> I don't know anyone who wants a 4k sqft house for $650k
I'd love to have that option compared to just seeing 650sqft condos for ~$650k in/near my neighborhood in CA. :)
I'd love to have that option compared to just seeing 650sqft condos for ~$650k in/near my neighborhood in CA. :)
There are "anti-poor-people" laws, restricting the minimum lot size (in some cases, 1 acre in certain areas of Mountain View, for example), and restricting the number of SFU you can build in a single lot to 1.
Or maybe there's zoning in place to (giving it the benefit of the doubt) prevent it from just turning into "two 600K 2k sqft houses".
In CA this comes about in the form of "the additional cost of furnishing this condo/apartment building in a way that will sell for 5K/mo or 1.xM+ versus targeting the middle of the market is small enough that we'd be leaving massive amounts of money on the table."
So there's a very loud debate going on about how much this construction just attracts wealthy or high-income outsiders who otherwise would live elsewhere (and so doesn't have any trickle down benefits on the rest of the housing stock) vs actually helping people who currently live in the area.
I'm not aware of any areas with the political will to really substantially push back against top-of-the-market targeted construction, though.
Building a good house costs a few hundred thousand dollars. Just a lot size in those areas is worth a few million dollars.
Building costs aren't the constraint. Land availability is, mostly due to zoning laws.
"then there's more money to be made by building only for the top of the market"
Housing again follows supply and demand. It doesn't matter the size or luxury of a house, if there's nobody willing to buy it, prices will drop.
But it doesn't necessarily follow it in a straightforward manner in any particular location.
If you knock over a building of 5 crappy old apartments in a dense area to build a bigger building with 10 new, bigger, luxury units, it's easy to imagine scenarios where the net effect is more supply but also an even larger increase in demand:
- If the new units are condos, it's unlikely those displaced renters are going to be served by the new building.
- If the units are much more luxurious they could attract wealthy commuters to move into town, who otherwise may have been outside of the demand sector for the units because of lack of AC, or in-unit washer/dryers, or whatever. (I'll admit to being this sort of housing consumer.)
- Alternately, they could attract absentee tenants who would rather just leave the place vacant and just use it as a second home. Or AirBNB it most of the time. Or (if condos) use it as a assumed-relatively-safe asset or investment.
Things are complicated. And in places like SF, LA, and NYC, people do have enough money and are willing to buy right now. So the question is how do we best help the ones with less money short of "just build enough new luxury condos until all the rich people in the world are satisfied"?
Apparently in NYC the last few years we've just about built all the 50+M condos that the market can bear - that's a long way from helping the people who could only afford 100k.
They exist. You just gotta wander from the coast and check the Central Valley instead.