
A lot more market-rate construction helps low-income renters more than subsidies - bmmayer1
https://medium.com/@albrgr/a-lot-more-market-rate-construction-might-help-low-income-renters-more-than-increased-subsidies-c4a2a86c9e21
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collyw
That's kind of obvious is it not.

Every time the UK government do something to "help first time buyers" it
involves getting them into even more debt, and keeping the prices high. There
are still the same number of properties around, and the same number of people
competing for them. How can they honestly think this is helping in any way.

~~~
chii
i think gov't are reluctant to introduce any policy that will cause housing
prices to drop - a lot of "wealth" is locked in property, and should property
prices drop, the on-paper measure of such wealth drops too (despite the fact
that a house that's lived in is stable in it's "wealth" measured with
utiliziation).

~~~
brc
Sensible market release would cause markets to stagnate while new supply was
introduced.

It would be impossible to build enough supply to overwhelm demand anyway if it
is done realistically.

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yummyfajitas
If you stop thinking about prices and simply count people in houses, this
result becomes more obvious. If N people want to live in SF but only K < N
houses exist, N-K people have a problem. (For simplicity I'm ignoring details
like crowding 3 people into a 1BHK.)

The only question is _which_ N-K people have a problem - this will be
determined by economic and political processes.

~~~
whybroke
> determined by ... political processes

Part of which is playing out here where people of privilege are working out a
story that allows them to displace an older population dependent on rent
control so that they can get that housing.

~~~
ageek123
I assume when you said "older population" you mean "people who have lived here
longer." Because as you know, rent control applies to a housing unit
regardless of the age of the person living in it.

But more importantly, I'm not sure what you mean by "people of privilege are
working out a story that allows them to displace." As far as I can tell,
what's happening is that landlords own property, and they see an opportunity
to rent the property to someone who is willing to pay more. I'm not sure what
"story" is being worked out by the new renter; by the time they find out about
the property, it is already on the market.

~~~
ZeroGravitas
I'm guessing they're talking about here on Hacker News, where young, rich
professionals who may want to live and work in SF are upvoting stuff that
undermines rent control.

Which is convenient as they'd like to use their superior purchasing power to
acquire nice SF apartments, and rent control blocks them from that goal. So it
helps to have economics on your side, to a) make you feel better about
yourself and b) to convince others to join your side.

Maybe in this case that's "right", but the fact that we are collectively
upvoting the economics that helps us and not approvingly discussing some other
economic theory about how importing low-wage software developers would boost
the economy makes it political.

~~~
yummyfajitas
As one of the pro-economics faction, I'm a strong proponent of offshoring and
immigration.

[https://news.ycombinator.com/item?id=9246255](https://news.ycombinator.com/item?id=9246255)
[https://news.ycombinator.com/item?id=9126011](https://news.ycombinator.com/item?id=9126011)
[https://news.ycombinator.com/item?id=8884775](https://news.ycombinator.com/item?id=8884775)

------
nabla9
This is fairly obvious once you think it trough and one of the few things were
majority of academic economists agree.

Houses are not build to stand empty[1]. The number of houses available and the
income level determine the prices. Even if you build luxury apartments, the
end result is more affordable houses available to people with low income after
the chain reaction where people move up to better housing ends.

[1]: If this happens in some market conditions, raising property taxes to
empty apartments works miracles.

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realjakedoe
And a lot more subsidy-rate construction helps low-income renters even more.
Go figure.

If we have more market-rate construction, low-income renters would mostly have
to pay market rate which would always be above subsidy rate. Because if the
market rates are low there is less construction. If there are not enough
housing units in the current high price market it is not the fault of
subsidies. The return of investment in other markets is apparently even
better.

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bjourne
It's not only a problem in SF, exploding rents is a problem all over the
world. But is "barriers to new construction" the problem? No one ever explains
those, just blames politicians. But for a property owning corporation it is
obviously a poor idea to invest in new apartments because that would reduce
the value of the ones they already got. It's not much different from OPEC not
wanting to flood the market with oil.

~~~
patio11
_No one ever explains those_

Examples:

\+ Mission Street between 16th and Ceasar Chavez is a rail corridor. There was
a proposal to limit this area to 8 story buildings. SF counterproposed and
adopted a height limit which was on a per-property basis the _lower of_ either
a) what was presently built there or b) what city staff recommended, to
preserve the character of the neighborhood. (Source:
[http://www.slate.com/blogs/moneybox/2013/04/11/san_francisco...](http://www.slate.com/blogs/moneybox/2013/04/11/san_francisco_zoning_needs_more_density_and_tall_buildings.html))

What is currently built there includes e.g. two- to three-story non-operating
pornographic theatres. (Source: I periodically walked past them while doing
business in SF.) Reasonable people can disagree on whether one prefers non-
operating pornographic theatres or new housing. San Francisco has decided,
through their elected representatives, that they affirmatively prefer the
theatres.

\+ San Francisco has a complex, interlocking system of permits required to
approve new construction, which is designed to and has the effect of
minimizing it.

SF has built an average of 1,500 new housing units per year, for the last
several decades. I pulled that stat from an advocacy organization which quotes
it as what is realistically possible given that SF is filled with " _strong
communities, both those concerned about equity and those with more NIMBY
interests, that will not allow the radical deregulation many developers (and
the growing ranks of Ayn Rand libertarian techie counterparts) seek_ "

[http://www.sfccho.org/wp-content/uploads/2014/02/Whose-
Futur...](http://www.sfccho.org/wp-content/uploads/2014/02/Whose-Future-
final.pdf)

The population of SF has increased by almost 100k in ~15 years. (2001 census:
777k, 2013 census: 837k, all signs point to it accelerating) At that point,
Ayn Rand libertarian techie propaganda ^H^H^H^H^H^H fourth grade math takes
over.

~~~
bjourne
Well, redeveloping existing areas is of course not as simple as building on
unused land. From my limited research using Google Streetview, Mission Street
looks like a charming neighborhood with many buildings worth preserving.

What about south of San Francisco? Couldn't you build five story or higher
apartment buildings there? Again, using Streetview, it looks like there are
many newly built suburbs (or maybe they are just well-kept?) but almost all of
them are single homes. Which isn't dense enough to solve the housing shortage.
Also quite a number of golf courses and country clubs around. :)

~~~
nulltype
Well, SF has definitely chosen the "preserve" option. Of course, the result of
that (in the face of increasing demand) is ridiculous prices.

Oddly enough south san francisco still seems to be fairly expensive,
especially along the decent public transit lines. Assuming you're commuting to
the city every day, you are trading say, an extra hour or two a day in
commuting time for cheaper rent.

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brudgers
_As a result of its high housing costs, California has the highest real
poverty rate in the country._

California ranks 35th in terms of poverty rate. [1] The graph that follows the
statement shows that California's poverty rate is higher than the US average.
That's not an auspicious premise for quality economic reasoning.

The constraint on housing prices in places like San Francisco is land cost. If
developable land costs $500,000 per buildable dwelling unit on the open
market, then $1,500,000 and up is where finished dwellings need to be priced
to make development economically viable. Land supply is mostly fixed pending
large investments in public infrastructure, particularly efficient extension
of public transit.

[1]:
[https://en.m.wikipedia.org/wiki/List_of_U.S._states_by_pover...](https://en.m.wikipedia.org/wiki/List_of_U.S._states_by_poverty_rate)

~~~
nulltype
If I took a 500k plot of land and built a 100k house on it, why does it need
to be priced at 1.5m?

~~~
brudgers
Construction value to land value ratios are conventional not "functional".

So you can bypass convention and build $100k worth of improvements. But once
the property hits the market again, the economic odds favor a buyer coming
along with $600k who puts in $1200k worth of additional improvements. And then
the property is at $1.8 million. It's casino odds, so to speak.

The general term is "highest and best use" and that's where property heads
over time. The real estate business naturally accelerates that process because
there's usually more net revenue on $1.8million properties than $600k
properties, but the amount of work required to develop and sell a property is
roughly constant regardless of price, e.g. it's about as hard to get a
building permit, secure financing, or close a sale for a $600k project as a
$1.8million project.

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wwweston
Can anyone point to an example of a location where rents have fallen with
significant new construction and _without_ any underlying national/regional
economic weakening?

(Not interested in arguments/models as to why it would; just places where I
might examine data showing where/when it has in fact worked out this way.)

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venomsnake
When we have strong and not very elastic demand, increased supply will help?
Never would have guessed.

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tormeh
Subsidies are almost never a good answer to anything. Just give low-income
renters cash they can spend on whatever they want instead.

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cauterized
Of course, rent control and zoning/adjusting regulations for higher rates of
construction are not mutually exclusive.

