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Comment by pmorici | Hacker News Reader

I see people complain about this a lot on Reddit. I personally take the view alluded to in the article that all supply is good supply in that it will drive down average rent in the long term. Calling something 'luxury' is primarily a marketing gimmick. No one wants to live in a complex advertised as "respectable housing for the indigent". A better way to look at these developments might be what their average square footage per intended occupant is. So long as these apartments aren't all pent house sized then they can always lower rents and still make the numbers work.

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I used to live in what could be called "respectable housing for the indigent" - studio apartments in a 1920s building, with radiator heat, college fridge, and only 40A of electricity per unit. I stayed there while getting back on my feet after a failed robotics startup in 2012.

Currently, I live in a luxury apartment about 4 blocks away. A 2013 building, it has AC and gigabit internet, and free wifi on the roof deck

The housing problem is that - while the difference in utility between these units is huge, the rental price difference is just a few hundred per month. Granted that they are the same square footage. "The indigent" cannot afford base-level housing.

Yes, SF is a perfect example where demand so wildly outstrips supply that the dominating driver of cost is space. Whether it is nice space or a total dump is only a small percentage of what dictates the over all price.

Look at it this way, say a small apartment has 12 Square feet of counter space in the kitchen laminate counters cost $25 per square foot and granite costs $50. the relative cost difference between luxury and cheapo now is almost nothing once amortized and compared to the total rent.

This is a really interesting theory. Initially I read this and nodded in agreement. But now I question, if demand in SF is truly so high, wouldn't those renting out nicer places be able to charge more? An increase in overall demand means some portion of that is an increase in demand for "luxury" housing, so wouldn't the rent for those units rise accordingly?

Because the prices are already super high for both? The primary utility there is close proximity to extremely high paying jobs.

Both examples are within a mile of Amazon's offices, and one bus away from Redmond.

It is illegal to charge more for a lot of the places that could be made nicer. Demand remains, quality suffers.

Nicer places can charge more. It's just what when push comes to shove people aren't going to move 5 hours away for nice finishes. They will how ever put up with cheap counter tops if it means being 1 block from the metro. The over riding factor as other have pointed out is space and location. everything else doesn't really move the needle when you are looking at markets with very high prices.

It’s fake luxury though :-/

"Luxury" is a normative term, a qualifier. Utility - how useful it is, it how many problems it solves - gives a more positive, quantative measure.

In my area (socal) the gap between really nice housing and garbage is shockingly small.

Not a rental unit, but the gap between a crappy house (unmaintained 1950s with a staircase in the bathroom) and an ultra modern home with a pool next door was only 20% or so. I view this as a sign that the market is way off its mark.

Curious about which is next door to the modern home - is it a modern home with a pool, next to a 1950s home? Or is it a modern home next door to a house with a pool, in a different neighborhood than the 1950s house?

In the past, I've heard that a house's value can maximize at 140% of the value of its neighbors, so a 1950s house in the same neighborhood as the modern house might drag down the modern house's value.

Not if it’s a mid century modern. Also in LA you can basically build whatever you want. There are few deed restrictions etc...

land is generally 90%+ of the value out here in santa monica. 1 story tear downs go for $2M in the area i live. the new owners usually want to build their own thing - a big spanish style ranch or weird japanese/modernist house - it's the land that's valuable and scarce, not the access to construction crews and building materials

>staircase in the bathroom

Wow how does that happen?

I wondered that as well.

Remove a wall that separates them. In college, I rented in a house with a toilet in the hallway. Because the landlord took the bathroom door away, and cut a hole in the wall to the other bedroom, so the bathroom became a hallway.

The "difference in utility" between those two units is actually not huge, that's why the prices are similar. Your two homes are comparable on location and size which are the largest components of utility.

The housing with low utility is in Bumfuck, IL where there haven't been any jobs for 40 years.

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