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Comment by seibelj | Hacker News Reader

This is why luxury housing and condos is actually helpful for lower-income housing - the luxury housing of 60 years ago becomes the affordable housing as the top of the market continues moving into better places.

Basically all housing whatsoever is helpful. But the optics of it makes it difficult to understand.

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In reality older housing gets bought renovated and marketed as luxury housing, so the affordable housing is lost to the higher profit market.

Richer people will always outbid poorer people.

There are fewer rich people than the capacity to build homes. Keep building homes until the rich stop buying them.

Houses are bought using money, not heads.

Good thing governments can collect taxes or print money and hire people to build housing.

Rich people won’t buy houses if there isn’t a stupidly low restriction on capacity. That’s the same reason they don’t hoard land.

Please, I've never seen this in my day to day personal experience. Do you have examples of this. It sounds very suspicious to me.

Just drive to the nearest new luxury condo and count how many low-income folks just moved in.

If you don't build these things, you'll have to compete in a bidding war with rich people to rent an old, renovated shitbox. Guess who will win?

I think might have misunderstood. I know low income people are not moving into fancy new condos. I'm just not familiar with older fancy condos being opened up to low income residents. They just stay high rent, but with "charm" since they are older.

That's because extreme scarcity distorts the market to the point that old housing never gets to its natural cheap point. If they stopped building but only a few cars, a pimped out Datsun 240Z from the 70s would still look a lot better than walking, and fetch a lot better than 70s prices. In fact you could raise them with impunity.

Didn't something similar happen in Cuba?

It’s not instantaneous but it does happen - go look at some of the random lower price housing in a big city - it’s often in older neighborhoods that have “fallen on hard times”.

How would you know? Compare original 30 year old apartments to new builds and see the rent difference. There is one.

Yes, to bring our corner as an example. Compare the rent of these buildings on the same street:

- 2020, new ~$4500

- 1990, renovated, ~$3500

- 1975, maintained, ~$2500

Ever check prices for thirty year old BMW or Lexus or Acura? Those are old luxury cars, but they aren’t priced like luxury. In part because what was luxury then isn’t luxury today.

Building a new car doesn't tend to require scrapping an old one. Every car built increases the total supply of cars. Building new luxury housing often (not always) involves tearing down existing housing, leaving the total housing supply static.

Even so, everything else remaining necessarily moves down-market as new stock is built.

Typically when people complain about "luxury" housing what they are talking about are dense condos or apartments where there are far more units than whatever was there before.

The only people that I've heard complain about luxury housing that's not adding more units are when YIMBYs gripe about single family zoning: it's perfectly legal to replace an existing single family home with a far more luxurious single family home without any community input or checkpoints. But more affordable "luxury" townhomes are blocked st every stage by legislative processes that enable single family homeowners to extract ever increasing land rents, when they enforce artificial scarcity. But YIMBYs have almost zero political sway in almost all jurisdictions, and their framing of single family homes as luxury is far from usual.

No, I've never compared the price of a car that old in that model. However, comparing a 30 year old car to a 30 year domicile is kind of not in the spirit of the conversation either though. Nobody expects a car to last for 30 years, and most just hope it lasts longer than the financing. Also, cars are rarely purchased as an investment, where someone's place of residence is precisely considered an investment.

> Ever check prices for thirty year old BMW or Lexus or Acura?

Why dont you compare houses to prices of 30 year old rotten piece of fruit, because thats what you are doing.

20 years ago my familt bought an apartment, is it now worth 3 times more. Our 20 year old BMW is worth approximately 5% of it's original price as scrap

Okay... and have you considered the "why"?

To start with, 2.2 million cars get built per year in the US, while housing has consistently been under 200,000 new units per year for a long time.

Yes, I have written why, car decays and a house doesn't. Value of land only grows. Even the built up portion of the house only grows un value withing human lifetime.

I know a guy who lives in a 500 year old house, i know zero people who have a 30 year old car

What you have seen is its corollary: Cities where building is so impossible, that a run down shack that will be extremely difficult to remodel goes for 7 figures, because it really is the best available choice for someone that can afford the luxury housing.

Housing is a sorting and ranking problem: Everyone gets to pay the best house they can afford. The richest man in town gets the best house, the second gets the second best, and so on. When what you can afford is fixed, it doesn't really matter much which house gets built: Everyone underneath gets, for the price they can afford, a slightly superior house.

The one thing that throws a wrench into it is immigration, from the same country or a different one. I am not moving to SF for the current house prices, but I would think about it really seriously if the housing I can afford, coming from far away, was good enough. But in that case, it's not as if building affordable houses is going to work either, unless you just say "Sorry, you can't buy this house, it's going to go to someone poorer, even if you really want it, and would pay more".

And that's really the ultimate problem of affordable housing in a place that is extremely in demand: You either make it so unattractive that nobody wants to live in it, or your affordability is really handing a giant subsidy to a set of chosen people that get to live there, while many other people would be willing to pay more for the same dwelling, but they didn't win your lottery. You have to stop the affordable buyer from selling too, because otherwise all you did is to let someone pay, say, 200k for an apartment that in the open market would be worth 1 million, handing out 800k to a lucky winner.

The end result is that you need enough new housing to satisfy the demand of not just all of the people who currently reside in or near the city, but also everyone who lives elsewhere but is currently kept from immigrating by high housing prices. This is a massive undertaking, but of course the only solution to the problem of insufficient housing in the places people want to live is to build sufficient housing. Anything and everything else is fundamentally just moving deck chairs on the Titanic.

I would say, "Chicago." People in Chicago get really frustrated that they don't get to ride the wave of housing appreciation, but the flip side is that housing seems to be overwhelmingly more affordable there. I'm sure part of that is the tax levels and general instability of the Illinois government, which put downward pressure on prices, like flooding insurance in hurricane prone areas.

If you can't see filtering where you live, that says either that you're not looking, or that it's a place where new housing stock is being severely restricted.

It varies by locale. In high rise condos, filtering may mean that the appliances are white, the floors haven't been refinished, and the bathrooms are original. In my hometown, it's houses without air conditioning; I can immediately recognize a house that has no A/C in my old neighborhood by its listing price, square feet, and bedrooms, which means that refraining from doing that retrofit keeps space open for lower income or lower net worth people.

In my area, those older houses have all been renovated by flippers. Flipped renovations were pretty depressing when we were looking: the house was priced like a new build, and the renovation wasn’t really to our liking (at least they all have A/C, usually modern heat pumps). So we just went for a new build.

The flippers (basically investors) are looking for those places that would have been a cheaper entry point into the housing market, and after they are done with their 1-2 month renovations, they are no longer cheap entry points.

I think your experience is pretty consistent with nationwide reality due to restrictive zoning, but it is more or less ubiquitous in locales depending on how tight the market is there.

And I sympathize, because I've seen horrible examples of renovations, like people on Facebook forums proudly showing off their renovated kitchens, which scream "usability nightmare" to anyone who has ever looked at design standards. When I lived in San Diego, I could always recognize the work of the flipper who did my house because they used identical kitchen materials and appliances every time.

I’m doing a partial renovation on our 2016 kitchen (when the house was built). Not exactly as bad as a flip, townhome builders make a lot of mistakes. Hopefully our reno isn’t a usability nightmare.

Unless of course the luxury housing gets periodically torn down and rebuilt or remodeled making it even higher end housing. If the core neighborhood is already high-rent and or desirable real estate, why would high cost real estate buildings somehow allow themselves become low rent?

If you don’t build new luxury housing, then the top end goes to the next best thing, and the next to the next best, and so on. Building more helps increase total supply which alleviates pressure everywhere.

That step down doesn't necessarily happen at all - old luxury housing may get upgraded in place, or upgraded to higher luxury housing which then becomes less efficient at serving many. The total supply may shrink from serving the luxury market.

My larger point is that knee-jerk opposition to luxury housing isn’t helpful, and actually damaging to the cause of increased affordable housing. In the OP you can see how uneconomic building affordable housing is - so build luxury if that’s all that can be done.

How is that "shrinking"? If new luxury housing gets built now and refurbed later, the additional unit count is still there.

Upgraded luxury housing often reduces the unit count as well as the number of people housed.

The luxury housing around here goes to high earners from cities that are far away, and then wealthy people's adult children from all over the world move into the homes in the city after they leave. Housing here and in the cities has only gotten more expensive.

That's fine. Tax that property and build more market rate housing. Repeat.

Somewhat. A lot of that old housing goes to rentals.

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