measures is not the answer.
> Is this a thing in the United States? If not, why not?
So local entities govern building in the USA. I know that where I live, Boulder, has a requirement for affordable housing to be built in any new development, but also allows for the developer to pay cash in lieu of building the affordable housing. The cash is then used by other entities (non-profits, the city) to build affordable housing.
Is there any appetite for something at the federal level, or would this be seen as an unwelcome intervention for something that should be devolved to state level?
It's great that one city in Colorado has done something (and I'm sure it's not the only locality), but I can't help think that this sort of governance must lead to a ton of fragmentation in regulations.
Note that that example is for the city of Boulder.
Trying to do this at large levels ignores a bit of the differences in housing density and cost of housing in the area.
Would it be possible to build luxury housing in San Francisco and then some affordable housing in a different city or state?
While there is going to be fragmentation of regulations, a developer working in Boulder is working in Boulder. Building luxury housing there and then building housing in... Federal Heights or Alamosa doesn't help the affordable housing issue in Boulder.
Handling this at the city level (rather than state or federal) is likely the right spot.
It's ironic that I know someone who lives in a building where sprinklers have been retro-fit in the most incompetant and chaotic manner you could imagine.
The problems within the UK construction industry go far, far beyond the implementation of obvious saftey measures.
The Grenfell disater would never have happened if works had been carried out in accordance with regulations at the time, sprinklers or no sprinklers.
> I'm not sure why you're holding it up as a good example.
Because it has the regulatory requirements I detailed in my post for housing developers.
> The UK is well known for unaffordable, poor-quality housing
And houses in the states aren't poor quality? Do builders over there even know what bricks are?
Freeholds in some areas have a reputation for being unaffordable, sure. I'm not so sure that the shared ownership and affordable rent properties I refer to have this reputation, but it is clear that there's not nearly enough housing stock for demand.
Quality is definitely variable across all housing stock, but I'm not sure I'd say all new builds are of a poor quality.
London is well known for unaffordable housing, is the UK as a whole? As for the quality, same as in France and other countries with similar profiles, old housing is of ( comparatively for today) poor quality, but it's getting progressively upgraded and replaced.
Having lived in neither, going off reports I'll take the UK, even with Grenfell, than the US(where the Florida collapse compensates for Grenfell).
This make excellent sense, and the only solution would necessitate public transportation.
Unsurprisingly, whether it’s public housing or public transportation, there really is no way around investing in public infrastructure if you want to have a healthy society.
Public transportation is one piece of the puzzle. Cities that are truly great for car-free living are also walkable and cyclable, and have dedicated infrastructure to this end. Public transit gets you part-way there, since unlike cars, public transit, even buses, do not really make the streets dangerous and hostile the way that individual transport vehicles do. Still, it's important to remember that public transit is a key part of a broader approach to the problem and not the end-all solution itself.
I'm not in zoning, so no idea if this is already done, but it would be great to have a (probably national-level) standardized formula for calculating a transit credit for a development that could be applied to decrease required parking spaces.
I.e. having a light or heavy rail stop within 2 miles gives an X credit, having a grocery or mixed use commercial (food and services) within 2 miles gives a Y credit, having bike storage and lanes gives a Z credit
Essentially, attempt to quantify the holistic experience of residents, when talking about parking requirements.
If we make the kind of housing / communities we'd like to see cheaper, developers will start building it naturally.
Edit: From the linked Reddit post: "In January 2013, LA enacted its first major parking reduction, essentially giving developers the option of replacing up to 15% of their required residential parking with bike parking if they are within 1500ft of a major light rail or metro station. However, these bike spaces must be “long term” spaces, which require locked cages, a dedicated bike servicing area." (But also notes some requirements around the bike spaces that increase the cost of making that trade-off)
Because then everyone would always build no-parking developments to maximize profit, even in neighborhoods unsuitable for it. E.g. no public transit, no nearby grocery store.
Market dynamics would solve for this pretty quickly. If a neighborhood of no-parking developments had no grocery store, then building one would be a blindingly obvious opportunity. If the neighborhood is actually incorrigibly unsuitable for zero parking, then developers would have to build parking to attract buyers. But if you mandate parking minimums based on a formula then you have absolutely no mechanism for A) discovering how much or how little parking is actually required in each neighborhood (only top-down prescriptions based on a system that may or may not reflect the reality on the ground), and B) you categorically shut out the scenario where a neighborhood densifies before the commerce/transit is there for it, which then in turn attracts commerce/transit to move in and meet the demand.
Ha! Development is... substantially less organized and intelligent, less agile, and happens over longer timeframes than you're thinking.
Most developers would have no problem building two apartment buildings right next to each other, on every foot of available space, with no parking, selling everything, and then never giving their futures a second thought.
Zoning exists precisely because all building parties involved in are absolutely mercenary, and yet the city has to deal with the mess in the subsequent decades.
The entire parking requirement was created because previously developers had overburden street spaces without care.
> Most developers would have no problem building two apartment buildings right next to each other, on every foot of available space, with no parking, selling everything, and then never giving their futures a second thought.
So what's going on with the developer's counterparty in this transaction? I'd be happy to buy a property without parking because I don't drive a car and I find that all the extra asphalt in a neighborhood dedicated to cars actively makes it worse.
I'll grant that removing any parking requirement creates short-term chaos in places where developers under-judge the amount of parking necessary, but I also think that people systematically over-estimate how much parking a place actually needs, and that over-building parking necessarily induces demand for cars because it forces the built environment to become spread out and less walkable. I also think that if the right incentive structures are in place that it's a problem that sorts itself out in fairly short order. In this case if you build a dense housing development with very little parking and no nearby shops then a grocery store on the corner is pretty much risk-free profit since you have a large customer base in close proximity with no competition selling essential goods. If you strip out parking requirements and zoning then you also clear out a lot of the red tape that makes such store difficult or outright illegal to build.
> Zoning exists precisely because all building parties involved in are absolutely mercenary, and yet the city has to deal with the mess in the subsequent decades.
> The entire parking requirement was created because previously developers had overburden street spaces without care.
Zoning is precisely what created communities that have such hopelessly ingrained car dependence and therefore demand huge amounts of dedicated asphalt just for basic transportation.
The "streetcar suburbs" in North America, which were built before modern zoning and before car ownership became an explicit assumption of developmental policy, are still in high demand even with the streetcars ripped out because the lower setback requirements, reduced/nonexistent driveway space, narrower streets, and corner shops make it a more livable and friendly environment.
Where, once you've removed all the parking footprint that existed before? Do you have any idea how expensive it is to retrofit underground parking under an existing structure?
Are people in those neighborhoods willing to forgo the hundreds of vehicle trips a month that they will create via their Uber/Lyft/cab trips and Instacart, Amazon, Chewy, Doordash, and Uber Eats orders? Simply outsourcing those car trips to someone else, and leaving them nowhere to stop in the process, is a hypocritical pipe dream.
> Are people in those neighborhoods willing to forgo the hundreds of vehicle trips a month that they will create via their Uber/Lyft/cab trips and Instacart, Amazon, Chewy, Doordash, and Uber Eats orders?
Walkable neighborhoods existed for millennia before these apps were invented. People just walked to a shop a block away for the things they needed. Not sure why you think that you have to "outsource those car trips to someone else" when many neighborhoods already don't need car trips at all.
I live car-free in the DC metro area. I ride a bicycle with a rack on the rear for attaching bags, I have a collapsible shopping cart that I can take on the bus, and I have a dolly for moving heavy objects short distances. I've gotten a lot done with them.
>People just walked to a shop a block away for the things they needed.
Those days are gone because no small "shop a block away" can compete with the behemoths of Amazon, Instacart or major supermarket chains that deliver, or cloud kitchens with DoorDash or UberEats, not unlike how American fast food chains and Starbucks crowded out a lot of former native mom-and-pop cafes and restaurants.
What "existed for millennia" only had to compete with nearest such other small business in each direction. Now, they're competing with the world's supply chain.
Just look at a traffic cam in any "walkable city" where vehicles still run and count the brand names crowding the streets doing trips that just didn't happen even 20 years ago.
There's a whole host of problems strongly linked to American car-dependent development for which the solutions already exist and have been in use for some time elsewhere. Air quality, street congestion, traffic fatalities, obesity, high cost-of-living, poor accessibility for the disabled, children growing up with little independence or hobbies outside the home, housing shortage, and the general unhappiness of people who have no choice but to drive everywhere to do anything in a congested suburban town.
The obstacles are not technological and have not been for some time. It's fully a social and political problem.
Are you suggesting that a pleasant rural/exurban environment, perhaps within a reasonable driving distance of an urban downtown is not quality of life focused? It may not be your preference but it is for many people. Others even like suburbs though that's mostly not my thing.
That's fine if people want to live in the suburbs but... They need to start paying the full amount of what it costs to maintain those suburbs. As it is, the dense urban downtown is subsidizing all of it. That's not fair.
That seems like an incomplete accounting though, as it's looking at net revenue per acre.
When in reality, the productivity of an acre (and therefore its tax revenue) depends on that acre + all its inputs (people, services, etc).
Downtowns (aka central business districts) look wildly productive, but they're fueled by people who live... not there.
From this perspective, it's really more of a call for mixed use development [0], which is able to supply more of its own requirements AND benefit from locality.
The City of London is perhaps the most extreme example. I assume its revenues are astonishing. But hardly anyone lives there. It would be absurd to say that the City is subsidizing the rest of London.
It's not like a city exists in some impermeable bubble from the surrounding area. A great deal is shipped into a city through the suburbs and other surrounding area. Many workers commute in from suburbs which are often cheaper than the city even though they may have better school systems (even though the per student costs are often lower). Food comes in from generally more rural areas.
Cities and especially their denser and more walkable areas are dependent on the surrounding area in many ways. More dependent than the suburbs are on the city except perhaps for employment.
There's a reasonable argument to be made that while San Francisco was the original primary catalyst for development in the Bay Area, Silicon Valley (which is effectively suburban sprawl) would be just fine without the city at all. The same would have been true of the Boston area to a large degree especially 20 years or so ago, except perhaps for the universities.
It makes sense the downtown is where people in the suburbs go to work and that therefore downtown appears to be making more. But that's still ignoring the fact that there's a cost to maintain every road, water pipe, sewer, sidewalk, etc. Those suburbs still cost way more than downtown and the suburbs are not paying enough to maintain their costs. Cities are going bankrupt.
If you want to consider the entire thing one unit (suburbs + downtown = unit), you still have to figure out how to pay for all the services. The more spread out everything is the more those services cost.
So it still comes down to the same thing. If you want, blame it on the government zoning downtown for no residents and only zoning for single family housing and therefore leading to the only affordable thing being the suburbs. But, to maintain those suburbs they're going to have to raise taxes 4x to 8x on everyone in that unit.
It’s an easy assertion to make because even car transit itself is better in places that aren’t car centric. (Because fewer people are on the roads, and roads are much safer.)
Population density in the Netherlands is 414.33 people per square kilometer.
Population density in the US is 34.05 people per square kilometer.
Granted, a huge amount of the US should probably be discounted for a more realistic comparison (e.g. unlivable regions, BLM / park / national forest, and massive amount of farmland), which would bump the number up.
But we're still probably going to need some adjustments going from a country you can drive across in about 4 hours, to one where it would take 40+ hours.
Your city council is the People’s Central Planning Committee that runs the construction economy in your city. They decide what is produced and they decide who does it. Construction in your city is a planned economy - every bit as much as the Soviet Union or pre-Deng China.
And like every planned economy, it sucks and fails in just about every way.
For an extra level of irony, where do wealthy Angelenos go for vacation? Paris, for its great, walkable neighborhoods that allow exactly what their city rabidly bans.
Hah, I wasn't wealthy but if it helps, I got sick of socal and moved from LA to Europe (Ireland, so not as good as Paris, but an improvement all the same)
Never had the desire to go to Paris. I'll probably go camping in the mountains for my next vacation. Doesn't mean I want to sleep in a tent the rest of my life and it doesn't mean I want people sleeping in tents in my neighborhood.
All the points raised here were valid then and still are valid.
It's really worth highlighting that in most of the US it is illegal to build anything other than single-family homes ("SFHs"). The sort of medium density neighbourhoods a lot of people like are an historical anachronism in zoning terms.
It's true there are local issues too. For example, New York's scaffolding laws just make all construction expensive [1]. Basically any gravity-induced incident is 100% the employer's fault and this hugely drives up insurance costs.
Tax laws play a part too. Ultra-luxury apartments in NYC not only don't pay their fair share of property tax (in terms of market value), which is an issue New York State has to fix and has refused to for decades because upstate SFH owners don't want to pay more tax (SFHs in NY pay way less property tax than an equivalent value apartment). Ultra-luxury getting property tax abatements for new construction is a crime.
But here's a key general issue that has been proven true around tdhe world: anywhere with the free flow of capital such that you can park money in real estate in the world's urban centers with little to no oversight have experienced huge increases in property value. This incentivizes ultra-luxury pdroperty development. We need to stop this.
We need:
1. More multi-family building in SFH zoned areas. Areas that prohibit this should be penalized for it with higher property taxes (if it's not outlawed entirely);
2. More medium-density development along transport corridors where we can and do create walkable neighbourhoods; and
3. More high-density affordable housing in urban centers.
Something I noticed happening around Boston metro starting with the pandemic is there is a lot more new builds than additions and remodels. The remodel we tried to do ended up significantly delayed due to labor and other shortages, and shopping around was very difficult. It made me wonder whether the developers prefer the hassle-free experience of unoccupied or new builds where you don't have constant headaches of finding old out-of-code shit, having to design custom workarounds, back and forth with the owners, keep the existing structure protected from elements, etc. I can imagine if the work is very asynchronous it would add hidden costs as well due to inefficiency.
At least in the city proper, I think I only see two-three new towers of housing Downtown. There looks like there's a retrofit of an office building by Post Office square, but I'm not sure if that's housing or not.
Small remodels are tougher in general especially if you still need a bunch of different trades. I've been putting off investigating for a kitchen update. Probably need to start that ball rolling.
Zoning laws seem like the easiest single lever here. Government can change one thing and get out of the way (yes I'm naive here..)
The cities of the world that don't feel like they're enveloped in a housing crisis have opposite zoning restrictions to those that do - namely they restrict single-family homes and high rises, and permit that middle-sized building and also for existing single family homes to be converted into multiplexes.
Zoning laws also impair land values. So a mass upzoning of all properties across the city also immediately increases the potential land value and assessed tax revenue.
The most counterintuitive fact about urban/housing economics: Only volume of new housing relative to demand matters. You solve housing crisis buy zoning high volume of apartments and the zoning is dense with good public infrastructure and transportation. That's all.
Research shows that if you build a new expensive apartment, it starts a avalanche of people moving and just 2-4 steps later someone with low income gets into a new apartment.
Background assumptions: no empty apartments (this can be fixed with tax) , no NIMBY limits for housing quantity or quality.
I wish this were true in India, specifically, in tier 1 cities. They keep building high rises with lots of amenities while I’d like to live in a townhouse or a single family dwelling in an otherwise dense development. Indian families deserve split multi-level housing too but all we get as options are flats. Maddening.
Isn’t it obvious? It doesn’t cost much more to build a luxury house but you can sell it for way more profit than if you built a regular or shitty house.
Exactly, "Luxury" really just means high-end looking finishes built at the lowest possible quality they can get away with. At least in my city all the new builds are absolute shit quality.
It's only you: in Russia developers build huge amounts of affordable housing (good mass transit availability, small/tiny units, high rise buildings) and get a lot of criticism for that.
Critics focusing on poor aesthetics of high/wide buildings, lack of greens and parking spaces, overload of civil infrastructure such as child care/schools. But it's quite obvious you can't have all of that taken care of and keep the existing price tag. Speaking of which, a basic studio apartment on the outskirts of SPb could cost you as few as 20k$ a few years back, especially if bought early in development cycle (which does carry some risks).
The real issue here is scarcity of square footage. The US has more than enough land to house everyone.
According to Wikipedia:
* ~4 million mi^2 of land
* ~130 million housholds
This is about 19 acres per family. Of course this is an overestimate because a lot of land is waterways, mountains, etc. Even if we assume that we're off by 100x that's .2 acres/family which equates to a house something like this: https://www.zillow.com/homedetails/40-Canvasback-Ln-Elizabet...
Maybe instead of trying to put as many people as possible into as small of a square foot area we could:
1. Build public transit that can cover larger distances. (Street cars, busses, subways)
2. Artificially stimulate new communities (0 property & sales tax for any restaurants, bars, theaters, etc for 30 years)
3. Build out high quality infrastructure. This could be built underground with maintenance tunnels that allow these utilities to be repaired and could be subsidized by the construction of subways. (sewers, power, fiber)
I think we continue to ignore asset inflation in these discussions.
While there are obvious gaps and issues with physical construction and zoning, the real issue is that housing, and many other assets, have gone up way above inflation for the last 14 years. And the corrections do not wipe out enough of those gains.
If we never solve the asset inflation problem with real estate values, all others issues are ultimately moot.
If people could extract yield from savings accounts people would leave their money in the bank.
In 2000 you could get 5% annual return from your savings account - but during the last 20 years you would have been better off buying stocks or real estate.
When rates went to zero, capital chased after yield: housing, stocks, NFTs
How did this monster trashfire of zoning laws even come to life? At this point we could probably suspend every zoning law in existence at least for a few years and end up in a better situation.
In a sane market when a good (housing) is extremely scarce and valuable, people make more of it and naturally compete away the profits to bring the price comes down.
Never in the history of modern housing has new housing never not been an overwhelmingly consumed by the people at the top of the income/wealth distribution. Even in the home building explosion of the 50s and 60s, new homes were purchased by the upper middle class.
But the point is that todays new luxury homes become tomorrow’s working class bargains. The analogies to the car market are instructive. Wealthy people, by insisting on paying top dollar for the latest style and technology, indirectly subsidize the poor. Their constant rotation to the latest and greatest creates a huge surplus of used cars/homes that are almost just as good (even if not as high status) as their new counterparts.
Or at least this is how it worked until the NIMBYs took over and blocked the demand for new luxury housing.
5000 sqft doctor's palaces are working class bargains 30 years hence? Only if you live in Doctor Zhivago's world.
We don't need hand-down/trickle-down, we need 1200 sqft entry-level housing built in line with demand. In large tracts of the nation this is not happening.
My problem with the car analogy though is that there is no "car developer" who can buy a 2002 Lexus and make it new again. In my hometown the "working class bargain" doesn't exist because those 50s and 60s homes are bought by developers before they hit the market (in many cases being sold by estate beneficiaries who don't care what happens to grandma's house anyway and just want the cash) and turned into luxury homes again.
Honestly I'd rather have developers build 1,000,000 luxury houses than 100k luxury + 900k "affordable" houses. In the long term high-income people will live in the best houses, and if there aren't enough luxury houses, then they will just live in simple houses and those houses will increase in price because of all the demand of high-paying renters/buyers and the good school districts.
That's what we have in the Bay Area - $3,000,000 houses in Mountain View that working class people used to live a few decades ago. And now working class people are priced out of even those simple houses. Nobody wins.
I’m a developer. I do tons of work to get the right to build - buy the property, the permits, the environmental review, neighbor meetings where they oppose it, more legal and municipal review, this drags on for years.
Now after all of these fix costs would I rather build luxury units that net me tons of money or affordable units that net me little money? And also the neighborhood itself is opposed to a lot of low-income housing for all sorts of class reasons. It’s just not in any stakeholder interest.
This is the answer, and it's kind of amazing the strange contortions people go through to not admit it. Regulation is a tax. Review requirements are a tax. NIMBY opposition is a tax. Complex irregular permitting requirements are a tax. All those taxes must be paid up front by the developer, so obviously developers are only ever going to build high-margin high-income housing. They'd probably lose money on anything else.
I'd support of a constitutional amendment that makes housing (any form, from a farmhouse to a high-rise) a by-right land use across the entire United States.
why don't more people act as their own architect / build more of their housing themselves?
I'm coming from an attitude of "a house is a home, a machine to make the lives of my family easier and more comfortable", not "houses are an investment with incidental utility as shelter." Is it that many don't care about their house as a home?
> why don't more people act as their own architect / build more of their housing themselves?
In Europe at least legality of the process. I do a shitload of DIY in the home and so does my brother in his home. Fancy hotel-looking closet with lighting and whatnots? (this sure give a "luxury" feel): we got it. But I'm not allowed to build a house from scracth. I'd love to: my grandfather build a chalet all by himself in the fifties and that chalet still exists.
For the architect plans you kinda can do it yourself and then find an architect that'll adapt and sign the plans.
But the concrete, the electricity: you need stamps/approval from professional and the state does send people verifying that everything is kosher.
You can have the wall and electricity lay out and then do a lot yourself, but you now have the issue that the price you'll pay for "stuff" aren't the discounted prices the professionals do get.
How does that work if I want something cheaper than a single family home such as a condo? I can't build a stand alone condo (I mean a stand alone 600 square foot house on a 0.05 acre lot would be awesome for me but zoning regulations prohibit that in practically all areas of the US). I'd need to organize dozens of people that also want a condo. That's not really feasible for me.
I'd also say zoning generally prohibits this in most desirable areas. Developers have the ability to do a lot of legal work to get approvals and permits. Since they are getting approval for a large number of buildings or units, they can distribute that cost and so they can sometimes build in those desirable areas where it would be too costly for me to build as an individual.
> Is it that many don't care about their house as a home?
Most people do not even understand something as simple as marginal income taxes and income tax withholding procedures. They would be well out of their league managing real estate development. Not to mention they would need to quit their day job to manage all the contractors.
And even with a general contractor (GC), you need to know enough and spend enough time to make sure you and/or the GC is not getting scammed. You will not find out about big problems until years after, and good luck pursuing those at fault.
Also, most people have nowhere near the necessary liquidity or cash flow to handle purchasing land, obtaining a construction loan, and managing payments for materials and labor.
Building your own housing usually means living either in the middle of nowhere or at the sprawling edge of suburbia. None of the places I would want to live have much, if any, empty developable land. So that would mean a tear down and rebuild of an existing house, which is a lot more expensive than just buying an existing house. Also, relatively modern building codes and zoning rules like setback requirements put new construction at a disadvantage compared to existing housing.
Most people who own homes either A) have most of their net worth tied up in it or B) have a levered position in its value via mortgage. And many people who don't own homes, especially younger people, have pretty much given up hope on being able to own their own home within their lifetimes. The rapid rise in housing prices and rents over the past couple decades means a lot of people are moving - their rents go up and their wages aren't keeping pace.
So, it's somewhat of a luxury to be able to form an emotional attachment to your home, without worrying about its effect on your finances.
Your points only make sense from the perspective of someone with the resources and flexibility to move at any time to any place.
Many people move because they're priced out of their former dwellings. Many people who want to move to a different area can't because of financial/family reasons.
Modern societies try their best to make independence difficult if not impossible by encouraging rent-seekers and gatekeepers. There were the Walter Segal people trying to bring back something like this, especially for lower income people with more time and bicep than cash, but*
1) The animating principle of his simple construction designs was that they were based on off-the-shelf materials and the industry conventions on how they are sold, and could be built incrementally. Those designs turned out to be hard to insulate. Alternatives that were far better to insulate would require new designs, the materials were harder to find, and building codes are tuned to enforcing the exact kind of construction that we always do (and that the old designs were a variation of.) He also created this sort of drag and drop style of architecture based on standard material sizes enabling people to design their houses themselves, and all of that has to be thrown away with alternative materials. That gets rid of most of Walter Segal's material contribution, leaving only the spirit of self-building.
2) Houses in Segal developments ended up shooting up in value, so it ultimately didn't solve any problems. It's land value that's important anyway. The way to solve this would be to only self-build in undesirable areas or on your own land?
People seem to want to move in with everything aready done, shiny kitchen, fitted carpets, etc, etc. This would be great if houses were built like Toyotas - but they're not.
They basically are. The various tract builders in the US (DR Horton, Lennnar, etc) even have the same offerings of budget and luxury models. You can get a Toyota which meets minimum code requirements (e.g. dr Horton express) or a Lexus (e.g. dr Horton emerald) which comes with nicer finishes.
Furniture is an especially good example where DIY is still possible to home handcraft, and desirable for individual fit, as well as many other reasons. Done that.
"appliances" too. moreso if you count frankenstein abominations that only I can run safely. there's some things I could sell to others and expect them to use without dying, so that counts.
"Laptops" meh. but I've had mobile computing things that featured structural duct tape and were indeed mobile, so I think that counts too.
"Car" ... I've assisted with the construction of go karts, dune buggies, and the repurposing of mass market cars into nasty perversions of their original functions. So I'll say "done that" too.
So yes, I think on reflection I can answer "I do."
It strikes me that new anything is usually better than older, used things. So almost by definition, anyone building a new version of X is going to build something nicer than the old, used versions of X and this will be perceived as a luxury.
Sure there are edge cases like nice antiques and the building where they filmed Downton Abbey but for the most part older stuff is just less nice.
I can't fathom the logic behind the idea that we'll get people to build brand new housing to a high spec and sell it for less than existing, very expensive housing. Every time anyone builds stuff near me there's cries of "BUT IT'S NOT AFFORDABLE!!!" and I just think... duh? New cars are expensive too, which is why you buy a used one....
Nicer architecture: Only sometimes. Sometimes, old is just old and plain. Not to mention that things change over the years: I'm guessing by 'old house' you refer to something built pre-1940 and not the ranch style house built in the 60's: Those houses from the 60's are over 50 years old, though.
Better materials? I'm not convinced. Drafty doors and windows, little insulation, lead paint, outdated plumbing parts, and old wires are a few things that were used. Any serious look at windows used during building booms during the 50's dispels the materials, honestly - at least in the US.
More space? Again, only if you get the right house. Plenty of old houses are small. You also have a bit of survivor bias here: Old, large houses that were expensive were more likely to be maintained and preserved later. I'll also point out that a good deal of old houses are now apartments, and also point out that the space you get in an old house costs more to heat. On top of that, this was a space designed for a different time period. That means that space can be a much less efficient space than you get in a new house that is wired for modern times.
Maybe using more mature trees really isn't something we should be doing right now? At least some of those mature trees contributed to deforestation and it seems better to get trees not from old growth, but from new growth from a well-managed forest area, where swaths of trees are replanted.
Old houses are just full of downfalls, even if you happen to be getting more space and possibly a better looking house.
He's talking about trees, not lumber. A nice healthy mature oak in the backyard is a thousand times nicer than a scrawny sapling that might give you shade in 20 years if it survives that long.
The flipside is that sometimes the mature tree isn't healthy, and remediation of a large and dying tree can be tricky and expensive.
As is often the case, preventative maintenance is a lot cheaper than remediation. It's easier to safely dismantle a tree that is dying but not yet rotting. If you ignore the problem for too long, that's when things fall on your house and fixing your roof will cost a lot more than getting the tree removed properly a few years ago would have cost.
I do understand both of these, and I advocate using managed forest areas with newer growth - perhaps you misunderstood? We simply don't have as many old growth forests that our ancestors have had due to deforestation. The trees being planted in suburbia aren't offsetting what we are using to build the houses either, and definitely aren't replacing them where they were harvested (the forest, in general). We also aren't planting the same varieties of trees that we use to build the houses, as trees in housing development are generally chosen for looks, speed of growth, and size.
I'm saying that houses in areas built in the 1920s have beautiful hundred-year old trees along the roads. Houses built in the 2020s have tiny saplings. I'm saying the former is nicer than the latter.
Not talking about building materials. Talking about the environment around the houses.
I meant of equivalent quality - and older houses are, somewhat ironically, often nicer because we've made it illegal to build those nice houses with short setbacks in pleasant little walkable neighbourhoods because of things like parking minimums, density maximums, minimum setbacks, etc.
Also lead and asbestos are no fun. Or thatched roofs, but I admit that's my own very particular concern having bought a 200+ year old house.
With asbestos, lead, I couldn’t just pick a piece of land and go to a showroom and get exactly what we wanted. Choose to get cat 6 prewired throughout the house. Some really old ones don’t have central air (even my parents house they had built in 1978 did).
I’ve bought five properties over the years. The two I bought to live in I had built and never had the maintenance costs people complain about (2002-2012 and 2016 - present).
Air conditioning is going to hugely increase in popularity here in the UK. I think people like the tech, including better heating and sound and heat insulation and FTTP, but it's balanced out by the poor reputation of new builds in terms of quality issues.
Expectations have also just shifted with respect to things like air conditioning. I live in a very old house and, while I do put a window unit in my office, my brother could never understand me not having central air in Massachusetts.
He did just rebuild a house after a fire and put all the latest gadgetry and controls in. The heat pump seems nice but mostly I find there's a lot of complexity and not a lot that offers significant advantages relative to my house.
The increased popularity of heat pumps should mean more aircon, but bafflingly houses in the UK and Ireland are still going with radiators instead of wall split units.
Just did a self build and apparently ceilings have been rising again - 9, or 10 feet (which brings you back to 3m). Lower-volume rooms do mean less volume to heat or cool though.
Sure but the new economy sedan is more expensive than the used economy sedan.
According to this interpretation therefore, if you build a new house, and it is broadly similar to houses in the neighborhood in which you build it… it’s going to be expensive relative to its neighbors. It will perhaps be perceived as “luxury” despite just being new.
> If the land is valuable, and all you can build on it is a single-family home, why not build a very expensive single-family home?
The article suggests changing zoning so triplex/fourplexes can be built. Even if they have marble countertops, they'd still be more affordable than a house.
Currently, I can't build the housing version of a Camry.
I live in a townhouse. Its land efficient, i have a garage w/ storage its relatively affordable to houses. What i dont like are HOA fees and useless common expenses (the pool) and forced rules (only white curtains). The space 3 units take up is about one house in same neighborhood.
No, the point he is making is not that they are actually less expensive than existing comparable homes, but that people complain that they do not meet affordability standards that would require them to be less expensive.
In the UK new-builds are seen as the worst option. Most people want a house from the 20s or 30s if they can. Every decade beyond that the quality of housing got worse and worse and worse. These days buying a new house is a desperate option for people who can’t afford anything else.
There’s some of that in the US but the reality is that modern home construction is way ahead on energy usage, even if the homes aren’t built from solid timbers and boards.
Elephant in the room being the 'help to buy subsidy'. Half the deposit needed for a new build rather than an old build.
That said, I'm not sure I have much sympathy for these buyers. There is a new esatate near me where everyone is driving a newish car in the 30-50K price range?
I genuinely do not understand where the money comes from for the number of very new BMWs, Mercs, Audis and Range Rovers on the roads comes from. It seems way out of step with my impression of "normal" salaries (in the UK).
I guess either it's a dangerous amount of finance or I'm just very underpaid. Not that's I'd buy a new car anyway, I'll let someone eat that five-digits depreciation thank you.
Anywhere that demand across the spectrum dramatically outstrips production capacity (e.g., anywhere in the Bay Area, where NIMBYism has made it nigh-impossible to build anything) what little production manages to happen will target the high end of the market.
You have to build enough to make satisfying demand at the bottom worth doing. Our regulations (onerous constraints to construction and land use) preclude that outcome.