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Comment by neurocline | Hacker News Reader

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.

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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.)

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.

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.

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