Apartment rents fall as new supply hits market | Hacker News Reader

Apartment rents fall as new supply hits market

wsj.com

245 pointslxm324 comments

For once, this directly affect me. I've been looking for a place since November 2022 in Los Angeles and it's the opposite that I see.

In November, I'd find 4 bedrooms for $3800 (2000+sqf). I thought it was expensive, but someone always got it before me. Now we are in March and I can't find anything reasonably close with 4 bedrooms for less than $4,500. And again, someone is always snatching these before I get them.

Maybe when you average out all the prices it seems to be going down. But browsing through the zill/apt/red/etc. does feel like prices are going up.

... still looking for a place by the way

4br isn't exactly a common scenario in the apartment market. I doubt there are enough of them to even make a dent in overall statistical analysis.

The latest episode of the Odd Lots Podcast (Feb. 27, 2023) titled "Why We Don't Build More Apartments for Families"

> On this episode of the Odd Lots podcast, we explore the hidden incentives and regulations that deter builders from making more family-friendly buildings.

I have friend who own apartments for rent. They have a rule that they’ll never buy large apartments and they’ll never rent to families. Their reasoning was that:

1. Families who rent are likely unstable because, all else equal, a family would prefer to own due to the stability owning provides.

2. It’s too heartbreaking to evict a family.

Just a random anecdote

I just want to point out that, in the US, it is illegal to not rent to families. More specifically, it is illegal to discriminate based on familial status. Whether anyone is actually enforcing that in a particular area may be a different matter.

That's not what the parent comment was saying. They were saying that there is a reasonable explanation to not develop properties that cater to families - e.g. 4 bedrooms. The alternative is that the 4-bedroom that you conceivably might construct would rent out to 4 individuals who would split the bill...which also introduces a whole bunch of other challenges.

Overall point still seems valid - which is there is little financial advantage to renting out a 4-bedroom property and thus a limited supply.

They said “they have a rule that they’ll never buy large apartments *and they’ll never rent to families*.”

The second part is the illegal discrimination.

People get around this by never putting themselves in the position of having to refuse. If, as a landlord, you only ever buy single bedroom apartments and studios, you aren’t going to run into families that need 4 bedrooms. It’s not illegal for the landlord to discriminate as to what sort of properties they buy.

I mean, gp recounted a story about someone who has a policy against renting to families, so so it sounds like they do refuse sometimes. Also, where I live, lots of families live in one or two bedroom apartments.

Whether anyone is actually enforcing that in a particular area may be a different matter.

And whether or not it actually is enforceable is yet another. Who would know if a small landlord passed over an applicant because they had a family? Maybe big landlords could be monitored, but I’ve Had a single rental house for 5 years and I’ve been through 2 tenants in that time, no one could detect any trends in that small sample.

It is weird to force a landlord to take customers they know they don't want. Especially when it comes to renting, where the behaviour of your customers does make a big difference. Looking at my current house, we have 10 appartments, and one family. Guess who is contributing to the noise the most? If I were a landlord, I'd also not take any families.

> It is weird to force a landlord to take customers they know they don't want.

What you call "weird" others call discrimination. Many racist folks didn't want to rent to black people or other minorities bc they "didn't want them". Others didn't want to rent to see senior citizens or people with disabilities.

Protected classes exist for a reason! It is socially optimal to not allow businesses to discriminate against many groups of people.

There's also an incredibly high bar to prove housing discrimination. It's not like all housing applications are reviewed by an enforcement agency and statistical anomalies in approval rates are investigated. Protected classes are really only protected from the most blatant forms of discrimination.

Is the opposite disallowed in the US? In Germany, we have plenty of housing coops and state run builders that e.g. discriminate against single (young?) men. I've tried half a dozen of these not-for-profit entities before I found one that said "we don't care who you are. If you want to live here and you can pay the rent, we're fine with it".

The "no discrimination allowed" is often just "no discrimination allowed that we don't approve of".

one day maybe all groups will be protected groups

Sure, I get it. However, as a person with a disability, I can tell you one thing for sure: I much prefer knowing that someone doesnt want me. Imagine someone was forced by law to take you as a customer, but doesn't like you at all. Can you imagine how you are going to be treated? Doy ou really think insisting does improve things? I very much doubt that. I very much prefer living somewhere where there is no hate towards me.

So, given that personal observation, I really ask myself: What good does it do to force people to cooperate with humans they dont like?

Imagine someone was forced by law to take you as a customer, but doesn't like you at all

I don’t care if the pharmacy clerk likes me or approves of my lifestyle, but I do expect them to fill my prescription even if it’s against their feelings or religious beliefs. I don’t see how a fair society can exist without anti-discrimination laws.

Your comparison isn't really appropriate. In a shop, I can walk in, get my stuff, and walk out in a few minutes. If you rent, your landlord will always be your landlord, and there are plenty of opportunities for ongoing conflict. As a person with disability, I know that I will loose if someone picks a fight with me.

Maybe you should try to put yourself in the position of someone with lower priviledges before blindly insisting that anti-discrimination laws are all we need to fix things.

They don’t suggest they actually fixed things, just that they were necessary. In a true profit maximizing meritocracy many disabled people would not be able to survive because nobody would employ them etc. The degree of accommodation required by law isn’t about the disabled so much as the issues should people be allowed to systematically exclude them.

> In a true profit maximizing meritocracy many disabled people would not be able to survive because nobody would employ them etc.

Just give them money?

Giving people money isn't profitable

Duh. Neither is going to the cinema or displaying paintings in your living room.

You can see charity as a form of (possibly conspicuous) consumption, if you will.

The person I'm replying to replied to someone discussing a profit maximizing entity which is the context. I understand there is value to other behaviors but corporations don't

Corporations are supposed to do whatever their shareholders want.

The default assumption is that shareholders want to maximize profit, but shareholders can also want different things.

In any case, even the most ruthless capitalist society imaginable is not made out of corporations alone. Corporations are just a legal shell. People work for them, people own them, people buy their products, etc.

In a true profit maximizing meritocracy some disabled people might not get a job (though they still might, at lower pay commensurable with their productivity). [0]

But there's nothing stopping people from (a) charitable giving, or (b) enacting laws to give tax payer funded assistance to disabled people.

(You might argue with (b), but you can't really argue with (a).)

[0] Compared to eg someone like John von Neumann, I'm an idiot, but I can still find work even with my comparatively weak intellect. I just can't expect as much pay as John von Neumann would warrant. Of course, that pay might in principle be low enough that people can't survive on it. That's where charity and/or public assistance comes in.

That's the default assumption because I'd you analyze the behavior of corporations, that's literally what they do. It doesn't matter if they could do other things. The fact is that they don't

People work for them because generally they don't have a choice. Not everyone has decision making power and 95% of workers need to follow what their boss says. Most Americans can't lose their job because they don't have savings, they barely make enough to survive

You’re actually arguing for the opportunity to be excluded from the housing market entirely? Or you can’t imagine that would happen, and you’re just in favor of being forced to pay more for worse housing? Because we don’t have to do this as a hypothetical with spherical cows - it used to be legal, for all kinds of disadvantaged groups, and it wasn’t better for them. Women, black people, parents, people with criminal histories, people who were unemployed, or Chinese, Irish, Jewish, etc…

So, maybe you should stop assuming that you are the only person in the conversation who knows what they are talking about.

Sounds like in at least 6 states, your pharmacist can indeed not to give you medicine?

https://www.mtsu.edu/first-amendment/article/2152/religious-...

It's not a matter of hatred in the vast majority of the cases, but convenience and profits. In a society where discrimination on the basis of disability is permitted, you may find that as people with disabilities cannot get a taxi or get on an airplane: the disability makes such a service more expensive to run and capitalism and profit maximization eliminates it naturally, no hate needed. Perhaps at some point an enterprising entity decides to break into the market of providing services for people with disabilities, at three times the cost of a normal fare. That would be somewhat better, but still not ideal.

I know this would happen because I moved from a country without anti-discrimination laws to a country with. I encountered more people on wheelchairs in the public during my first month in the latter than the previous 20-something years in the former. In the absence of anti-discrimination laws, all avenues for participation of people with disabilities in the society, even things as simple as going grocery shopping, was all but non-existent. As far as I know it still is like that in the old country. Not because people hate everyone needing a wheelchair: people are reasonably nice and thoughtful in the old country too. But in the absence of laws forcing accommodations, no accommodations are made, with obvious results.

> I moved from a country without anti-discrimination laws to a country with

Maybe the country you moved to was also rich and with a functioning free-market economy?

Capitalism naturally incentivizes entrepreneurs to seek and serve niche markets while doing everything to accept and accommodate potential customers.

In contrast, planned, state-run economies don't care in the slightest and just do the bare minimum required by law. Here is your job to jump through the hoops and manage to give them your money.

> Maybe the country you moved to was also rich and with a functioning free-market economy?

Yes, but the economy of the old country, while poorer, was not exactly state-run. All grocery stores were private businesses created by entrepreneurs. Same with taxis. Yet neither accommodated people with disabilities. It was not like grocery stores were owned by the government and those who ran them were disinterested government employees. They were private businesses who made their own decisions and still they did not accommodate people with disabilities.

I find it strange that people seem to think serving people with disabilities at "three times the price" is reasonable. In this so called free market economy, disabled people likely wouldn't have money to pay for those services because nobody would employ them. It would also likely be much more difficult for them to start their own businesses. There would be essentially no customers, so it wouldn't be a profitable business model.

Regulation is important, regulation literally creates and shapes the markets and allows people to participate in society where they would otherwise be unable to

Everything has a cost. Serving special needs may costs more. A rich society can decide and afford to cover that cost and that is perfectly fine. A developing economy on the other hand, may decide to impose that cost on its businesses, thus unwittingly weakening itself.

Regulation is not free and doesn't magically make our wishes come true. It just moves costs around, hiding them and often preventing the free market from minimizing them.

There is no such thing as a free market without regulation. Governments create money, they regulate it. Without the regulation of how business is conducted and how things are transacted there would be no market, do you realize that?

Who said anything about a complete lack of regulations?

Generally in rich countries, it is not "the society" that covers the cost. For example, government does not give money to grocery stores to create ramps and accessible bathrooms—they fine the stores that don't have them. That's the core of accessibility regulations in rich countries, like ADA in the US.

The difference between rich countries, the government forces the businesses to accommodate people with disabilities at the cost to the business. In poor countries, at least the one I came from, they leave it to the businesses to make that decision themselves. The result is that in rich countries are much more accessible than poor countries.

I don't know if your model (where "the society", which I guess means the government pays for this stuff) is tested in any jurisdiction. If it has, I would appreciate a link to an article about the results. But the model where businesses are forced by regulations to cover the costs works very well, as evidenced by how accessible US is thanks to ADA.

The money always comes from the citizens, no matter who pays. If the government pays - it is taken through increased taxes. If the business pays - it is taken through increased prices. But it's always the people's money - lifted from you and me.

The difference is whether the whole society pays (via taxes or higher overall prices at the till because of the higher cost of doing business) or the person needing the extra service does. In the countries without anti-discrimination laws, those in discriminated groups (like people with disabilities) tend to have a much lower quality of life—they cannot get hired, even if they get hired they earn much less, they cannot access services, even if they can they must pay much more. In the societies that have these sorts of regulations, the whole society bears the extra cost, so everyone's individual burden is lower and manageable.

My point still stands—unless the society via regulations forces businesses to accommodate groups like people with disabilities, those groups will be excluded from society, as they are in my old country.

Because you could end up with a scenario where there is nothing available.

It would only be weird if we did not live in a society. We as a society have decided it is wrong, for example, to not hire someone because they have a disability and it would be an inconvenience to accommodate their disability, or to pay them less to account for the extra inconvenience, or to charge people with disabilities more for services (such as a plane ticket) because of those extra costs or inconveniences. We as a society have made similar decisions about treatment of people based on their ethnicity, gender, and many more criteria, including family status.

Keep in mind the accommodation has to be reasonable - which is, largely intentionally, left up for the courts to decide on a case-by-case basis.

That’s textbook discrimination. The reason it is banned is because people have a right to housing regardless of familial status and business owners desire to avoid inconvenience.

Its often surprised me how anti-children many of the people in the West are. Children make noise, children are the future of your society. You make it difficult for families to live and children to be children and then are surprised when demographics are getting worse with no young folks. Interestingly, in India, the discrimination is the other way round and bachelors and unmarried folks find it harder to rent. Here there is no protection against that and a lot of listings, especially in good neighborhoods will explicitly specifiy, families only. People will conjure up parents and bring them over for a few months sometimes to make it look like they are a 'family'.

It's not just the west. It's even worse in Chinese cities, for example. Maybe has something to do with age demographics.

I don't mind children, but I prefer to not live around dysfunctional families that make the children run their household. People who say stuff like "children noise is the music of the future" have never lived below a family with children that really made noise (or I guess maybe they have, but they've lived in a bunker). I have, and you no longer live alone, you live with the constant noise that's sometimes higher, sometimes lower, but it's never gone unless you get ear plugs.

I'm fine with children, but they need to have adults that reign them in. That's a coin flip, so I wouldn't ever move anywhere again, knowing that families with children live above/below/next to me.

Full ACK. However, we are quite a minority. However, parents dont want to hear about their responsibilities...

ACK==acknowledge?

I'd argue the parents of said children are anti-children, because they are living in an apartment building without any possibility to play for the children nearby. There is nothing they can use outdoors to get rid of excess energy. Parents could have found something a few kilometers away, but apparently did not care about their chldren. I dont see why I should be especially understanding if the parents are unwilling to live somewhere where their children can have fun. The fact remains that they are very loud and parents apparently are bad at parenting.

> I'd argue the parents of said children are anti-children, because they are living in an apartment building without any possibility to play for the children nearby.

What do you have to say about the fact that apartments are the only option?

It feels to me that you're trying to depict not living in a nice suburban villa as subjecting children to abuse, as if this was a whimsical decision of egotistical parents.

Meanwhile, moving to the suburbs is a luxury that's way out of the reach of working class families, not to mention the fact that outside of the US it's outright unthinkable.

And all the time wasted commuting is not considered abuse why?

To me it reads you're claiming "let them eat cake", followed up by "not letting children eat cake is anti-children."

I know for a fact that child-friendly-suburbian appartments are actually cheaper then the city-center-appartment they have now. But you can go on and assume all sorts of bad things about me, that doesnt change my opinion about egotistical parents.

A proper city has plenty of places for children to play even in its center. But maybe I'm just an outdated european.

You seem to be living in a proper city, good for you. Move on, there is nothing to see here.

Most cities aren't proper by that definition. So congrats on being the exception but that's not really helpful to the broader discussion.

> Most cities aren't proper by that definition.

OP is not the exception. I have at least two playgrounds in a 300m radius. Perhaps I'm lucky but I don't recall ever living in a place that didn't had at least a playground in walking distance.

Might I strongly suggest, as a person who recognizes outsized emotional reactions to sound in myself… you may have misophonia? Maybe address that for yourself if that’s the case, because it’s bound to affect more than your relationship with families living in your midst.

Are you suggesting that everyone who doesnt approve of aggravating families is actually ill? Seriously?

I’m suggesting that there’s a name for feeling outsized emotional reactions to noise (whether particular sounds, or in general). I don’t know if that applies to you, but it helped me learning there is a word for it and that other people experience it too. In no way was I trying to suggest anything negative about you.

> bachelors and unmarried folks find it harder to rent.

Muslims as well

Your argument would be better if there was better, more available social housing. As there isn’t, and shelter should be considered a human right, discrimination must be discouraged.

Objectively it’s not weird where the law contradicts what you might prefer. If you want to discriminate you can discuss that without characterizing what’s normal or weird. But I suspect that doesn’t make you sound like a very good prospective landlord.

Some landlords are stupid enough to put it in writing.

You are allowed to discriminate when renting out your rental house assuming it’s a single family house and you’re the owner and not using an agent (under federal law, maybe not under state). So it’s not a lack of enforcement against small time landlords like you, it’s that it’s probably not illegal.

> it is illegal to discriminate based on familial status.

I think the point was why you can't find 4 bedroom apartments for rent.

People don't want to rent to families, they don't buy 4 bedroom apartments and they don't rent them. It's not that they actively discriminate against families, they just don't buy properties that would cater to families.

I am not a landlord and probably won't ever be one, but looking at it from a financial standpoint, it seems smarter to have 2 2br 1ba apartments for rent than 1 4br 2ba apartment. They would take up roughly the same space, albeit maybe with smaller rooms, but 2 $1500 incomes would provide a more stable income than 1 $3,000 apartment if for no other reason than it is unlikely both tenants would leave at the same time.

Worst case you drop to $1,500 for a month or so instead of losing all $3,000 income while you wait for a new tenant to appear.

> They would take up roughly the same space

Each apartment has 1 bedroom, 1 living room, 1 entryway.

Because you are maintaining two boilers, heating systems, plumbing, etc.

While you’re generally correct it’s important to note that the Fair Housing Act’s discrimination provisions don’t apply to all housing so it is actually sometimes legal to discriminate based on familial status. It’s probably not relevant here because we’re talking apartments it seems (although a 4BR is a huge apartment).

Huh, TIL. https://rentprep.com/blog/legal/landlords-refuse-rent-famili...

People rent detached homes to families all the time. My sister does it and I live next to a family who rents a detached home. Why would the viewpoint of owners be any different with renting apartments to families??

Detached homes are more isolated noise-wise, that's often not the case in apartments. If you rent out apartments, you want low-trouble tenants, not someone you might get a lot complaints about. That's also why many try to exclude people with dogs, they don't want to deal with dogs howling all day and neighbors complaining.

Additionally, families can be very stable tenants but that is a negative if your city has rent control. It is better to have turn over to stay at market rates.

I have the opportunity to build soon and it will all be 1 bedrooms. If rent control wasn't a thing I would gladly build for families. That is the city I want to live in.

Edit: You can downvote the truth all you want but it is still the truth.

While I understand their argument, on a social point of view this is utterly immoral.

It would be like saying "I do not want to rent to African Americans because they tend to be engage in more petty crime than White American people." And we all know there are very sad yet true stats to prove this.

Off topic disclaimer: Please do not read my comment as racist, as it is markedly egalitarian in nature: discriminating against families is still discrimination and is immoral and should be illegal.

What I am saying is that the social mesh in the United States is so fcuked up that many minorities tend to have a lower quality of life and thus have to resort to unsavoury ways to pay rent. The problem is structural and political, not them. See The Wire for more details.

Let's discuss the rent problem, not my example to prove the immorality of it please.

While that makes total sense, I think the market has been changing a lot. I suspect many more families are renting now where they might not have previously. Owning a place has become more difficult in many areas of the country.

Not sure of the numbers though. Just a feeling, could be totally wrong. Would love to know if there is data for this.

> person owns apartments for rent

That's problem right there.

Because families want homes with backyards.

4br are often listed as 3br with an office or similar, but at that point you’re probably looking at renting a house.

But if I want to live in a walkable downtown location, houses aren't usually an option either.

So you're in a niche market that may behave differently than the wider ones.

(I have no idea if that's the case or not BTW)

It's kind of disappointing how much pigeonholing sibling commenters are doing in this thread. If I had kids, I sure as hell wouldn't raise them in the suburbs. Less people are having kids in-part because more people live in cities in NA and the calculation is made that not only is it unaffordable to raise a family, but there's no availability either. The suburbs would be my choice if I already had the kids and ran out of viable options to house them where I live, in an urban area.

People planning to have kids want to live in the suburbs because the U.S., in its infinite wisdom, funds schools from local property taxes. If you live where there are nice houses, you get to send your kids to nice schools.

In many cities some of the most expensive real estate is in or adjacent to the downtown area because those areas were built before cars and so they’re walkable and appropriately dense. Since they are rare now and illegal to rebuild, the value of those neighborhoods is quite high and they are often considered the nicer homes. Architecturally there is little doubt. Only a custom build can compare.

Most in the suburbs don’t live in a “nice home”. There are more expensive homes dictated by tiers where you have more square footage and maybe a pool or something but these homes aren’t particularly nice either and aren’t well designed in the interior or exterior. Typically this is because there is too much space to do anything neat or useful.

Of course you’re right that many states fund schools through property tax and why I’m bemused by Republican efforts to initiate school voucher programs because based on typical policy relying on home ownership and property taxes to fund schools “keeps the undesirables out”. Once you go the voucher route you can’t do that anymore. Of course you can say well they’ll charge extra fees and such, but that’s assuming that families in the suburbs can afford extra monthly payments on top of everything else and I just don’t see it.

On the other hand vouchers can be a nice tool. Why should someone be forced to go to a bad school because they can only afford rent or a mortgage in the cheaper part of town? Maybe every kid gets a voucher to attend any public school they wish and the schools have to adjust. Finding a way to create competition within the public school system should be examined. Districting and property taxes for schools are probably regressive, especially for a child who has very little agency in the matter but has the most need.

Houses in the suburbs end up costing more than they contribute in property taxes. I'd guess though that it's a possible inequity that the suburbs pay directly into local school in those suburbs, and more efficient housing developments subsidize their infrastructure for them instead of funding schools.

The U.S in it's infinite wisdom is great at siphoning money away from people who have the least of it.

4br are very common in specific markets e.g. college towns, but yeah in professional areas probably not. Families needing to rent will probably look for houses more than apartments.

> 4br isn't exactly a common scenario in the apartment market.

On the builders side maybe not, because it's less profitable to build a highrise or large block with few but large units that have low churn and so less opportunities to raise rent.

On the demand side however? Completely hot market, because families want their children to have separate rooms (a fact that has been correlated with learning success even in 2006 [1], and most obviously during the pandemic years). A 3BR is barely enough for a family with two children, but now with the rise of home-office/fully remote work you'll need a 4 or even 5 BR simply to have enough room.

[1] https://taz.de/Enge-macht-dumm/!409005/

The rental market varies considerably from market to market. Where I live, there seems to be no end in sight for rental increases.

I own a few rental properties. During my last renewal cycle, I kept rent flat and every single tenant renewed no questions asked. A friend was competing with 30 other people for a townhouse rental for them and their two kids.

Hey made this account to share my experience…

My wife and I have been looking to buy something in LA and we’ve been outbid by $100k+ twice already.

The LA market is simply insane whether you’re buying or renting. The only “deals” I’ve seen are on properties with clear flaws (e.g. poor location, bad floor plan, etc.)

I’m not sure where you’re looking exactly, but all I can do is wish you luck and say yes, LA real estate is tough.

Find something with a flaw that can be mitigated for $100k maybe. Like a foundation issue or something.

from personal experience... i would be careful with that idea. at least in NYC anything that seems like it surely cant cost more than 100k will cost you 250

Yeah, you really need to be certain on the cost.

I've seen many with gotchas. Pictures look fantastic, first visit looks great, and then on the lease it says this is just the model unit. The actual unit available is the one facing the freeway.

With these prices I'd love to buy, but it takes a while to gather the deposit with a new job. If all fails, orange county it is.

Wish you luck as well :)

Is Orange County any cheaper?

I think it is less about price and more about availability.

The Metrolink has been fairly-improved and more lines are actually being built to service more area. If everything you need to do is near one of their stations, I'd try to find cheaper housing out in an area close to one of those stations (Riverside, San Bernardino, Fontana, Corona, etc.) I lucked out in that my job and home are very close to Metrolink stations, and if I'm on my e-bike I can just use the bike trail in the Santa Ana river and go home/get to work that way. I still drive because it is usually faster (and cheaper) than taking the train, but trains are an option.

Ha yes, always the freeways! That’s such a common thing 9 times out of 10 something looks too good to be true, it’s the freeway driving down the price.

I grew up in OC and it’s not bad, depending on where you are exactly and what your interests are.

Honestly, I don’t blame people that get up and leave for another state. But silly me, I’m not willing to leave my friends and family (and of course the weather).

I bought a fixer-upper house in Santa Clarita last year. If you don't mind being 20 minutes north of the valley it's a pretty awesome place and the prices don't bite (as much) like the rest of LA.

there's nothing "insane" about renting in LA

I see 1 bedroom apartments for $2k-ish everywhere. 2 bedroom apartments for less than $3500. that's just normal if not below average for a major metro.

Dunno that seems pretty nuts to me. I live in Australia: known to have one of the most unaffordable and bonkers property markets in the world, and I live 1.5km from the centre of Brisbanes CBD, and pay $2800 for a 3/2/2 townhouse with a backyard…

Different markets have different realities. People have to compare their relative markets.

I live in Israel near Tel Aviv. Your $2800 (I'm assuming AUD) is 10% more than my mortgage. I live 10 minutes from the beach (and downtown), 2 minutes from a forest, and have a 5+.

If your value was USD then everything I just wrote holds true fro Tel Aviv, one of the most expensive markets in the world. OPs original post would get him a fantastic place here ~15 minutes from the beach and 15 minutes from work.. on foot. But salaries also don't match that.

That sounds perhaps normal for New York or California metros. But even in Portland, which is not renowned for it's affordable housing options, a two bedroom apartment downtown can be had for $1800/mo, and a three bedroom for $2800/mo.

I respectfully disagree. LA is one of the least affordable metros when factoring in income. It gets even worse when you start looking for a place with a specific commute, washer/dryer, adequate off street parking, etc.

It's not. Median rents in NYC is over $4k. LA is nowhere near that.

"Factoring income" is also a non-sensical qualifier for how expensive a metro is. Using that measure then Miami would be considered far and away the most expensive metro in the country.

> I’ve seen are on properties with clear flaws (e.g. poor location, bad floor plan, etc.)

How do you determine these?

Look at where the house is, and look inside the house, respectively.

some examples:

For location it’s common for a property to be in a generally desirable area, but situated right next to a freeway (noise and bad for health) or located right on a busy street (not quite as bad as a freeway, but in certain cases it could be difficult to even get out of your own driveway).

For floor plan, the biggest offenders I’ve seen are configurations that limit the usability of the space.

Narrow bathrooms and kitchens that feel almost claustrophobic. In one case I saw a bathroom that was barely wider than the toilet! I’ve seen kitchens that two people cooking would barely be able to maneuver around. I’ve seen bedrooms that are basically closet sized, which is strictly worse than just having one less bedroom. I’ve seen large lot sizes, but half the lot is on a slope and not able to be used as a backyard.

This could be observation bias because the above-median listings are going to sit longer. So you scroll through, and that's what you see. The at-market or below-market listings will be quickly filled and removed. The same thing happens in the for-sale market too.

The same thing is true for order books for stocks. Anything that matches the buyer and seller at an agreeable price is fulfilled. The people selling too high or bidding too low sit on the order book longer.

Obviously this is one stranger’s uninformed opinion, but I do believe this situation will change faster than people would think.

So much money has been put into real estate as an investment due to unprecedentedly cheap debt over many years that it’s only beginning to unwind now.

Prices are falling, at least regionally. I don’t see how the real estate market can support small falls without a full crash, as unless there are substantial gains each year, landlords are facing mounting adjusted losses due to interest rate rises. Given the amount of leverage in real estate, most won’t be able to weather this storm without becoming insolvent, and those that can won’t be willing to do so.

tldr; I have high confidence this is just the beginning of a severe correction. (Again, just an armchair observer with an opinion).

> I don’t see how the real estate market can support small falls without a full crash, as unless there are substantial gains each year, landlords are facing mounting adjusted losses due to interest rate rises.

In the US at least, this is unlikely to happen as mortgages are almost all fixed-rate. In fact, with inflation pushing up rents and reducing everyone's relative amount of debt, it's probably a great time to be a landlord.

I think prices are mainly going down in smaller areas where rents went up A TON (which is something like 30-40% of the country by population).

This is because the amount of new units deployed was staggering.

In some towns in the Texas Triangle, there were literally more new units delivered this year than existing supply.

Doing something like that in LA or NYC would be absurd, given how much existing supply there is... Nevermind the Nimbyism.

And yet, Orlando has something like a 1/3rd increase in supply coming. So there are some big cities that are exceptions.

If you're in a place like NYC or LA or Chicago - where the increase in supply is like 2% - don't expect much relief from new supply...

Where do you determine that on a city level? Is there an article

https://www.reddit.com/r/realestateinvesting/comments/11dnrl...

There's a few companies that sell data on stabilized units, units under construction, and units expected to deliver in the year.

I don't know of anyone that makes the data public - but maybe someone else does???

Different markets can behave wildly differently. Not just different states/cities but different kind of homes too (appartment vs single family, size, standing, etc).

So talking about the overall market always hides big differences in each market.

Housing prices are very much priced based on supply and demand. When supply is constrained, for whatever reason, prices go up.

You have a couple things happening right now that are constraining supply:

1. Building has never fully recovered from the last housing crises.

2. Banks own way too much real estate and that leads to a level of price control if for no other reason then they can afford to be patient.

3. Speaking about the USA in particular, there is a lot of NIMBYism.

If you want to decrease prices build more. Don’t worry if it is low income or high income, just build more and prices will go down. It is unrealized revenue to let apartments sit empty and most private sellers can’t afford nor want to keep paying property taxes on a home that won’t sell.

I’d add that building more is not the only solution to increasing supply: some societal and zoning changes, like bringing back boarding houses would make a meaningful impact on supply. Apparently 1/3-1/2 of urban dwellers either rented a room or were a boarder [1] in the 18th century.

[1]https://en.m.wikipedia.org/wiki/Boarding_house

Seeking to return to the living conditions of the 18th century is a bold policy position!

Well, yeah, what century's living conditions does homelessness correspond to?

19th Century Victorian London - the time of coffin beds and T'penny hangers (hard benches with a rope to hang your body across as you slept sitting upright).

https://www.theguardian.com/artanddesign/2015/jan/02/homeles...

https://www.jack-the-ripper-tour.com/generalnews/the-homeles...

I needed a visual, and this site[0] has a picture of a two-penny hangover. Which looks to be just a rope hanging over some hay.

[0]: https://www.historic-uk.com/CultureUK/Two-Penny-Hangover/

That's the one .. there was a whole range of "sleeping" accomadations for the homeless in Victorian London and I muddled two together .. situp benches & a rope to drape over - my bad.

Welcome to the literal "Dickensian Aspect" ref'd in the fifth season of The Wire.

It beats living in a tent below an underpass.

There is wild huge gap between what zoning enforces and "living conditions of the 18th century". You can even ease on zoning while creating better living environment then currently exists.

.....or how millions of college students live every day! Which....is the preferred living situation one year, and inhumane the next????

Many people will happily sleep in a warm, safe room instead of a tent in a park. Even if they have to share a bathroom.

Airbnb nicely fills the modern day boarding house market, although it's slightly more expensive than the equivalent 18th century room for rent.

Slightly? Not where I live. The fees are always insane. Like cleaning fees that are 50-100% of the nightly cost

I neglected the /s, oh well, I'm in complete agreement with you :)

That's pre-industrial revolution. No way this makes sense today.

Beats sleeping in the park.

That's effectively the same as "build more" since you're adding additional housing slots to the market.

This kind of housing is still common in NYC, mostly in Queens. It’s all under the table and obviously illegal, but it’s the most affordable option in a prohibitively expensive city. I would say most are run by slum lords who are not dealing with tenants fairly in someway, for example price gouging or prejudicial application processes (no Muslims, must be Japanese, must speak Spanish, etc.).

The city has tried to squash these because they’re dangerous. During the last major floods hundreds were injured and many died due to these basement boarding units flooding.

I agree with sibling posters when I say making these more prevalent would be a step backwards. Source: I used to live in one!

Most people (on this website) likely have lived in dorms at school, which are not too different than a boarding house.

There's nothing inherently unsafe about boarding houses, and they're clearly filling a market need. Why not regulate them for safety and fairness?

> If you want to decrease prices build more

Estimates put 60,000 vacant units in San Francisco.

What number of vacant, newly built units do you believe will actually bring prices down?

https://www.sfchronicle.com/realestate/article/SF-Victorian-...

https://www.kron4.com/news/bay-area/61000-homes-are-empty-in...

In my experience builders build luxury condos and apartments that are priced the same as the overpriced rent rate standard the city is at right now. Last I checked new builds were at 3.5k/month for a one bedroom apartment in the city. Really great apartment, don't get me wrong, but not sure why people keep beating the "if you add more supply, the price goes down" drum, it doesn't seem to hold true in reality.

> "if you add more supply, the price goes down" drum, it doesn't seem to hold true in reality.

Plenty of empirical, academic studies show it does hold true. See: https://www.theurbanist.org/2021/06/02/new-round-of-studies-...

But the numbers matter. Adding a tiny bit of supply is better than no supply, but won't help as much as a lot of supply.

Sure, sometimes, yes, but like I said, the "build more and prices goes down!" is just too simple. https://shelterforce.org/2020/06/19/more-housing-could-incre...

It also distracts from highly effective solutions, such as social housing:

https://en.wikipedia.org/wiki/Public_housing_in_Singapore

https://www.npr.org/local/305/2020/02/25/809315455/how-europ...

Giving too much credence to an oversimplified "supply / demand" argument in the housing sector, which describes a human right, means that as soon as you mention socialized policies, people start complaining about "polluting" a "pure market supply / demand curve," despite the fact that supply / demand is just too simple a mechanism to describe a core human need, shelter. (It's such a core need it's literally the first thing one should seek in an lost-in-the-wilderness emergency, above food or even water).

Anyway, what's it gonna be then? 100,000 new units at 3k/month? 200,000? When will the price automagically come down? And why is that better than the government simply buying out vacant units and giving them to the homeless, for starters, and then building blocks of housing at set rates?

Prices will come down when we build many millions of new homes. Sadly we are structurally unable to do it and unwilling to fix our regulatory environment to make it possible.

Obviously that need is not uniformly distributed across the nation. California is probably around 4 million homes short all on its own.

Sounds like prices would also come down if the government built or bought housing and then set the prices.

Seems more certain to me than waiting for market forces to decide it's gonna be profitable to build 4,000,000 units.

Why pick only one? We need to reduce barriers to construction, regardless of who is pursuing it.

When builder's remedy rules kicked in this month for California cities that didn't meet state planning requirements, projects got filed for upwards of 10,000 housing units just in the first week alone. It would have been higher, except that some cities tried to game the process even more by foot-dragging and so there are ongoing lawsuits to declare them out of compliance.

Current market forces would love to build truly astounding amounts of housing. The problem in the way is NIMBYism and shitty local zoning and permitting.

10k sounds high to me. I'm aware of about 400-500 submitted so far in the SFBA (of which I filed 20), and I personally know folks preparing a total of another 700 or so. Did you find a comprehensive tracker with higher numbers?

There's a bunch in SoCal, but their non-compliance kicked in a little over a year ago.

Santa Monica was about 5k units by itself. That is a 10% increase in the city's housing stock. There is so much pent up demand and the government and NIMBYs do everything to prevent new development.

There was a four year period in Santa Monica where a grand total of 12 multi family units were permitted. [1]

1. Page 14 https://scag.ca.gov/sites/main/files/file-attachments/santam...

Ok, but that's southern California which became vulnerable a while ago. The post I was replying to suggested there were ten thousand in the Bay Area based on the recency of vulnerability.

> Sounds like prices would also come down if the government built or bought housing and then set the prices.

Yes, if the government built literally millions of houses, then prices would come down.

That costs a bunch of money though.

Instead of that, we can get private developers to build literally millions of homes, if we just made it legal to do so.

We can get all of that for free.

> than waiting for market forces

There is no waiting here. Just make it legal for them to do so. Stop preventing them.

Yes, if we make it illegal for private developers to build millions of homes, then they won't do that, because it's illegal.

Why would we spend government money on a problem that private money is capable of fixing?

Doesn't seem like you've read the article:

https://archive.ph/w29ut

Look if the government offers to give me a free house I wouldn't say no, but the NIMBYs who oppose free market construction because it will cause a shadow on their zucchini garden will equally oppose government construction for the same reason.

I get that social housing is something you're particularly fond of. But in this case it would be enabling the bad behavior of NIMBYs. Why do you want to bail out people who are already rich with taxpayer money? Seems like the opposite of fair.

I just looked over the article and the referenced papers and this is at best dubious. The presumption of the skeptics are that the housing is a closed system as opposed to outsiders moving in. They also don't look at second order causes or effects of the policy and the feedback cycles. Also these models in the linked papers are descriptive without controls, applied upon the data as eisigesis.

What might be a better analysis would be divided cities such as these https://en.wikipedia.org/wiki/List_of_divided_cities where there is otherwise free travel and look at the separate policies and see if the hypothesis can be supported without using neoclassical models - because they definitionally demand the conclusion to be supported.

That's the real neoclassical critique - the framing of the analysis excludes confounding factors and then attributes price movements to exist within the confines of the model which forces the conclusion of the presumption of the analysis.

For instance let's take this paper linked in the article:

> I find that for every 10% increase in the housing stock within a 500-foot buffer, residential rents decrease by 1%.

https://blocksandlots.com/wp-content/uploads/2020/02/Do-New-...

Because the 57-page analysis always presumes new building supply will definitionally affect price their only job then is to find out how much and why.

They don't take the time to do say, instead of new building permits, a random scattershot around the city and compare results, or to apply the perimeter model to every possible combination and then demonstrate the effect has significance with respect to new construction through exhaustion. That's taken as presumed.

The fundamental assumption is never demonstrated and no baseline is shown. 100 years ago, Pittsburgh, Baltimore and Cleveland were more expensive than San Francisco, Los Angeles, and Miami. The reason those positions have changed CAN be explained by these closed system supply and demand housing models in the same way that the Christian Bible has a logical working model to explain hurricanes.

Also given that the author gives interesting reasons for a decrease in price - such as the noise and hassle of a large skyscraper being constructed across the street, or a decrease in the view from the high rise, it's hard to say that even that paper supports the overall idea of "more supply is lower prices" but instead "less attractive units yield lower prices"

> outsiders moving in

That's just the demand side of "supply and demand". You can lower housing prices by either:

Increasing supply

Decreasing demand

For example Detroit decreased demand by having all their automobile manufacturing jobs move overseas. Now Detroit is relatively cheap.

But obviously, most state governments do not view killing off jobs as a desirable solution because it shreds their tax base.

If you want your state to prosper, you want more jobs, and that means you need more housing for the people working those jobs.

The NIMBY "solution" is always to say that the housing should be built another city over, and that's why we have housing crises and ridiculous commutes.

Again, this is all way too constrained and that critique suffers the same problem.

If we used that as advocacy then we should steamroll Central Park in Manhattan and replace it with apartments. That certainly would lower the prices in the same way that demolishing Stanford and putting in apartments there would.

The narrow vision of "supply and demand" ignores the obvious problems in those examples because it cannot accommodate for things outside its narrow scope.

If Central Park was steamrolled and prices dropped, then the model would be hailed as predictive of the price drop because the supply increased. It doesn't see the park and doesn't understand the reality.

It also ignores say, how the quality of public schools can affect housing prices, access to, speed and reliability of mass transit, recreational and cultural areas, cleanliness of the streets and the unhoused, perception of crime, availability of parking...

These important aspects all get ignored. Deciding policy without them is disastrous

The behavior of the market is complicated and new buildings with an increase in supply doesn't guarantee a price reduction. In practice, that should be sought through market regulation and policy - controlling of airbnb units, or units sitting idle as investments, or being withheld from the market ...

Those problems do not magically fix themselves and as you pointed out, self interested actors in a free market did not make 1,000 flowers bloom in Chattanooga or Cleveland. There's consequences for basing public policy strictly on neoclassical economics and pretending like nothing else matters.

Intentional holistic policy like they do in Amsterdam or Copenhagen is a good counterexample. Look at those places in the 1970s versus today.

We need more housing and lower prices but doing the first does not guarantee the second and the second can happen without the first. They're related but mostly independent problems that need separate attentions.

> The behavior of the market is complicated and new buildings with an increase in supply doesn't guarantee a price reduction. In practice, that should be sought through market regulation and policy - controlling of airbnb units, or units sitting idle as investments, or being withheld from the market ...

I'm down with taxing needlessly vacant houses to encourage them to be sold or rented out. I think a Land Value Tax would help tremendously.

But that's not a solution alone. San Francisco has created many more jobs than it has built housing units for, and the only way to make up that shortfall is building more.

To put it simply, you can't house 100 new workers in 1 apartment no matter how much you regulate AirBnbs.

That's reasonable and I agree.

Of course, you also won't house 100 new blue collar, lower-working class, or entry-level families in 100 expensive McMansions or luxury condos either. Because they can't afford it.

But if that's all the builders want to make for the profit margins, and that's all the NIMBYs and zoning regulations will allow, that's what we get. Not just in the wealthy Bay Area. You see that in parts of the country with much lower median salaries.

It's a difficult, multi-faceted problem. "Just let the market sort it out" is a markedly overly-simplistic solution. One that doesn't work well if at all except for very simple problems involving simple fungible commodities with a wide supply-side availability. Real estate obviously doesn't fit that description.

My real advocacy is we should use the same level of eminent domain effort we took when we cut cities in half to build freeways out to winding suburbias full of giant malls to center life around driving and transform the cities again.

It takes a lot of bravado and gumption to seize control of destiny like that and I think Americans at least have collectively lost that kind of imaginary.

The modern apartment buildings are endemic of it. They are the closest thing you could get to the Jetsons; 30 feet of parking with the first floor of residency literally in the sky. They look like concrete fortresses with iron bars protecting parked cars. The only way in and out of the urban prison is to use your car as a key. If you're on foot, it's some side door.

These things are extremely hostile to community building and offer the same clinical separation and isolation narrative of the redlined suburb of the 1950s. It's the lonely by design individualist approach to cosmopolitan living and personally I find it repulsive.

Better, friendly buildings, fewer cars, more green space, this is all possible. Tokyo pulls it off pretty nicely. We just need to exercise the political power to make it happen

> Of course, you also won't house 100 new blue collar, lower-working class, or entry-level families in 100 expensive McMansions or luxury condos either. Because they can't afford it.

That’s sort of true, but not really true in the sense of the broader market. If you build 100 high end housing units, some of them will be occupied by people currently living in lower end housing, which will free up that housing for lower-income people.

> not sure why people keep beating the "if you add more supply, the price goes down" drum

The cynic in me assumes it's because they're investing in real estate and want more real estate to invest in, so they can continue profiting off the backs of people who just need a place to live

> What number of vacant, newly built units do you believe will actually bring prices down?

When the residential vacancy percentage rate is more like 15%, then I expect that prices will crash hard.

Total housing units 346,527

60000/346527 * 100 = 17%

https://www.infoplease.com/us/census/california/san-francisc...

Actually the number is a bit below 10% vacancy rate.

The vacancy rate is a bit above the national average, but not by much.

https://sfist.com/2022/02/01/report-10-of-san-franciscos-hou...

New construction is not a short-term solution. A reasonable rate of construction increases the housing supply by 2%/year. After 20 years, there should be 50% more housing, which should have a significant impact on prices.

important wrinkle: in SF, leases are (can be) long term arrangements, i.e. limited annual rent increases and very hard to evict. Landlords won't drop prices if it locks them into a bad economic situation, or even if they perceive that rents will rise quickly in the next few years.

also in general, with real estate owners are very reluctant to drop prices and "lose" money - instead, prices rise more slowly and/or stagnate. If you see a big price drop, that typically means the seller/landlord is desperate.

>2. Banks own way too much real estate and that leads to a level of price control if for no other reason then they can afford to be patient.

Are you suggesting that the banks are leaving the homes vacant? If not, and they're renting it out, doesn't that add to the housing supply insofar as supplying places for people to live?

Yes, where I live, the banks are intentionally leaving the homes vacant. After the shit hit the fan in 2008/2009, the government bailed out a bunch of banks and acquired a bunch of houses in the process. Those houses have been slowly leaking to market so they 'wouldn't disrupt the housing market'.

Maybe. But, for a bank, carrying a load of vacant houses long-term is an expensive, risky, and unfamiliar adventure. Even if an "all in nice neighborhoods" hand-wave keeps the vandals, squatters, and looters away - you've still got property taxes, utilities, and upkeep. And "vacant" usually guarantees that no one notices stuff like leaking pipes until they get expensive.

I suspect the glut of bank owned homes might suddenly burst. Right now banks are finding it more profitable to rent these homes and own them as appreciating assets, but what happens if rental prices bottom out, or the banks need cash?

I could see mass sell offs.

Why would a vacant house have running water? They shut down the utilities, no?

I see this claim sometimes but I have never been able to find figures for how many houses banks are holding and are NOT for sale. I guess one of the upsides of non-zero interest rates (especially for banks) is that they suddenly have a big incentive NOT to sit on assets like this...

I don't know if it intentional, but a bank owned property in my neighborhood has been vacant for years and they will not put it on the market. I can only guess as to why, but my guess would be that they are underwater on the property and are willing to hold on until either market conditions improve or something happens to the property and they can collect insurance.

Anecdotally, yes:

https://www.auction.com/blog/where-have-the-reo-investors-go...

When securitized, there are rules and the “buy-and-hold” investors want to avoid those.

>When supply is constrained, for whatever reason, prices go up.

It's the law of supply and demand, when supply goes down but demand remains the same or goes up, then it moves the price equilibrium up.

This is why the only solution is to build more and add more supply to meet demand. Everything else is a half-measure that will fail or is a lottery solution (i.e. BMR and affordable housing requirements) that only solves the issue for a few lucky winners.

Story says rents in February are lower than in August. Duh? Landlords don’t put units on the market in winter if they can help it.

When the article discloses year over year figures, sure enough, rents are still rising. (Supposedly “decelerating.” No details given.)

If they don’t put units on the market in winter, that would keep rates higher, not lower.

the is less demand though (people don’t like to move in winter/mid school year)

Exactly. It reads like the author is trying to frame seasonal effects as something else.

Reverse going on in Australia right now. International students have returned and a semi decent 2 bedroom apartment is now averaging $800/pw in Melbourne.

Pw=per week? I ask because in the US rent is typically monthly

Yes, Australian rents are fairly universally listed per week.

It's probably in AU$ so it cancels out /s

It cancels out a bit of the shock. It seems that apartment is ~$2200/mo in USD.

closer to US$2,350

Housing here is insane. We need long leases, tenants on body corporate, and rent price controls. Really.. what we need is sustained investment in state housing, which all the states gave up on during the post-keating privatisation storm. They don't understand their role as provider of socialised influence in the rental market.

Its been left to private sector and 'negative gearing' tax breaks for investor-owners fuel the insanity. Now, with so many private owners vested, they are unwilling to risk voter backlash to undo the madness of 25+ years of bad planning.

In Queensland, they had a really stupid relationship with cooperative housing movements, co-owning properties in the inner city. Then they realized the huge value proposition in the land, booted the tenants out to cheaper outer suburbs and realized the capital gain. It sucks. Gutting suburbs like west end in Brisbane where I live did nobody any favours. Why shouldn't working class people live in the inner city too? They always used to!

(I'm an owner occupier. I just think rental madness in Australia is sucking life force out of younger people)

Everybody loves to hate on socialised housing but the alternatives are far far worse.

It's insane how the 3 countries with the most space per human & least historic infrastructure: USA, Canada & Australia also have the worst housing crunch in the world right now.

Housing is not an investment. It is a depreciating asset. The anglo-world has done to housing what Singapore has done to cars. It is no wonder that a Toyota Camry costs 150,000 USD there.

There's not really a housing crunch in small town USA, more broadly space isn't the issue, the concentration of economic activity is the issue.

Like small towns don't necessarily do a good job of managing development, but you can buy a very reasonable house where I am for $150,000 (and pay a lot less if you want).

Similarly I'm sure that in the Australian outback one can find an affordable home, or in the Yukon. The problem is housing prices in the places people want to live and are able to find work.

There is something in between. There are places that are accessible--if not every day conveniently commutable--to reasonably-sized cities that are pretty reasonably-priced. But that's not a great tradeoff for someone who wants to live in the core of a relatively major city where they can walk to restaurants and twee coffeeshops--or does need to commute into the city most days.

Yeah, that's what I was getting at, it's not the abundance or lack of space that is the issue. Thanks for emphasizing!

The Yukon is insanely expensive. A single family home is C$639K. A condo is C$416K. Maybe better than Vancouver (C$1.9M), but still crazy compared with incomes (median is C$100K).

https://yukon.ca/sites/yukon.ca/files/ybs/fin-yukon-real-est...

The houses will be cheaper in the outback for sure, but they will be less plentiful. Good luck finding a decent rental outside of cities.

The physical structure is not that valuable in Australia. It's the land its on. You can get a house of some description in Australia for very cheap. It just won't be in the nice inner city areas. It'll be an outer suburb with dismal public transport access so very few people want to live there. The majority of Australians would rather live in a crumbling shitbox if it's within 20 minutes train distance to the CBD over a large house in the outer areas which involve a 2 hour train trip each way.

International students in particular will only consider the CBD as acceptable and will pay whatever it costs to live in this roughly 1 square kilometer area.

Not true as of late - there is a construction slowdown, so even lower grade houses in rural areas with no services are going for unattainable prices. 700k for Albury is insane. We have a supply issue.

To be fair, it’s a very intentional policy on SG’s part, since the low land area puts a brake on how many cars can be accommodated while maintaining free flow traffic.

A quick search suggests cars are expensive in Singapore because of the taxes. I don't see how that relates to housing in the mentioned countries, but maybe I misunderstood the sources about Singapore.

Singapore guarantees you a house. They don't guarantee its cheap, or nice. But they do have a social housing commitment. Their superannuation is phenomenal as well. The downside is you have to be a LOT more socially conformist, although thats loosening up a bit too.

Well, Singapore also has a proudly racist immigration policy which is unlikely to ever change.

Same in the UK. Rents were up 10% annually in 2022. Meanwhile, new housebuilding is at the lowest level since WW2, and the government has surrendered to NIMBYs and abandoned all construction targets and loosening of planning laws. Looking forward to the when shantytowns start popping up in the UK, to really underscore its regression to developing nation status.

Same in Canada.

Would you buy a property in Australia right now given the rates and future prospects or continue renting with this prices ?

If you believe in efficient markets, both options should be roughly equal value.

"The market can stay irrational longer than you can stay solvent."

Originally said about short selling, IIR, but the same principal applies.

I did the conversion and that’s about what you would pay for a downtown apartment in my city too.

Cries in San Francisco. I get the sense that "rents falling" is a narrative that manages to consistently skirt popular urban centers like SF, LA, NYC and co.

sf rents have stayed below pre covid highs for a while now -- https://www.zumper.com/rent-research/san-francisco-ca

Rent went down because people left, and they did because (1) remote work is way bigger than before and (2) housing price are still incredibly high.

I suspect that is the SF housing prices were not that high to begin with, not that many people who have left when remote became possible.

Yeah, because San Francisco barely builds anything.

The article says rents are falling while housing prices are remaining stable.

I wonder if this means we'll start to see a lot of apartments convert to condominiums to equalize this imbalance?

Probably some. A house and an apartment you own aren't really comparable anymore as the appeal of urban living for professionals has declined, however.

Probably most likely impact is the decline on new apartment development and perhaps dilapidation of some of the stock ("if I can't get 3k/month for this place anymore, fine I'll charge 2k but I won't bother maintaining it")

Isn't it the other way round? When rents are higher, how well maintained the house is matters less to tenants compared to the location and rent. But when rents are low, they have more freedom to choose a well maintained house.

If you're talking about long-term maintenance so that skipping it is just deferring costs to greater costs in the future, then why would a landlord do that unless they expect to demolish the house before ever fixing it up?

> When rents are higher, how well maintained the house is matters less to tenants

When I'm paying more than I think I should in rent I start expecting more for my money. Suddenly I want every little thing fixed and I push for things like newer appliances. When rent is low and I feel like I'm getting a really good deal, I'm much more willing to let the little stuff slide.

You're acting the opposite to the power you have. I think people overall act in line with their power. High rents means tenants are weaker and can demand less without being told "take it or leave it".

Rental units generally change hands much more frequently than owned homes. Accordingly, rental units offer a more real-time view of housing cost trends.

There are also a lot of homeowners who locked in at a very low interest rate (both new homes and refinancing) with little incentive to move any time soon.

What's the difference between the two? Every rental unit is ultimately owned by someone. And if rents are falling but your equity is rising, you are still coming out ahead.

The big issue is that condos come with a bunch of additional issues surrounding mortgages. Along with very different maintenance models.

It's one of the hidden problems of the housing shortage: condos are very difficult to get financing for which artificially deflates the market for them. Which means that our best form of housing in terms of the efficiency of building units isn't terribly attractive to actually build.

Are condos really the best form of housing? I’d guess apartments were better, in as much as the build cost is similar, but the resident has far more flexibility. Owning a condo when the building hits ~50 years old or so is problematic because of the massive influx of cash needed to replace mechanical systems (or worse).

Renting is always going to be more flexible/mobile. But you can also be kicked out at any time, your rent can often be raised somewhat arbitrarily, and you're probably limited in the degree to which you can modify your unit. (And you'll always be paying rent.)

Depends on the ownership structure.

A lot of large apartment buildings are single-owner/single-management with all units rented. Usually some sort of corporate owner.

Condo buildings might have id rentals offered by individual owners.

The former is (possibly) more likely to ask questions like “is it better to sell the whole building in the face of falling revenue?”

The latter, if their mortgage is lower than rental income, might just hold the unit regardless of the unit’s value. Probably a much less sophisticated owner/landlord than a big corporation.

A fun little TIL: if you're talking between cultures/countries you may be talking about different things here without realising it. For example, an apartment in Australia can be rented or purchased, it just refers to a type of construction, not an ownership structure. In the US it appears to be quite a different set of terminology!

I wasn't aware of this difference until just now.

In the U.S. condos are always owned by individuals, but the word "apartment" can mean different things depending on where you live. In the suburbs, people tend to use the word "apartment" to always mean a rental, but in most dense cities, you can absolutely "buy an apartment" - they use the term like Australia to refer to the form of construction which can either be rented or purchased.

Somewhat related: there was a discussion on NPR about how new builds will likely be much more popular because of rising interest rates. The cause is that there will be a much smaller supply of previously owned homes because owners won’t want to refinance at the much higher rates at the moment.

According to Slate Money, the reason that new builds are in more demand is that builders have programs that will reduce the interest rate by around 2% making the mortgage lower than a similar price existing home.

The cost of raw materials and labor has gone up a lot more than interest rates in the last couple years.

But at least in hcol areas the cost of the house is in land value, so if that goes down you can pay more for labor and materials while charge less for the finished product. That $2M 1800sqft house is not priced on labor and materials.

Cost of labor is a large part of why housing is expensive in hcol areas. Workers that make $15/hour in Dallas are making $45/hour in Los Angeles.

I originally didn’t think it’s a big effect but apparently per sqft new construction sfh in CA is $500 and in TX is $100. That’s insnane (so 2000sqft new construction costing $1M vs $200k).

Some portion of that is the California codes as well. You can't build the same house California that you could in Texas.

As an example, I read that California will be moving our requirements for roofs to withstand a once per 700 years wind event. They're also more mundane requirements like you have to install Outlets every 4 ft along walls whether you want them or not. Why that's any of the state's business, I'm not sure.

There are some codes that have a big impact, but I don't think that's one of them. In practice insane permitting and impact fees, high labor costs, and onerous requirements for professional services drive up housing costs.

My town in California charges more in permit fees to build a house ($140-180k) than it costs to buy a house in many parts of the country. And on top of that they demand about $200-250k in professional services (excessive architectural drawings, geotechnical surveys, hydrology analysis, blah blah blah).

San Francisco managed to expend a million dollars on a toilet that was donated to the city and installed for free.

We suck.

Am I reading that right (and are you sure)? The cost of permitting alone in your are can add $180K +/- to the cost of a house? If true, that is truly shocking.

Where I live the building permit fee is $8 per $1000 of estimated building cost. A one million dollar house would pay a fee of $8000 total (and most houses near me cost a lot less than that).

It seems a little steep to me, but within the range of possibilities if additional fees and inspections are tacked on. I'm working on a project now and the permit is 5 to 10% of the building cost.

Here is an example for SF: permit fees start at 5% of the project, but environmental review and other assessments can easily tack on another 100k flat rate.

https://sfplanning.org/sites/default/files/forms/Fee_Schedul...

https://losaltoshillsca.portal.civicclerk.com/event/3027/fil...

See page 201 of the agenda packet. By the town's own accounting, they are imposing $133,624 in entitlement, permitting, and impact fees per typical housing start. And it's in their interest to under-report in this document.

My own experience suggests that these numbers are obviously low. I've already spent more than double what they claim for entitlement just for a remodel. And they didn't even include plan-check fees (another $8k so far, if memory serves).

I agree that codes aren't the biggest part of the total, but just find it interesting to think about low costs which are widely applied to protect against rare events. .

What is the ROI and total cost of increasing every roof price 1% statewide to account for a rare and localized 1/700 event.

There are aprox 100k new home starts per year. At say 50k for a roof that would be 5 billion in roofing costs/yr. 1% increase is 50 Million. over 700 years that is 35 Billion dollars in new construction costs

Houses are also repbult or reroofed. Say a house or roof is replaced every 100 years, with 15 million houses, a 1% increase is ~53 billion in 700 years.

So over the 700 year period, that is ~88 billion in costs, or 1.8 Million new roofs.

In conclusion, a 1/700 year wind event would have to destroy 1.8 million roofs, >10% of all roofs in state, to break even on a 1% building cost increase.

Outlets are required every 4 feet to minimize needs for extension cords. Extension cords are a fire risk.

NYT had an article about this recently:

https://www.nytimes.com/2023/02/24/realestate/florida-condo-...

In Seattle, a converted apartment will generally have much lower build quality (e.g., wood walls rather than concrete), so it's not going to appeal to someone in the market for a purpose-built condo. The business of selling condos is also significantly less attractive to developers.[1]

[1]: https://kuow.org/stories/why-are-condos-in-seattle-so-rare-a...

Jersey City here. We're building 10,000 new apartments a year but everything is full and rents are up again this year, its probably 20-30% higher than pre-covid. The new construction has just attracted new crowds, it hasn't helped.

If that is the case the new crowds old location dents are getting lower.

Didn't happen with real estate. Big city real estate values went up too despite all the talk of wfh migration from cities.

If you look at the actual numbers, a tiny, tiny number of people moved out of the cities during wfh. It's been massively overblown by the news because that's what the news does, blow any tiny story out of proportion for ad revenue. "Man bites dog" etc.

Nope, could be a lot of people are just leaving or apartments are being kept vacant at high asking rents.

> The new construction has just attracted new crowds, it hasn't helped.

Quip: If it was actually the new construction that attracted the new crowds, then there would be a whole lot more apartments out in rural cornfields.

https://www.slowboring.com/p/induced-demand

Wouldn't that suggest that the development is lagging existing demand? Jersey City seems like a prime spot for spillover demand from Manhattan, so I'd probably expect that cycle to continue until it reaches parity with similar neighborhoods.

It HAS helped, because those residents had to move away from somewhere to live in those shiny new units. Any time you build housing, you're helping. And we need to keep building housing, because the population is increasing.

>Apartment rents fell in every major metropolitan area in the U.S. over the past six months through January

For an article that doesn't mention New York, the largest major metropolitan area in the US, a single time, this assertion rings very hollow. I can assure you that rents have not fallen in the New York metropolitan area - quite the contrary. Nor has then been a "crush" of new supply here in New York - or virtually any new supply at all, unless you consider a few ultra-luxury skyscrapers where you can get a place for the low price of $20 million dollars.

The number of 6 story high apartment complexes with massive footprints that have gone up in our university town is amazing. I need to find the raw numbers and compare that with the current population, but it is substantial.

Honestly, I have been wondering for several years now who is going to fill all these apartments. The scale of increase is really that big.

Maybe the answer is… no one?

The United States has added 100 million people since 1995. The pace of building hasn't even come close to that. The best estimates I can find is that we've added about 30 million units in that same period. The answer to your question is: the people already there. The cost of housing has spiked because we've let supply get low after all.

The Fed tracks this.

Housing units per person really has not moved much since 2000 either way. We're basically near the median for the 20-year period.

https://fred.stlouisfed.org/graph/?g=j9kB

One big issue not stated in the graph however is that the amount of childless people and people living alone is up, so we require more housing to match changing preferences.

I can't help but notice that data doesn't go back very far.

It's a shame we can't compare to 1920, 1950 or 1970.

> shame we can't compare to 1920, 1950 or 1970

We only started collecting information on housing in 1940 [1]. That's why household data only go back that far [2].

[1] https://www.census.gov/history/www/through_the_decades/overv...

[2] https://www.census.gov/data/tables/time-series/demo/families...

The lack of housing is not distributed equally over the country.

I sure wish they'd distribute less of it to my city

What? Where do you live that you have come to think that there’s too much new construction?

GP could be using a double negative. "Less lack of housing."

Correct. Just a tough crowd tonight I guess.

My wife and I are looking for a house, and the lack of options is extremely dispiriting.

Yea my bad. Thanks for the correction.

It's a shame they are getting downvoted because I really like the wordplay.

> The United States has added 100 million people since 1995

Where did you calculate this? Or are you excluded deaths?

1995 population was 266.6M. Today is 331.9M. That is growth of 65.3M

If you build it, they will come.

I don't know how residential rent/lease works in comparison to commercial, but I have known office space to sit unused for years. They landlord would rather the space sit empty than lower the rate to find a tenant. I'm guessing there's a deduction for loss in taxes, so it might be in the landlord's interest to have a few empty properties. But that's just a wild ass guess

Don't know if it's true, but I've been told that loan renewals for commercial properties use the most recently rented unit as an anchoring point, so if you lower rents too much, you end up under-water in your loan.

Lenders are smarter than that. CMBS (commercial mortgage backed securities) lenders require borrowers to maintain a certain debt service coverage ratio.

https://en.wikipedia.org/wiki/Debt_service_coverage_ratio

You do not get to pretend a half empty building is worth the same as a full one.

The rent affects the comps.

If the landlord happens to own the comps (he owns the building after all) He will run into trouble in multiple ways if hes lowering rent, for example with resets (every 10yrs or so), rolling the debt, refi, , lowering the floor for units in negotiation or renewal etc

Still it doesnt mitigate the fact that there is a real estate loan that must be paid.

Yeah, I've seen way too much empty office/restaurant spaces in many of the places I've lived simply because landlords won't lower the rent. IMO, there should be penalties if a space sits empty for too long in high traffic areas. It's an eyesore, it harbors pests for neighboring spaces, and there's people out there who can definitely use the space but can't afford it. Intentional empty spaces are simply bad for communities and I wish something could be done about it.

You should be asking why property owners can afford to sit on an unproductive building in a high traffic area. Forget your penalties. The answer is complex but fundamentally lenders are ruining our society.

Land value tax would solve this.

But it could be designed to be more specific. Demonstrate the lost city revenue from hypothetical retail or office work; split the difference if it’s vacant.

I believe the other reason this happens is “extend and pretend” [0].

Basically the bank issues a loan to a developer, based in part on how much income the developed property is expected to bring in. If the expected revenue isn’t coming in (say because the rent is too high), the bank doesn’t always want to admit that it’s a bad loan and call it a loss, so they extend (the length of the loan) and pretend (that the rent the developer is trying to charge is realistic). This incentivizes the developer to keep the high rent as-is even though nobody is going to pay it.

A case of terrible incentives causing terrible outcomes.

0.https://www.wsj.com/articles/SB10001424052748704764404575286...

We haven't kept up with housing need since 2008. And the new construction is still far below our actual need.

Tons of home developers lost their shirts. Tradespeople also left the industry. Housing prices have risen quite a bit since 2012 which has attracted some home building, but it has still been too easy to just hold index funds instead.

The answer is foreign students if it's anything like my university town.

The number of international students in US is less than 1M in the last year [1]. Maybe they will be true in college towns that they represent a higher percentage, but that is rounding error compared with the actual population demand. More than this, there are ~ 20M in the last year [2] university students in the US, so taking all universities there would be an average 19 to 1 ratio for US students vs international students. I really wonder what is your town and if this is really the case (or maybe a unique case).

[1]https://www.statista.com/statistics/237681/international-stu...

[2] https://www.statista.com/statistics/235406/undergraduate-enr...

lol don't worry they'll fill up. The US ain't Japan.

Super dense Japan wouldn't fill up these apartments?

Except for like three or four cities, Japan has been rapidly depopulating, to the point where some towns and villages are giving away properties.

Even Tokyo has started declining in population.

Wow, population estimates for 2022 have Japan at roughly back to 1995 population levels. By comparison, the US population is ~25% larger than it was in 1995.

Population growth rate by country:

https://www.indexmundi.com/g/r.aspx?v=24

USA: +0.71, 135th out of 235

Japan: -0.29, 215th out of 235

I'm somewhat randomly guessing that the amount of housing in your town has increased under 10% since the start of the pandemic. With just remote work, it's feasible for the same population to expand into that much more housing, guessing that 15% of people want an extra room to use as a home office.

I saw this in my town during the pandemic - an unprecedented, insane shortage of housing that led to a near-doubling of rents. People are now moving back into the city after learning how inconvenient it can be to live in the boonies..

Maybe a few hedge funds buy them wholesale and keep them empty until rents reach the desired price?

While lobbying to limit further construction and against rent control?

I found our population growth…

2018 +11.8k +1.8%

2019 +6.8k +1.0%

2020 +6.8k +1.0%

2021 +2.8k +0.4%

2022 +2.8k +0.4%

I would estimate that just one of these massive facilities would house 1k people and we have built no less than 10 in the last 3 years.

Household size has also been declining though; later marriages, single parenthood and lower fertility have all played their part

If housing costs in your area were elevated, great, these 10+ will help bring supply & demand back to reasonable levels and allow locals to save money or spend on other things. This is good!

If housing costs were not elevated, it still makes sense to build as you can see that your town needs between 1 and ~7 of these (or equivalent) built annually just to absorb population growth at recent trends. Housing takes a long time to permit and build; it's great that builders are willing to build ahead and slow rent growth in future years. This is what we should have been doing everywhere.

This is based on census data, yea? Students are _notoriously_ bad at filling that stuff out.

It's not an anomaly that many six (6) story apartment complexes are popping up everywhere. The building style is called a "5-over-1" (https://en.wikipedia.org/wiki/5-over-1) and its high-prevalence seems to be a result of building code standards and construction cost effectiveness.

Related youtube video discussing the topic: https://www.youtube.com/watch?v=mrxZqPVFTag

This sounds a lot like my nearby university town. Apartment complexes and retirement homes are being built. Single family homes are not.

The message is clear. You are allowed to live there, but only temporarily.

> I have been wondering for several years now who is going to fill all these apartments.

vacationers using Airbnb?

I think this is the original report that the article is based on: https://www.apartmentlist.com/research/national-rent-data

The WSJ article seems to have concentrated on this bit from the report: "But even as rent growth has tracked that typical seasonal pattern, the winter dip this year went well beyond what we normally see. The 3.4 percent decline in rents from last August through January was the sharpest dip in the national median rent over any five-month period in the history of our estimates (starting in 2017)."

cries in Canadian

Seriously. According to [1] rent in Calgary has increased 39% (!!) compared to last year. Still below Toronto and Vancouver, but pretty ridiculous.

[1] https://www.zumper.com/rent-research/calgary-ab

That’s all the people who have had to leave Vancouver and Toronto… Toronto’s figure is 24%. Yikes.

You could argue that Alberta is just undervalued, which is probably true… but not exactly a good consolation for people who were already struggling to get by before 2022.

“I’m leaving Toronto” is almost a meme at this point.

There's supply and demand, but there's also cost and risk. I wonder if landlords have raised rents because they now more heavily weigh the possibility that the tenant might not pay.

In other news - the sky is blue and the earth is turning on its axis

My landlord is raising rents but this apartment has always been below market. I think apartments that have been attaching a luxury price tag no longer can justify that cost.

Someone should tell my landlord.

hardly any decline

https://archive.ph/w29ut/60a10ca91e1e9765852ba9fb0e5f6476790...

It will be back to new highs soon enough

Rent has always been expensive in America, especially since 2008. Overseas way cheaper even after accounting for lower cost of living. Part of the reason rent is so high in America is due to the difficulty of evictions and increased regulation. Landlords have to pass these costs to renters. Landlords need multi-month deposits plus credit checks. It's tough being a renter, for sure.

Seems very market dependent, opposite here in Vancouver

But I keep being told that supply and demand doesn't apply to housing because of "reasons"

It's almost as if supply and demand is a real principle that exists and applies to housing. Who would have thought?

Seriously though, I find it baffling how many people are completely adamant that housing costs are completely fixed (usually by some kind of shadowy cabal of landlords), and are not subject to market forces whatsoever.

https://www.propublica.org/article/yieldstar-rent-increase-r...

> What role RealPage’s software has played in soaring rents — which in the decade before the pandemic nearly doubled in some cities — is hard to discern. Inadequate new construction and the tight market for homebuyers have exacerbated an existing housing shortage.

Yup -- I love that people always point to RealPage's existence as some sort of smoking gun that proves literally every landlord is colluding with one another.

Also, even if it were proof that every current landlord was colluding, the easiest solution to that would be... to build a lot more housing, to severely dilute the power of current landlords.

> I find it baffling

Housing Breaks People’s Brains: "Supply skepticism and shortage denialism are pushing against the actual solution to the housing crisis: building enough homes."

https://www.theatlantic.com/ideas/archive/2022/11/us-housing...

Or apartment rents fell after a massive cycle of aggressive rent raising after landlords got free of temporary rent control after the pandemic, and the most aggressive landlords lost their tenants to landlords who were less aggressive.

oh no the housing crisis

I hate the framing of the headline making it sound like a negative. "Crush" is surely a negative.

I wouldn’t worry about the connotation of a headline like this too much: hate isn’t good for you.

Just understand the information it conveys and move on from there.

Good advice in general, but there's additional information coded in the words chosen. It shouldn't be a surprise that the Wall Street Journal would see falling rents as a "crush" given it's readership probably leans more towards landlord than tenant.

Yea, I do see that coded language, I just guess I’m a bit tired of picking apart language instead of discussing content. I’m not surprised at the headline for the same reason as you: “given its readership probably means more towards landlord than tenant.”

I would imagine that an editor chooses headlines based on their readership, would they not?

My judgement may be off here, but is a WSJ reader more likely to be a landlord or a tenant?

Goes both ways I reckon. A lot of folks rent.

It's a bit surprising for the WSJ to include obviously clickbait words in their headlines.

Definitely landlord. WSJ has also been pushing the "no one wants to work anymore", "quiet quitting", "WFH workers are unproductive/cheating" etc. narrative pretty hard. They (and their readership) have been center-right for a long time now.

I bet the paying ones are landlords. WSJ costs hundreds per year and they're stingy with discounts.

Apple News is one way to get it cheap, but you've gotta use that reader.

I just wait for the good articles to show up on HN and hit the archive link. No wonder they aren't tailoring headlines to my interests.

Lots of wall street people rent. Renting is actually a good experience if you're rich and nothing is for sale in Manhattan anyway so there's not much of a choice.

I think Barron's is probably more targeted to people that actually work on Wall Street. I suspect Manhattan finance people make up <1% of the people that subscribe to WSJ.

Yup. The main attraction of buying/owning vs renting is reduction of risk/uncertainty. If you're rich (>double-digit million net worth) and not stupid (hold your entire net worth in crypto coins), you don't have to care about uncertainly. With 10M net worth, you can get a few 10k from just interests or dividends, so you can rent something pretty nice anywhere in the world on a whim.

Also because of tax reasons I guess. But that demographic does not care very much about lowering rents.

Don't worry, the audience of the Wall Street Journal hates it as well. Whoever is renting loves it, though.

The other crazy part of the framing is that while sure, apartment rents are down slightly from all-time highs, they're still up over 20% in just two years.

Even as someone with a decent amount of my net-worth wrapped up in real-estate, a real-estate crash can't come soon enough. Housing ourselves is eating far too much of the average person's budget, and I hope this small dip in rents is a harbinger of much bigger drops to come.

clicks don't come from accurate descriptions.

It's exactly what they want. They got you to react to their crappy headline.

Of all the low-effort ChatGPT grifts, I'd love to see one that de-sensationalized headlines. A headline should be the shortest possible summary of the rest of the article.

“Housing rents continue to obey supply and demand” isn’t that interesting.

Ok, we've uncrushed the market in the title above.

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