I don't think this work as this is just rent controlled housing. Better to cut the unnecessary red tape and let developers build more housing.
Also, I think penalizing vacant properties would also be a good idea.
Also, I think penalizing vacant properties would also be a good idea.
The reason new construction never works like this is because developers only build housing when there's already a severe shortage of housing in the metro area. They respond to price signals, and the price only starts going up when you have multiple bidders bidding for the same home. And why wouldn't they? If they built housing in places that already had an abundance of housing, they're making an economically foolish choice and will go bankrupt. When you observe that developers never build affordable housing, you're observing the effect of selection bias: in a region where there are enough houses for everyone and hence they're affordable to the average worker, developers aren't going to build even more new houses.
You can observe this throughout the Rust Belt: there are more homes than people, so prices are very affordable, but developers would need to be insane to build even more houses (outside of specific neighborhoods or suburbs that are locally hot). Also when you get a macroeconomic crash in the middle of a housing boom: the houses get completed, they sell for dimes on the dollar, but nobody has jobs anymore so they can't afford to buy them,
Raw cost of housing is essentially the cost of the land + the cost of the building.
In established cites the cost of land is high and developers tend to build expensive buildings on that land. Low-income workers than move to older buildings as they're cheaper (expensive land, cheap building).
In a new greenfield city the land will be very cheap (for whoever established the city) so that can keep the cost of housing down (cheap land, expensive building).
We care more about the number of people housed, not merely just people who are housed who can afford their bills.
Remember, housing prices in high-priced areas are driven by location, location, location, location, location (yes, two more locations than ordinary housing), so "it's small" doesn't translate to "the market price is low." (It's just less expensive than big.)
When the "market price" exceeds the cash price, the folks who get to buy are the ones who have some way to pay outside the system.
Investors get much cheaper prices, developers get easy liquidity. The downside is that you have to wait a year or two before moving in, and some theoretical risk. (Which can be managed with proper legislation.)
But the scheme works if you want affordable housing.
Suppose that the residences will be worth $1000 when built and it costs $500 to build them.
The pay-in-advance price will be around $1000 - interest.
The pay-in-advance price won't be significantly less than $1000-interest because the builder can borrow the $500, and sell for $1000 when built, repaying the bank and pocketing the rest.
The pay-in-advance price won't be significantly more than $1000-interest because if it is, folks who want to buy will wait and pay $1000 when the units are built (forcing the builder to borrow $500).
In other words, pay in advance doesn't result in below market prices.
If you add in some units which would sell for $500 but you're forcing the builder to sell them for $250, the question is "who gets them?" The answer to that question does not depend on when the payment is made.
In the US, the vast majority of the "below market" units will be split between friends of the local govt and the developer.
Yes, it would be nice if that wasn't true, but it is absurd to behave as if it isn't true (in the US).
With "buyer-funded development" the developer gets free liquidity, with no interest and no obligation to pay anything back. (Just an obligation to build something.) Obviously more profitable than having a bank take a cut for a loan.
The property is cheaper for the buyer because there are obvious risks involved for those in on the scheme at an early time. (And yes, it can be significantly cheaper, both because of the risk and due to opportunity cost while the property becomes attractive on the second-hand market.)