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Comment by epmatsw | Hacker News Reader

> because developers mostly would build high-end units

This is such a frustrating perspective.

It's frustrating because, as propaganda, it's been extremely effective.

If you're an opponent of increased housing supply in California, you can roll out that talking point whenever threatened. It's tested, emotionally resonant, and most people don't have the time to be explained why it's wrong.

Supporters of increased housing in CA need to come up with their own powerful rhetoric, rather than whining about the fact that their opponents' rhetoric works.

(Whining further that bad rhetoric shouldn't be allowed is even worse--we live in a democracy; you have to influence people; rhetoric matters.)

I usually put it this way:

The wealthy are coming and they are going to take a house. If you build nice new condos, they’ll happily take them. But if you don’t, they’ll buy up run down duplexes, evict the tenants, and convert them into McMansions instead.

It is, in my experience, true. I live in an up and coming suburb of Detroit and every new apartment / condo building is incredibly skewed towards the high end.

In fact, a huge development project is going on in the downtown area currently. One of the requirements of the project was to set aside a certain percentage of the new units as affordable housing. When the developer was asked about the affordable housing at a city council meeting, they revealed they were targeting a price point of ~$1600/mo for a 1 bedroom. For context, the going rate in the city for a bedroom is $300-800/mo. There was no language specifying what exactly affordable housing so they can get away with it (something the city is working on for next time).

My point is, this is a real problem. You need to think about it and you need to actively prevent it in from happening in whatever legislation you put forward.

> I live in an up and coming suburb of Detroit and every new apartment / condo building is incredibly skewed towards the high end.

>new

And what happens to the old units? They are sold and rented to the non-super wealthy.

I also live in south east michigan and my neighborhood is undergoing gentrification, they are tearing down 1000 sq ft homes and replacing them with 3500 sq ft homes.

What is the problem? I couldn't fit my large family(and renters) in a 1000 sq foot home.

Old units in many places are frequently renovated and re-sold to upper-middle class and wealthy tenants. The end result is an erosion of housing stock for average and low-income residents.

But the said "upper-middle class and wealthy tenants" already bought the "new apartment / condo building" that were built in the first place.

It seems to me that opponents seem to think there is a phantom limitless pool of "upper-middle class" that buys up all the new high-end condo _and_ all the refurbished older units.

Logically speaking, this is not possible

There doesn't need to be a limitless supply. In many cities if buyers aren't found, property owners are content to leave them vacant. You can see this in the relatively higher rates of vacanies in condos compared to other kinds of housing.

Rhetoric matters much less than economic clout. Much of the "influence" you describe is from sustained marketing rather than through rhetoric. The rhetoric itself is almost irrelevant, in fact.

It's effective because there's a measure of truth in there, especially in California. Prop 13 will limit taxes on existing housing stock, so cities and counties will levy fees on new developments to make up for it. Additionally, the cost of labor in much of California is such that just building any structure is extremely expensive (to the extent that only luxury units will make any money for the developer).

Prop 13 allows a 2% increase a year. That's more than enough to keep up with inflation.

Housing price growth well exceeds inflation.

Because the cost to create a unit makes them high end from the start. You have to add fire suppression systems, elevators, seismic reinforced construction and pay for the land. NPR had a segment on it, listing the costs to build a modern day high rise unit and it there is no way to build it for low-income housing and make a profit. Even if given the land, at most it is break-even.

Low income would have to rely on housing that wasn't new. Kinda like cars, it wouldn't make sense to have car manufacturers to try to create a sub $10k car when you require air bags, backup cameras, tire pressure monitors etc.

Where has the middle gone? Is it either extreme luxury or low income assistance?

The middle is old luxury housing.

Is that a unique SV situation? Where I live, most new housing is close to or only slightly above general market price for the corresponding market segment (e.g. 2br condo, 3br SFH, etc). It usually seems to come with pretty ordinary trappings- ordinary countertops, ordinary fixtures, maybe the floors are laminate, etc. Luxury appointment can be found, but nobody's building five hundred units with gold inlay.

The notion that new construction being 'high-end' won't improve the market on the low-end is erroneous in markets where the spread of rent budgets of people forms smooth, continuous gradient. But the Bay Area is not such a market -- nor are places where significant cash infusions such as very high pay at the high-end or subsidies like military housing allowances to people of middle incomes will distort the field upwards. Then there's Prop 13, which disincentivizes the sale of legacy homes, removing many residents and homes in the middle of the income/rent spread from the liquidity of the market.

Developers want to build units that are 'high-end' because it's the best way to recoup their costs. Urban construction is expensive and many projects are made possible by a combination of loans, private equity funding, and government subsidies. The increase of supply in high-end apartments creates competitive pressure on older units, places with less amenities, places with dated design, and places in inferior locations. Since housing sorting resembles an auction, people with the highest rent budgets have the most options. Landlords of less ideal places will see some tenants filter out and replaced. Eventually, the replacements stop coming, because all people of higher rent budgets have already moved to more desirable places. Instead of letting apartments sit empty, the landlord might lower the rent while still staying within the profitability threshold.

This doesn't work every time. If people of high rent budgets never stop coming, they never have to lower prices: there's an undersupply on the high-end too. This is clearly the case in the Bay and other desirable areas of California.

A lot of today’s housing stock was originally built as higher-end units, and moved down the chain as it got older. The idea is that when higher-end units are built now, the wealthy vacate some of their current units, which then have downward price pressure and become middle-range units, and so on.

And it's self fulfilling too by those who limit housing construction. If only 10 units are built but there are 1000 units needed, those 10 units are going to be sold to the 1% wealthiest. If, seeing this, voters to restrict construction even more because the "wrong type" of person is buying, and only 1 unit is built, only the wealthiest buyer gets housing and it becomes even more "luxury."

The only way to start serving the needs of "normal" people with new construction is to issue permits for that full 1000, or maybe even better, try to get developers to build 1200 or 1500 and then compete for buyers, rather than having buyers compete for limited production.

Any new modern apartment is considered luxury. Its actually impossible to build non luxury apartments in Sf. It seems what people want is for builders to actively destroy the apartment after they build it so that it will be rented at a lower price.

> It seems what people want is for builders to actively destroy the apartment after they build it so that it will be rented at a lower price.

What some people want is subsidized building of units in exchange for rent limits.

Ok so what you want is subsidized luxury apartments. Because the quality of the apartment doesnt seem like its going down under your model.

> Ok so what you want is subsidized luxury apartments.

The main thing that makes an apartment luxury is location and being new; new construction in the Bay Area (except maybe an isolated single unit or small development in a particularly blighted area) is luxury inherently. The only thing that's not is old units, and you can't ramp up the supply of old housing units easily (about the closest is you could do a minimal inhabitable renovation on existing units that are too dilapidated to be legally inhabitable, but the supply of those is limited and IIUC it's often more expensive to do that than demolishing and rebuilding front scratch.

So, yes, that's literally the most cost effective way to increase the supply of affordable housing for anybody but the rich.

> The main thing that makes an apartment luxury is location and being new; new construction in the Bay Area (except maybe an isolated single unit or small development in a particularly blighted area) is luxury inherently.

Ok, so a 1 bedroom 2nd story apartment in San Francisco in a new building without air conditioning and without a dedicated doorman that costs $4000 a month is luxury but a $1200 a month apartment on the 25th floor of a highrise in Atlanta with a view of the entire city, a dedicated doorman that will bring groceries and packages to your door and air conditioning isn't?

Or are they both?

The San Francisco option is to be clear not a luxury apartment. It's just overpriced.

So what I'm saying is

this statement is flat out wrong.

>So, yes, that's literally the most cost effective way to increase the supply of affordable housing for anybody but the rich.

Just so we stop using terms that were invented for the sake of propaganda such as "affordable housing" and "luxury apartments" why don't we call a thing what it really is?

Affordable housing - a limited supply of apartments taken off the market and given off in a lottery to a lucky few who get to pay less than market rate for rent. The rent is subsidized by the rest of the people living in the city.

Luxury apartment - a normal apartment that is overpriced due to artificial scarcity. This artificial scarcity exists because of people using direct democracy to vote for laws that they believe to be in their interest without any understand of the second or third order effects of the law.

> Affordable housing - a limited supply of apartments taken off the market and given off in a lottery to a lucky few who get to pay less than market rate for rent

No, affordable housing for a given income level is defined by a cost formula. Achieving affordable housing for lower income levels is frequently done by the means you describe, because you literally cannot build it in quantity if it is distributed by normal market means because what is new will be desirable, and therefore both expensive and snapped up by the well-off, for that reason alone.

new construction in the Bay Area is luxury inherently

The very state of newness is in itself luxury? That's a pretty damning assessment.

Well it is. Leasing a new car is more expensive than buying a used one. But that's not an argument against manufacturing more cars.

Of the same model, yes. But a new Corolla can be cheaper than a used Lexus, or what have you

Serving the customers who can pay the most first is pretty much what happens in almost every industry but for some magical reason housing is "special". It's probably just that they have let their "customers" wait so much there is now a massive backlog of hundreds of thousands of them and in the current political climate it will take decade to serve all of them.

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