Only building more housing will make housing cheaper.
It's remarkable how some cities will do literally anything but that, probably because they know it will work and they're controlled by property owners.
It's remarkable how some cities will do literally anything but that, probably because they know it will work and they're controlled by property owners.
I think this belief gives hope that affordability can improve even without new inventory.
In reality, the entire stock (low to high) moves lock/step as if they are chained together. Gaps cannot exist because buyers will eagerly move a little up or down (in quality) based on pricing changes.
And developments happen in order to increase value of land and demand for that land, so it's not necessarily trivial. (For instance: people with money go to new suburbs because the units of housing are larger and more upgraded; new in-city units are built that are larger and more upgraded than the old one -> some of those people want to move back. And hundreds of other little interplaying loops of human activity.)
Is the scale of it complicated? Absolutely. But the solution itself is simple. Double the size of the city. Triple the size of the city. 10x the size of the city. Shenzhen can show you how it's done.
Also, I agree more housing is necessary. But building more housing also risks induced demand. Cheaper houses encourages people to move to buy them. Therefore, we probably would need to also restrict demand, either with a hard limit (max properties you can own) or more likely with a soft limit (2nd property is taxed 2x, 3rd is taxed 3x etc).
More housing doesn't necessarily mean more affordable housing. And I don't even mean section 8, just units that two median wage earners (outside of tech) could potentially afford together.
On the other hand, refusing to build any housing at all (for whatever the reason is: too unaffordable, too gentrified, too out-of-place) means those high earners will live in generic housing for the masses, and those places will be expensive.
This debate ends in the same way as always. It's a bit of everything. Nightly rentals, REITs, build more, yada yada yada...
"Affordable" housing is not a magic number; it's a ratio as defined by financial "experts." It's usually one-third of your net or gross income, depending on the advisor you talk to.
Think of an extreme example- take a town with 20k families and only 10k houses. Now setup some program where many of those houses are part of an affordable housing program with a price cap. This changes basically nothing because only a few lucky people will get them, the rest will still be unhoused or move. This is literally the exact situation in most small USA west coast college towns like Davis- where the city government will do anything to make housing more affordable except construction- and we can see that none of it works.
I was using the standard English language definition of the word affordable, which is qualitative and has no specific quantitative definition.
You are right that if there is a market where the scarcity is caused by insufficient supply, building more slow costs increases. But there is a point where the costs of the product cannot be cut anymore. The more you produce it will not be cheaper.
Let's take another extreme example. Start with the city of 10,000 people. A developer razes the city center and rebuilds with very dense housing capable of housing 10,500 people. Is the cost of housing cheaper because of those extra 500 units? The answer is no; they would increase the cost of all the other units. Why? Someone has to pay for the materials, labor, and profit. If someone is not renting those units, the cost of creating those units is now spread among all the other units.
The core question is how to lower the cost of the unit. Building more once you satisfy demand is not the answer. Building more expensive units frees up cheaper units if and only if enough people can afford them and move into them. But the cheaper units are not going to drop in cost. They will rent for at least the same price.
It's important to acknowledge a couple of truisms. Demand for urban space will grow, and landlords will do everything to minimize expenses and maximize profits. There will never be enough housing to meet the demand. The question is how far behind demand is the housing production rate
I don't agree at all that "there will never be enough housing to meet the demand." There was enough in the past when populations were lower, and wealthy nimby landowners blocked construction from keeping up with population growth- you don't need that much more to just catch up with growth. It's also very regional- there are many places where supply radically exceeds demand, mostly because there aren't jobs. Much of the rural USA has nice houses that sit on the market for years at low prices because populations in those areas are declining.
Housing could be way cheaper if innovation were legal in housing... there are a lot of creative ideas to radically reduce materials and labor required, but they are also completely illegal with building codes in most places. So you get a situation where something like Fuller's Dymaxion House would be criminal because building codes say the HVAC system is undersized or something (because it's more efficient and doesn't need more), but in practice you have people living in highly flammable plywood and PVC shanty towns on every corner. If you consider the illegal shanty towns and homeless camps, supply already meets demand, you really just need to make it legal to build low cost housing that meets a minimum standard of safety to replace the shanty towns with something safer but still cheap.