Developers can profit by building affordable housing almost anywhere | Hacker News Reader

Developers can profit by building affordable housing almost anywhere

citylab.com

25 pointsjseliger14 comments

I don't like how this treats "affordable housing" as though affordability were a built-in property of construction. The way to make housing affordable is to build lots of units, so that you don't have too many people bidding on too few apartments. If you don't do that, then everything is going to be expensive no matter how shitty you make it (see San Francisco). If you do do that, then you can make the units nice and they'll still end up being cheap.

You mean, build houses where people want to live and where the jobs are?

I am pretty sure you only have to build enough houses for three hundred million people.

Cross that with zoning and practical building concerns, and you find that affordable is partially a built-in property of construction.

If the lot will only support X thousand square feet of heated living space, you can build 1 X kft^2, 2 X/2, 3 X/3, or 4 X/4 units. It seems overwhelmingly likely that the last will be more affordable than the first.

I have a seriously hard time believing housing shortages are the result of bad people and not the underlying economics and regulations. And when you openly state that the purpose of your program is to demonstrate a particular point of view, I am not surprised when, lo and behold, the program confirms what you programmed it to confirm. I would oe much more interested in an honest, agenda-free analysis of the housing market.

The source for this article's is the web app linked at http://www.affordableownership.org/inclusionary-housing/incl.... I attempted to sign up to so I could use it, but the captcha test is broken for me. Has anyone here been able to try it?

Yes, I have it. Haven't been able to test it thoroughly, but so far it functions as advertised.

There will always be a shortage of below-market-rate housing by definition. If there were enough of it, it would be market rate.

Except that pretty much any measure of market-rate is likely to be biased. From the FED's estimates biased up to rental sites biased down.

Besides the market price of dwellings, there is also the variance of prices of all dwellings.

You can have a shortage of below-market-rate housing by not having enough variance.

Also, the creator of this site can profit by 10% per year by working for 10% more than it takes to afford ramen noodles and live in a tent.

10% is hardly a rate of return to brag amount, especially since dense housing requires large amounts of capital tied up for multiple years. Assume a complex takes 18 months to build. Then that 10% is even less.

I noticed that too.

Also, they didn't do a side-by-side comparison of building affordable units and not. How much does the profit change?

It's important to remember that just because you turn a profit on an investment, doesn't mean you should make it. You need to look at what else you could invest in.

If constructing a building in SF with affordable units turns a profit of 10%, but constructing the same thing without affordable units in, I don't know, Houston, gives you 20%, where do you think the investments will flow?

A 10% projected internal rate of return is unlikely to attract the capital necessary to develop multifamily housing. The lower the projected returns, the higher the risk.

Unlike VC, a project that goes south has a massive impact on a portfolio. There are not 1000:1 real estate projects to make up for losers.

And then factor in the costs of the approval process and probability of being denied ...

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