Comment by kragen | Hacker News Reader

Comment by kragen | Hacker News Reader

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> Every newly-built house lowers the value of every already-built house.

Do you mean every already-built house nearby or every already-built house in the world?

If you mean nearby then your theory would predict that places like San Francisco, Manhattan, and Paris would be among the cheapest places in the world to buy housing. This is very much the opposite of the truth, so if that's what you mean, then either your theory is completely wrong or the effect it describes is swamped by other effects that are much more important determinants of housing value.

If you mean in the world then I suppose it's possible that you're correct in a market-value sense, since the effect on the price of my house due to someone in Shanghai building a nice new condo would be to drop the price by, say, US$0.00003. But if we're talking about use-value rather than exchange-value (which is the sense in which it really matters whether things are zero-sum, positive-sum, or negative-sum) it's hard to see how that could be true. Perhaps you think the use-value of my house is primarily that it enables me to laugh at the suffering of the homeless beggars of Dhaka? I assure you I spend zero time on that activity.

So I think it's clear that your theory is just completely bogus.

It's not bogus. It really is as simple as supply and demand. Yes, SF and NYC etc. are super expensive despite their density, however, what you're missing is that 1: Supply hasn't kept up with demand, and 2: SF/NYC would be even more expensive if they weren't as dense as they are now, and continuing to build (however slowly).

Have you considered that density may drive demand?

What is one supposed to do with that consideration, not build more housing? Because that's already happening, and it's not going well.

(I notice that you didn't answer the two questions I asked, an omission I deem discourteous.)

So evidently the main determinant of housing prices is "demand", not your hypothetical effect of houses getting cheaper because other houses are nearby.

What do you think produces "demand"? Why is there more demand for houses in Phoenix than for houses 200 km to the northwest? In some cases, of course, there are real differences in land quality: land that is close to waterways or railroads is more valuable for industry than land that isn't, land that's close to iron ore deposits is more valuable for automotive manufacturing, land that's frozen cold 9 months out of the year is less valuable for human habitation, and so on. But none of these explains the universally observed price premium for land in cities over land in the nearby countryside, which often amounts to three orders of magnitude.

It turns out that the main driver of demand for housing is being close to other housing. So building houses drives up the price of land nearby. Not down, as your theory predicts.

>It turns out that the main driver of demand for housing is being close to other housing.

This seems to be conflating the symptom with the cause. I doubt housing is more attractive because there are more houses nearby; they're attractive because more services are nearby. Granted, they are going to correlate strongly but I think it's a mistake to conflate the two.

Consider the following:

1) A house with no neighbors within a 100 mile radius. But it has all the best restaurants, utilities, schools etc. within walking distance.

2) A neighborhood with hundreds of houses, but none of those services within 100 mile radius. It's a little isolated island of housing.

Which do you think would cost more to live in?

I think this is an interesting thought experiment. I suppose the restaurants, utilities, and schools are all fully automated, like Automats or Skinner's Teaching Machine? (Or perhaps they have employees, but they all commute from over 160 km away?) And my family is the only consumer of those automated services?

It seems like the price of each meal at the restaurants would need to be sufficient for the restaurant to operate for a month or two, perhaps a few thousand dollars. That seems like it would discourage eating at these wonderful restaurants.

I'm not really sure what point you're trying to prove. You're using land and housing prices interchangeably, when the problem being discussed is about real estate prices not land prices specifically. Yes land prices are part of real estate costs, but that's not all of it by a long shot.

Building codes, bureaucracy, and NIMBYism all contribute to construction costs, which in many cases severely constrict supply (SF being a shining example), and thus make existing units more expensive. Focusing solely on land prices is missing the forest for the trees. The problem is that there isn't enough supply to meet demand, so prices are skyrocketing.

Building more housing will drive prices down at best, or slow price increases at worst, but it doest affect housing affordability, which is the original statement I was commenting on.

> (I notice that you didn't answer the two questions I asked, an omission I deem discourteous.)

One of your questions was “Perhaps you think the use-value of my house is primarily that it enables me to laugh at the suffering of the homeless beggars of Dhaka?”

I think omitting a proper response to that question is more courteous than discourteous.

How am I supposed to rationally engage with their thesis, given that their theory of value is so ambiguous that I can't even tell if they think the value of my house is primarily a use-value in that it enables me to laugh at the suffering of the homeless beggars of Dhaka? The fact that they refused to answer even such basic questions makes me think that, rather than attempting to engage in reasonable discourse, they are playing some kind of sadistic mind game.

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