In my experience builders build luxury condos and apartments that are priced the same as the overpriced rent rate standard the city is at right now. Last I checked new builds were at 3.5k/month for a one bedroom apartment in the city. Really great apartment, don't get me wrong, but not sure why people keep beating the "if you add more supply, the price goes down" drum, it doesn't seem to hold true in reality.
Giving too much credence to an oversimplified "supply / demand" argument in the housing sector, which describes a human right, means that as soon as you mention socialized policies, people start complaining about "polluting" a "pure market supply / demand curve," despite the fact that supply / demand is just too simple a mechanism to describe a core human need, shelter. (It's such a core need it's literally the first thing one should seek in an lost-in-the-wilderness emergency, above food or even water).
Anyway, what's it gonna be then? 100,000 new units at 3k/month? 200,000? When will the price automagically come down? And why is that better than the government simply buying out vacant units and giving them to the homeless, for starters, and then building blocks of housing at set rates?
Prices will come down when we build many millions of new homes. Sadly we are structurally unable to do it and unwilling to fix our regulatory environment to make it possible.
Obviously that need is not uniformly distributed across the nation. California is probably around 4 million homes short all on its own.
When builder's remedy rules kicked in this month for California cities that didn't meet state planning requirements, projects got filed for upwards of 10,000 housing units just in the first week alone. It would have been higher, except that some cities tried to game the process even more by foot-dragging and so there are ongoing lawsuits to declare them out of compliance.
Current market forces would love to build truly astounding amounts of housing. The problem in the way is NIMBYism and shitty local zoning and permitting.
10k sounds high to me. I'm aware of about 400-500 submitted so far in the SFBA (of which I filed 20), and I personally know folks preparing a total of another 700 or so. Did you find a comprehensive tracker with higher numbers?
There's a bunch in SoCal, but their non-compliance kicked in a little over a year ago.
Santa Monica was about 5k units by itself. That is a 10% increase in the city's housing stock. There is so much pent up demand and the government and NIMBYs do everything to prevent new development.
There was a four year period in Santa Monica where a grand total of 12 multi family units were permitted. [1]
Ok, but that's southern California which became vulnerable a while ago. The post I was replying to suggested there were ten thousand in the Bay Area based on the recency of vulnerability.
Look if the government offers to give me a free house I wouldn't say no, but the NIMBYs who oppose free market construction because it will cause a shadow on their zucchini garden will equally oppose government construction for the same reason.
I get that social housing is something you're particularly fond of. But in this case it would be enabling the bad behavior of NIMBYs. Why do you want to bail out people who are already rich with taxpayer money? Seems like the opposite of fair.
I just looked over the article and the referenced papers and this is at best dubious. The presumption of the skeptics are that the housing is a closed system as opposed to outsiders moving in. They also don't look at second order causes or effects of the policy and the feedback cycles. Also these models in the linked papers are descriptive without controls, applied upon the data as eisigesis.
What might be a better analysis would be divided cities such as these https://en.wikipedia.org/wiki/List_of_divided_cities where there is otherwise free travel and look at the separate policies and see if the hypothesis can be supported without using neoclassical models - because they definitionally demand the conclusion to be supported.
That's the real neoclassical critique - the framing of the analysis excludes confounding factors and then attributes price movements to exist within the confines of the model which forces the conclusion of the presumption of the analysis.
For instance let's take this paper linked in the article:
> I find that for every 10% increase in the housing stock within a 500-foot buffer, residential rents decrease by 1%.
Because the 57-page analysis always presumes new building supply will definitionally affect price their only job then is to find out how much and why.
They don't take the time to do say, instead of new building permits, a random scattershot around the city and compare results, or to apply the perimeter model to every possible combination and then demonstrate the effect has significance with respect to new construction through exhaustion. That's taken as presumed.
The fundamental assumption is never demonstrated and no baseline is shown. 100 years ago, Pittsburgh, Baltimore and Cleveland were more expensive than San Francisco, Los Angeles, and Miami. The reason those positions have changed CAN be explained by these closed system supply and demand housing models in the same way that the Christian Bible has a logical working model to explain hurricanes.
Also given that the author gives interesting reasons for a decrease in price - such as the noise and hassle of a large skyscraper being constructed across the street, or a decrease in the view from the high rise, it's hard to say that even that paper supports the overall idea of "more supply is lower prices" but instead "less attractive units yield lower prices"
That's just the demand side of "supply and demand". You can lower housing prices by either:
Increasing supply
Or
Decreasing demand
For example Detroit decreased demand by having all their automobile manufacturing jobs move overseas. Now Detroit is relatively cheap.
But obviously, most state governments do not view killing off jobs as a desirable solution because it shreds their tax base.
If you want your state to prosper, you want more jobs, and that means you need more housing for the people working those jobs.
The NIMBY "solution" is always to say that the housing should be built another city over, and that's why we have housing crises and ridiculous commutes.
Again, this is all way too constrained and that critique suffers the same problem.
If we used that as advocacy then we should steamroll Central Park in Manhattan and replace it with apartments. That certainly would lower the prices in the same way that demolishing Stanford and putting in apartments there would.
The narrow vision of "supply and demand" ignores the obvious problems in those examples because it cannot accommodate for things outside its narrow scope.
If Central Park was steamrolled and prices dropped, then the model would be hailed as predictive of the price drop because the supply increased. It doesn't see the park and doesn't understand the reality.
It also ignores say, how the quality of public schools can affect housing prices, access to, speed and reliability of mass transit, recreational and cultural areas, cleanliness of the streets and the unhoused, perception of crime, availability of parking...
These important aspects all get ignored. Deciding policy without them is disastrous
The behavior of the market is complicated and new buildings with an increase in supply doesn't guarantee a price reduction. In practice, that should be sought through market regulation and policy - controlling of airbnb units, or units sitting idle as investments, or being withheld from the market ...
Those problems do not magically fix themselves and as you pointed out, self interested actors in a free market did not make 1,000 flowers bloom in Chattanooga or Cleveland. There's consequences for basing public policy strictly on neoclassical economics and pretending like nothing else matters.
Intentional holistic policy like they do in Amsterdam or Copenhagen is a good counterexample. Look at those places in the 1970s versus today.
We need more housing and lower prices but doing the first does not guarantee the second and the second can happen without the first. They're related but mostly independent problems that need separate attentions.
> The behavior of the market is complicated and new buildings with an increase in supply doesn't guarantee a price reduction. In practice, that should be sought through market regulation and policy - controlling of airbnb units, or units sitting idle as investments, or being withheld from the market ...
I'm down with taxing needlessly vacant houses to encourage them to be sold or rented out. I think a Land Value Tax would help tremendously.
But that's not a solution alone. San Francisco has created many more jobs than it has built housing units for, and the only way to make up that shortfall is building more.
To put it simply, you can't house 100 new workers in 1 apartment no matter how much you regulate AirBnbs.
Of course, you also won't house 100 new blue collar, lower-working class, or entry-level families in 100 expensive McMansions or luxury condos either. Because they can't afford it.
But if that's all the builders want to make for the profit margins, and that's all the NIMBYs and zoning regulations will allow, that's what we get. Not just in the wealthy Bay Area. You see that in parts of the country with much lower median salaries.
It's a difficult, multi-faceted problem. "Just let the market sort it out" is a markedly overly-simplistic solution. One that doesn't work well if at all except for very simple problems involving simple fungible commodities with a wide supply-side availability. Real estate obviously doesn't fit that description.
My real advocacy is we should use the same level of eminent domain effort we took when we cut cities in half to build freeways out to winding suburbias full of giant malls to center life around driving and transform the cities again.
It takes a lot of bravado and gumption to seize control of destiny like that and I think Americans at least have collectively lost that kind of imaginary.
The modern apartment buildings are endemic of it. They are the closest thing you could get to the Jetsons; 30 feet of parking with the first floor of residency literally in the sky. They look like concrete fortresses with iron bars protecting parked cars. The only way in and out of the urban prison is to use your car as a key. If you're on foot, it's some side door.
These things are extremely hostile to community building and offer the same clinical separation and isolation narrative of the redlined suburb of the 1950s. It's the lonely by design individualist approach to cosmopolitan living and personally I find it repulsive.
Better, friendly buildings, fewer cars, more green space, this is all possible. Tokyo pulls it off pretty nicely. We just need to exercise the political power to make it happen
> Of course, you also won't house 100 new blue collar, lower-working class, or entry-level families in 100 expensive McMansions or luxury condos either. Because they can't afford it.
That’s sort of true, but not really true in the sense of the broader market. If you build 100 high end housing units, some of them will be occupied by people currently living in lower end housing, which will free up that housing for lower-income people.
New construction is not a short-term solution. A reasonable rate of construction increases the housing supply by 2%/year. After 20 years, there should be 50% more housing, which should have a significant impact on prices.
> not sure why people keep beating the "if you add more supply, the price goes down" drum
The cynic in me assumes it's because they're investing in real estate and want more real estate to invest in, so they can continue profiting off the backs of people who just need a place to live
important wrinkle: in SF, leases are (can be) long term arrangements, i.e. limited annual rent increases and very hard to evict. Landlords won't drop prices if it locks them into a bad economic situation, or even if they perceive that rents will rise quickly in the next few years.
also in general, with real estate owners are very reluctant to drop prices and "lose" money - instead, prices rise more slowly and/or stagnate. If you see a big price drop, that typically means the seller/landlord is desperate.
Estimates put 60,000 vacant units in San Francisco.
What number of vacant, newly built units do you believe will actually bring prices down?
https://www.sfchronicle.com/realestate/article/SF-Victorian-...
https://www.kron4.com/news/bay-area/61000-homes-are-empty-in...
In my experience builders build luxury condos and apartments that are priced the same as the overpriced rent rate standard the city is at right now. Last I checked new builds were at 3.5k/month for a one bedroom apartment in the city. Really great apartment, don't get me wrong, but not sure why people keep beating the "if you add more supply, the price goes down" drum, it doesn't seem to hold true in reality.