Doesn't that seem like a given? That people without the incomes to afford housing in a given locality don't own housing there?
Gentrification actually only affects a very small percentage of people who end up refusing to sell and holding out until they cannot afford anymore.
But the point remains that a 90 year old living on Social Security could potentially own a million dollar home.
In California, gentrification almost never affects long time homeowners. Once you pay off your mortgage, your only housing costs are maintenance and property taxes which are highly subsidized thanks to Proposition 13.
However, renters who make up 44% of all California households very often do experience increasing housing price pressures which drives them to move to lower cost (and lower opportunity) areas. Some municipalities have tight rent controls, but most do not. There's a state law which prevents rent increases in older units above 5% plus inflation but that is still an allowable rate which quickly outpaces income growth.
I happen to like some rent controls but I'm not saying that universal rent controls are a solution here. There just has to be some explanation for why housing construction costs seem to grow just as fast as housing prices in general. If housing prices are growing faster than wages and the producer price index for materials then it cant just be construction labor and materials!
What I am alluding to is that there is simply a lack of locations which are able to be developed into new housing. Sometimes that's onerous land use constraints, very long project entitlement and permitting timelines which increases financing costs, local taxes/fees or exactions on development, or some combination of all of these!
But that would require builders to build affordable homes, which is the same effort and lower profit than building luxury.
The claim that housing supply advocates make about affordability is not that new units will be most affordable than but that older comparable units will become more affordable due to the increased competition. The people who’ve been bidding up the prices on older rental and resale homes will choose the newer housing instead because they are able and more willing to. The older stock becomes more affordable. Time goes on and even newer buildings cause what was once new to become a more affordable option. It should eventually get to a point where nobody would ever choose the older (again, similarly sized and located) units with poor amenities because it’s not worth it compared to newer options that are a better value. And those get replaced with new construction. That’s how a housing market should function.
But instead we have housing that is over 100 years old going for ever increasing prices even without modern renovations. Thats a broken market.
Also, your average 100 year-old house is a much higher quality structure than your average new house. And 100 years old is about the pinnacle of craftsmanship.
As for 100 year old houses being considered high quality… there’s definitely going to be a survivorship bias for such buildings that didn’t get replaced while they could (prior to mass downzoning on the 1970s) but they literally didn’t have building codes back then. Lots of money needs to be spent to retrofit old buildings for modern seismic and energy standards.
Also — not saying you’re guilty of this — there is a lot of racial prejudice when folks criticize the “poor craftsman” of modern construction workers compared to those of past generations, as they more often tend to be Latino workers these days.
This is nonsense. The reason people say nearly all modern construction and manufacturing sucks is because the primary focus is on reducing costs and increasing production efficiency/speed. Something that needs to be replaced sooner is also seen as a benefit rather than a problem - planned obsolescence.
Is there a drawback with those except price? Like do they fall apart earlier?
Land tax reform is debated amongst economist. It is a form of wealth taxation, and in America we generally don't tax wealth. And even if we did, unlike having $1 million in the bank - which is a known amount of wealth - the value of land is rather hard to quantify. You could arbitrarily say that all land in the city is taxed at $10 a square foot per year. Clearly that would be inequitable by some land is worth considerably more.
Land, unless it's farmland, generates no income and our tax policy is generally based upon income income tax.
Perhaps it is different in temperate climates, but old houses can be an absolute hassle.
That’s probably a big part of it, but of course making anything stand the test of time is extremely difficult.
This is only true because they can't build homes in significant volume in most localities due to land use and zoning regulations. It took 3 years in my former neighborhood to build 20 houses, because of the review and public comment period. This is the same story I've read about across the country: any locality that is desirable to live in has had increasingly strict regulations and processes that artificially constrain the building of housing inventory of any type.
Given this, if you can only build 20 units instead of 2000, you'll end up building in the luxury category, as its the only way to maximize any value of the build without other incentives.
If instead they could 2000 or 20000 homes that meet building code, builders could not only compete in earnest but you could do things like selling units at lower prices per unit but its made up in volume, or each housing unit could be denser (like town houses, condos etc).
You can't overlook these aspects. Real estate is not a functional marketplace and should be seen as the definition of government regulation overreach in many respects, but home owners tend to vote in blocs, so politicians won't touch it
If they wanted to, they could build them much more affordable and save 30% off the total price, but nobody does it. Why not? It takes the same amount of time and you might as well build the more expensive one because someone will buy it and you get a percentage of the sale price.
Where is there both desirable places to live and infinite land you can build on?
Also important: how are those plots zoned and what is the process for the builders to get approval for their builds?
The builders get approval from the county if outside a city, or the city if inside one, or build a new city.
“All over the country” isn’t a specific answer to the question at hand
Costs like 15% more and sells for 30% more. Building economy is a losing proposition.
For renters though, you’re absolutely right that they suffer much more directly.
Not quite just those who refuse to sell — because housing costs impact the cost of every other local service, maintenance in a gentrified area often becomes unaffordable for those who hold out, and then they can’t afford it. Roof replacement is the classic example. Another example (though not as relevant to the 90 year old on social security) is childcare costs.
It's that those factors don't appear to matter.
There is plenty of available evidence that when zoning laws are less restrictive and buildings get faster approval the overall cost of housing comes down over time in significant ways.
The way income factors into this tends to be driven by the fact that the weather the neighborhood the more time that is spent at city hall by residents lobbying for regulations to preserve their market values in their neighborhoods in order to achieve artificial local scarcity which drives the home values up.
That’s what I strongly feel they didn’t quantify
Another looks more broadly at patterns of regulations and how they affect the market[1]
Bloomberg also did some nice reporting in this space[2] as well which goes over many cases of attempted land use / zoning reform and various outcomes, most notably that trying to only single out 1-2 regulations is at best token reforms and more meaningful comprehensive reforms are needed to zoning and land use laws.
This is simply what I have easy access to at the moment, but there is more out there that studies housing as an ecosystem and they all seem to be converging on similar conclusions: the real estate market (housing in particular) is functionally broken around the country
[0]: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3659870
[1]: https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.32.1.3
[2]: https://www.bloomberg.com/news/articles/2022-05-24/the-limit...