I don't even think it's "ought" vs "does" - it's more NIMBY interests being more ingrained into local politics allowing them to somehow gaslight everyone into thinking the laws of supply and demand don't apply to housing.
People who live in an area want policies that will benefit them at the expense of newcomers, full stop.
And when you concentrate value and therefore power in those existing landowners to an extreme degree, you get a political feedback loop strong enough to overpower something as trivial as reality. After all, the market can stay irrational longer than you can stay solvent.
A lady the other night at a dinner party was, in the same conversation, complaining about the "high-density" (townhouses, but she acted as if they were high-rises) housing being built in the area, and moved on to whining about how her daughter was priced out of a home in the area.
I stopped myself.
I do understand the bitching & moaning. I remember, and miss, the days when there wasn't a standing jam on I-25 every single Saturday, you could show up at a trailhead later than 8 AM and actually find parking, or rent a nice apartment in Wash Park for $600. But then I'm an immigrant too, so I don't have much moral authority to tell the more-recent immigrants to GTFO.
[1] http://www.bayareacensus.ca.gov/counties/SanFranciscoCounty....
1.) New housing starts to get built 2.) The new residents demand safer/cleaner streets or just higher quality restaurants/cafes/etc. Or, sensing a market opportunity, those businesses move in themselves. 3.) Those things happen...and more 4.) More residents want to move in 5.) Prices for the existing housing stock increases 6.) New houses are built because there is demand 7.) go to 2.
QED: rents rise "because" new housing was built.
There definitely IS an equilibrium that will be reached, but a city like San Francisco has an almost unlimited supply of young and wealthy residents that think the suburbs are hell and want to live in a vibrant city.
So the fear of some people that oppose more housing is that the equilibrium point, even if you were very aggressively adding housing stock, would be way above what "normal" people would be able to pay.
So it's really a tough problem. yes, nimbyism is a thing. Yes more housing will eventually reduce prices (or reach a steady state), but the number of houses that need to be added may very well be unrealistic for any city and end up with rents just going ever higher pricing out all but the $200k/yr techies.
What it says is "there may be nearly infinite demand for high cost housing in the mission".
It's due to the unfortunate rhetorical coincidence that it's very easy to paint this belief as "trickle down economics" (even though it's absolutely not) and many, many voters will nonetheless be fooled.
Example: https://archives.sfexaminer.com/sanfrancisco/its-still-calle...
If you haven't registered to vote where you currently live, please do so now. In many states (including California) it takes just a couple minutes, you can do it entirely on the Internet, and you don't even need a local driver's license.
This then becomes politicised and people paint broad brushes of each argument, one side arguing "its not about supply! Its about x policy!" and the other side arguing "Its about supply and demand!".
Both sides are extremes, when the answer may well lie somewhere along the line in the middle. Specifically, in Australia the debate is about whether the best way to tackle affordability is Supply/Demand or whether it is reducing incentives for investors (tax breaks for house investors). There are solid arguments on both "sides", but its pretty clear that housing supply plays a part in both solutions.. the real question is to what degree it has a bigger impact than changing government policy in this case.
Point is the overall reason/cause doesn't mean it's the only consideration and thinking of it that way can lead to dismissal of valid joined issues/solutions.
One big thing they don't understand. You MUST increase the supply, absolutely MUST. There's no other way, except to reduce the number of jobs in the area. Every single regulation, every single affordability requirement reduces the total amount that can be built.
I've heard this: People make the argument: well every new market rate housing goes to rich people. What they dont get, is, for each so called rich person who moves into that new development, a new house comes onto the market (their old residence) and that helps push down prices.
It's unthinkable that so many people are going homeless needlessly. We need to increase the supply all the way to point where housing becomes affordable to everyone. And, yes, it will take a long time and a lot of building, but It'll be worth it.
The costs of buying land and building a mid-market building is not that much cheaper than building a luxury building. This causes the free market to favor new higher price units which leads to other development that pushes out the previous residents. Sure, that new supply will trickle down and lead to more affordability throughout the whole market, but it can still lead to higher prices in that specific neighborhood due to gentrification. It is therefore a balancing act between the health of the whole market and the health of individual sub-markets within it.
I don't think the emphasized part is a given. There is likely no new construction at the bottom of the market for these displaced people to move into.
For example, let's say a SRO hotel is torn down and a luxury condo goes up in its place. The result is increased supply in the luxury market and decreased price in the luxury market. That decrease in price trickles down throughout the rest of the market. However at the bottom of the market the SRO supply has now dropped and the demand is now higher due to all the displaced residents. There are too many variables involved to say the trickle down effects will always outweigh the direct effects of removing the housing from the bottom of the market.
In every other instance, new luxury housing in a constrained market allows wealth individuals living in mid-range housing to move up. That frees mid-range housing for middle-class individuals to move out of their low-end units. Those low-end units are now free for the individuals displaced by the luxury construction.
This is the cycle that the article is highlighting in action. The key here is not the number of people demanding low-income housing - that level stays fixed, whether they lived in the old demo'd building or not. The determining factor is available units of supply, which is stable once the middle- and upper-income people vacate their lower-end units. This is an observable phenomenon, as highlighted by the original article and all of the crosslinks therein.
Here is the first news story I found on Google about the subject.
http://www.latimes.com/local/lanow/la-me-ln-skid-row-tower-2...
The protesters in the article seem to conflate one kind of construction with the other: "The protesters say the city should house the neighborhood’s homeless people before it approves another big residential development in downtown Los Angeles."
Market-rate development is a process that can continue to take place while the city grapples with housing the homeless. They don't interfere with one another, since the market-rate construction is private enterprise.
The protesters, further, are falling victim to the same fallacy discussed in the original posted article here: "They also argued that hundreds of new market rate apartments will drive the neighborhood’s rents beyond the means of residents living “precariously” in nearby converted flophouses, hotels, tents and buildings."
The basics of trickle-down housing dynamics work strictly against the rising rents scenario being true. The pressure goes strictly the other way for the existing units in the neighborhood, which have new competition at the top end.
But, beyond the topical similarity, the cases fall apart. The situation with traffic involves only a small incremental cost being born by each driver, whilst in housing, the internalised costs are large. The drivers of housing inflation -- the interest of numerous parties in increasing asset values (free money for no work!) most especially -- are also highly different.
Actually, that last factor tends to make me suspect that the housing arguments are at least in a significant number of cases insincere.
There is no economic mystery in induced demand: it’s Economics 101 once you realize that drivers pay for their usage of roads in time, not money. So when a roadway is expanded, all else equal, the cost of driving on it falls—you’re no longer stuck in traffic; but the lower price (that is, travel time) increases demand for use of the road, just as low prices tend to increase demand in other markets. The result is that many more drivers use the expanded roadway, to the point that they bid the price, paid in time waiting in traffic, back up to previous equilibrium level.
(That said, there are ways in which building more roadways can increase congestion itself. Since land use is closely tied to access, building new highways can spur development in far-off areas, causing people to drive more than they otherwise would. There’s also a theoretical possibility that adding new roads can change the roadway topology in ways that cause people to change their routes in ways that create congestion.)
Or if the tolls are indexed to wealth and/or income.
Would you agree that a speculative boom can cause an increase in demand?
Notice there are not a lot of speculative booms in things the world only has three of.
It's disingenuous, however, to argue that this wiggling invalidates the crystal clear overall direction of the supply and demand curves or somehow invalidates the idea that the way to increase the amount of affordable housing is to increase the amount of housing.
My point is that, if a particular housing market is experiencing a shortage of supply due to a speculative boom, but has sufficient housing to actually house people, then you have two options: tackle the supply side by building more houses, or tackle the demand side by addressing the cause of the speculation (e.g. tax incentives could be encouraging this non-productive, speculative investment).
https://www.strongtowns.org/journal/2015/1/7/americas-suburb...
The real problem that prevents building up and in is rampant NIMBYism.
This is because newer, taller buildings are almost always going to be higher quality than the old shit that was already there.
There never was. There are actual, valid debates around construction policy, however. Among them:
1) should you prefer subsidized housing or market-rate?
2) should you remove cheap, existing housing stock to make room for market-rate?
3) does new construction lead to gentrification of affordable neighborhoods?
Interfering with the market almost always produces poor global outcomes, even if interventions can provide an illusion of success in small localized cases. Sure, you can protect your neighborhood from gentrification or whatever, but at the cost of impoverishing an entire city. How is that fair or just?
I believe in caring about people, not abstractions like neighborhoods, and so support greatly loosening zoning laws and allowing builders to build the market-rate housing that people demand.
People who want to live in SF and have $10m to spend are going to live here. If you won’t let developers build luxury condos for them they’ll just buy a Victorian, Ellis-Act the tenants out, and remodel it back into a single-family home. There is literally nothing you can do to stop it.
Yeah, fuck 'em. For that matter, let's not care about cities or states, either. As long as the national mean rent goes down, everything is dandy, right? After all, we all know that real estate is global. Let the poor move to North Dakota. /s
When you have two affordable neighborhoods in a city, and you gentrify both, the fact that rents are a few bucks cheaper city-wide is thin gruel for the people who got evicted. Nor does it "impoverish" the rest of the city to not gentrify those neighborhoods -- they're out some small number of dollars a month.
"I believe in caring about people, not abstractions like neighborhoods"
That's obviously untrue. You believe in the long-term effects of markets, even if they screw actual poor people in the short term. That's fine, but don't pretend you're doing social work in the near-term.
All you can really say about markets is that the only thing they "care" about is the most profitable allocation of capital.
Part of renting is accepting that your tenure in a particular location might last only as long as your lease. If we had it your way and gave renters a de-facto property right to stay in their apartments as long as they liked, we would slow the development of cities and put pressure on the remaining housing stock. The renters benefit and the rest of society loses. That's unfair.
So, yes, "fuck 'em". Fuck people who want to be selfish and profit at society's expense. Selfishness is exactly what schemes like rent control, prop 13, Oregon's weird tax cap, and so on all enable.
You must have posted this to the wrong thread, because it has nothing to do with anything I've written. There are legitimate, open questions about development policy. That doesn't mean anyone is giving renters a "de-facto property right" to live in their homes forever. How about we start with simply building affordable housing, for a change?
In any case, regardless of your Randian philosophies about what poor folks "should" do to remain in their homes, cities don't function when the people who cook your food and fix your sewers can't live near the city anymore. So these things actually do matter, and the only people currently getting screwed are the poor. We can deal with fairness for rich people once it's an observable problem.
(That said, I'll admit I tremendously enjoy how you jump from complaining about renters screwing society, to complaining about prop 13 in what...50 characters? You're Angry because you're getting screwed by pretty much everyone, it seems.)