"Surprisingly, given the anxiety over "luxury" apartments vs regular, non-luxurious ones, there does not appear to be any segmentation in the rental market in any year, even by unit size. In every year with more than a handful of listings, the total pool of prices is a smooth curve (except for the occasional taboo price: landlords were strangely reluctant to offer apartments for exactly $105), approximately lognormally distributed. The 95th percentile apartment always rents for about 2.2 times the price of the median apartment, and the 5th percentile apartment for about 1/2.2 of the price of the median apartment, but see below about variability in this. "
...they aren't like San Francisco. In addition to construction costs, I wonder what the effect of periodic major earthquakes is on maintenance costs of large buildings. And, particularly, the relative costs of larger vs. smaller buildings.
It really depends. They just gutted 101 Van Ness (a pre-existing 1960s-era skyscraper) and turned it into housing. It's all luxury -- the cheapest units are upwards of $3000 a month for a tiny studio. When developers renovate a building, they ask for what the market can bear, not for their cost of redevelopment.
All you can really do is assume that long-term, more housing is good, and less housing is bad. That's fine, but it doesn't change the fact that new construction doesn't help anyone but wealthy people in SF, today.
"In the long run, we're all dead."
If you build more luxury housing it lowers the price of luxury housing so that a marginally less rich person can move to that tier.
That marginal move reduces the demand on the next lower tier of housing which should reduce the price at that level.
And so on, and so on...
Love that analogy!
Lowering rents enough to make SF affordable for poor people requires construction on a scale that isn't just impractical -- it's economically impossible. No developer would choose to build into such a market with fixed construction costs at hundreds of dollars per square foot.
The price of Lamborghinis doesn't have much to do with the price of Kias.
Despite conventional wisdom and lots of hand-waving justifications, there's actually very little evidence that building more luxury units impacts low-end housing prices on anything but the long term. Even the author of this piece is falling back to long-term averages to make his argument, and the results are...tepid. A 2% reduction in aggregate, long-term rents for every 1% of new housing built is not a screaming endorsement for indiscriminate construction.
If you have data that shows otherwise, feel free to cite it.
No part of this market in any way resembles the market for Lamborghinis and Kias.
The question is whether or not new luxury housing makes rents cheaper for poor folks, today. Even here, in the epicenter of a housing crisis, there's not a lot of evidence that it does. But there's evidence that preferentially building low-income housing does make a difference.
This isn't a controversial or irrational or counter-intuitive argument: there are a lot of great reasons that a rich person might choose to live in a cheaper apartment. It isn't a given that rich people will self-segregate to luxury buildings because "luxury". So at the end of the day, you're back to aggregate supply vs. aggregate demand. And if that's the case, why not build for low-income people instead?
(I lived in Bayview for a bit, and I was hardly the only tech person I knew who lived there.)
I'm not claiming that they do. I'm arguing the opposite: if you build only luxury, it doesn't help poor people much, because most people will try to get the cheapest, nicest housing they can find. Building luxury units helps only to the extent that building anything here helps -- and if we believe the OP, it doesn't help very much at all.
Basically, this: you lived in Bayview, so you know who lives there. Knocking down every existing low-density home in Bayview and replacing it with market-rate housing would displace a huge number of poor folks. It probably also helps lower aggregate rents for everyone in SF by $40 a month or whatever, but that's thin gruel to the people who were there before.
This is the fundamental dilemma facing all construction in San Francisco.
There's no guarantee that building luxury housing lowers prices, which is what you were implying. You have to take it on a case-by-case basis.
http://www.masongaffney.org/publications/G2009-Hidden_Taxabl...
Look up filtering down. As houses age, they become less luxurious.
See http://cityobservatory.org/what-filtering-can-and-cant-do/
In the long run, that isn't true. A skyscraper has a useful life well in excess of 50 years. If you look at places like Chicago, you'll see that luxury high-rises get renovated 20-30 years in to become mid-range places.
Of course, that requires the foresight to have permitted enough high-rise construction yesterday.