Seems a little unfair to existing home owners though. This is how you get people voting down tax increases for any reason whatsoever.
Frankly, I think as long as you change the zoning the market should work itself out.
The issue is complicated, not just economically but morally and ethically too.
Point Reyes isn't very dense for example. Should I be petitioning the government at Point Reyes Station to raise taxes so high that people have to give up their current homes so I can have a cheap condo to buy? I mean that's basically what we're asking to be done in San Francisco, it's just not covered in baggage.
Another alternative is that if prices become too high then companies won't be able to attract workers to the area, or they'll be paying so much it's like well, fine then.
Idk. I have a hard time with this because I don't view skyscrapers (or any building over around 3 or 4 stories) as good development, but I also don't like actual suburbs either. It's two ends of an extreme spectrum and both are bad/good for their own reasons.
I also don't think you can really satisfy the demand for living in San Francisco either. The more you build the higher the prices will go. It's counter-intuitive but when developers go off and pay exuberant prices for these single-family homes, they'll have to make up for that somehow. So they'll build higher-priced units which will create higher rents. But the previous units aren't going to drop in price. If you're a landlord or property manager that's not good for business and it messes with your investment forecasting models. But unlike a typical supply/demand relationship that you may think of, what ends up happening is that this current price point is just filled by other workers who previously wouldn't have lived in San Francisco and they come in at that rent price.
So what happens then is that the higher-rent people want higher wages to maintain their previous COL. More people move in, more developers build, etc. etc.
And you can see this in Manhattan right?
I think often people assume that the demand is stable. But it's not. It is just increasing and further supply does nothing to change that. People are willing to pay any price to live there, they just change how much they're making.
I'm sure there are examples, but I can't recall a major city like San Francisco where rent prices have gone down over time as a result of building new developments. Maybe someone has a link or anecdote. I mean, prices in Manhattan haven't gone down have they? Maybe Chicago if people have actually been leaving the city.
It gets even weirder sometimes based on how properties are leveraged. It's sometimes why you see places stay vacant for long stretches at high prices rather than rented or leased at lower prices just to generate some revenue.
If an owner/developer has their properties as backing collateral, and they recognize revenue on the books at significantly less than the projections/models of the property value that's been collateralized, then a whole weird cascade of things can kick in. Like statutory insolvency, etc. So, in certain circumstances and certain markets there's a very, VERY strong local incentive not to adjust prices down in the short term.
I agree. I think too often people just think about simple supply and demand but the reality is much more nuanced than that. You even provided another good example and to add to it, that may also exist in the long term depending on the situation and time horizon.
It seems to me that there is a breakdown in price elasticity.
-edit-
Sorry to see cowards downvoting you without even commenting. Idk what you said that was so worthy of that. Sucks it's hard to even have a speculative conversation without "this doesn't fit my worldview click".
Frankly, I think as long as you change the zoning the market should work itself out.
The issue is complicated, not just economically but morally and ethically too.
Point Reyes isn't very dense for example. Should I be petitioning the government at Point Reyes Station to raise taxes so high that people have to give up their current homes so I can have a cheap condo to buy? I mean that's basically what we're asking to be done in San Francisco, it's just not covered in baggage.
Another alternative is that if prices become too high then companies won't be able to attract workers to the area, or they'll be paying so much it's like well, fine then.
Idk. I have a hard time with this because I don't view skyscrapers (or any building over around 3 or 4 stories) as good development, but I also don't like actual suburbs either. It's two ends of an extreme spectrum and both are bad/good for their own reasons.
I also don't think you can really satisfy the demand for living in San Francisco either. The more you build the higher the prices will go. It's counter-intuitive but when developers go off and pay exuberant prices for these single-family homes, they'll have to make up for that somehow. So they'll build higher-priced units which will create higher rents. But the previous units aren't going to drop in price. If you're a landlord or property manager that's not good for business and it messes with your investment forecasting models. But unlike a typical supply/demand relationship that you may think of, what ends up happening is that this current price point is just filled by other workers who previously wouldn't have lived in San Francisco and they come in at that rent price.
So what happens then is that the higher-rent people want higher wages to maintain their previous COL. More people move in, more developers build, etc. etc.
And you can see this in Manhattan right?
I think often people assume that the demand is stable. But it's not. It is just increasing and further supply does nothing to change that. People are willing to pay any price to live there, they just change how much they're making.
I'm sure there are examples, but I can't recall a major city like San Francisco where rent prices have gone down over time as a result of building new developments. Maybe someone has a link or anecdote. I mean, prices in Manhattan haven't gone down have they? Maybe Chicago if people have actually been leaving the city.
Idk.
Tl:dr
New units increase prices.