Comment by civilized | Hacker News Reader

Comment by civilized | Hacker News Reader

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Yes. The problem is:

1. A lot of high earners want to cram into a small space

2. The existing high earners living in that space don't want to allow more built in that space because they like the neighborhood how it is

So all these high earners compete against each other, and houses become as expensive the winning high-earning bidders can afford.

For this to stop happening, #1 or #2 needs to stop. So, either the high earners need to stop cramming into a small space, or policy must be changed so the locals can't stop the growth of housing supply.

(Usually when I've pointed this out in the past, I get mobbed by NIMBYs who insist that growing the housing supply will somehow cause prices to skyrocket even more. There seems to be a widespread NIMBY belief that standard economics doesn't apply to housing, for mysterious reasons that no one ever quite gets around to explaining. It'll be interesting to see if it happens again today.)

Per-unit rent will go down if you increase supply of housing, but the value of the land underneath will go up if you increase the amount of houses allowed to be built on said land. There's one part of "standard economics" that a lot of people forget with property, which is that land in desirable locations is of limited supply and you cannot increase its supply.

Land at the boundaries of a city is not equivalent with land in the centre, because of location value.

I do agree that #2 should stop, but be warned that it doesn't solve land values going sky-high; it actually increases land values. The solution is land value tax, a la Henry George.

> but the value of the land underneath will go up if you increase the amount of houses allowed to be built on said land.

which is what would incentivize the owner of that land (ostensibly a single family home land owner) to sell and let high density to be built. If the land doesn't increase in value this way, the owner would not have any incentive to sell.

It can happen because new homes are more expensive. People prefer new and will pay more. That raises the average price which raises prices on the existing supply.

Or it lowers price on the existing supply because wealthier buyers are going to the new supply now rather than bidding up the existing supply.

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