That's not the crazy part. The crazy part is arguing that building additional supply in response to that demand will _increase_ prices.

Yes, I can't see how that could be possible.

By fueling the boom? The greater the supply, the bigger the phenomenon, the more people it pulls in.

Notice there are not a lot of speculative booms in things the world only has three of.

Have you studied art auctions much?

That's not all that crazy to me, I can imagine many scenarios where that could happen. The answer is, as always, "it depends". It depends on what you build, how you build it, where you build it, how it's perceived, the time interval across which you're measuring prices, etc. Price of stuff is way more nuanced than surface-level supply and demand. It all comes down to perception of value, and there are a LOT of factors that can affect perception of value outside of scarcity, and they're often very dependent on each other.

It's not as contingent as you think. We normally model the supply curve as a line going up and to the right, indicating that price increases stimulate the creation of additional supply. The demand curve has the opposite slope and effect. These curves form an "effective field theory". They explain what's happening at a high level. In reality, supply and demand curves aren't necessarily linear, and at small scales, they can wiggle around a bit. This wiggling is where your "it depends" factors come into play.

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.

Not necessarily. There are things called "Veblen goods". For them, the demand rises as the price rises, because the higher price confers additional status. You pretty much have to be in prestige, luxury goods for this to happen, though, so it's (probably) not relevant to a discussion of entry-level housing.

That doesn't seem to apply in this case however. This article is talking about people paying >$1 mil for shitty shacks in Silicon Valley. It seems very hard to think of people buying those because it confers "status", actually, anecdotal evidence from my coworkers and I, we are ashamed of telling folks back home how much we payed or showing pictures of our new house.

I agree; I don't think it applies in this case either. I was merely pointing out that one small part of quotemstr's argument didn't hold.

The best way to end a speculative bubble is to crash the price by increasing supply.

...potentially degrading your urban environment in the process.

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).

Part of the "degradation" happens because we forgot that we can build up, as well as out, in much of the US

https://www.strongtowns.org/journal/2015/1/7/americas-suburb...

I don't think we "forget", I think developers are after the quick buck and buyers are after most-sqft-per-dollar. Building up or down is more expensive.

Developers just build places for people to live and work. Like the house you live in. They could build a lot more in places like San Francisco and Palo Alto. Yes, it's a bit more expensive, but that's a pretty minimal component of the price at 2/3/4 stories.

The real problem that prevents building up and in is rampant NIMBYism.

Is it? Assume that land is expensive. If I build up, I can create a lot more units for the same land cost (at the probable price of higher building cost per unit). For some land price, there's probably an optimal height to build to that decreases total cost per unit.

Well, it really depends on where. When much of Silicon Valley was built, I believe land was not really that expensive, and that continues to be the case in many parts of the country.

Building taller buildings isn't degradation. I would argue that it makes the urban environment better, no worse, even if you ignore the housing supply benefits.

This is because newer, taller buildings are almost always going to be higher quality than the old shit that was already there.