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Comment by mabbo | Hacker News Reader

> It mainly leads to building high-end housing in desirable locations

Which is perfectly fine! It still works, because houses do not have intrinsic price tags. They have intrinsic ordering of values, but their price is determined by what people are willing to pay.

Line up every person in the city in order of how much they're willing to spend on a home. Do the same with the homes available. Face the two lines across from each other. Everyone will buy a home nearby to what is across from them right now. Building a whole bunch more houses on the top end of the house scale doesn't leave those mansions empty, it just drives the mid-range homes further down the scale.

Supply shorter causes those further up the scale of "willing to spend on a home" to have only modest homes as options (what's across from them). At the same time, it pushes less and less desirable homes (often ones 2 hours commute from work) in front of those less able to afford homes.

If you want to argue that the divide between rich and poor is growing, and it's a problem, oh heck yeah I'm on board for that argument. But conflating the housing shortage problems with that allows the landlords to keep getting richer.

View on HN

> Line up every person in the city in order of how much they're willing to spend on a home.

This is the “city as a closed universe” fallacy. What you actually have to do is line up every potential purchase of a home (which may be more than one per buyer) in the city by any person in the world in that order.

Which is why you can't move the needle very much in a high demand region by increasing supply in any way that is practical over any reasonable period [0]; there's usually a lot of available demand that must be filled before you see a perceptible price drop.

[0] at least before considering the effect that population density outpacing service and infrastructure scaling can have on desirability, which isn't usually the effect people are looking to leverage to reduce price, though making the city into a hellhole does have that effect.

Exactly this. The problem is that capital is essentially globally mobile at this point. I personally support making cities for the residents of that city first and foremost. An example of this would be:

- All property ownership needs to be tied to a person as in no shielding behind LLCs for tax purposes at least (you might for privacy reasons).

- Owning a property in a city makes you a resident of that city (and country). Your worldwide income and assets are now taxable.

How about also:

- A property that is unoccupied for more than N days in a year is considered abandoned and forfeit to the public. Pick an N that makes sense.

We have too many “investors” just buying property (that could be used to house people) and sitting on it empty like it’s some lump of gold. Or they leave it vacant only to vacation to for a weekend per year. End this speculation and waste and prices become more affordable.

This seems unenforceable; how do you know if a property is unoccupied, and for how long? Cletus' suggestion is more enforceable.

Something like this can be (and is) done: https://en.wikipedia.org/wiki/Adverse_possession

I don't see how that's relevant. It works on much longer time frames, and in particular, only comes into play when someone else tries to claim the property in question. If the property is merely unoccupied, no one will ever know. Implementing this law will require regularly inspecting all properties in the city to see if they are indeed occupied (and how would you tell the difference between a furnished/staged unoccupied apartment and one that is occupied?).

Also, good luck squatting in a modern apartment building. You won't be able to get a keycard to even get inside the building.

Fun fact, BC has no adverse possession law. Damn shame, I've been living next to an abandoned lot for 6 years now. I could easily afford a house -- but not the land to build it on

For single-family homes (or individual units in a multi-family property, e.g. individual condos), those rules would be a welcome addition. For commercial/industrial properties or apartment buildings/complexes, however, this would throw a massive wrench in things and cause a lot more problems than it'd solve.

> Owning a property in a city makes you a resident of that city (and country). Your worldwide income and assets are now taxable.

So, would I be able to become a US resident simply by buying an apartment?

The term would be 'resident for tax purposes' an already existing category in some parts of the world that doesn't give you extra rights.

Yes. The US luxury condo market is being fueled by EB-5 visa applicants. They have to invest $450k to $1mm. That gets you a pretty nice pad.

They have to invest the money into a business, or one of those regional centers. Buying a house does not get you the EB-5 visa.

IIUC rental leasing companies are businesses. https://www.citylab.com/equity/2019/04/hudson-yards-financin...

The case in TFA is putting in money as investment for a business to develop housing. That is NOT buying a house.

More likely you'd have to become a US resident before you're allowed to buy an apartment.

I wonder if this is what gentrification feels like when it happens to those in the middle class.

If you build more housing and prices don’t go down, that means your satisfying unmet demand. And that’s a good thing too—you’re increasing the tax base of your city. If you keep building, then at some point the unmet demand will be met and prices will go down. Every step of that is a win.

Only if constant growth is always good.

Every step of that has side effects that people may not like.

Nobody talks like this about traffic. More lanes, same slow traffic speed. Yep, that's newly satisfied demand. It's also widely considered undesirable and self-defeating.

It's not irrational to think that slowing down or distributing the growth elsewhere - geographically - would be preferred.

> Nobody talks like this about traffic. More lanes, same slow traffic speed. Yep, that's newly satisfied demand. It's also widely considered undesirable and self-defeating.

It’s only considered undesirable by urbanists. Building more lanes allows more people to travel without making commute times longer. That’s a win. (Here in DC, we are moving from six car trains to eight car trains. That doesn’t make the trips any faster, but allows meeting unmet demand. Nobody disputes that’s a win.) There may be a downside if you’re just encouraging people to move out of the city into suburbs, but in many cases living in the city isn’t an option for those people to begin with. In any case, no equivalent downside exists for housing—the new houses will generally be sold to people who weren’t living in your city and paying taxes there to begin with.

It's considered undesirable for anyone that hates traffic. So the OPs statement is actually incorrect. It's not:

More lanes = same traffic

It's:

More lanes = MORE traffic

It's called induced demand.

https://www.wired.com/2014/06/wuwt-traffic-induced-demand/

I can think of three mechanisms to bring down house prices:

1) Build more houses

2) Reduce the amount of lending banks do

3) Distant third, if the government has mucked up the tax/renting incentives so much that people are leaving houses empty that should be fixed.

They all sound good to me. However, if the complaint underlying "prices are too high" is that people don't have a place to live then that can't be fixed without growing the stock of available housing. Growth is required. We don't want people to have to chose where they live because there aren't enough houses being built, we want them to move based on economic opportunity or because they like the lifestyle.

Traffic is different from housing. In a moment of flippancy, I suggest that nobody wants to be sitting in traffic, but they are happy to be sitting in their own house.

I'd add:

4) move the jobs to less expensive cities. The discussion largely driven by a very small area in a few cities that have been extremely successful at job growth in tech, finance, and lobbying. There isn't a housing affordability crisis across most of the country.

I'd add:

5) move the people to less expensive cities. The discussion largely driven by a very small area in a few cities that have been extremely successful at job growth in tech, finance, and lobbying. There isn't a housing affordability crisis across most of the country.

Just a note number two doesn't express rent or actual home cost. Just home prices.

> 2) Reduce the amount of lending banks do

> 3) Distant third, if the government has mucked up the tax/renting incentives so much that people are leaving houses empty that should be fixed.

From what I read, the amount of lending banks do is specifically because of government policy. Specifically, fixed-rate 30-year mortgages do not occur in the wild. You're more likely to see 10-year mortgages -- and that means borrowing a lot less.

> I can think of three mechanisms to bring down house prices: ... Reduce the amount of lending banks do

How will this reduce the actual cost of housing? If banks lend less, interest rates will go up, which will lower the value of homes. However, the value of the home will go down in proportion to the higher interest rates. So the homes will be valued less, but they will cost exactly the same taking into account the higher interest rates.

The only one who wins here are the banks who get higher interest rates.

:P I didn't say the real cost, I just said house prices. So I have a weaselly escape route on that one. Nevertheless...

You seem to be going to the real cost of housing; there are very complicated feedback loops and if there is a good argument for what should happen in theory I don't know it.

My personal belief is that if you reduce bank lending then they will discover they can't raise the interest rate enough to make up the losses from people borrowing less money. You might reasonably disagree.

Note that in practical terms the way a bank loan works is that a buyer can elect to jump to the front of the queue of buyers by promising some of their future earnings to the bank. Since all buyers have this option, the equilibrium is likely a bank extracts some portion of the future income from all the buyers without changing the ultimate order of the queue (the buyer with the most money is likely the one who can promise the best return to the bank to stay in front). It doesn't really cost the banks anything to create a loan, they just account the money into existence. That factors in.

Given that frame, it seems likely to me that reduced bank lending activity will be to the net benefit of the buyers at maybe some cost to the sellers. Exactly how it shakes out depends on the details of how lending activity is reduced.

> if you reduce bank lending then they will discover they can't raise the interest rate enough to make up the losses from people borrowing less money. ... it seems likely to me that reduced bank lending activity will be to the net benefit of the buyers

I agree with the first sentence, but not the second. Reducing a bank's ability to lend is similar to creating a price floor. It will certainly drive up interest rates, and this will effect each party differently.

Banks: Even though banks will make more money on each individual loan, banks will make less loans overall and it will be a net negative.

Home Owners: Obviously it will hurt home owners as the value of their home will decrease in proportion to the interest rate.

Home Buyers with Capital: The effect on home buyers is more complex. Some, that already have capital and do not heavily rely on mortgages will do better, as the value of the home decreases. The higher interest rates don't effect them as they don't need to take out loans.

Home Buyers w/o Capital: These folks would do worse. The buyers with capital will blunt the effect of higher interest rates. So even though home values would decrease, the decrease will be slightly less than it would otherwise be because those that don't require loans will be unaffected. Thus the total cost of purchasing a home with a large mortgage would increase.

Conclusion: Slowing lending will hurt home owners, banks, and those without much money. It may help people who are already cash rich. It will likely exacerbate inequality, not help it.

Cheaper debt can be canceled out by higher prices. The fact that home values correlate so strongly with interest rates is very tellling. I think the net effect is simply higher asset prices and a greater portion of society's capital locked up in land. Easy money via debts is making every household more levered and more exposed without fundamentally improving access to housing.

If the population is growing, what’s the alternative?

Currently its price the poor out of participation in the most productive markets like its good for them to have no opportunities to get ahead because whole regions of the country are price gated out of their reach by NIMBYs that want the same skyline SF et al had in 1970.

> If you build more housing and prices don’t go down, that means your satisfying unmet demand.

That's not in dispute.

> And that’s a good thing too

It's a good thing if the tax revenue plus positive externalities created by the additional residents outweighs the public service cost and negative externalities.

It is by no means given that this is the case.

> If you keep building, then at some point the unmet demand will be met

Assuming that the unmet demand doesn't expand faster than you build, sure. And since if you build fast enough you adversely impact living conditions and decrease demand, that's actually quite easy to guarantee. OTOH, no one in the existing population wants that, and no in government wants that on their resume.

Can you realistically meet unmet demand in a small city with high global demand other than by crushing demand by making the city unattractive to live in? It is not obvious that the answer is yes, and it's not really an attractive experiment to run.

It doesn't work that way because of the self-reinforcing network effects of cities. The more people in the city the more people want to move there.

SF doesn't suffer from this problem. Americans move out to cheaper cities. The population is still growing because immigrants are more willing to live with room mates.

Housing demand consists of both demand for residences, and demand for investments (both apreciating, and as stores or transfers of wealth).

That second demand can be huge, favours already hot markets (appreciation, liquidity, long-term durability of value), and can suck up unholy amounts of investment leading to very little actual housing supply created.

Ironically, the best way to promote more housing supply in such markets is likely to reduce prices, Both through increased supply (densification, new construction, relaxed zoning and codes favouring these), and through increased land value tax, which both eats up investment and store-of-wealth value, and encourages development in order to meet increased carrying costs.

Vested interests, from homeowners to real estate brokers to banks, will resist such measures as they directly reduce the value of their asset portfolios.

Having a place to live is not a luxury, it is a basic necessity, so it warrants to take a closer look at the reasoning.

> And that’s a good thing too—you’re increasing the tax base of your city.

To say something is good because it gives more money is the capitalists fallacy. There are many examples where this capitalists fallacy leads to situations that benefit a few and damage the vast majority, and sometimes even preventing technological advancements via political regulation or market domination held in place by self-preserving wealth.

Let me give an example. The national or even supranational electrical grids are essential to industrial economies. It's continued functioning is very important, so it is considered a stable financial investment to buy a share of it. The electrical grid is used to transport electrical energy from the producers to the consumers, which often are very far from each other. Selling and buying electrical energy directly in this market is not possible for households. The energy amounts traded there are vast compared to what houses need. Modern decentralized energy production and storage, like solar panels and batteries in homes can provide storage and production capacities that are relevant to the quantities in the electric grid. However, if houses were allowed to band together and act together as a distributed or federated net of producers and storage units, the long distance transport of electrical energy via the grid would be less important for the economy, and thus its stability is less important, and so it's worth as an investment sinks. Depending on how much value the grid was assigned before, this devaluation might "destroy" a lot of wealth, and therefore be bad according to the capitalists fallacy. Yet, the society gains from this technological advancement. Even more problematic is that wealth is correlated with political power, so those that have invested in the grid can manipulate society to prevent this technological advancement.

I can give more examples, like externalizing costs on environment and society, articifial lock-ins without right to repair, and more.

Capitalism is a tried and true heuristical approach to achieve economic and technological advancements, but directly working with the unquestioned assumption "more money" => "good" is worse than myopic, especially when it comes to basic needs such as food, drinking water, housing, and basic medicine.

The premise of your argument is that the new value here is purely a difference in monetary value without any underlying real value, but that isn't the case. The tax base is larger because the real value in your city has increased. It's not just numbers on some investor's balance sheet, there is physically more housing there being put to productive use and providing real value to real people.

The point that the government then gets their cut of the value created is often specifically noted because it's typically the government officials who you have to convince to enact the policy you support.

My argument was solely that of the capitalists fallacy, i.e. that monetary value and desirability are not always identical. Each case needs its own consideration.

However, there are streets in London of very highly priced completed uninhabited houses, which serve as speculation objects and money parking vehicles. There are many examples in Germany were newly constructed housing lead to a increase in rents of already existing housing. Where is the value for the very real people who must leave the city because they can't afford the rising rents, even though they have their work there and their children go to school there?

Housing is one of the examples where a rise in monetary value for the same product has immediate negative sides, and a house in one place and an otherwise identical house in another place are not the same product. I see a sometimes more or less pronounced conflict between the right of having housing and the right of owning property.

I'm not arguing against building more houses, if that is the doubt. I just don't think that housing should just be unregulated so the market can have its go at it as if that were the god-given solution to every problem.

> However, there are streets in London of very highly priced completed uninhabited houses, which serve as speculation objects and money parking vehicles.

Inhibiting this is another benefit of building even more housing. Speculation only occurs when people expect housing costs to increase or at least stay the same. If you build enough to actually start to lower prices then the speculators will try to get out before they lose their money and thereby put even more housing on the market.

> There are many examples in Germany were newly constructed housing lead to a increase in rents of already existing housing.

This can happen when the shortage is so bad that it's actually harming quality of life in the city, e.g. by making local traffic worse because people who want to be living in the city have to commute in instead.

As you start to relieve the shortage you start to address those problems, which improves quality of life in the city (good), but that makes housing there more valuable and makes people willing to pay more of a premium for it, which increases demand.

That isn't actually a problem -- the demand isn't infinite and improving quality of life is a gain -- it just means you still aren't building enough housing to satisfy the pent up demand.

> Where is the value for the very real people who must leave the city because they can't afford the rising rents, even though they have their work there and their children go to school there?

This is one of the situations where you're almost out of water but the middle ground is a desert. If you don't build more housing, the status quo is untenable. If you only build a little bit it can even get worse. To actually fix it you need to build a lot. Not an infinite amount, not an impossible amount, but quite a large amount. And the status quo if you do nothing is that you die a slow death.

> I just don't think that housing should just be unregulated so the market can have its go at it as if that were the god-given solution to every problem.

Government: <causes problem by imposing unnecessary rules>

Government: We should address this problem by imposing some additional rules.

...

There are things markets are bad at. Matching supply with demand is not one of those things.

> There are things markets are bad at. Matching supply with demand is not one of those things.

The market matches supply with demand by definition, one can say. But at what price?

Of course, some people go the fundamentalist capitalists path, and say 'fuck those that can't afford to live where they are now, they don't deserve to live there and should leave'. I disagree with that radicalism.

Housing is different from other products.

Housing is essential, so everybody has to satisfy their demand. This may justify regulation.

Housing is not arbitrarily replaceable, so people may be forced to compromise important parts of their lifes when moving. This may justify regulation.

These issues are not created by government regulation. They are there. If regulation is used to internalize these aspects into the market, then it would be myopic to view that as the pesky authorities meddling with the market.

It is possible to build more housing under regulation taking into account these aspects and other aspects.

> The market matches supply with demand by definition, one can say. But at what price?

At the market clearing price. That is why rules that constrain supply are so problematic -- they raise that price.

> Of course, some people go the fundamentalist capitalists path, and say 'fuck those that can't afford to live where they are now, they don't deserve to live there and should leave'. I disagree with that radicalism.

If you own property somewhere, the amount it costs you was set in the past. Whether the price goes up or down doesn't matter to you until you do leave.

Price increases can push out renters, but the whole point is to ultimately get costs to go down. That doesn't push out anybody, except maybe speculators.

> Housing is essential, so everybody has to satisfy their demand. This may justify regulation.

The "regulation" that allows more people to satisfy their demand would by definition be regulations that induce more housing to be constructed. So this would be things like not imposing tax on buildings (LVT instead of property tax), tax incentives for new construction etc. But notice how easily this is reframed as really just removing existing legislative disincentives from new construction.

By contrast, the rules we have now do things like expressly prohibit taller buildings or impose minimum parking requirements and other costs that do nothing but make housing more expensive for the people who could otherwise do without those things and would not willingly choose to pay their cost if not doing so was available as an option.

You can't just say "we need rules" without specifying what they are. Bad rules are explicitly worse than no rules -- and bad rules are what we have. So we can start by getting rid of those. Only if the problem then continues to exist do we need to worry about replacing them with something else.

But notice also how hard it is to find and enact good rules. When rents are high you get numerous loud people who don't understand math or economics proposing counterproductive nonsense like rent control and designated affordable housing, and then those get enacted precisely because they don't reduce overall rents, allowing the politicians to lie to the proles about helping them while increasing the rents collected by the landlords.

Doing wrong is worse than doing nothing.

> Every step of that is a win.

Maybe if you focus on the wealthy it is, but it’s more complicated when you consider the less fortunate.

Here’s an analysis of Seattle that concludes "by overbuilding housing for the wealthy, Seattle has achieved some short-term improvement in affordability for the middle class, at the expense of substantial displacement and continued upward pressure on the most vulnerable."[1]

[1] https://knock-la.com/seattle-a-cautionary-tale-for-supply-si...

I read the entire article, and it just drops that conclusion out of nowhere. It offers nothing to support the second part: no data, no arguments, not even a hypothesis.

At best you can say that the reduction in middle-class rents didn't immediately cause a reduction in lower-class rents. Why is that an argument against? Is it inherently bad to improve middle-class living conditions?

I honestly fail to see the left-wing case for taking the side of wealthy, unproductive landlords against middle-class workers engaged in productive occupations.

Huh? Just some of the data it offers: Seattle’s “Central District, which was more than 70% black in 1970, has long since become a majority white neighborhood, with blacks comprising less than 15% of the current population. A long-standing trend of displacement and gentrification continues unabated by redevelopment, with the District coming in second citywide for the most home teardowns for new construction since 2015.”

It clearly describes displacement and gentrification as harmful to what you refer to as “lower-class” people.

Finally you end on an unsupported political talking point that paints a false dichotomy. Progressives are concerned about the most vulnerable people, including “workers engaged in productive occupations” who are displaced by wealthier gentrifiers of working class neighborhoods.

What does a demographic transition that started in the 70s and has "long since" taken hold have to do with recent construction? That's not even an argument, it's pure sleight of hand. It only seems convincing to you because you are already convinced.

Except the place is being filled with rich people. Who drive up the prices for everything else.

Soviet Union had the same problem: in a vast country being 99% shitland, there were very few livable spots where everyone wanted to live. They solved it by basically implementing an internal immigration barrier: only way to live in such a place was either for the Party to send you there, or to get married to a local. In the end it is either that, or simple pricing out of those who can't afford, unless you can make more places in your country livable.

Reminds me of the Swedish system where one must queue for up to 20 years to get a contract for a rent-controlled apartment.[0]

i.e. like you said, if it isn't pricing keeping people out of the most desirable areas, it's some other mechanism, such as queues, migration barriers, etc. And analogously, waiting lists are used for operations in the public health system.

[0] http://www.bbc.com/capital/story/20160517-this-is-one-city-w...

So yeah, it's either just pricing people out, or one of the other form of Communism which as we know, never ends well, because it is a market distortion, which reduces efficiency of everyone.

In a Soviet Union it wasn't even that bad because all of the country was Communist: whole economy being centrally planned, it made quite some sense for the Party to be able to decide who gets to live where, because without right cadres where you need them, how will you execute the Five Year Plan. Would be much worse to do the same in the system which is otherwise market-oriented. An SV startup has money but unable to hire workers locally because there are simply no slots for them to live here, are reserved.

If only we had some example of a city that built as much as the market demands. https://jamesjgleeson.wordpress.com/2018/02/19/how-tokyo-bui...

If only the naysayers of development as a solution bothered to do research on how Asian cities (esp Tokyo) develop to get ideas to apply to cities in the west.

The US has about 10× as many immigrants as a share of population as Japan does, and the Bay Area is significantly higher than the US average share. Globalized demand is not an issue Tokyo (or most Asian cities) face. Globalized demand is what makes it impractical for SF to lower market clearing costs significantly by increasing supply. Also, Japan has a shrinking population, which means that not only isn't globalized demand a thing, the localized potential demand is shrinking, too. So, yeah, boosting supply works well on prices there, for reasons where it wouldn't in SF or the Bay Area more generally.

(And the US shutting down immigration to control the SF housing market, aside from being a radical national solution to an isolated local issue, would also undercut the economic engine driving progress in SF--and lots of other places in the country. While that also would contribute to lower housing prices, we've done "tank the economy to drop housing prices" back around 2008, and I don't think it was all that popular; the cure is worse than the disease.)

I wish the people pointing to Asian cities as a role model for SF bothered to do research on the differences between the situation facing SF and those facing the Asian cities at issue.

Tokyo is a weird case, since apparently people don't like living in used homes.

If only a single self fulfilling data point of the largest city of an insular society (requiring citizenship to buy) with falling population near the edge of recession for 30 years was representative of the world's real estate market.

Also, I'd recommend talking to people in Tokyo about the cost of living/working there (you'll find most people commute in over an hour by train) and about rising homelessness. This is with a population growth rate over the last 30 years of less than 0.5% and is EXPECTED TO RELENTLESSLY DECLINE AFTER 2020 to 2100 by 6million people.

http://worldpopulationreview.com/world-cities/tokyo-populati...

If you want some other data points on massive building increases, I offer you Beijing, Shanghai, and Shenzhen, where prices have doubled many times while the available housing has also more than doubled over less than 30 years at a more than 2.5% population growth rate.

The data you linked is for the entire Tokyo metropolitan area. The trend is that people are moving out of rural areas and into the urban core. It would be more appropriate to look at the central part of Tokyo, the 23 wards (former city of Tokyo): http://www.newgeography.com/content/002923-the-evolving-urba...

From 1990 to 2010 (latest year in data), the population grew 9.6%.

In the same time period, SF's population grew 11.3%: http://worldpopulationreview.com/us-counties/ca/san-francisc...

Not a big difference if you ask me. Yet SF prices have skyrocketed.

Tokyo may require citizenship to buy, but that doesn't mean foreigners can't rent. Rent prices in central Tokyo often start at around $1500/month, which is a lot less than that of SF bay area suburbs.

It is possible to buy housing in Tokyo without citizenship. You don’t even need permanent residency.

Source: I am a homeowner in Tokyo.

That’s a bad example.

I live in a median market, where the price per square foot is about $150 for a detached house in an urban area with tight supply.

The difference why places like California and NYC are so out of control has less to do with supply than demand. As fiscal policy and philosophy demand consolidation and concentration, more and more people in the same circumstances go to the same place.

Since the mid 70s, smart jobs go to the top 10 cities, dumb jobs go the the South or offshore, and everything else is mined for value.

It doesn’t have to be that way. When IBM was at its prime, their big engineering centers were in places like Upstate NY, Minneapolis, Tampa, RTP, Toronto, etc. GE did similar things.

Modern tech companies would rather pay 3-7x more for folks in the Bay Area or NYC. That’s all about control and where the money is.

The pressing question is: where are the companies that pay 1/7 if the salaries elsewhere and use the low prices to drive their SV competitors out of the market?

I imagine the answer runs around government intervention and wealth concentration.

Many of the most popular products made in SV are free so there’s not much room to compete on price.

Perhaps because the value of being in the valley, near customers, know-how, and investment, is worth the multiple (though I'd put the salary difference closer to 2.5x than 7x).

Because SV has more financial capital and can pay 7 times higher salaries or even afford to make losses.

It doesn’t matter because most of the players are losing money — the social connections allows you to burn billions and make no money at all.

The consolidation / concentration issue applies more to normal businesses. Regional banking, for example is dead, and that has all sorts of negative impacts on places that aren’t the biggest cities. Not only are the workers gone, but there’s no commercial banking available anymore.

Gwern referred to this as "yeah the failure case is you unlock a billion dollars of economic output"

> What you actually have to do is line up every potential purchase of a home (which may be more than one per buyer) in the city by any person in the world in that order.

This is an excellent point. People who point to “basic supply and demand economics” often leave out the concept of price elasticity, also a basic economics 101 concept. It can mean that under extreme demand, building supply won’t actually move the price much.

Unlike the first dotcom boom which was spread all down the peninsula, this one is highly centered on SF in terms of where talent wants to live. It’s the heart of an industry that is creating some of the most valuable companies in the world.

Lots of people making six figures who would move to SF if only it was more affordable for them. So many companies that would open SF campus if only if was affordable, for them. That’s a ton of demand, regionally, nationally, worldwide. All that needs to be satiated before prices come down to what working class folks can afford — if developers decide to keep building, that is.

The alternative to building housing is not building housing, which is not a solution to the housing problem either.

Yes, wealth inequality needs to be solved, and its implications harm society through myriad aspects of it.

That doesn't change the fact that building, especially for density, is a good thing. No, don't build 50 story apartment blocks adjacent 2 lane country roads with no transit, of course, duh? Modernizing American cities, all of them, will take trillions of capital to fix the collapsing infrastructure and dramatically increase the density, but doing so would confer force multipliers to productivity that are stymied by participatory isolation over distance. People could be much more successful in life if they had access to opportunities they cannot reach so long as the closest they can get to an urban business district is several hours away by bus.

False dichotomy. There is a substantial debate about how to build housing. In SF we sometimes call it the YIMBY vs PHIMBY debate.[1]

[1] https://www.citylab.com/equity/2018/04/nimbys-yimbys-and-phi...

> by any person in the world

I think you've identified a big part of the problem (and for which the solution is obvious).

This has an assumption that the people are a fixed group - that if you add more housing, that will mean better housing for the people at the end of your 'line'.

This doesn't take into account something mentioned in the article - that increased housing supply is going to attract MORE of the highly skilled workers that were driving up costs, and those people are going to be the ones filling up the houses, not poorer people.

This is a form of induced demand.

https://en.wikipedia.org/wiki/Induced_demand

And the highly skilled workers were where before this? Oakland suffers because SF doesn't build.

They live in the surrounding areas or other parts of the country. They will move closer to the cities, with shorter commutes, as housing prices move down.

Sounds like a win all around.

There are low income requirements in many cities though.

For every X number of expensive apartments, builders must sell Y% low income housing.

Even if you only care about the low income stuff, upzoning still helps, and gets you what you want.

Induced demand is nonsense. It really means there is unmet demand at the price point. Once everyone who wants a house at a price point gets one. Same applies to roads: if you build them big enough eventually there are enough lanes.

What really you are saying is we don't want to build enough for all the unmet demand at the current price point. This is a perfectly fine thing. Roads are expensive, if we can get people to not drive someplace because the current roads are too crowded that might be a worthwhile thing. Unlimited road expansion quickly requires expensive bridges.

Building more houses actually starts to fix the road problem because dense enough houses makes public transportation practical.

Yes rich folks will move into San Francisco at first. However their old house isn't in middle of nowhere, it is a longer commute away from San Francisco, and that house is available.

> Once everyone who wants a house at a price point gets one. Same applies to roads: if you build them big enough eventually there are enough lanes.

Here is a report from UC Davis that shows otherwise: http://www.dot.ca.gov/research/researchreports/reports/2015/...

Yes, other factors can change to compensate. In that case, people drove more miles with bigger roads, meaning congestion doesn't decrease very much.

But big picture: more people got more of what they wanted, which to drive farther (without more congestion).

I think the parent comment was pretty clear in their argument - you have to build enough roads to get ahead of constrained consumption.

If they built an extra lane on every road between me and the pizza shop, I'd go the pizza shop more. I dont' go to the pizza shop as often as I'd like because I hate traffic, if there were less traffic, I'd be better off. But I won't drive any more than I'd like to, I think we could build more roads and build that capaity for more people.

A tangent: Or we could invest more in public mass transit, which is proven to get people around dense cities more efficiently — without all of the negative externalities wider roads bring (sprawl, mainly, which even an all electric-fleet won’t stop; and, as has actually been seen again again, congestion: in many cases a proper multi-modal street grid is actually more efficient and faster for everyone, including drivers, than a single-purpose channel accessible to only cars).

There’s certainly a place for cars in city planning (lower density areas), but there’s also a point where planning focuses too much on cars to the detriment of everyone else.

> which is proven to get people around dense cities more efficiently

Only for specific definitions of "efficient". You get higher throughput, and with that higher latency.

Not everyone needs a whole car, though. Motorcycles, for example, would be a more efficient use of roads, increasing throughput without sacrificing latency, and also decreasing the parking footprint necessary per capita (these are, in fact, the two primary reasons why I'm strongly considering getting an M-class endorsement and buying a motorcycle, or at the very least getting a motorized scooter that doesn't require said M-class endorsement; the tertiary reason of "motorcycles are fucking badass" certainly doesn't hurt the former option, either). Should be no surprise that in most dense cities you see outside the US, motorcycles and scooters compose a significant portion of road traffic.

Mass transit is only a feasible option when the city has been designed around it or has evolved around it for a long time. Specifically, you need both high density commercial and residential spaces where you can place transit hubs, and those spaces need to be laid out so that routes between them are fairly direct. You also need transit vehicles to come at very regular intervals (no more than ~5 minutes, and preferably ~2 minutes). Ideally, you would also have a lot of low cost rental vehicles such as bikeshares or micro-cabs that could be used for the last mile to a destination commercial space.

If you have to drive a car to a transit hub, wait 10-15 minutes for a vehicle, transfer multiple times (with wait times for each), then walk more than ~5 blocks to your final destination it becomes a shitshow. Los Angeles is a perfect example of this.

I actually live in LA, without a car. It’s perfectly feasible, and actually pretty convenient (and a lot of the times, yes, even faster than dealing with car traffic!), if you live in an area walking distance to a frequent transit stop (admittedly not everywhere, but definitely okay coverage, and it’s only expanding).

LA being antithetical to transit is... really a stereotype. The entire city (and even much of the county) is built along the old streetcar lines and the red car network (the largest streetcar system in the world back in the 30s!), which existed until the 60s. It’s a city built for transit and a city where transit is being heavily invested in again — because only relying upon cars turned out to be a failed experiment.

As a fun tidbit of things to come:

By the 2028 Olympics, LA is hoping to have completed a metro line connecting the Valley to the Westside via the Sepulveda Pass within 12 minutes — a journey which takes the average driver during rush-hour 55-65 minutes to complete on an ever-expanding Highway. Once it’s finished, it’s projected to be the busiest single rail line in the US, surpassing any in New York City even.

I also lived in LA for quite a while about 10 years ago, and for certain routes (like venice/sm -> downtown) it wasn't that bad. Unfortunately if I wanted to get anywhere outside the major hotspots, that involved the aforementioned walk half mile to bus stop/10-15 minute wait/take bus in traffic/get off and walk several blocks to next stop/wait 10-15 minutes/take bus in traffic/walk to destination loop. I highly suggest getting a motorcycle - I was able to cut some trips that took almost 2 hours down to about 30 minutes and parking was always easy because you can park end in between cars.

more roads != less traffic.

right, but it means the existing traffic can potentially spread out more so you don't see each other.

You will see the new traffic that previously would not have been on the road, b/c there wasn’t enough road for them to consider driving at that moment.

Well, let's look at it from the other side of the equation. It seems like a lot of companies are creating a second office location in Austin, Salt Lake, etc. at the series C stage. From my conversations with these founders, the required salary/costs in SF just make it unfeasible for both the company and employee at some point. If more housing just induces demand, it still means the required salaries are still too high for the company versus say Salt Lake. At some point, this matters. If the average SF vs. SL engineer isn't 10x, but 1.2x, a Salt Lake company will beat its SF competitor if the SF company has to pay 2x for 1.2x talent. The job side of the equation has to be there to induce demand, even if the cost of living falls.

> Yes rich folks will move into San Francisco at first. However their old house isn't in middle of nowhere, it is a longer commute away from San Francisco

It's potentially anywhere on Earth—people moving into San Francisco are not limited to people currently within commuting distance of San Francisco.

> and that house is available.

No, rich people can and do own multiple homes without renting any of them out, and are known to just buy another one if one meeting their interest becomes available. There is no fixed limit on the number of homes a person can retain exclusive use of.

SF vacancy rate is extremely low: https://sf.curbed.com/2019/3/21/18276227/vacancy-rate-san-jo...

Insofar as vacancy rate is germane to this subthread, it would be vacancy rates of non-SF homes owned by people who own SF homes, not SF vacancy rate.

>No, rich people can and do own multiple homes without renting any of them out, and are known to just buy another one if one meeting their interest becomes available.

How big of a problem is that really? Is there that many people owning an absurd amount of homes everywhere?

It's a big problem in London. https://www.bbc.co.uk/news/magazine-34930602

Roads aren't a great comparison because there is legitimate induced demand for roads - if you build more roads, and the roads are not at capacity, those around the roads will trend towards more car ownership, more frequent usage of the roads, the range of commute using said roads will grow larger and larger, and people will immigrate and build up sprawl to fill those roads.

This keeps happening for any practical width of road, because in practice you can't really have a 30 lane wide highway. Automotive travel is inefficient enough that even at suburban density you can always congest any road network you build around it.

This does also apply to housing - even at the highest densities you can get, rivaling Hong Kong, there are too many people in the world for anyone city to ever build enough housing to legitimately run out - density itself creates economic multipliers that attract business, and if you were to have some of the highest density in America (which is largely the claim of NY) you would have effectively unlimited attractants for capital to fund immigrants to move into said city and populate it. In the scenario where you "overbuild" high density housing to the point where the next poorest local cannot afford it at its upkeep costs you would attract foreign immigration for the cheap housing with ample employment opportunity.

Note that that last scenario assumes all other variables are held constant - desirability, transit supply per-person, availability of public services like fire and police, etc. Missing other variables can make high density areas undesirable for capital and thus prevent the chain reaction.

Most people have ideal commute distances of about 30 minutes: Note clearly that my distance unit is time. Anything within 30 minutes, regardless of transport modes, is close, anything more is far. Eventually the time to get to the inner lanes is longer than 30 minutes and you cannot go wider. Of course this is reduction to absurd.

Roads can go up (or down) quite a bit though. It is expensive (much more expensive than adding more lanes) which is why we rarely do it. Even when/where we have, we would have to go more than we have to get ahead.

My point is you can get ahead of induced demand. I know a farmer who planted right across a public road - technically illegal, but the neighbors didn't use that road anyway. When you get in a city is is harder - by enough that it isn't worth it - but you can. (Cities should of course have more public transit which gets ahead much quicker).

You are correct that cities building - at affordable rates - do attract people. However if the city allows building over the long term we know from existing examples it gets out of it. Chicago and Huston don't have housing price problems because you can build there.

Now we do need to be clear: it costs money to build. New houses are always higher end. How high depends, if only a few houses can be built, they will be mansions. Once demand for mansions is filled builders move down market to lower profit houses until it is no longer feasible to build anything (humans don't fit in a doll house).

The paper is no only slightly better supported by data than my arguments above and really isn't useful.

On the other hand, if you don’t build, rich workers will win and force folks out anyway. At least with more supply folks are forced out more slowly, if at all.

Induced demand applies to roads because people have a choice whether to drive or not. But they don't have a choice of whether they need a house or not. For housing it's not induced demand--it's just demand.

Some people choose not to live in the Bay Area (or SF specifically) because prices are too high. Or they choose to live with more people per unit of housing because of pricing.

This is definitely a good point. Let’s think of two scenarios.

1. Stick a lot of affordable housing in building, but math works since the developer can make money selling the high priced units.

2. Increase total housing supply through less restrictive zoning, meaning more developers are building units they plan to sell at list price.

Scenario one is only possible if some people are paying too much for housing, and the people that are squeezed the most are the middle class. Scenario two probably means that the poorest group is displaced.

New York has been attempting scenario one. I’m not sure if SF has tried to accomplish either route, leading to the worst case scenario.

#1 can be tricky in SF. If you mix affordable and market rate housing in the same development, there are still "luxury" amenities in the building. The HOA fees are not capped by law and with special assessment fees could possibly exceed a BMR mortgage payment. I'm not familiar with the configuration of all-BMR developments, but I assume there are HOA fees for those as well. This situation can make affordable housing unaffordable.

In SF there's no reasonable way to stabilize (let alone bring down) home prices without less restrictive zoning.

I remember in my control engineering classes, my professor would say that the worst buildings to construct in a high earthquake risk area are midrises (~18 stories). I'm not an expert on this matter, but if this is correct, San Francisco has a natural challenge to housing that NYC doesn't have. Building tall is expensive, and building low doesn't create optimal density.

That's a pretty simple regulatory change to cap HOA fees as a percentage of rent for affordable units though.

Obviously the developers will fight this, and the rich tenants will never exercise or swim near poor people, but conceptually it's easy enough to solve.

Nothing regulation related in SF is "simple". They've known about this issue for years. There are stories every year in the papers about low income individuals and families being squeezed by HOA fees in their "affordable" dwelling. It hasn't been changed. Remember - this is a city where a majority of the population voted to tax business hundreds of millions of dollars to combat homelessness while in the nearly the same breath has protested against building a temporary homeless shelter.

I just hope that in 5 years Captain Sisko is able to time travel back to SF ensure the Bell Riots take place. That's the only way homelessness will end in the Bay Area.

It works fine in economic simulations. It works out terribly on human timescales. I could post a couple thousand words describing the negative feedback loop this can create but you're not even thinking about transaction costs.

Agreed.

What does high end even mean? A modern high rise with high end amenities like a roof top swimming pool and nice interior appliances and craftsmanship?

I visited a friend in Atlanta who lived in such a high rise at a fraction of the rent of what a similar unit would cost in SF. A vast majority of the price of housing is from the supply-demand of that particular piece of land. Sticking a pool and some quartz countertops in there doesn't suddently make it ONLY viable as a rich-man's home, incapable of satisfying any of the middle-class demand that is overflowing in the area.

> Supply shorter causes those further up the scale of "willing to spend on a home" to have only modest homes as options

In some built out places, perfectly good homes are torn down just to make way for a replacement only the wealthy can afford. Depreciation doesn't level the playing field if the field keeps getting replaced.

> Line up every person in the city in order of how much they're willing to spend on a home. Do the same with the homes available. Face the two lines across from each other. Everyone will buy a home nearby to what is across from them right now. Building a whole bunch more houses on the top end of the house scale doesn't leave those mansions empty, it just drives the mid-range homes further down the scale.

What if people buy multiple homes? Doesn't that mean people down the line get none? And then the people who buy multiple can rent seek or leave them empty. They just get more money to buy more houses. Doesn't always push the price of the mid range houses down.

If the multi-home buyer "rent-seeks" more homes than they otherwise would, tenants will be less desperate for housing and rent will fall. If the multi-home buyer buys the same number of houses as before, some of them will be the newly built houses... and prices will fall. The only way you could lose is if you built new houses that nobody would buy.

Despite rent-seeking being undesirable for purposes of equality, more people rent-seeking over more houses does mean more competition in the rental market, and you'd expect rental prices to go down as a result. If you want to eliminate rent-seeking and have low housing costs, the only solution is an appropriate land value tax plus sufficient construction. You can't have affordability with insufficient construction, supply is a prerequisite.

If an investor is planning to buy $1 million worth of housing, it is strictly better that he spends it on 2 small units in the midst of a luxury high-rise than spending it by snapping up 2 large traditional family homes. High density central housing reduces prices for the suburbs. That's why Tokyo housing is so cheap.

So you just ignore the study and make pronouncements that fit your pre-existing assumptions. It's almost like a religion with econ 101 types.

And what if the rich people are so much richer than the poor(er) people they just buy multiple houses until they own them all?

More houses doesn't fix that problem.

Well considering that’s never happened in history (“buy multiple houses until they own them all”), I’m not too worried about that.

Hasn't that happened many times in history? The landed gentry owning land, everyone else "renting".

In many countries today, home ownership is pretty rare, and the majority of people rent.

Airbnb is making this a distinct possibility. I regularly run into people in my small, tourism based town who own 2 or more properties they sit on and rent through airbnb. The most frustrating was a guy who after receiving inheritance is doing exclusively this. Meanwhile the city is spending money buying run down apartments above market rate, competing with these investors who bring little value, to meet the demands of the community to protect the tenants from being forced out.

It is wildly inefficient and would not exist if airbnb followed local laws. If this is allowed to continue, I could easily see airbnb units exceeding the number of hotel units we have in town, where the total number of rooms is nearing 10% of the towns population.

And here's the problem - "investment". Residential property should never be an investment,it should only be a place one calls home.

So if someone wants to rent a house (for whatever valid reasons), we prevent that somehow?

Sorry, want to live here? You have to buy; we don’t allow residential investing here.

Surely there are a lot of ways it could be discouraged that would fall short of a complete ban?

Whatever extent it's discouraged would seem to reduce the supply of rentable residences, which is a negative for renters.

Renting a house isn't usually a problem, however there should be some safeguards in place,i.e. taxes that discourage excessive profiteering,etc. I remember working on this development( hundreds of flats)in London,where some Asian man walked passed, saw the building, went to the site office and said: I want to buy this block( at least 40 flats),I'll send the lawyers to sign the papers.The guy didn't even look inside. So he'd most likely end up renting the entire block.

> ATTOM Data Solutions, curator of the nation’s premier property database, today released its 2018 Vacant Property and Zombie Foreclosure Report, which shows that nearly 1.5 million (1,447,906) U.S. single family homes and condos were vacant at the end of Q3 2018, representing 1.52 percent of all homes nationwide — down from 1.58 percent in 2017. [0]

> A report from the Department of Housing and Urban Development has found that just under 553,000 people are homeless, with approximately 65% staying in sheltered accommodation. Out of every 10,000 people in the United States, 17 experienced homelessness on a single night in 2018. [1]

It looks like this already happened.

[0]: https://www.attomdata.com/news/market-trends/single-family-r...

[1]: https://www.forbes.com/sites/niallmccarthy/2018/12/20/the-u-...

You ATTOM link doesn't specify if these are actually 2nd/3rd/etc homes. Some of them are mentioned in the article as foreclosures. A good number could be houses for sale or newly built apartments or abandoned houses in bad areas. The article mentions that Baltimore has the highest rate - a city with a very high crime rate. The next two are Flint and St. Louis.

Why does it matter if the homes in the report are owned by wealthy individuals, wealthy banks, or wealthy developers? They are clearly not owned by the "poor(er)" people!

Did you forget about abandoned houses in the worst areas in making your list? And it matters because what are you going do? Don't allow apartment owners to wait for new tenants? Don't allow people to have houses for sale? Don't allow foreclosures? Force people to live in unlivable conditions in areas with a huge crime rate? Etc. None of this is even remotely realistic.

If I had all the answers I'd be desperately trying to get them implemented.

I hear some places levy an extra tax on empty residences. This is a pretty good conservative approach that puts downward pressure on rents and provides some revenue that can be used to explore other solutions to these problems.

A more extreme approach would be to seize all the abandoned housing in a "bad" area and invest heavily on improving it and the area. Fix broken infrastructure and fund emergency services. Offer the housing for free, or low cost with favorable loans. Use tax incentives to entice businesses to move in so the residents have places to work and buy things. Etc...

Is any of this remotely realistic? Perhaps not, but it can't hurt to think about it.

I mentioned the tax proposal elsewhere in this thread and it seems to be the most workable solution.

Why would they do that?

So they can rent them out and profit.

You can have an extra city tax in this case. It would mean that the city gets even more "free" money without having to provide services to that person when their house is vacant. This was seriously discussed in NYC - see pied-à-terre tax.

The more houses you build, the more it costs to own them all. Eventually the housebuilding itself will transfer wealth from rich people to builders.

A couple problems:

> houses do not have intrinsic price tags

New housing does, or at least it has a minimum price tag. A builder selling housing for less than it cost them to build will not be building much housing!

> Line up every person in the city in order of how much they're willing to spend on a home.

People can freely move downmarket, but can't freely move upmarket, so the demand is moving opposite the supply.

Houses are fairly cheap. It's land that's expensive. So the only thing the developer needs to do, is accurately predict sales price in order to not overpay for the land.

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