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Comment by im_down_w_otp | Hacker News Reader

It's worth noting that most housing developers need to be prompted and incentivized pretty aggressively to build affordable housing in high-value areas even when they're allowed by law to do so.

Usually what happens is they raise or borrow a bunch of money to build much higher margin housing (e.g. hip condos instead of affordable apartments) until the market is saturated with still more unaffordable housing.

Without explicit incentive structures or requirements like, "You must build X number of affordable units for every Y number of luxury units." things tend to stay pretty broken.

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What do you think would happen to all that “luxury housing” if there wasn’t all the red tape and we allowed as much as the market could bear?

In earlier eras the answer was it didn’t stay luxury housing, but moved down market as shinier and newer buildings kept coming online, and as overeager developers built more fancy housing than there turned out to be a market for.

Then when you have all those landlords and more housing units than are needed, there’s price pressure all the way down, and a lot of upward mobility as people slide up into slightly nicer homes, leaving a bunch of reasonable quality homes open all the way to the bottom of the market.

We haven’t had anything like free market supply of housing since the FDR era, so this example is so far removed from living memory that most people can’t even imagine it.

That has not been my observation from my environment or from the data over the last couple decades.

Usually what happens, is in order to keep the asset value high they'll sit on vacancies for as long as they possibly can to avoid having to recognize a lower value on the property, until it becomes advantageous to do so as a write down after they're done leveraging themselves based on the inflated asset price.

The person you're replying to said that it hasn't been operating well since FDR, so they agree with you that.

It sounds like something is wrong with lending if someone is willing to lend to them based on inflated asset prices!

What you’re advocating for is exactly the status quo that got SF into this mess. “Build X affordable units per Y luxury units” has been the go to line for every shitty NIMBY supervisor for the past 10+ years and we’ve clearly seen all it does is result in a lot less of both.

We need housing in absolute numbers, real units to fill the very real jobs to housing imbalance of 150,000 more jobs than housing units that were added to the city over the past decade. And we need real units of subsidized housing as well for those at the very bottom of the economy. What we don’t need is feel-good percentage requirements where the denominator just ends up being close to 0.

Also, so-called luxury housing is often like ~15% more expensive than the median housing price in many areas. It’s a name that makes it easy to hate on, but like it or not it is housing for real middle and upper middle class people. The amount of hate it gets, you would think we’re talking about housing for billionaires or something.

I'm not advocating for anything. I don't have a horse in this race.

I'm just pointing out that changes in zoning alone don't tend to work to increase affordable housing supply for already high-value, desirable areas due to the inherent market incentive for a real estate developer to try to make more money by making more expensive housing units.

Part of this is due to building codes. For example, in California, solar photovoltaic is now required on new buildings.

> It's worth noting that most housing developers need to be prompted and incentivized pretty aggressively to build affordable housing in high-value areas even when they're allowed by law to do so.

No car company produces cars for people living on the minimum wage and yet a great many people living on the minimum wage can and do afford cars. Building new housing reduces the value of existing housing.

cars have much shorter lifecycle than housing, are mobile, much smaller, and get replaced far more often than housing.

Cars also depreciate and aren't seen as an investment.

Indeed. This gets at the root of the problem. Housing can't be both affordable and a great investment at the same time. The latter requires high (and increasing) asset value which eventually precludes the former being increasingly affordable.

The problem with housing is a lot deeper rooted than basic Econ 101 supply & demand models can address.

Cars ARE housing, hence the urgency to have them. When everything else falls through, you live out of your car, and move it on when the police bang on the window.

Tata Motors

I will grant you that it may take subsidies and artificially low loans to incentivize developers to build low-income housing. But in many places that already exists. The real issue is there is no land to build, and the permitting process takes forever and ultimately results in a negative outcome more often than not.

Here is an article about a developer who tried to build a low income apartment building in SF, and the absolutely insane roadblocks the city put in his way https://reason.com/video/san-francisco-mission-housing-crisi...

It's not surprising that they prioritize higher margin housing, since 'luxury' apartments are barely any different than affordable housing units. It doesn't cost a developer that much extra for them to dress up a basic apartment as luxury with a stainless steel fridge and granite counter top when they're doing it in bulk.

The California Assembly recently passed AB-1482 which will lead to statewide rent control if signed by the governor. I personally believe more in increasing the supply than attempting to control the existing supply, but no matter what, signing this without demanding SB-50-like concessions to make it easier to increase supply near transit was a real miss IMO. SB-50 got pushed into 2020.

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtm...

https://sf.curbed.com/2019/5/16/18617019/transit-housing-bil...

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