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Comment by snarf21 | Hacker News Reader

I'm not saying building isn't the problem but how do you solve for someone who is in a loan at $1.2M and in one year it is worth $500K on the open market due to all the building. This is something that has to happen incrementally and why people dig in so hard. That property is the main store of wealth for a lot of people. The wrong scheme could bankrupt them and destroy their retirement. Additionally, super dense housing will need major updates to public infrastructure to support these new numbers; from roads to trains to schools to hospitals and more. There is a reason that no one has the political will to do such a thing.

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I own a house in 940xx and am all for more building.

It won't bankrupt anyone. If you bought a house you could afford for "x", and you budgeted as if it cost "x", you still have a place to live if you keep paying the mortgage. All your plans remain exactly the same. If the "value" of the house goes down, you'll save on property taxes.

If you scrimped and saved to pull together a 5% down-payment on a "starter house" and new construction nearby takes your home value own by 20%, you're going to be stuck in that starter home for a very, very long time.

Can you really even get a house here on 5% down? I presumed anything over $750k would require 20% down immediately (and there's basically nothing that you'd want to own under $1m here). At least - that's what I got told when I talked to a guy at a bank about it.

Show me where any house would be worth 40% of its current nominal value because of nearby building. That's completely unrealistic conjecture.

My current house is apparently worth $2 million. Even with California construction costs, replacing it with a new house would cost less than $350,000. If someone could build a lot of houses nearby, it would drive the price of my house down to something realistic.

I’m in favor of lots of construction, because it’s the right thing overall. But it would hit me hard. I’m willing to accept that, so I lobby for new construction when I can. I’m just realistic about the outcome.

I doubt your place will drop even 20% even if construction goes up drastically. Until it happens - you can't really say your home price would drop drastically.

Realistically, it won't. The new supply will be apartments - not single family homes. It's not like people will all want to sell and move into apartments or that the desire for homes will go down. It just means competition for apartments will improve.

Sure it will. Housing is about compromises. If you can rent a 3 bedroom apartment for $900/month would you pay $9000/month (plus taxes and insurance) to buy a house?

The above numbers are realistic. You have a choice to nice 3 bedroom apartments for $900/month in the Des Moines Iowa area. The payments on a 30 year loan for a 2 million dollar house are a bit over 9000/month.

Your comparison doesn't make sense. You're conflating multiple variables.

I'm conflating multiple variables, but the whole is reasonable. If SF would build enough apartments (starting 20 years ago!) it is reasonable to expect that you could rent there for not much more than Des Moines. Given that lack of space in SF - they are not making more land - owning a place will always be more expensive than renting, but high rise apartments amortize the land costs over a lot of people and so it need not be that much per person. Neighborhood is important too: if you are right next to the big jobs centers you should expect to pay more (in Des Moines downtown apartments run $2000 for a 2 bed room - they have just started building them though so I expect that price to come down in 10 years.)

Much of your value is in the underlying cost of land. More permissive development rules would increase the value of your land, because it would be possible for a developer to buy it and build more units of housing on it.

If it makes you feel any better, I live in an area that was built with a mix of SFHs and low rise apartment/condo buildings. The SFH are all $1m+ while condo prices range from $160k for a studio to $500k+ for a new 3-4 bedroom. If you figure that to build a new house they have to tear down an existing house, the minimum price for a new construction SFH or multi-unit is greatly increased.

I bet your hypothetical developer would price the new houses at $1.9 million (or maybe $2.1 million, because where else are you going to buy a new house?), and they'd sell out as fast as they could build them, netting them a huge profit and hardly affecting your property values. Now if they could build 10,000 houses nearby it might have more of an effect.

Those numbers seem very unlikely. Ignoring that California is a nonrecourse state. If someone ended up owing 1.2 mil on a 500k house, they could walk away and only be out the house and whatever payments they had already made on the loan. The risk of massive correction simply isn't borne by the individual (especially if they've bought the property in the past 5-10 years).

“Only be out the house and whatever payments” isn’t negligible in most cases, why are you hand-waving that away?

Because if you can walk away from a $9000/month payment into a $900/month rent, investing the difference will make you better off in the long run.

I can see why someone might not want to loose their 40% appreciation of their real estate property but that doesn't make them right.

That is, of course if you change a policy that was primarily designed to inflate housing prices to the stratosphere then it might negatively impact that, but maybe you were wrong to do that to begin with.

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