I think this is simply a misunderstanding of how development works. They see rents going up, and new buildings going up, and assume that the new buildings are the cause of the increase, not a response to the increase. They think we need to build more below-market rate units, because the luxury ones raise average rental prices.
But really, the shortages which create high prices are what create the business case for building expensive luxury condos. If rents weren't already high, these buildings wouldn't be built. If the demand is there but not the supply, everyone at the wealthy end of the spectrum will take all of the supply, leaving the poorer ends out of a home. So the more market rate units we have, the more lower end units that are available. Seems simple to me, but a lot of people seem to get this wrong.
They have this idea that there are a bunch of wealthy and greedy developers out to get them and their precious neighborhoods. The buildings these developers start have a shockingly high rate of spontaneous combustion in Oakland, right when framing is complete.
I wonder if the property owner interests only encourage these mis-perceptions since they serve their interests.
This narrative is so persistent because it's 100 years old. But for most of that time, developers were called greedy because they made money by introducing cheaper housing into the neighborhood, thereby "ruining" it.
Here's a Supreme Court Justice shitting on apartments in 1926:
> With particular reference to apartment houses, it is pointed out that the development of detached house sections is greatly retarded by the coming of apartment houses, which has sometimes resulted in destroying the entire section for private house purposes; that, in such sections, very often the apartment house is a mere parasite, constructed in order to take advantage of the open spaces and attractive surroundings created by the residential character of the district.
That's from Euclid v. Ambler, the case that established the constitutionality of zoning. Our cities are expensive on purpose.
>So the more market rate units we have, the more lower end units that are available. Seems simple to me, but a lot of people seem to get this wrong.
Probably because what you're saying doesn't follow at all. The more market rate units you have, the more market rate units you have, that doesn't say anything about lower end units.
>They have this idea that there are a bunch of wealthy and greedy developers out to get them and their precious neighborhoods.
Because there are? Developers would love to take poor areas in the city and convert them all into high rent yuppie districts, it would be great for business.
>I wonder if the property owner interests only encourage these mis-perceptions since they serve their interests.
If you think everyone around you is misperceiving the world, sometimes it's important to check your own perceptions.
Everyone is spilling over into the housing that previously served a socioeconomic level (or two) below, except those at the bottom who have nowhere to go but tents.
In an ideal world, new housing would most directly target those in need, but in the world we live in, the money for luxury towers is chomping at the bit to get started while the money for signficant subsidized construction is pending a literal revolution. A greater proportion of tech migrants living in new luxury housing is a smaller proportion bidding up formerly affordable housing.
If the market isn't bifurcated as you say then building lots of lower rent units will bring down the rents in the luxury segment. Great for everyone!
>In an ideal world, new housing would most directly target those in need
What you're arguing for is a removal of the poor from certain parts of the city they currently exist in. It's a purely political decision and an ugly one at that. We don't need an ideal world or a revolution to build and maintain affordable housing.
I'm not sure I agree that that will help anything, and it might even be a bad thing.
Assuming an area has a housing shortage because of an influx of people drawn to the area by good jobs, the newcomers' biggest problem is not a shortage of money to spend. It's a shortage of housing to spend it on.
That is, if you have 100,000 people who make $150K/year, luxury units go for $3000/month, and there are only enough luxury units to house 75,000 of those people, lowering the price on luxury units to $2500/month won't pull the remaining 25,000 people out of non-luxury units.
And the reason why it might be a bad thing is that it costs money to build new housing. The higher rent the developers can charge for brand spanking new housing, the more investors and developers it attracts and the more housing can be built. Once the new luxury housing can be built, the well-paid 25,000 who were forced into non-luxury housing can upgrade and stop being forced to take lower rent housing (that they don't even want to live in) away from people who don't want them to have it.
This screws over everyone. The poor don't want to compete with the rich for housing. The rich don't want to live in housing that is below their quality standards.
Also, how do you think new housing stock gets built? It takes capital to build housing. You attract that by luring investors with the promise of returns on their investment. Who can pay for that? Wealthy newcomers who can afford to pay high rents. The way to get housing built is to tap into the gigantic piles of cash available.
Sure. Wealthy people can lower their standards and take housing meant for the class below; people who are struggling can't exactly raise theirs, but they do group into larger/more crowded households to bid upmarket. When there are not enough small apartments, for example, people find several other working housemates for single-"family" homes that are then no longer available to 1- or 2-income middle class families. I suspect the pressure is stronger in the downmarket direction but it absolutely cuts both ways. (And homes that are too upmarket sometimes don't act as housing at all).
>What you're arguing for is a removal of the poor from certain parts of the city they currently exist in
Nope. With sufficient heights, the problem is addressable through infill development on commercial/industrial properties (ideally replacing existing uses on the lower floors) and upzoning to permit mid-rises in predominately owner-occupier single-family house zones.
>We don't need an ideal world or a revolution to build and maintain affordable housing.
The Bay Area's housing deficit over 2012-2017 is conservatively 120,000 homes based on 400,000 new jobs, 60,000 new homes, and an average household size of 2.3 (many household members are not workers).  The average cost to build an affordable housing unit in California (so an underestimate for the Bay Area) is $332,000.  So $39 billion is a lower bound to walk balk just 5 years of a problem decades in the making. Where's the money going to come from? Not property taxes: prop 13 repeal would be a revolution in itself. Not federal subsidies: do you think the Trump administration wants to subsidize coasties? Not tech companies: there's always some Bay Area municipality that's happy to keep the free tax revenue and soaring housing demand (particularly for owner-occupier areas) local. San Francisco spends tens of millions on affordable housing when what's needed is tens of billions. Even the state of California spends only hundreds of millions.
So far the best anyone has come up with is (effective) taxes on market-rate development. To get the numbers required, we're going to need a hell of a lot more market-rate development to tax.
That's the point though, if the housing is actually low rent the wealthy can't just 'take it.' Some wealthy people will get apartments but so will some poor, that's definitely better than building high rent housing which only wealthy people will have a shot at.
>With sufficient heights, the problem is addressable through infill development on commercial/industrial properties
So you're gonna move the poor to industrial sections... This is just a reinforcement of what I said.
>and upzoning to permit mid-rises in predominately owner-occupier single-family house zones.
You're going to go into neighborhoods and throw up large buildings filled with low rent housing? In your dreams you're going to.
>The Bay Area's housing deficit over 2012-2017 is conservatively...
I think you misunderstand. I'm talking about housing which is affordable for the poor - subsidized housing, rent controls and the like. Housing for well to do techies is of secondary importance.
The only buildings which are permanently carved out for low- and middle-income households are those built as permanently affordable. You are actively hostile to accelerating the construction of such buildings, so this statement is just bizarre. Of course you can spend less than your maximum budget. Do you imagine that rich people can't buy economy cars?
With demand so far exceeding supply, all other housing (regardless of its quality or who previously occupied it) becomes "for" the well-to-do given enough time. Leases end, the units maybe get renovated a bit, and the new occupants are wealthier and whiter and paying more.
Not caring about "techies" doesn't remove the effect of a population boom from the market.
People are wildly overthinking this. Adding N + 1 households to N homes is certainly going to cause a problem, by the pigeonhole principle.
Is there not also a gap before the new production? I live in a city that's been through some serious gentrification and gone from an afforable southern city to something...else. What I've, anecdotally, noticed is that the prices start before the rents.
1) Area is priced well below an adjacent or similarly positioned area but missing the amenities
2) A handful of developers build/renovate and put in something that's way above (50%?) current rate in the area
3) Marketing and salesmanship move the houses.
4) More developers/flippers enter the market, this time their marging shrinks a little or the price goes up.
5) Repeat until profits are less than moving to somewhere else in step 1
What I'm getting at is the gap in prices where the developers are looking to make several fold what they would in more established areas. That being possible shows it's still more affordable. Additionally, if it's not already more affordable, where are the people worried about getting pushed out living?
People getting pushed out get pushed into minimally suitable housing in out of the way areas. Those unqualified for subsidy live in unsafe conditions, live in SRO units or are in various states of homelessness.
I used to live in Koreatown in Los Angeles, my rent was $1000/month including one parking spot for a 1BR1BA. A few blocks from me a brand new building opened with micro-apartments going for ~$2600/month for a studio, around the same time a non-luxury building opened two blocks in the opposite direction but that was all subsidized housing so I never found out how much they even charged (I didn't qualify).
Within a few months of this our landlord, who owns other properties and businesses in the area, stopped accepting new tenants or actively marketing the available apartments, it's rumored they are trying to tear that building down and make a bigger one. It's only about 30 units, but it's down to the last 3 tenants, rent has consistently gone up each year by the maximum allowed amount, maintenance is nonexistent, the parking lot sits empty and they still somehow enforce the max 1 vehicle per tenant rule. The rent for it is now $1200, trying to move in to a similar-sized apartment in the same block would cost you $1450 and an extra $100 for a parking spot. It's a crummy situation all around
People aren’t dumb. The type of construction common today isn’t in the interest of people who own single or <4 unit property or people who rent.
Developers are absolutely greedy and generally have no interest in the impacts surrounding their work. For most, their job is to gather capital, do a deal and gtfo.
But you're right that it isn't in the interest of people who own a property. Congratulations, you've identified the cause of NIMBYism!
There are probably two dozen residential or mixed use skyscrapers alone being erected in Manhattan. The annual rents of 80%+ of these units probably exceed the median household income in Manhattan, unless they are directly subsidized.
The rents will come down when rates go up and overleveraged developers go bankrupt.
To borrow your car analogy, there will never be a "Toyota" housing unit built in Atherton, CA or a few blocks from Rockeffler Center in NYC.
The current issues have more to do with a glut of cash than a shortage of housing.
In what world do you live in where the number of housing units in a city is bounded by some value? A cursory examination of any city's housing stock data would tell you otherwise.
>To borrow your car analogy, there will never be a "Toyota" housing unit built in Atherton, CA or a few blocks from Rockeffler Center in NYC.
This is like saying that when you go to the Mercedes dealership all you see is expensive cars, therefore there only exists expensive cars.
Each incremental Mercedes that is produced does not raise the price of a Toyota. In fact, the derivative of that price curve is most likely negative.
Why is housing any different?
>The current issues have more to do with a glut of cash than a shortage of housing.
I agree that low interest rates have exacerbated the situation, but the fact of the matter is that there is a net influx of people to large cities like San Francisco, and there is indeed a shortage of housing. Why you choose to ignore the data, I do not know.
Land sure is finite, which is why it’s so important to prefer the 500 homes of a luxury skyscraper over the 5 luxury houses that would otherwise occupy the same size site.
Standards have only risen over time (at least since WWII). If anything we should want more structures to be recent.
The problem is that it’s taken out of context. It may be true that, in a static or declining city, thwarting development tends to preserve the status quo both physically and economically. But developer scheming isn’t responsible for the massive regional demand growth in coastal megacities today. Economic and population growth are. In that context, classical anti-gentrification strategies backfire because the demand surge is so large, it fills in every crack and can’t be deflected to other neighborhoods by undesirability (only by high prices).
This wouldn't be an issue at all if municipal governments instead intensified housing in the most expensive areas, but homeowners there are rich and capable of superior organization. For that reason you basically never see any attempt to upzone wealthy areas with low density detached housing.
The only available easy out for municipal governments is to rezone industrial land to residential and upzone it before anyone lives there.
Right now, Chicago has maybe 6 neighborhoods that people from outside of the city consider moving to. This puts a ton of pressure on the rents in those few neighborhoods and their surrounding areas.
But if the whole city had proper services, transportation, properly maintained housing units and relatively low crime, that should ease the demand on those few neighborhoods.
Instead, people just move into one area until it's too expensive to live there, then get pushed into another area until it's too expensive to live there, and so on and so forth.
There's also the issue of how tourism affects local economies.
So yeah, it's a complicated issue.
If you build evenly gentrified cities, isn't that going to be the results anyways? (also, I'm sure the US has way more than twice the number of people living in property, perhaps you meant per capita)
But when I was living there, it was fairly stressful. I guess if I was a poorer resident rather than a relatively more well off post-doc, it would actually be easier to find housing since there would be some assistance at least.
Percentage of population, yes. 7% in Switzerland, 14.5% in the US.
> But when I was living there
Do you mean living in Switzerland or the United States?
The problem is that this is what everyone is already trying everywhere, and it simply doesn't work.
The minute you improve any previously-bad neighborhood with any of the things you just mentioned, you immediately price it out of any person who previously wanted to / could have lived there. The act of improving anything is itself one major cause of the un-affordability.
Chicago is the textbook example of this - https://local.theonion.com/neighborhood-starting-to-get-too-... is 'satire', but basically 100% true.
This is a whole other issue, which is that once rents go up, they really don't go down, even in the event of a major market crash. I'm not sure if there is a market-based solution for that.
So it is an issue beyond normal economic inflation.
Actually I think developers would very much prefer to do this, but rich neighborhoods tend to have by far the most organized opposition, and opposition causes delays, which tend to add substantially to the cost, so poorer or less populated areas tend to be preferred instead.
Neighborhoods evolve as time moves on. Both waxing and waning. If you are familiar with NYC, places like Bushwick and parts of the Bronx off of the Degan Expressway were bombed out, full of crackheads and squats in the early 80s. Today they are vital neighborhoods. Conversely, many parts of Long Island and the Hudson Valley have declined.
Yes, if other factors aren't taken into consideration. Speculative investment for instance. If we accept that there is a market limit on the number of people willing to pay to live in Chicago, then we can say increasing the number of viable units and neighborhoods should reduce the market rental rate.
But if people are willing to purchase properties without using them, then that throws that expectation out the window.
You may see reductions in the use of opaque LLCs and other structures for laundering money via real property, but even excluding that, most urban centers land markets are controlled by a small group of property owners.
These folks are very politically powerful. I can't think of a city where the city administration isn't dependent on the local property bigwigs.
It's happening _incredibly_ quickly in Boston's neighborhoods one by one. It happened to The South End, Southie, Jamaica Plain, Somerville (not technically Boston proper but 10 years ago they used to call it Slummerville), and now Dorchester and Roxbury are gentrifying.
I own a single-family house in a previously undesirable area, and on 2 separate occasions I've had developers come to my door cold trying to buy my single-family house to tear it down and develop on the property.
But a lot of people simply don't understand this and fight development despite it being in their best interest.
Then again, I see that one of the two studies was done in San Francisco, and if the renters are in rent controlled apartments, they don't have much reason to care about housing prices and can oppose development because they don't like change.
What does happen is that both housing construction and gentrification increase when the economy is going well. It's easy to think that one is causing the other when in reality they're both caused by an underlying factor.
If this situation also started with the demolition of low-end high-density housing, it compounds in the direction of increased rents.
Rents don't go down when a neighborhood gentrifies...
How is this not obvious?
I get the impression the HN crowd is so solidly in the demographic of the gentrifying forces being overpaid tech folks that these types of discussions will always be strained.
My unstated assumption when writing "new development" was that it's a net addition of new development.
I think that was obvious to most, but now I've spelled it out.
Aside from that, none of your caveats hold. Even adding high end luxury housing lowers the average rent, compared to if it wasn't added. If you don't understand that, you don't understand basic supply-and-demand economics, and will struggle understanding a lot of what happens in society!
Since after the Johnson era, high density low income housing has been taboo.
And what about those of us who got priced out of our neighborhood this past year?
>It's happening _incredibly_ quickly in Boston's neighborhoods one by one. It happened to The South End, Southie, Jamaica Plain, Somerville (not technically Boston proper but 10 years ago they used to call it Slummerville), and now Dorchester and Roxbury are gentrifying.
If they're still holding it, I plan on attending the Somerville city meeting tomorrow night to fucking scream at them to stop trying to impose density limits. How am I supposed to move back to Somerville after getting priced out into Medford with net-added units equaling zero?
Hell, has anyone tried getting Cambridge to stop being a leafy fucking suburb that actually takes up almost half the Red Line?
Because even densifyig redevelopment usually does that, and not accidentally.
> They don't realize that by opposing development they're actually restricting supply, and thus increasing prices.
The people concerned about displacement have a preference for their current location that exceeds the cost savings they might realize by being displaced by a new development, even if that development drove down average prices in the broader area by upply side effects (which it might not; because new development can attract new people, induced demand can prevent local price reductions.)
Multiple residents of the North End of Boston went to a public meeting to complain about the addition of handicapped ramps on brick sidewalks because it would damage the historic authenticity of the neighborhood.
The Cape of Massachusetts couldn't get an offshore windfarm because locals complained about how it would negatively impact the view.
Ok, then we take away their say and put zoning decisions at the state or regional level. Fuck rich NIMBY's, I want a place to live.
Had you meant 3% + 1% PMI + 4% interest for an FHA consume 100% on median, because that definitely implies either high prices on houses or low median incomes.
I think this is a sad step backwards in the development of human society. It's downright dystopian.
The average household should be able to own an average home (or condo/apartment, for cities). For the same reason that the average person should be able to own a toothbrush, cell phone, some clothing, and so on.
This idea that it's just 100% OK that no real person could/should ever afford any housing, and every poor-middle-class person should always be beholden to renting from a private for-profit corporation forever is incredibly destructive to public finances and the ability of regular people to generate any meaningful savings or financial stability.
The rent will not change for the life of the lease. Under rent control, the renter won't be much affected ever.
Renters become more like homeowners when there is rent control. They essentially have an investment to protect. Their immediate financial situation (rent being due, much like a mortgage payment or property tax) is unaffected by neighborhood changes. The enjoyment of their neighborhood is affected though, and they seek to maximize this.
The difference between the controlled rent and the market rent is in some sense an income that the renter receives from the landlord. The higher the market rate rent, the greater this income will be.
Long leases may have a similar effect; this is voluntary rent control.
What I find annoying is the same people that are against rent control and zoning are also utterly against government providing basic public services such as buses, subways, and mass transit.
So developers build more office space, businesses add jobs, people get packed in tighter with no increase in transportation services to match. You don't need to be a renter or owner for that to rankle. And at least as a owner in theory the value of you asset is going up. As a renter there is no upside at all.
I guess I must be the exception then. I am very much in favor of government spending on public transit (which is a reliably good investment in our economy) and generally against rent control (which is known to suppress the creation of new rental stock) except as a temporary measure.
Nice straw man, but this is not a commonly held stance aside from the extreme Libertarian crowd.
The renter's upside to NIMBY behavior is that the neighborhood is more appealing. This is obviously an upside for the renter, as long as there is no way for the landlord to take advantage of the increased value.
The owner only gains if they sell the property or find some way to cause a rent control reset.