A lot more market-rate construction helps low-income renters more than subsidies
medium.com
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Every time the UK government do something to "help first time buyers" it involves getting them into even more debt, and keeping the prices high. There are still the same number of properties around, and the same number of people competing for them. How can they honestly think this is helping in any way.
It would be impossible to build enough supply to overwhelm demand anyway if it is done realistically.
The only question is which N-K people have a problem - this will be determined by economic and political processes.
Part of which is playing out here where people of privilege are working out a story that allows them to displace an older population dependent on rent control so that they can get that housing.
In either case, eliminating the malthusian constraints on housing are a solution to the problem.
See also this article on moreright illustrating how your view and mine are not strongly in opposition: http://www.moreright.net/social-technology-and-anarcho-tyran...
As crowding rises the value of labor relative to land will fall, something very beneficial to the wealthy and harmful to the employed.
On a site where conjecture about immorality pills and "the singularity" abound, how is it supposed that population density can grow forever and everyone be better off for it? Mega-cities are the characteristic of the third world and they are paragons of failure. Or will SF uniquely continue to grow infinitely owing to killer apps and the innate superiority of its people?
It's also beneficial to the unemployed who want to go to SF. Saying it's generally harmful to the workers is only true if you ignore those left out by the restrictions.
And as business expenses rise to cover the inflated cost of living (eg rent) there will be fewer and fewer jobs available (eg no unemployed teacher looks to San Francisco). And cost of living will rise with population density while wages fall. Also there are plenty of unemployed people in SF too namely the huge homeless population. As the real value of wages drop their numbers increase. Since calls here for justice and opportunities seems strangely focused on middle class people, I should ask how that new person's arrival would affect these other equally unemployed people.
If you believe in "market forces" then unemployment and low wages are not solved by adding more people. Indeed individuals would be happier and communities stronger if they were not often up rooted by market whims. Especially in old age. So the ideal solution for employment, wages and quality of life would not assume people are infinitely portable human resources.
I don't see how you justify this, and therefore the rest of the argument. What mechanism do you see that implies that increasing population density leads to higher costs of living?
I think you are falling into a third cause fallacy mistake. While there is certainly correlation between higher pollution density and higher living costs, it's not one that causes the other, but a third factor that causes both: wanting to move there.
The reason rents are higher is because people are willing to bid more to live in SF; preventing population density will do nothing to curb that desire. But it can reduce costs of living, by allowing rents to drop and therefore reduce the need to bid higher and higher.
If there is a theoretical supply and demand argument that building always drives down costs then there is a theoretical argument that excess supply of labor drives down the value of labor.
If there is an observational argument that large population densities do not lower wages then there is the observation that high density cities do not have low cost of living.
My claim is that the price of housing will rise to at least 30% of wages no mater how many or few units you have. If you really wanted to lower rent rather than shuffling around who is living where, you'd need enormously radical change to land ownership laws and incentives. The things that made the twentieth century unique in history for the relative wealth of ordinary people. Things now being reversed.
Another apparently impossible option would be to make other cites into bastions of free thinking diversity, tolerance and creativity so there would be innovation and demand to live there instead of fleeing them for the few cities that have those things and the wealth that comes with them.
But the path we're apparently going to follow, deregulation, which will do exactly nothing, could nicely degrade the character of one city after another which would reduce demand and that might slow price rise. It'd take surprisingly little to turn SF into another Huston. But don't expect the people with a choice to stick around a characterless city among a sea of less imaginative people looking just to get rich quick.
[1]http://www.nytimes.com/2014/04/15/business/more-renters-find...
https://en.wikipedia.org/wiki/List_of_cities_proper_by_popul...
Bangalore, Istanbul, London, Mumbai, NYC and Pune are all wonderful places and I'd be happy to live in any of them. Mumbai in particular is a place I actively plan to spend at least a year in. (I've already lived in NYC, London and Pune.) I can't say I love Delhi or Hyderabad, but you could certainly do worse.
By the standards of the west, Mumbai or Delhi certainly are "paragons of failure". That's the problem with living in a developing country. It's not a failure of density, the low density regions of India are vastly worse.
Indeed if mega-cities were a good thing then Pakistan, Nigeria and the Congo should be doing better than Japan. Excepting just 6 out of 84, your list thoroughly proves my point; over crowding correlates with societies with suppressed labor value.
And by the way, in spite of adding endless supply of housing, none of these cities have cheaper real-estate than the rest of their country.
If universal healthcare was a good thing then people in Rwanda should be more healthy than in the US. They aren't, so universal healthcare is bad.
Find the flaw in this argument and you'll find the one in yours.
84/100 mega-cites are in the third world.
I don't know how this could confuse you but feel free to google inductive reasoning.
http://www.prb.org/Publications/Datasheets/2013/2013-world-p...
As for the one I gave a negative opinion about, a big part of my dislike for Delhi is due to the lack of density - it's more suburb than city. Going from where I work/live (Pitampura) to the fun parts of town (South Delhi) takes 1-1.5 hours and the metro shuts off at ~11pm. (Other things I dislike are pollution, oily food, and the difficulty in finding a date.)
India almost certainly will be better off after people escape rural poverty and enter the middle class living in the cities. This process is happening rapidly and the results are good.
High prices is not beneficial to the wealthy, it's only beneficial to homeowners. A vast majority of tech workers in SF are renters, who can afford high rents but would nonetheless prefer them cheaper.
If you want to cap populations on cities, then do so explicitly and not through back-door means. Otherwise you have to let them ebb and flow as people desire.
Wtf? How do you get to that conclusion when inequality has been growing for the last 40 years?
This is of course completely tangential to the main point, namely that they both can live in SF if we build more housing.
This conclusion doesn't follow from your premises, unless you include the hidden premise that more wealth in the world is the only criterion you're using.
Once you begin looking at things like wealth distribution or the like as measures of "better", your argument doesn't reach that conclusion.
But logic must take a backseat to ideology.
You got that completely backwards. A developer can be productive during the commute. Given modern offices with their distractions, an hour commute each way can give a developer much needed time for design and analysis. The barista, on the other hand, does nothing productive while commuting.
I could argue the exact opposite. The barista assists those who'd like to drink a cup of coffee and contemplate, and increasing contemplation creates a lot of value (intrinsic value) -- maybe not every barista, but this particular one does -- whereas the software developer writes programs that make soul-crushing economic activities more efficient, and so sucks away value from the world.
> The world is then better off.
Or worse off. It all depends on how you see value, which, naturally, is part of your personal value system. For example, in my opinion, a single crippled cat may create more inspiration for a great work of art than, say, Uber. I therefore see a single crippled cat (or any cat, for that matter) as making the world much better off than an inane ride-sharing smartphone app. I would venture to guess that you believe Uber is more valuable than a cat. You value efficiency, I value inefficiency (or, rather, freedom from efficiency); you value rational behavior while I value spite -- or freedom from rationality (not all the time, of course); you value freedom from the will of the masses, while I value freedom from the will of corporations.
BTW, are you a Dark Enlightenment believer? If so, I'd love to shoot you an email, if you don't mind.
But more importantly, I'm not sure what you mean by "people of privilege are working out a story that allows them to displace." As far as I can tell, what's happening is that landlords own property, and they see an opportunity to rent the property to someone who is willing to pay more. I'm not sure what "story" is being worked out by the new renter; by the time they find out about the property, it is already on the market.
Which is convenient as they'd like to use their superior purchasing power to acquire nice SF apartments, and rent control blocks them from that goal. So it helps to have economics on your side, to a) make you feel better about yourself and b) to convince others to join your side.
Maybe in this case that's "right", but the fact that we are collectively upvoting the economics that helps us and not approvingly discussing some other economic theory about how importing low-wage software developers would boost the economy makes it political.
https://news.ycombinator.com/item?id=9246255 https://news.ycombinator.com/item?id=9126011 https://news.ycombinator.com/item?id=8884775
The "story" built here and in other articles is the minimal believable tale that gets rid of current generally older tenants to make those units available for people with more money. To reach the front page of HN, it only needs to be believable to those who will benefit from its implementation. Not a very high hurdle and usually easily reach by hand waving some misunderstood "free market" juvenilia.
That's sort of the problem though - "that" housing. If there were more housing, if it were not the zero-sum game that it is in SF, then it would be less of a problem.
Houses are not build to stand empty[1]. The number of houses available and the income level determine the prices. Even if you build luxury apartments, the end result is more affordable houses available to people with low income after the chain reaction where people move up to better housing ends.
[1]: If this happens in some market conditions, raising property taxes to empty apartments works miracles.
If we have more market-rate construction, low-income renters would mostly have to pay market rate which would always be above subsidy rate. Because if the market rates are low there is less construction. If there are not enough housing units in the current high price market it is not the fault of subsidies. The return of investment in other markets is apparently even better.
Barriers to new construction is of course the problem. If you had to fill out a lot of paperwork and get government permission to build a tractor, and there was a shortage of tractors, the solution wouldn't be to give farmers more cash to procure a tractor, nor try and control the price of tractors, nor pass laws restricting use of tractors. The solution would be to build more tractors. With enough tractors, it woudotn even matter if the occasional farmer kept one in the barn unused.
I don't know how people develop this blindspot with housing - if the prices are going up too much it is because demand is exceeding supply. Everyone is reluctant to say the lack of supply is an issue, and I don't know why.
And honestly, if I wanted to live in a cess pool like Houston, I would move there. Houses are cheap enough (comparatively) but it is a huge icky sprawl.
I'm curious, has it really happened at a city level? Seems to me that it would get prohibitively expensive, since other owners would see the massive demand and push up the prices, but that's really just a supposition.
Best to start when the land is cheap, and when you are going to build infrastructure to increase the value of the property. So the railroads with tracks and stations, amusement park operators (Disney World...), or it could be a factory with lots of jobs in a depressed area.
There isn't anyone with enough money.
Just to by a simple suburban street takes millions and millions.
Even someone with the cash resources of Apple could maybe get one or two suburbs of San Francisco before the prices started rising fast and they priced themselves out.
Cornering a market happens periodically in small markets like commodity futures or stocks in a single company - and usually only for a brief period.
You could make the argument that you could 'buy' a government by buying all the available currency. Technically it's true but practically it's not. Who would want to own a monopoly in real estate anyway? People and businesses are sticky, but not stuck. If the rents got out of hand they'd just move.
Let's say there are 10 people renting apartments that a monopolist plans to buy out, and each of their properties are 'worth' $1, meaning you could reasonably expect to pay $10 for one property. They also rent out their appartments for $1 each.
What happens when the monopolist starts buying properties? He buys a few, and they notice he's going for a monopoly. They will raise their prices, because they know it will be worth it for the monopolist to pay $20 or even $30 to aquire their properties.
Let's say, through a miracle, the monopolist endures these exponentially growing raised prices, buys 9 of the 10 properties, and raises rates to $3 to cover the losses he's had to put into buying his last couple of properties.
Well, the 10th would be able to rent his land out at nearly the same price as the monopolist, say $2.50. But notice that the 10th property owner didn't have to over-pay for his land, so he will is making way more profits than monopolist, which would price his property out of the range of the monopolist.
You aren't making sense. The monopolist doesn't buy "10 apartments", they just buy the entire building since those 10 people are "renting." You only have to buy from the person who owns the building; even in an non-free market renters have no ownership rights.
> Well, the 10th would be able to rent his land out at nearly the same price as the monopolist, say $2.50. But notice that the 10th property owner didn't have to over-pay for his land, so he will is making way more profits than monopolist, which would price his property out of the range of the monopolist.
When did the 10th renter become a property owner?
And anyways, the monopolist doesn't corner the market directly; they use inside information to buy cheap, and have excess capital to take advantage of market opportunities. How many old west movies are premised on some rich guy trying to buy up all the land in town because they know the railroad is coming through? Those are actually based on "true stories." The late 1800s was full of that.
In what way does that apply to SF?
SF is already sold out, so it doesn't apply at all; there is nowhere to build and all the property is spoken for. It might have applied 110 years ago after the great fire, or even in the early 90s after the S&L crisis, but not today.
On the contrary it is an inevitable risk to any commodity that can be monopolized.
The monopolist can make more from the resource because he will be able to charge more than the current owner. Thus he can offer the current owner more in cash than the owner could ever make renting it. If the owner is a rational actor he will always sell out to the monopolist.
In your analogy, the holdout charges $2.50 rent, the monopolist plans to charge $1000. The monopolists borrows 100 years rent and offers it to the holdout who, being rational, sells. The holdout makes more money, the monopolist makes more money. Only the tenant looses.
It is that way with every commodity that can be cornered. That is why we need to enforce anti-trust laws.
In the event the current owner did not sell, the monopolist could use part if his holdings to eliminate his competitor by selling at a loss. So stretching your analogy, he could use rent from distant apartments to offer discounts on those near his competitors until his competitor goes broke.
Besides, you can you have a constrained space in a free market?
I'm dissapointed this type of thinking still pops up. The whole point of this article is to discuss increases in supply.
Examples:
+ Mission Street between 16th and Ceasar Chavez is a rail corridor. There was a proposal to limit this area to 8 story buildings. SF counterproposed and adopted a height limit which was on a per-property basis the lower of either a) what was presently built there or b) what city staff recommended, to preserve the character of the neighborhood. (Source: http://www.slate.com/blogs/moneybox/2013/04/11/san_francisco...)
What is currently built there includes e.g. two- to three-story non-operating pornographic theatres. (Source: I periodically walked past them while doing business in SF.) Reasonable people can disagree on whether one prefers non-operating pornographic theatres or new housing. San Francisco has decided, through their elected representatives, that they affirmatively prefer the theatres.
+ San Francisco has a complex, interlocking system of permits required to approve new construction, which is designed to and has the effect of minimizing it.
SF has built an average of 1,500 new housing units per year, for the last several decades. I pulled that stat from an advocacy organization which quotes it as what is realistically possible given that SF is filled with "strong communities, both those concerned about equity and those with more NIMBY interests, that will not allow the radical deregulation many developers (and the growing ranks of Ayn Rand libertarian techie counterparts) seek"
http://www.sfccho.org/wp-content/uploads/2014/02/Whose-Futur...
The population of SF has increased by almost 100k in ~15 years. (2001 census: 777k, 2013 census: 837k, all signs point to it accelerating) At that point, Ayn Rand libertarian techie propaganda ^H^H^H^H^H^H fourth grade math takes over.
Real estate economics is not fourth grade math.
What about south of San Francisco? Couldn't you build five story or higher apartment buildings there? Again, using Streetview, it looks like there are many newly built suburbs (or maybe they are just well-kept?) but almost all of them are single homes. Which isn't dense enough to solve the housing shortage. Also quite a number of golf courses and country clubs around. :)
Oddly enough south san francisco still seems to be fairly expensive, especially along the decent public transit lines. Assuming you're commuting to the city every day, you are trading say, an extra hour or two a day in commuting time for cheaper rent.
Just saying.
"In these areas, community resistance to housing, environmental policies, lack of fiscal incentives for local governments to approve housing, and limited land constrains new housing construction."
In other words: zoning.
I've spoken to both policy wonks and developers. IIRC, a good 70% of our land is zoned residential. Everything else is being redeveloped as fast as possible. The single biggest bottle neck is lack of available land.
Community resistant isn't simply just NIMBY. Methinks there's also self-image. Maybe like an inertia thing. Like the incumbents don't want to become "that kind of city".
Many are super reluctant to upzone residential areas (to permit greater density). And the upzones that do occur, are often via the backdoor, by introducing mass and public transit.
Resistance to redeveloping our South Lake Union area (think Amazon) was huge. A light industrial area with a smattering of hovels. A real dump. The political opposition was impressive. So a former mayor pushed thru a super silly trolley car and got the whole area upzoned. Clever.
For non-Seattleites, this will add context (South Lake Union, circa 2005): http://www.seattle.gov/economicdevelopment/files/south_lake_... http://www.seattletimes.com/seattle-news/nickels-outlines-fu...
http://m.theatlantic.com/magazine/archive/2007/11/a-tale-of-...
That doesn't seem sensible to me. One additional unit of housing will reduce prices by some very small amount, but rake in quite a bit of cash for the company owning it, in the current housing climate in SF. Closer to some kind of sane equilibrium, those numbers might start to balance out, but right now they're pretty far apart.
California ranks 35th in terms of poverty rate. [1] The graph that follows the statement shows that California's poverty rate is higher than the US average. That's not an auspicious premise for quality economic reasoning.
The constraint on housing prices in places like San Francisco is land cost. If developable land costs $500,000 per buildable dwelling unit on the open market, then $1,500,000 and up is where finished dwellings need to be priced to make development economically viable. Land supply is mostly fixed pending large investments in public infrastructure, particularly efficient extension of public transit.
[1]: https://en.m.wikipedia.org/wiki/List_of_U.S._states_by_pover...
I'm not sure how carefully you read the page you cite.
Firstly, that 35th is 35th from the bottom - which means that California has the 17th highest poverty rate amongst the 51 states and federal district of the USA.
Secondly, that rank is based on a definition of poverty based on income thresholds that do not vary across the country:
http://www.census.gov/hhes/www/poverty/about/overview/measur...
It therefore does not take into account geographical variations in the cost of living, such as housing. Since the whole point of the article is that California has a higher cost of housing, it is therefore not a useful measure in this context, or indeed at all. That's probably why, in 2010, the census bureau adopted a better metric, the Supplemental Poverty Measure:
http://www.census.gov/hhes/povmeas/methodology/supplemental/...
Helpfully, the 2012-2014 average of this measure is also tabulated on the page you cite, and if you sort the states and the district by that, you can see that California does indeed have the highest poverty rate in the country - 23.8%, just pipping Washington DC's 22.7%
So you can bypass convention and build $100k worth of improvements. But once the property hits the market again, the economic odds favor a buyer coming along with $600k who puts in $1200k worth of additional improvements. And then the property is at $1.8 million. It's casino odds, so to speak.
The general term is "highest and best use" and that's where property heads over time. The real estate business naturally accelerates that process because there's usually more net revenue on $1.8million properties than $600k properties, but the amount of work required to develop and sell a property is roughly constant regardless of price, e.g. it's about as hard to get a building permit, secure financing, or close a sale for a $600k project as a $1.8million project.
The static list measures by income - assuming that costs are the same across areas. Which isn't true.
(Not interested in arguments/models as to why it would; just places where I might examine data showing where/when it has in fact worked out this way.)