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Comment by dcolkitt | Hacker News Reader

> one big way to prevent this downward trend in quality of life is to build more cheap housing

One pedantic quibble. It's not necessary to build cheap housing specifically. It's perfectly fine simply to build more housing of any type. Today's new expensive housing will indirectly create more cheap housing in the pre-existing housing stock, by pulling demand out of the market.

Throughout all of American history, new housing has almost exclusively been relatively expensive housing. The rich prefer to live in new housing stock, and the poor prefer to get discounts on old housing stock. The same way that a robust new car market creates a secondary market for cheap used cars.

A lot of people with good intentions will try to block any type of development that doesn't specifically include affordable housing. But this is the exact opposite of what's needed. The best way to lower the cost of housing is to increase the supply of housing. And the best way to do that is to unleash developers whatever is most profitable whenever and whoever they want without government regulation and NIMBY activists getting in their way.

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This generally doesn't happen for two primary reasons.

First cities are not closed systems. Places like LA and the Bay Area have a built up demand that exceeds housing. The new housing would have to be added at an extremely high right to keep up with that demand otherwise the city just grows rather than becomes cheaper. When a city simply grows, the cheaper units never flow down to the bottom of the market as someone else will move in who lives outside the city and was previously priced out of the mid-tier housing. We see the same type of thing when designing transportation systems in a city. Adding in a new road can actually increase traffic as it ends up encouraging more people to drive who otherwise wouldn't have.

Also the housing market is not a singular market. The type of person who would live in a 3 bedroom luxury condo is not the same type of person who would live in an SRO hotel that shares a bathroom. Most people have a small window of what housing they consider acceptable and what budget they can afford. When a city gentrifies and knocks down SRO housing and replaces it with luxury condos (something that has happened a lot in both LA and the Bay Area over the last couple decades), the available units at the bottom of the market decreases in favor of the top of the market. That doesn't result in everyone in the city just moving up one rung on the housing ladder. Competition for the affordable units is now even higher because there are less of them available.

> cheaper units never flow down to the bottom of the market

“Never” is too strong.

It happened to me in New York. I negotiated down my rent on account of nearby buildings with better amenities opening at slightly higher but similar enough pricing, net effective.

Meanwhile, Brooklyn and San Francisco were busy blocking all new construction, thereby forcing their restaurant workers to compete with millionaires.

You are disputing a point I never made. I didn't say "no units ever get cheaper". I said when growth outpaces new housing "cheaper units never flow down to the bottom of the market".

You said yourself that the new construction had slightly higher pricing meaning your unit was in the same basic market as the new construction and also implies you likely were not shopping at "the bottom of the market". Do you think you would have been able to negotiate your rent down if the new building was in an entirely different class and was charging 2x or 3x your rent?

> Do you think you would have been able to negotiate your rent down if the new building was in an entirely different class and was charging 2x or 3x your rent?

Yes. What do you think people bidding for ultra-lux housing do if they don’t have supply?

In New York, the ultra-wealthy have penthouses. In San Francisco, they have rows of townhouses. Which one do you think displaces more affordable housing?

I think you are saying San Francisco should embrace greater density in order to solve its problem. That's pretty short-term thinking.

Start here: San Francisco, for very specific geographic and regional reasons, will not have sufficient housing in the next century, and it will continue to have growing homeless populations. Solve for a 50-year horizon.

> San Francisco, for very specific geographic and regional reasons, will not have sufficient housing in the next century

Some of the densest cities on the planet are on islands. San Francisco is on a peninsula. It is a low density city with tons of infill potential. That densification potential, together with slow population growth in the developed world, makes the problem perfectly tenable. (That said, homeowners would lose money. So not holding my breath.)

No way would homeowners lose money long term if San Francisco turns into Hong Kong. They are land owners first and foremost

> No way would homeowners lose money long term if San Francisco turns into Hong Kong

In the short term they would. And in the long term, they would gain wealth but lose their iron grip on the city. Never underestimate the seductiveness of power. As long as San Francisco’s renters believe density is impossible or will price them out, homeowners (specifically, about half a dozen families) will retain their lock on the city.

Which half a dozen or so families are you referring to here?

> San Francisco, for very specific geographic and regional reasons, will not have sufficient housing in the next century

You mean, "for very specific political and cultural reasons". There's nothing in San Francisco's geography that most world cities haven't solved.

> someone else will move in who lives outside the city

I don't really see this as a gotcha. Those would-be new arrivals to the city don't materialize out of thin air. Presumably they left some other place behind, and their migration is freeing up housing stock wherever they leave behind. The underlying dynamic is still the same. New housing increases low-end affordability by soaking up mid-end demand for old housing stock.

Maybe you build housing in the Bay Area, and all it does is bring in new people who pay the same market rate. But that migration will free up housing stock in Ohio. The only difference is that instead of helping the house poor in your local area the policy helps the house poor in flyover country. Unless you place a lot more moral weight on helping Californians than Midwesterners, what's the difference?

>Unless you place a lot more moral weight on helping Californians than Midwesterners, what's the difference?

The difference is that housing costs take up a much higher percentage of wages in California than Ohio and as a result there are many many more homeless people in California than Ohio.

Sure, if you want to take a holistic view of the entire planet, the people have to come from somewhere and there is a finite demand for global housing. However that just isn't a practical way to look at it when the problems are localized. Different cities and regions have varying levels of desirability. It makes sense to build housing in those cities and regions for a wide spectrum of the population. The solution shouldn't just be "if you are poor, move to Ohio".

We're already there. The US has 15.6 million vacant homes [0] and only around 567,000 homeless people [1]. Unfortunately people skirting homelessness often don't have the resources to pick up and move half way across the country so you're going to need a radical proposal for moving the homeless to where the homes are.

[0] https://www.census.gov/housing/hvs/files/currenthvspress.pdf

[1] https://endhomelessness.org/homelessness-in-america/homeless...

My sense of community would have to be severely damaged or underdeveloped to be content with municipal policies possibly helping individuals who live thousands of miles away while passing by people living in tents on a daily basis.

With this logic, it’s not necessary to build housing at all. There’s plenty of extremely low cost housing available in South Dakota.

> But that migration will free up housing stock in Ohio.

You don't need to go as far as Ohio, just a commuter suburb.

This may be true if the housing market has sufficient capacity to build homes at the required rate. The UK’s experience over the past 50 years is that the private sector has built around 170k homes per year, but the rate of household formation suggests we need around 300k extra each year.

The U.K. hasn’t built 300k+ homes per year (or anything like that) since the government stopped building houses - the private sector has never picked up the slack. And the result is hugely increased prices.

What's the bottleneck? Obviously the demand is there, right? What's constraining the private supply side to expand? (More explicitly: what happened when the public sector building shrunk, why private sector did not pick up the slack?)

Is the difference that council housing is in a large part publicly funded? Difference in the permitting process?

>We see the same type of thing when designing transportation systems in a city.

I don't know how to describe this but sometimes people say things that drive an agenda which from a first glance support the agenda but when you dig deep down into the details you realize that there is a second message that completely contradicts the actual agenda the comment pushes.

For example, "induced demand" is something that happens on roads because they are free to use by any road user. By building wider roads you make it very cheap to drive both in terms of congestion and money. Public transport costs money, is space efficient and slow. Driving a car is inefficient, convenient, fast and when you consider the "better service" it is worth the additional cost. Therefore people will stop using public transport and start driving cars, because roads are free.

This almost contradicts the agenda because housing isn't provided for free, you have to pay for it and you have to pay a huge premium for inefficient but convenient housing (single family homes). Of course, the problem is that there is a subsidy that encourages inefficiency similar to free roads, namely property tax freezes. An old single family home may have a lower tax burden than a new apartment. It's effectively a subsidy to homeowners that haven't moved out. However, the real contradiction lies in the fact that the argument hasn't been against property tax freezes, instead the criticism is aimed at new construction, which does not suffer from the subsidy problem.

That sounds like an argument to add housing at an extremely high rate. Of course places like the Bay Area have huge pent up demand that requires huge supply to satisfy, the housing in these cities have been constricted for decades and needs substantial resources to correct. This is like saying that more money generally doesn't help debt if you accumulate more debt than you earn. Somehow, the point is missed.

The existence of SRO hotels and similarly "special" dwellings are symptoms of severe housing deficit yet they're portrayed as necessary. There's no reason that the bottom of the housing market needs to be specially gimped, especially when LA is paying $2600 per month for a tent. In a less starved & dysfunctional market, old and adequate housing stock can satisfy that role.

> Adding in a new road can actually increase traffic as it ends up encouraging more people to drive who otherwise wouldn't have.

You're alluding to "induced demand," which does not claim that adding a new road increases traffic. When it becomes "cheaper" (in terms of time) to drive, more people will start driving, but the cost of driving (time to get from A to B) still goes down.

This is basic economics, except with time instead of money. Adding a new road is a positive supply shock, which causes demand to rise until equilibrium, but the new price is going to be below the old price.

See: https://youtu.be/6dwSIO_Slhc?t=236, except imagine the supply shock is in the other direction.

Your logic is present in a lot of economic thinking, but it is flawed as it assumes people are purely rational actors that make decisions at the margins. That is a classic Economics 101 assumption that turns out to only be true in theory.

In reality people are stubborn. We chase sunk costs and we repeat inefficient behavior because it is habit. People therefore won't necessarily choose to drive based on an evaluation of that individual trip. They will base it on things like whether they own a car, whether they have an unlimited pass for their local mass transit system, and simply what they did the last time they made the same trip. Therefore traffic can actually exceed where it was before as new and improved roads can lead to people buying more cars and people being less reliant on public transit.

You're right that basic econ doesn't always hold, but in practice, it often does. In this case we actually have data on how road expansion affects transport times, which show that transport times slightly drop (as econ 101 predicts).

https://www.thecgo.org/wp-content/uploads/2020/10/Can-We-Bui... (Pages 8-10)

The problem with wider roads is a shift away from walking, cycling, public transport to car driving but that isn't what the comment complained about, considering the car (the single family home) is already there and anything you do can only increase efficiency. Building apartments it is the exact opposite and can only help over the long term.

With sufficient deferred maintenance, today's 3 bedroom luxury condo is next decade's slum. It takes time to reach steady-state.

A 3 bedroom luxury condo never becomes an SRO hotel with shared bathrooms regardless of how little maintenance goes into the place. A neglected property will obviously fall down market in terms of desirability, but a place like that will never reach the actual bottom of the market.

I can't provide a counterexample to the specific 3br luxury->SRO scenario, but it certainly does happen on occasion that previously expensive units wind up getting subdivided into cheaper units. I knew someone who lived in a low-end furnished room (with shared bathroom) that had previously been part of a larger unit.

I'm not sure that is an equivalent example. The previous example was housing falling into a lower tier of the market through lack of maintenance. Your example is actively retrofitting a place to be in a different tier of the market. That isn't really the same thing because your example requires new investments and is actively creating new housing at the bottom of the market rather than just allowing a place to deteriorate through inaction.

You're thinking too specific. Retrofits can be expensive or they can be cheap. The point is that housing stock drifts downmarket as it ages. Sometimes quickly.

I used to live in San Luis Obispo, CA. There's a house in the middle of town that clearly used to be an enormous beautiful mansion. It looks like it belongs on a plantation. It's still beautiful, but it's now 9 funky apartments.

Street view: https://www.google.com/maps/@35.2749914,-120.6611941,3a,75y,...

I'm not sure your point anymore. According to Trulia that is a 11 bedroom, 10 bath, nearly 6k sq ft home. Was it switched to 9 apartments because the place fell down market as it aged or was it retrofitted because there is very little market for a single family house like that in SLO? Also are we even sure those individual apartments are truly down market? Like you said, the house still looks great from the outside. It certainly doesn't look like a "slum" like you mentioned in your first comment.

I criticised a previous comment of yours because of incorrect implication of "induced demand" as the situations are very different but I like this comment.

>Was it switched to 9 apartments because the place fell down market as it aged or was it retrofitted because there is very little market for a single family house like that in SLO?

Definitively, I would have to invite my extended family to fill the building.

>Also are we even sure those individual apartments are truly down market?

They definitively cost less than renting the entire building, which is what stickfigure's anti-apartment stance would mandate.

> It certainly doesn't look like a "slum" like you mentioned in your first comment.

Of course not, it can't look like a slum because the exterior hasn't changed. We are running into a problem here. The classification or living arrangement is apparently the deciding factor behind the "character of the neighborhood" and whether it is a slum. How can that be? Well, maybe it's not the building or the architecture or the zoning and so on, maybe it's the inhabitants that turn the place into a slum? You certainly can't see them from the outside.

We also run into another problem, if there are "evil" people that turn neighborhoods into slums by their mere presence then how do you distinguish between slum people and non slum people? It should be impossible in practice. Of course, there is a reliable(in the sense that it is self fulfilling) visual proxy for that.

Today's new expensive housing will indirectly create more cheap housing in the pre-existing housing stock, by pulling demand out of the market.

Only if people actually live in those houses, and they're bought by people living in the cheaper houses right now who then move up in to the new housing stock.

If people buy the new houses as investments and leave them empty most of the year then it has no impact on the rest of the housing market, or if people from outside buy them and move to the city then it just increases the population of the city with no effect on the lower social strata. This is precisely what happens in places like London. There's a boom in house building but it's often apartments bought by foreign investors (allegedly for money laundering... ).

Directly building more social housing would have a far greater impact than trying to affect cheap housing stock by 'trickle down' methods.

Wow, buying a house and leaving it vacant most of the year doesn't seem like a very good investment. In my experience when people I've known bought an investment property the number one thing on their minds was occupancy, and if they thought it would lie vacant for more than a month or two, they wouldn't buy it.

I do see your point about foreign investors though, they will view the house as a bank account, one that won't lose money, and will probably appreciate, and is safe from the corruption (or corruption investigations) of their home country. And they have money they need to put somewhere, so why not there?

But even they would probably prefer someone to be living in it and paying them in the meantime, because that improves the return by a lot, and doesn't put the principal at risk.

Housing prices in my area have literally doubled in the last 5~ years. Sitting on a house doesn't look so bad with those returns. At the same time flipping is also a housing investment method that inflates prices while often diluting the quality of the housing market, as it's often not done properly.

Let's also not forget the housing crisis saw a lot of money pouring into bad investments. Assuming people only make wise investments is naive. The market is crazy right now with people paying over asking and waiving inspections. A lot of people are going to ride that train over the cliff.

> Sitting on a house doesn't look so bad with those returns

Those returns are underwritten by voters rejecting new housing. If that political landscape changes, the incentives for landholders evolve.

I dunno, I do see "luxury" apartments being built rather often around here, but starting at $2K/mn for a 1 bedroom isn't really affordable.

Political NIMBYism probably does play some part along with the pandemic, but again, that doesn't mean these investors are paying attention to that. There is a gold rush on at the moment.

People who move into these more expensive units leave other, less-luxury units though that now someone else can move into. Of course, as someone else pointed out, there is actually pent up demand outside of major cities as well by people wanting to move to the city. But still our only realistic, long term solution out of this mess that 40 years of insufficient construction had gotten us into is unprecedented construction. Upzone and remove barriers to get permits.

Someone is willing to pay that much, they will pay that much for an old apartment if they must.

That, and inflation showing up in certain areas.

If it's not occupied isn't it losing money at least by bleeding to property taxes?

Yes, but property values in London are increasing at a rate that more than pays for that (many times over actually).

Do you have any data on that?

Currently living in zone 2 north-east London and house prices have seemed pretty flat for the last couple of years. Flats have had a surge due to current stamp duty holiday... and prices outside London seem to have increased a lot with people anticipating a permanent move to remote/hybrid working.

Taxes on empty properties aren't high, but you still need to consider maintenance... and there's an opportunity cost of leaving a house empty rather than renting it out.

Just interested in your data - thanks!

Update: found https://www.actiononemptyhomes.org/pretty-vacant in one of your sibling posts - was that what you were referring to? I just read it (on my phone, so might have missed it), but didn't see any numbers for investment returns here... and there was a fairly-extensive section talking about London property being used for money-laundering instead - is that what you're referring to?

Same in Seattle, my block has a 2017 constructed home that has never had occupants, owned by a non-resident from China. He owns at least a few other empty new homes in the inner suburbs as well.

About once every 2 weeks his son pops by to make sure the house has not burned down or had a pipe burst.

Can I rent one of his houses?

In CA (at least Los Angeles) there are some tax laws in place that allow a home owner to make more in tax breaks by not renting a house or building vs renting it out.

I don’t know the details as I'm a renter but from speaking with a few Realtors they mentioned the companies the worked at did this.

I'm fascinated by how widespread this weird idea is.

Even if we buy the exotic premise that investors would buy houses and leave them empty - generating zero rental income for these greed driven people - as an investment, we still have to explain why they would only do this with new housing stock.

Why can't you do the same trick with existing housing?

I’ve heard of it too, apparently foreign money (mostly China) needs a legit way to pull the money out of their country and real estate is a good way to do it that doesn’t alarm regulators. Can’t say why it doesn’t make sense to rent it out. But I do know that Vancouver passed laws to limit this type of purchase.

Did Vancouver pass limits on foreign purchases because that was the underlying reason for the high cost of housing, or did they pass limits because that was easier than actually building new housing?

Building housing must be stopped at all costs.

>Even if we buy the exotic premise that investors would buy houses and leave them empty - generating zero rental income for these greed driven people - as an investment, we still have to explain why they would only do this with new housing stock.

Where I live the housing prices are expected to go up roughly 15% this year. So someone buying a house for 600k can expect to sell it for 690k making 90k. That is 7500 USD a month. If you wanted to make that much money from rent you would have to squeeze 4 or 5 tenants into the property. It is simply not worth the hassle trying to rent buildings out when house prices go up at such a high rate

> If you wanted to make that much money from rent

It's not either/or, which is why I'd assume the parent poster called it weird. That investor could make the appreciation and of top of it could make the rental income. So it is weird, from their perspective, to leave it empty. If they're flipping real estate for profit (as opposed to buying a home to live) why reject the extra income.

Also, selling a rental property with a solid history of rental income tends to be better than one with a history of sitting empty. Although that probably doesn't apply to mansions.

My point is you can do both.

Make $7500/month from house value increase, and also, say, $4k from rent.

This increases the resale value since the house is generating income to the buyer.

Homeless people of people with low income cannot afford $4k rent. Also I find it preposterous that people can make $7.5k/month in the first place from just house value increase. At the rate at which housing get more and more expensive we will soon reach a point where new home owners will never be able to fully pay a mortgage back

Luxury second homes should simply be taxed at a high rate, it’s one of the least defensible indulgences so with enough of a campaign it could happen. Ditto for speculative foreign buyers, this is already happening in some cities that have been hard hit by such “investments”.

> If people buy the new houses as investments and leave them empty most of the year

Fortunately, this is already a metric that is tracked, called the vacancy rate. And what we see is, that in in-demand cities, that have high rents, the vacancy rate is pretty low.

So, if the vacancy rate is 5%, that means that if you build 100 houses, then 95 of them are going to be lived in. Yes, it sucks that those other 5 houses are not lived in, but those extra 95 houses, in our example, are still a good thing.

> This is precisely what happens in places like London

It is really not. A quick google search shows that the vacancy rate is as low as any other major in-demand city.

A quick Google will also show that the vacancy rate for high end property is higher, and that builders are building more high end property, so logically there is less useful housing stock being added than the overall vacancy rate would imply.

One factor in vacancy rates at least in SF / NY - rent control. You really CANNOT rent to someone without a big risk - so if you have an elderly parent who might want to move in in the future, you have kids who might want a place - and are wealthy - you really need to keep place empty.

So yes, the rich do leave I think more places empty in some places because they can afford to and because the economic calculation is not simple. If you rent and want to end the rental later you end up in a bad spot.

> more places empty in some places

Ok, this is a nice story that one could make up. But once again, my point is that vacancy rate is something that is already tracked.

In San Francisco, the vacancy rate is about 3.5%.

So, in other words, regardless of whatever story you are making up about parents, or rent control or whatever, the actual data shows, that the vacancy rate is very low, and therefore not much of a problem.

I'm not disagreeing at all. But I know of enough unusual vacancies in SF among the rich that it strikes me as a small corner factor. In another city (smaller, parents live there) EVERYONE rents when they are not in their space. I mean, even just for summer if traveling. But when you come back, the tenant must leave (and does).

I know someone who sublet an extra room to someone, a year later her wonderful lease was destroyed, landlord sued her and the women never paid a dime, could not be evicted, claimed she felt unsafe and got a restraining order against the person actually paying rent etc so they ended paying rent on two places, one to live in and one for the women.

I mean - this stuff does turn you off renting a small bit.

That said, supply is REDICULOUSLY constrained around here, red tape is nuts, minimum requirements crazy, affordability payments high etc. So yeah, no question that there is artificial scarcity.

The vacancy rate in Dublin (in Ireland) is 1.6%, but I was there 2 weeks ago and there are so many empty buildings - some of them empty at least since I lived there back in the 90s/00s. I'm not sure that vacancy rate reflects the reality of a city's unproductive building stock

When people buy housing and leave it empty, they are buying the land, the house is a bonus. People never buy housing as an investment unless they use it to reduce the cost of living (pretty much never) or rent it out (happens a lot). Buying land works fine because of rent seeking.

What concrete data do you have to suggest that luxury homes aren't being occupied at significantly higher rates than general housing stock?

Vancouver https://bc.ctvnews.ca/10-800-housing-units-sit-empty-in-vanc...

Manhattan https://www.theatlantic.com/ideas/archive/2020/01/american-h...

Seattle https://www.seattleweekly.com/news/luxury-apartments-whos-bu...

Melbourne https://www.theage.com.au/national/victoria/ghost-tower-warn...

Boston https://bostonagentmagazine.com/2018/09/11/study-bostons-new...

None of the articles support a narrative that there is an epidemic of vacancies among high-end housing.

Vancouver: The article claims that there is ~5% vacancy rate. This is actually below the normal rate for vacancies in the US. Condos have a higher vacancy rate, but the article offers a reasonable explanation.

Manhattan: Ultra-luxury home vacancies aren't the same as luxury apartment buildings. Most people are not buying $5-$10 million condos. And even if the buildings are unsold, they aren't necessarily unoccupied.

Seattle: Again focuses on "foreign investors" and unsold apartments. No concrete data on how many those apartments are actually empty.

Melbourne: > Prosper Australia project director Karl Fitzgerald said, based on the water data, Melbourne's actual vacancy rate was closer to 7 per cent.

7% is on the high-end of vacancy rates, but if you reduced that down to 5% then the effect on prices would still be low.

Boston: No data on vacancy rates. Again, sale != occupancy. There are plenty of property management companies that build out luxury apartment buildings and directly rent to people.

The real issue is lack of housing, which can be fixed by letting developers build more housing, including high-end housing.

Vancouver: "condominiums that are owned and not available for rent had a whopping 12.5 per cent vacancy rate"

The Manhattan article links to https://www.nytimes.com/2020/01/10/realestate/new-york-decad... which says "Nearly half of new condo units in Manhattan that came to market after 2015... remain unsold, according to a December analysis of both closed sales and contracts" and "7,050 new condo units available for sale in Manhattan in January [2020]"

Melbourne: "Docklands... 17 per cent consuming no water in 2013" and "12.4 per cent of Cardinia and Clyde homes reported no water use."

Boston: "12 of Boston’s newest and biggest luxury developments could remain largely empty despite having sold most of their available condo units to buyers."

Vancouver: "City housing planner Matthew Bourke said there doesn't appear to be a correlation between empty homes and housing prices, given that the vacancy rate remained flat while prices skyrocketed.... Bourke told council that about 70 per cent of single-family homes marked as vacant in 2014 were found to be waiting for a renovation permit." 12.5 * 0.7 = 3.75% (this can't be directly compared to other vacancy numbers, though).

Manhattan: Unsold != unoccupied.

Melbourne: Now we're cherrypicking districts that have less than 15,000 residents total in a city of 5 million in one specific year? This is essentially p-hacking to support a non-existent narrative.

https://en.wikipedia.org/wiki/Cardinia,_Victoria

https://en.wikipedia.org/wiki/Clyde,_Victoria

https://en.wikipedia.org/wiki/Docklands,_Victoria

Boston: "could remain largely empty." This is speculation. Where is the data?

"Came to market" clearly means they were not renting directly.

That seems like solid evidence that vacancy is not the problem in the least...

https://www.actiononemptyhomes.org/pretty-vacant

"Wealth investment leaves an estimated 125,000 homes in London without anyone living in them."

There are 268,385 empty homes in England according to the government (people get a tax break in most parts of England if they own a property that is unoccupied and unfurnished so its quite easy to track empty homes), and half of them are luxury houses in London.

I'm not saying that's definitely the case everywhere, but I am saying it's worth considering.

The actual report says that there are 125,000 homes in London without permanent residents. Those homes aren't unoccupied; they're often used for AirBnB or temporary rentals. That's not a vacancy. In reality, only a fifth of those homes are empty most of the time.

Also, the report doesn't tell us how many non-vacant homes there are in their survey area, so we have to guess. London reportedly has 3.59 million dwellings, so 25,000 vacant homes would only represent 0.7% of homes being vacant. Even if you use the higher 125,000 number, that's still only 3.5% of all homes. That's a fairly low vacancy rate, and about right for a city.

Even after the pandemic, housing officials report a 3.4% vacancy rate, which is the highest in eight years. https://lfpress.com/news/local-news/london-apartment-vacancy.... Before that, it was only at 1.8%. That's extremely low.

You can tax vacant homes, but in general, those taxes have a very small effect on housing prices. It's far, far more effective to allow people to build more housing, including luxury housing.

What is the rationale for giving such a tax break? That seems ridiculous.

The current UK government is full of people who believe rich people keeping their money is how you stimulate the economy in to growth. It's not a completely unreasonable position according to economic theory but there are plenty of reasons to disagree with it.

If your economy cannot produce all the products consumers consume then you need to encourage saving.

If the economy cannot consume all the products the suppliers produce you need to encourage consumption.

If you perfectly hit the balance (unlikely but in theory possible) then you need to do... nothing, neither savings nor consumption increases.

It depends on what your economy needs.

Why wouldn't "social housing" get gentrified?

I'm all for building more housing for people. Ending homelessness, by definition, would mean to provide housing.

But the thing is, we don't even need to build more housing. There are more than 30 times more vacant homes [0] than there are homeless. It makes the most sense to redistribute resources more effectively and efficiently. We should be looking at our system as a whole when it clearly doesn't distribute necessary resources effectively (e.g. food insecurity, wealth inequality, homelessness when there are 30 times more vacant homes than there are homeless, etc.)

[0]: https://247wallst.com/housing/2019/09/30/there-are-over-17-m...

This is the worst possible take. Yes, there are vacant homes. They are by and large vacant because there is no economic opportunity near these homes. The vacancy rates in cities with high homelessness rates are at or below 1%. Yes, there may be more homes than homeless in these cities but "the homeless that currently reside in a locale" are not the total extent of the stakeholders that may want to move in our out of a city.

Those houses are empty for a reason.

Usually they are where there is a housing surplus, because population in the area has declined.

I predict offering the people in my Oakland neighborhood shantytowns housing in abandoned rustbelt towns will not find many takers.

I don't think that "we don't need to build more housing" follows from "we have more vacant houses than houseless". It seems like the implicit assumption there is we have the ability to move all the houseless to those house, but that sounds really unlikely (albeit an extremely interesting project if it's tried).

Another comment in this thread prompted me to research a bit. While building expensive housing is probably fine, it seems that the cities with the most success have adopted a housing first[0][1][2] policy. Building cheap housing (and housing homeless there) is a major part of what is seen by many as the most effective solution.

[0]https://www.bloomberg.com/news/features/2020-07-06/why-is-ho... [1]https://www.reuters.com/article/us-usa-homelessness-housing/... [2]https://www.bbc.com/news/uk-england-46891392

Yes but we have a crisis now which means that we need both regular market housing now and affordable housing now.

We do not uh have the luxury of building luxury housing only then waiting 40 years for it to eventually become affordable.

Market housing creates affordable housing by displacing demand. No matter what kind of housing you build, as long as it gets built now it will lower prices now.

That assumes there are market incentives to actually fill the housing that is built. What about when buildings of hundreds of luxury condos are built and they just sit empty, either owned by disinterested "investors" or unwilling to be sold for the market-directed price?

Someone who studied this in Toronto by overlaying nighttime photos to find units where the lights are literally never on: https://www.movesmartly.com/articles/condo-units-sitting-emp...

That blogpost you cited says that there is a 5% vacancy rate. That's well within the normal range. So I don't see how it supports your argument.

https://www.reddit.com/r/badeconomics/comments/musne8/dispro...

Fair— I kind of picked one at random. Obviously part of the point of that dude's effort is that this is a difficult thing to get numbers on. Here's some other coverage around responses to a planned vacant unit tax:

https://www.blogto.com/real-estate-toronto/2021/02/real-esta...

Raise capital gains taxes on land. If they don't sell or rent it's their loss.

If you build more prices will come down and these "investments" will become nonviable.

Maybe, but that is difficult when a) the "investors" are split between connected, powerful people who really don't want to see their investments go negative; and families just getting started who could be utterly ruined by an underwater mortgage, and b) the fact that the housing situation is a crisis now; there isn't time to faff around and hope that ten to twenty years the invisible hand of the market does this or that.

I think you're mostly right, but it's not as straightforward as 1 dwelling per household and everyone just moves up a rung. Market housing could get bought up by people who are currently living with roommates (but would like their own home) or one of the 52% of young adults currently living with their parents.[0] Those spots are then unlikely to become available for the homeless.

This is just another symptom of the major lack of housing in the US, and needs to be solved as well, but it highlights how difficult it is to alleviate homelessness when there are other casualties of the housing market as well. By all means, build as much housing as soon as possible, but some of it will probably need to be specifically targeted at homeless or poorer populations.

[0] https://www.pewresearch.org/fact-tank/2020/09/04/a-majority-...

Why are those people living with roommates? Because they can't afford not to. If they suddenly move out and fill up a space they otherwise couldn't afford, that requires that prices have gone down.

price = F(supply, demand) therefore demand = G(price, supply) and supply = H(price, demand)

More luxery houses would lower prices for luxery housing, but not necessarily for affordable housing. I don't know how much those are competing markets

In addition to the relation between luxury housing market and affordable housing market that others are calling out, regulations and other hurdles to build are a reason expensive units are built rather than cheap ones. If you need 15 permits to build in SoMa and changes requested by one council can require going through the process for another permit again, your fixed cost gets so high that you really have no choice but to build expensive units. I'm sure housing cost would quickly get under control of SF for example were to eliminate any height and other zoning constraints and have as the only requirement that you are able to get insurance for your building.

New housing is always relatively "luxury" because newness is itself a luxury. Much of what is relatively affordable now was relatively "luxury" when it was built. But if you stop building anything new it would be like trying to keep the price of cars down by banning new cars – what will happen after a decade or two if you did that?

To use your car analogy- just because a new car will be worth more than a used one (and this is much more true of cars than houses), that doesn't mean there's no such thing as a luxery car. Sure, newness is a type of luxery (I'm not sure how much housing price depreciates with time, but I'll believe you on this one), but new houses can be built to cater to wealthy buyers or to cater to lower income buyers.

They compete strongly. Rich people pay a lot for junky apartments due to the shortage.

Somehow I doubt that's a considerable driver of affordable housing prices, but it's possible. Where did you get that from?

You ever seen techies living in the mission district?

Not what was said. A new building automatically makes the ten-year-old next door look shabby in comparison, and so on.

Still, we need to remove barriers that prevent middle-class housing from being built, such as parking minimums and other bureaucracy.

If you build enough luxury housing it will become cheap right away.

San Francisco has ~400k housing units. If you build a million more, prices will go down very sharply.

When there is more housing units than people who want to live there, prices go towards zero, whether they're "luxury" or not.

This is all true if we're talking about supply demand lines on a graph, but when on earth in real life is a for-profit company gonna whoops accidentally build so much that they have to take a loss and then keep building? lol.

I mean the idea is correct, but I don't think we can depend on the private market to deliver on this concept.

Don't get me wrong SF badly needs more housing and needs to approve tons more, I'm just saying there are limits to the outcome. At some point for profit developers will not build because they can't make a return.

Now if we had a not for profit government agency that steadily built housing regardless of the market conditions, say they were working toward a vacancy rate goal, now that could create surplus housing.

You might see friction there though in the private market would pull back.

I was arguing against the idea that adding "luxury" housing won't lower prices.

Most people understands it does it if you add a million units, but for some reason they can't grasp that each new unit contributes.

I was not predicting anyone would build a million units overnight, certainly not accidentally.

> At some point for profit developers will not build because they can't make a return.

SF has been very near this point for decades. Because new construction is mostly illegal, and if not extremely expensive and slow. Because of explicit policy from the SF BoS.

If housing construction were legalized in SF, say by adopting the regulations of Houston or Tokyo, there would be an enormous construction wave in the city. No one can predict to what level, but after that has transformed the city we can take stock and see if any other measures need to taken.

But I don't see SF doing anything of the kind without at least a decade of hesitation. The city is far too conservative to change.

Assuming the infrastructure is there to support it. Developers are more than happy to pass costs onto the government/taxpayer while keeping the profit, such as by building enormous neighborhoods with a single access road or in high risk flood zones. My brother's neighborhood is right now dealing with a developer who is building a 500-unit housing project whose only entrance and exist is the two lane road in front of his house. They'd have direct access to the highway except for the fact they're too cheap to bridge a five foot wide creek.

I see you've read that CityObservatory article from a few years back [0].

Unfortunately as the Tiktaalik mentioned, we have a housing shortage now. So the trickle-down economics of luxury housing won't work for at least a generation.

Also, all the actual luxury housing that ends up being built is bought by wealthy investors buying their third or fourth property. Just look at the housing market in London.

> Throughout all of American history, new housing has almost exclusively been relatively expensive housing.

Eichlers and Craftsman homes were targeted squarely at the middle class of their time. Now in the Bay Area, the price of a "middle class" home is probably skewed to something around $1,000/sqft, but I don't know if middle class wages can actually afford that.

[0] - https://cityobservatory.org/how-luxury-housing-becomes-affor...

Why would you need to wait a generation? More like a couple of months. People who are moving to luxury housing live somewhere now, which is less new. When they move out of there, someone else can move in, etc. and on down the line freeing up multiple housing units one by one at ultimately different prices. It adds to the total housing stock in the city immediately.

And no, “all” the luxury housing is not being bought by investors. Even in places where this is a problem it is nowhere near “all”. Investors can also just buy existing housing. Once again, what you anti-housing folks are claiming as a problem of building new housing, is a problem that is going to happen anyway and will be even worse if we don’t build new housing.

> People who are moving to luxury housing live somewhere now, which is less new.

People living a $1mil shithole aren't going to be moving into a $2mil luxury home. You need to find the buyer that can afford a $2mil luxury house. This is why the problem takes so long to work out. Prices are inflated, and luxury homes will be inflated even more - the people that would normally buy them aren't going to be able to move and afford them. Combine this with how people can just sit on homes rather than sell them, it's gonna take a real long time for prices to make their way down.

It’s very sad that the phrase “$1mil shithole” can actually be a thing.

I’m not sure it would be a whole generation, but I could see a decent percent taking a generation.

Anecdote time

I’m nowhere near rich, but we recently upgraded from a condo to a house and kept our condo. Our intention is to rent it out until our kid is old enough to move out and give it to them.

> Unfortunately as the Tiktaalik mentioned, we have a housing shortage now. So the trickle-down economics of luxury housing won't work for at least a generation.

What data are you basing this claim off of? Many people (especially young people in finance and tech) move every few years, and some of them want luxury apartments. That reduces the demand for cheaper housing stock. A 25 y/o moving to SF isn't going to buy an apartment and stay there for their entire life.

A 25 y/o moving to SF isn't going to buy an apartment period.

I'm confused. What will a 25 y/o moving to SF buy? They can't all be homeless or wealthy enough to buy a house in SF.

I believe the confusion is over the term "buy." In San Francisco/US terminology, a 25 y/o is likely to rent or lease an apartment. Buying would more likely be of a condo (or a house, as you mentioned.)

Do we actually have a "housing" shortage, though? I know that supply of stereotypical single-family, detatched homes is massively outstripped by demand in many parts of the US and that's a problem. But is there actually a shortage of "housing" - places to live - including apartments, condos, duplexes, mobile homes, etc?

This is not a rhetorical question, by the way. I'm genuinely curious as I've never been to LA or spent significant time in parts of the US where this problem is at its worse. I live in the midwest and there are plenty of places I could buy or rent here if I needed - cheap and expensive - but I'm lucky enough to have a decent place now so I can be picky about the next one.

Yes, there is a housing shortage in many major US cities. This is evident both from the high rent in these cities, and the large share of workers who commute long distances to work in these cities.

It can be hard to immediately see that there is a shortage of something like housing, because it’s rare that people will actually end up without housing because there isn’t enough to go around. But this is because people will rationally choose to live further and further from their jobs and commute longer and longer distances as the shortage drives prices up near their workplace, rather than choosing to go without housing.

Absolutely. I live in West LA, one of the places in the US worst hit by the housing shortage and it is hard to even find an apartment and vacancies are filled quick.

Luckily, I haven't had to move in a while, but it was bad enough that when I got my place, I signed for it purely based on the opinion of a friend who could go see it for me. If I had waited the extra week to come home from the trip I was on, it almost certainly would not have been vacant.

Technically there is a shortage of nice places to live.

Yea, 100% Agree. Fully supportive of all housing. I was specifically referring to SRO type housing or boarding houses which are currently illegal to build, but there is so much simple stuff to be done here anything helps.

Boarding houses used to be pretty common in the USA. Are they really illegal to build now? "Sober Living" homes seem legal to build, they're all over the place, and they meet the definition of "boarding house".

    The best way to lower the cost of housing is to 
    increase the supply of housing. And the best way 
    to do that is to unleash developers whatever is 
    most profitable whenever and whoever they want 
    without government regulation and NIMBY activists 
    getting in their way.

You had me up until here. There is surely a (messy) middle ground between "recognizing that increasing housing supply drives down pricing" and "letting real estate developers do literally whatever they want."

I spent quite a few years living in a "trendy" area where housing developers crammed as much housing into it as possible. The results were not pretty. Very easy to create an environmental and quality-of-life nightmare which is particularly unfair to those already living in the area, with no say over what becomes of it.

The goals of housing developers are not necessarily aligned with that of society.

Owning a home in LA is like investing in microsoft stock in the 90's. Now that it's so inflated, you don't want it to go down. More houses = less value to your house. When people are looking at having to lose a quarter million or more they're the ones showing up and running the city council.

> It's not necessary to build cheap housing specifically

because cheap housing falls from the sky. It trickles down, yknow. Some people get rich first, then we all profit from their breadcrumbs. There's a god, and god is just. Jeez.

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