<owners of $5 million Tribeca lofts have entered the chat>
It feels wrong to build luxury housing when regular folk are suffering but if you build luxury housing to the point that the rich stop bidding on regular housing, or even better there’s so much luxury housing that everyone can get a good living space, it’s a net improvement for all of society
Even if the price of expensive apartments does go down a little because more people are able to afford "luxury" you don't necessarily have to let the little guy in on the savings you can as an industry collude to keep the price as high as the market can bear without literally becoming homeless. You don't even have to actually collude in an illegal fashion if your interests are actually sufficiently aligned that you all act in lockstep without overt coordination. Any real savings can be virtually entirely absorbed by the owner class.
There's a natural floor to this though. For example, if Boston built 3 housing units for every human being on the planet, there would hardly be any problem even if every person wanted to live in Boston and own multiple units. This is obviously absurd, but hints at the greater point. There's a point along the supply/demand curve where prices will end up falling, no matter how much external demand or AirBnb rentals come into the area.
The argument I think you're making is that there's no way to build enough housing units in a reasonable amount of time to meaningfully affect non-upper-end housing. There's not much controversy about that in practice (though weirdly enough there is a lot online.) California (and many Californian cities sweeten these deals) specifically offers developers many benefits for varying percentages of affordable housing mixes in their units. Boston also seems to have income-restricted housing as well. Most pro-housing policymakers agree that housing isn't just a build-build-build game but that incentives need to be offered to ensure affordable units are built along with upper end luxury housing.
Rent control changes who gets a home from a decision of whose wealthiest to whose luckiest which isn’t any morally or functionally better. Subsidizing or requiring developers to have “affordable” units in developments either offloads the cost to the other purchasers which will increase the average unit price in the area, which will cause people who used to be able to afford a home to slide down into too poor to afford one. All that’s doing is just moving around who gets to lose when it comes to this scarce resource.
The only answer to a scarce resource with high demand is to produce more of it. Unfortunately Boston, like most US cities, is full of nimbyism. It’s exacerbated by the fact that existing homeowners tend to have more political power just by virtue of the fact that they are more tied to the location and have a vested interest in voting in the area, vs renters who are more likely to up and move instead of invest time in local politics.
I also harp on the luxury housing building quite a bit. Emotionally it hurts to see only luxury housing being built when there is a housing crunch hurting the poor or middle class. The pragmatic bit however is that developers are always going to be incentivized to build luxury housing since it nets them the most profit. These building eventually turn into non luxury housing as the building age and the owners decide to not repair the unit to spec, or standards change and what is considered high end today isn’t in 20 years. We should stop fighting the natural incentives here with developers and lean into them to just build build build, imo.
The policy decisions that I think require actual thought are more along the lines of zoning and standards. Policies that require parking spots for every unit even when they are next to subway stations for instance hurt density a lot. Zoning being in the hands of towns who can act in a parasitic manner is also something that needs to be addressed, with my preference being something more along the lines of Japan’s zoning policies
Everything becomes luxury housing when theres a shortage and it gets bid up by dollars. And the existing government housing has not covered itself in glory such that we should look to that as a solution (paging NYCHA).
This stuck-in-amber Euro-ficiation of US HCOL urban coastal areas is not going to work in the longterm, especially as we continue to have growing population unlike many of the quaint European cities people like to visit.
The poor do not have the willingness to pay a whole category of prices, as they are unable to finance it. Creating luxury accommodation can increase supply, but as the decrease in price does not necessarily put the older accommodation within reach, the owners of captial can choose to retain it.
Housing is not that special, when there is a lot of it, it gets cheap.
Given rental vacancy rates of ~5.8% in the USA in 2022 it is more akin to a hypothetical of building a 12th and 13th house, while an 11th already lies unoccupied.
I am not sure in this more realistic case that building improves matters, unless an unhoused family can gain access to one.
2) Is it easier for unhoused to gain housing when vacancy is 1%/5%/10%/20% ?
For example, Manhattan has 2% vacancy. Even in peak covid dread it never got much above 4%. And you know what - pricing updated very quickly to get those units filled. Lots of tales of people getting crazy deals, including people I know. Of course when the world was no longer ending & everyone moved back.. prices snapped back.
So even a 2% to 4% move can have huge pricing impacts. Imagine building enough in HCOL areas to move the needle.
2) at a certain point squatting sets in. I believe the answer to your question depends on how much capital is held by the rich/poor, and how well property is protected by law enforcement and private security. If you look at the parent comment I was responding to, it mentioned not building so much that it flooded the market.
There's areas of the country with out-migration, lack of jobs, but tons of housing. Post industrial cities in the midwest are like this.
There's areas of the country with high paying jobs, but no housing being built. Areas of NY & CA are like this. It is then no surprise that we have 60k homeless in NYC when even people working for banks or tech can barely afford to live there.
There's also areas of the country with decent paying jobs, but lots of housing.. with lots of in-migration. Sunbelt is like this.
All three of these types of areas have vastly different vacancy rates and homeless rates. Taking national averages confuses the matter.
Quick googling points to vacancy rates of: Manhattan 2%, Boston 3%, SF 7%, Detroit (12% owner vacancy / 7% rental vacancy), Miami (3% owner / 7% rental), Austin (1% owner / 6% rental) etc.
FRED has some good charts you can see state by state the levels and even shapes are totally different in terms of trends and averages. Expensive northeast- https://fred.stlouisfed.org/series/NYRVAC https://fred.stlouisfed.org/series/NJRVAC https://fred.stlouisfed.org/series/CTRVAC
Midwest https://fred.stlouisfed.org/series/MIRVAC https://fred.stlouisfed.org/series/MNRVAC https://fred.stlouisfed.org/series/ILRVAC
Sunbelt https://fred.stlouisfed.org/series/GARVAC https://fred.stlouisfed.org/series/FLRVAC
Northwest https://fred.stlouisfed.org/series/ORRVAC https://fred.stlouisfed.org/series/WARVAC
Basically everywhere thats expensive has vacancies around 4% or less while areas that have been building its closer to 8%..
> why do you assume a wealthy family will only buy one house, or could be outbid by a poor family? I was responding to this post that seemed to assume all new housing will be bought by the rich as like extra homes..
People underestimate how much "trickle down" kind of is real in RE. In the absence of nice new construction (which seemingly always gets called "luxury"), people with money will move further and further down the market, to buy & renovate. So the option is build more homes to increase supply, or see the dollars chase existing supply & raise its value (and cost).
All newly build luxury housing will by definition be bought be the rich. There is no assumption about that. The discussion was whether they decide to hoard, rent out or sell their old residence. The trend (global) is clear, e.g. NY, CA, SF and further beyond. https://old.reddit.com/r/toronto/comments/14zdsia/housing_pr...
The decider onto luxury housing being a benefit is whether the poor can in aggregate afford what the rich want for their old accommodation, increasingly, they cannot.
It's not some sort of conspiracy that nice new construction is called 'luxury', whereas less nice new construction is called 'affordable'.
I don't feel I have anything more to contribute.
The wealthy aren't waiting around to buy/sell houses per se, they're trying to get a maximum return on investment. Adding enough supply so that housing isn't an investment vehicle removes those incentives.
Who will add luxury apartments or affordable apartments except for the already wealthy? Who has the incentive to build enough luxury apartments, to stop housing behaving as an investment vehicle?
There are many many factors that are contributing to high costs like euclidean zoning that took off when the US had less than half of its current population. It's literally illegal to build multifamily housing in vast swaths of the US.
It's very clear that some sort of housing reform is going to be needed, as overly restrictive zoning, suburban sprawl, and it's associated housing costs have become unsustainable.
This isn't some fantasy either, Japan has very reasonable zoning and housing is generally not an investment vehicle there. Sure there's other contributing factors like a declining population, but it all leads back to supply and demand!
how sure are you about the validity of the claim you just made? Note the link below does not include cash buyers.
https://old.reddit.com/r/toronto/comments/14zdsia/housing_pr...
The point I've made, is that demand is not just people wanting houses, it's also their ability to pay. There's some magical thinking out there that if investors build 'enough' luxury homes the poor will be able to afford homes. This is a falsehood.
I can't speak to Japan, however I don't think it ever accepted the level of homelessness that the west takes for granted. I would wager that the Japanese government builds more housing projects for the poor than the west.
Most of New York's affordable housing is former luxury townhouses subdivided. You saw similar subdividing in Phoenix post crash. Every time people study this, they find building housing–any housing–eases prices. Yet every time a debate about building housing in high-cost areas comes up, someone comes out with this and throws a wrench in the gears. (The marginal property in a high-cost area will always be luxury. That's what high cost means.)
Anecdote: I've negotiated down my rent in New York based on new luxury developments nearby. I tallied up the cost of their amenities, saw how much I spend, compared the floor plans and showed my work to the landlord. Two units had already left, and I knew one had sized up to the luxury. Based on the math, it made sense–$200 for far more square footage. Landlord delayed but eventually agreed and reduced my rent to keep me.
What size of place are you looking for? My partner and I bought in Boston in 2019 while making a fraction of that income.
the last place they lost a bidding war on was $600K.. for a 3bed/1bath 1000 sq foot.. well outside the city, went for 20% over ask.. crazy stuff
We found some places we could afford but they either made our commute fairly long(>1 hour each way), would stretch our budget to have zero tolerance for emergencies, or both
People also have a lot of received wisdom of how they were brought up in the burbs and just assume you HAVE TO buy.
There's plenty of markets where prices/rent are upside down and you might as well rent indefinitely.
People forget you are either renting housing or renting money to "own" housing. If you are disciplined enough to save the difference, renting can be better in some markets. Mostly its HCOL coastal cities where people are accepting ridiculously low rental yield because they are banking on price appreciation.
If you don't know if you want to be in X location for the next 5.. probably more like 10 years, there's not always a solid reason to buy.
I know of several big, high-rise office buildings that are 75% empty since the pandemic. We’re talking a few years now!
But then again, greed is real. My current office building is getting more and more empty by the day. And they refused to budge on the rent for my company even so.
So you'd probably end up with close to 5k square foot condos - which isn't too ridiculous.
You'd probably do 4 corner units and 4 non-corner units for a total of eight, and end up with each being between 2000 and 2500.
The problem is, they'd be ridiculously expensive for a number of reasons. And when you're paying that much money, you probably don't want to live in a building that wasn't even designed to be lived in...