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Comment by zbrozek | Hacker News Reader

Let's say I'm a developer and there's unmet demand at all price points. Obviously I build the highest-margin product until I've satisfied that demand. Then I move on to the second-highest-margin product until I've satisfied that demand.

Anywhere that demand across the spectrum dramatically outstrips production capacity (e.g., anywhere in the Bay Area, where NIMBYism has made it nigh-impossible to build anything) what little production manages to happen will target the high end of the market.

You have to build enough to make satisfying demand at the bottom worth doing. Our regulations (onerous constraints to construction and land use) preclude that outcome.

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In the book The Affordable City [0], this is illustrated with a really powerful analogy:

Every year in the United States, the Toyota motor company sells about 2 million regular Toyota cars and 300,000 expensive luxury Lexus cars. Suppose that we introduced a law that each motor company can only sell 300,000 cars a year. Which cars would Toyota continue to make?

[0] https://islandpress.org/books/affordable-city [1] https://pressroom.toyota.com/toyota-motor-north-america-repo...

Precisely why the law should really say that making X affordable cars per year buys you right to sell 1 luxury car.

You actually want it more complicated than that, maybe something like for every dollar of affordability you sell (under $X), you earn the right to sell $0.10 worth of luxury.

The solution isn't to put a band-aid on it. But to get out of the way as much as possible.

If you prohibit most profit you prohibit most progress.

Profit should not be a thing in housing, healthcare, or food until everyone is housed, cared for, and fed.

Why should someone go through all the effort to do that if they aren’t getting paid for it?

The workers get a livable wage. The organization breaks even.

Who is going to organize said organization and deal with all the BS (petty and not) to make a livable wage, if they can do simpler and get the same, or do the same and get paid more?

A few will, but most won’t. The amount of risk to develop and the type of skills required are non trivial.

a livable wage is a really bad metric because the definition of living is extremely subjective. We had it right initially with market derived wages. This talk of living wages is keeping us from real discussions about market power abuse/monopsony/oligopsony situations in the labor market that would improve labor market efficiency a lot more than arguing over what a living wage is.

Without profit many more will go unhoused, unfed, and definitely uncared for.

A nice platitude. What are you doing to achieve it? My guess is nothing, because you have bills to pay, like everyone else.

The reality is that if all those things were provided population would grow unchecked until resources ran out. It’s not sustainable.

On the other extreme, we can do a lot better than artificial scarcity.

Pretty sure Upton Sinclair debunked that theory over 100 years ago

Pretty sure he didn’t ‘debunk’ economics.

There exists a market equilibrium (2 million regular cars, 300k luxury cars, in the Toyota analogy). You're proposing to construct a regulatory scheme to reach a different equilibrium. Why? What's wrong with the market equilibrium?

You're proposing to construct a regulatory scheme to reach a different equilibrium. Why? What's wrong with the market equilibrium?

In the context of cars, arguably nothing.

In the original context of real estate, all kinds of things, because having somewhere to live is essential to quality of life and reserving more of the finite real estate available for development for a few luxury homes means a lot more regular homes that could house a lot more families can't be built there instead.

Toyota aren't constrained in how many cars they can make a year (well, more or less, and under normal circumstances), housing developers are much more constrained.

In a world (kind of like the one we live in right now...) where Toyota only had components to build 500k cars a year then they'll make 300k luxury cars and 200k regular cars and buying cheap low end cars becomes almost impossible.

If the market equilibrium in an unrestricted market is 2mil:300k, or roughly 6:1, regular to luxury cars then an argument could be made that regulations should be but in place to retain that market equilibrium even during a restricted market, assuming we believe it is important that everyone can own a car.

The restriction on the market is largely arbitrary - people “don’t wanna” let other people build apartments on land they own. The only real reason they do this is regulatory capture - if someone who owns land slows housing production on other people’s land, theirs is worth more.

Like "earn a buck" in Wisconsin. The DNR is trying to manage the herd and keep the deer numbers in check. Before you can get a buck tag you first get a doe tag and must turn in a doe to get your buck tag.

This line of reasoning is why systems collapse. You are proposing adding further regulation on top of a mountain of existing regulation without considering the problem is probably bottlenecks caused by existing regulation.

Simple: Toyota would stop being a motor company. It would instead start 10 new motor companies, and a parts manufacturing supplier system for those motor companies, and keep controlling interest in those new companies.

More deeply, I don't understand how it's analogous. Why are companies prohibited from selling more than 300K cars? Is it because of too-high pollution (CO2 emissions, tire micro particles, etc.)? Is it because of a mass desire to switch to public transit systems? To stop having so many traffic deaths?

If so, then the laws will likely result in a ban on the total number of new cars, or at least higher import fees and higher tax rate. And these all shift the economics of what Toyota would produce.

As an unlikely case, if the laws were passed due to a mass movement against displays of wealth, such that private car ownership is frowned upon and luxury cars frequently get vandalized, then Toyota isn't going to make many Lexus sales at all.

You're choosing to interpret the analogy outside of the bounds implied by the argument it is supposed to relate to.

In which case the rebuttal to your argument is as simple as adding another arbitrary layer of assumptions that do not generalise, in order to restrict your use of arbitrary assumptions that do not generalise, e.g "the government will not allow that split, back to discussing the original scenario."

I think part of what muddies the waters here is that there's so much speculation in the market. In some areas, particularly megacities, there are also a lot of ultrawealthy foreign investors buying up real estate in the U.S. and Canada to park/hide their fortunes. So you have lots of market participants who are not interested in buying a property for the purpose of living in it. And if you're building exclusively for the top bidder, then it will take some time before you get to actually housing the people who need it, and it may not be in areas that are convenient for them to live in.

Folks around here point to that scapegoat a lot, but our local vacancy rate is <3%, suggesting that foreign speculation is not a real issue.

It'd be perfectly reasonable to mandate that for one high value luxury house, a developer has to build a certain number of affordable homes. I guess it'd be the nimbys that would try and prohibit such legislation.

It is unreasonable to mandate, as it invites unnecessary corruption and bureaucracy into what is and is not affordable (specifically the location aspect of it).

The only thing that should happen, if the goal is to lower prices, is increase supply and/or lower demand. The supply can be increased by simply changing zoning to allow for much denser residences.

You’re forcing private businesses to take on contracts that they may not want. Totally unreasonable.

The only way to do this is to zone things certain ways. For instance, pass a law that says any building in a certain area needs to be a certain height and contain n% affordable units.

> You’re forcing private businesses to take on contracts that they may not want. Totally unreasonable.

Regardless of how you feel about this, it can and does happen all the time. New residential highrises in Manhattan don't get approved unless they have a percentage of low-income units.

Indeed it happens all the time, especially in the NIMBYest of places (e.g., CA and NY). The results speak for themselves.

Are new residential high-rises getting built in Manhattan at a rate which is commensurate with demand and keeping prices stable? According to Redfin[0], housing prices there are up 12.9% YoY, exceeding general inflation and showing that the rate of construction is too low.

In CA, we've added additional burdens onto affordable housing which makes them more expensive than market rate housing. A report from UC Berkeley[1] says that regulatory constraints make 'affordable' units 7% more expensive to build than market-rate units. And of course CA has also made market-rate units more expensive to construct, further exacerbating the crisis[2].

This is unsustainable. On our current trajectory we will either needlessly sprawl our way into occupying all unincorporated land (because there's no Planning Department) in the entire country or we'll have tens of millions of people living in tents and camper vans.

[0] - https://www.redfin.com/city/35948/NY/Manhattan/housing-marke...

[1] - https://ternercenter.berkeley.edu/research-and-policy/the-co...

[2] - https://www.builderonline.com/land/local-markets/californias...

I said that’s the better option in my comment. Then you aren’t forcing anything. Just adding levels to the project. But forcing other developments is the issue.

These are the types of regulations that backfire with unintended consequences. Off the top of my head you're going to probably reduce the amount of home builders off the bat. Even if its just upper-end builders, less options at the top of the market will cause high end price increases and then buying down the ladder ultimately raising the price for all housing.

Projects that don't pencil don't get built. Constraints are costs and reduce the number of projects that make sense. There is only one way out of our housing crisis and it's removing constraints to construction. The biggest of those constraints right now is zoning law and the planning approval process that it creates.

Also, risk. It might "pencil" with 10% profit, but have risks approaching ~20% of total. Need to be reasonably sure, or what is the point?

That's called inclusionary zoning and exists in many large markets. There's no evidence that it broadly helps but it does further turn housing developme t into a political pawn.

https://www.mercatus.org/publications/urban-economics/inclus....

If there’s a shortage of luxury housing. The wealthier demographics will buy cheaper housing stock displacing middle and low income. This is what happened in California.

Exactly, if you banned car companies from making more than 100,000 cars a year, you'd soon find that only rich people owned cars and all manufactured cars were luxury cars.

Then if you banned them from making luxury cars you'd still find that the rich bought all the new cars.

The fundamental fix is let car companies build more cars.

This is way more complicated than you think. How do you define what a luxury house is, how do you define an affordable house, can the affordable house be sold to anyone, where does the affordable house need to be built?

Or we could simply make it legal and cheaper to build denser housing.

maybe I'm missing the big picture here, but I don't see why it's actually desirable to have a wide range of incomes within a specific neighborhood. poor people can't afford to shop at {expensive grocery store} or dine at {fancy restaurant}. and wealthy people generally don't want to shop or eat at the places their poor neighbors could afford. if you "urban plan" them into the same neighborhood, now you need two (or more) tiers of every type of business to serve all the residents. at best, everyone has fewer suitable choices of each. at worst (and more realistically imo), most of the businesses continue to serve the wealthier residents, and the less wealthy need to travel away from their "affordable home" to actually get their needs met.

There's a big project in North Cambridge near the city line. The only easily accessible (i.e. walkable) supermarket is a... Whole Foods. Though that's probably the most common chain in Cambridge as a whole to be honest.

But with or without specific affordable housing areas do gentrify and long-term residents don't necessarily like it even if it results in a "better"/safer/etc. neighborhood.

Because you need people to fill a wide variety of jobs and roles, like teaching, transportation, retail, food service, sanitation, etc. that can’t be done remotely. Unless you are planning for those jobs to be equally lucrative as CEO of Megacorp, you can’t build a functional society without people from various socioeconomic strata. Some neighborhoods can get by with shoving off people in those roles to nearby locations, but commuting time and expense is a limiting factor.

I'm not proposing an entire city inhabited by a single income bracket. I'm talking about neighborhoods as much smaller areas, as a rough definition "all the places I can walk to in 10-15 minutes".

I think I see your point though. at a high level, the neighborhood composition could be optimized for everyone to walk to work (wide range of incomes), or for everyone to walk to everything outside work (narrow range of incomes), but not both. or there's the US suburb approach where no one can walk to anything.

imo, assuming you're reasonably connected to work by transit, quality of life maximized by the latter arrangement (homogeneous incomes at the lowest level of organization). even if it's a little inconvenient, I will figure out how to get to work everyday. outside of work, a little inconvenience is the difference between doing or not doing all kinds of spontaneous activities.

Helping people by lottery is terrible. Ten affordable homes are built when 1000 are needed. Those ten get all the benefits, everyone else gets nothing.

Or we could invest in better high density housing and more mass transit and get rid of the lottery nonsense.

Yes. In general, the more costs are added to supplying a product (such as housing), the more luxury versions of that supply are favored over cheap ones. Because the fixed overhead is a bigger fraction when building the "cheap" version,

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