In what sense is there an oversupply of luxury housing? Are there lots of vacant luxury units?

The number of vacant apartments and the number of apartments listed for sale/rent are both at an all time high. Despite this, most new construction is priced at the high end of the market. In addition, there's been a big boom in ultra-high-end multimillion dollar apartments.

https://www.6sqft.com/nearly-250000-nyc-rental-apartments-si...

https://www.nytimes.com/2018/03/16/realestate/brooklyn-devel...

New construction of expensive high end apartments help lower the prices on other units. Wealthy people will move there rather than driving up prices on dilapidated brown-stones. Its kind of how the average new car price is 30k, which is off limits for many Americans. But the new car inventory drives down the price of older models.

The problem is likely more rooted in wealth inequality. As a smaller group of wealthy individuals control a larger portion of the nation's wealth, they will inevitably acquire all sorts of investments (stocks, real estate, etc) driving prices up.

If there weren't luxury multi-million dollar apartments to buy, they'd be buying the brownstones anyways. And given that the multimillion dollar units sit on the market far longer than the more affordable housing stock, is there even really high demand among the wealthy to own premium housing?

Luxury housing gets built because it's the only thing that's profitable to the builder once you take into account zoning and permits and regulations that need to be satisfied in order to build. What we really need is relaxed policy that allows for the profitable building of run-of-the-mill, average housing.

Wealthy people are less likely to stay put in one place I think. Thus, there's a demand to rent multimillion dollar units for 1-3 years at a time, but not necessarily own one.

Poor or average people buy a house in order to save money on rent. Rich people don't care about that amount and can easily get their stuff moved with company money. They recover the rent vs mortgage cost via increased flexibility.

With a few exceptions new construction is high end.

There are a few areas that were designed as slums from the beginning: Lower East Side in Manhattan, parts of the West Side in Chicago.

Taking Silicon Valley, if 25,000 high end apartments were built, that would take a lot of pressure off low end, because well paid people wouldn't be taking them out of desperation.

> In what sense is there an oversupply of luxury housing? Are there lots of vacant luxury units?

Short answer, yes. If you're interested in detailed information about NYC housing, I definitely recommend checking out the Housing and Vacancy survey data (https://www1.nyc.gov/assets/hpd/downloads/pdf/about/2017-hvs...)

There are a lot of vacancies and nearly unheard of concessions being thrown out there. A ridiculous amount of construction as well. If there's prolonged weakness, concessions eventually turn into rent decreases.

https://ny.curbed.com/2018/4/12/17227574/new-york-rent-marke...

All of that seems good and necessary - given that the median net effective rent is still over $3k/month in Manhattan, and that there's apparently room to profitably continue building, it sounds like things are headed in the right direction.

Its a great example of how just building more housing isn't a complete solution, because all builders are going to target the top of the market if they at all can.

No. The price of housing is not determined by the builder. Like any good its price is driven by what people are willing to pay. Here in SF, even 230 square foot studios are considered "luxury housing" because the shortage of housing is that extreme. Any new construction commands a premium over old housing. In effect, restrictions on building more "luxury housing" restricts the construction of most new housing even if it is high density.

Building more housing, and giving incentives to build as much housing as possible is indeed a complete solution.

Tell that to china https://news.ycombinator.com/item?id=19171099

They have something like 65 MILLION excess, unused apartments, almost exclusively targeting the luxury market (because they are created and valued as investment first, housing second), and they still have extreme affordability issues.

Building more housing is absolutely not a complete solution.

Much of those houses in China are not built in desirable cities but in ghost town that have little to no people living in them. There aren't million of chronically vacant units in Shenzhen. One could just as easily point to vacant houses outside Detroit.

Housing isn't just about the number of houses in a given country. It's about having available housing where the demand is growing.

I really don't think it's fair to compare China's housing policies to the United States' policies as they couldn't be more different.

Of course there are differences, merely pointing out if building more housing, even building more housing to an almost comically absurd extent solved affordability issues by themselves, China wouldn't have them.

I still don't see your point. No one acts as if housing supply is a magical fix-all to affordability. Almost all housing issues in America are caused by multiple factors and New York is no different.

They target the top because the regulatory environment is such that it’s too costly to target middle and lower range properties. In places like Houston, there are tons of “normal” places being built. With land prices in places like New York and requirements to subsidize “affordable” units within the building, that necessarily means the market rate apartments have to be much more expensive to compensate. In Houston, there is no such thing as “affordable” set-asides because their isn’t a need for it. Houston also doesn’t set aside thousands of acres of prime land as “open space preserves” like they do in the Bay Area, further constricting available land. We can debate the quality of life value of “open space;” it would be a fair debate, but you can’t have lots of available but politically unbuildable land while simultaneously lamenting the lack of affordable housing.