“Why Are Developers Only Building Luxury Housing?” - "This is a common lament in the tense debates over growth and development in many North American cities. Sometimes, the observation is made simply to call attention to the need for housing that's affordable to those across the income spectrum. It may also, however, be used as an argument against market-rate housing development. “It's not going to help the people who truly need help," say those who favor maintaining strict local limits on the use, height, and intensity of development, to those who would relax such limits. If only well-to-do people who can already afford nice homes will benefit from new construction, why risk your community's character and stability and quality of life just to let developers make more money? This notion that development's benefits accrue only to the well-off can engender a sort of defeatism among affordable housing advocates. Those who might stand to gain from additional investment in their neighborhoods aren't going to be motivated to come out and advocate forcefully for it if they don't think that they will be the beneficiaries. Too often, however, the observation, "Developers are only building luxury housing," reflects a lack of understanding of the situation it describes. Why are developers in your community primarily building for the high end of the market? If your gut reaction is “Greed!” please read further. Developers, yes, are in business to make a profit, and aren't easily persuaded to act contrary to that goal. But the actual issues surrounding what gets built, when, and for whom are far more complex. We need a more sophisticated understanding of these problems, so we can have more sophisticated conversations about what to do about them. Here are five reasons you might see your local developers primarily building homes that you and your neighbors can't afford.
1. New Construction is Expensive... according to data from the National Association of Home Builders, the median cost of constructing a single-family home in 2015 was $289,415, or $103 per square foot. Even if the land costs nothing, and the developer makes no profit, this is already out of reach of many would-be buyers... how do these households afford housing at all? The answer is filtering. As a building ages, it often becomes more affordable... Think about who buys new cars versus used cars. It's not all that different. Yet, as Joe Cortright points out, "There's no outcry about America's affordable car crisis"—because America has plenty of affordable cars, just not affordable brand new cars...
2. Supply and Demand are out of Whack
Let's get this out of the way: nine times out of ten, "luxury" is really just a marketing term. Most houses marketed as "luxury" aren't really luxurious in any meaningful sense of the word...
3. Your City's Zoning Limits the Creation of Less-Expensive Housing... 'if we limited Toyota to only 100,000 cars per year, they might well choose to keep the Lexus and scrap the Camry, even though, at volume, the Camry is more profitable'... If the land is valuable, and all you can build on it is a single-family home, why not build a very expensive single-family home? Sightline has documented the spread of large homes in Portland that don't add any net new housing to the city, but were the most profitable thing developers were allowed to build on their lots...
4. Other Regulations are Driving up the Cost of Development... Many building codes, for example, require fire sprinklers in residential buildings. This is most common in apartment buildings, but California, Maryland, and Washington, D.C. require them in all homes. These requirements can add six figures to the cost of a project. Yet there is no epidemic of fire deaths in older buildings that are not equipped with state-of-the-art sprinkler systems. The sprinkler regulation, in isolation, is easy to defend on safety grounds; on the other hand, its cost, in the form of unbuilt housing that could have been, is harder to quantify and grapple with. Most cities have parking minimums for residential development... One important effect of all of the above factors is to privilege large developers over small-scale ones, and those with the expertise (and cash reserves) to navigate a complicated regulatory process...
5. Your City Makes it Hard to Build Missing Middle Housing...
No wonder "they only build luxury housing." We've made it pretty hard to afford to do anything else."
Liberals claim that there's no point building anything other than affordable housing, but they're economically illiterate anyway
When there's little parking, people claim that the housing is only for investors, not for real people to live in. But a lot of them hate cars anyway, ironically
Yes, You Can Build Your Way to Affordable Housing - "“You can’t build your way out of a housing affordability problem.” That’s conventional wisdom. I hear it all the time... Like Houston, Tokyo makes home construction extremely easy, imposing few legal barriers and rarely delaying construction with red tape. Japanese zoning rules give property owners enormous flexibility. Takahiro Noguchi, head of the planning section in Tokyo’s Minato ward, told Robin Harding of the Financial Times, “People have the right to use their land so basically neighbouring people have no right to stop development.” And build they do! In Tokyo proper, with a population of 13 million, builders started construction of more than 142,000 homes in 2014. That’s far more than the 84,000 new homes started that year in the entire state of California, which has three times the population, as Harding reports. Tokyo’s homes may be smaller than Cascadia’s, but they’re growing. Residential space per person has doubled in Tokyo over the last 50 years... Tokyo, the world’s largest city, is much cheaper than Cascadia. It has built housing faster than its population has grown, and it has grown denser along the way. Of course, Tokyo has a radically different land-use governance system, with strong national control and little influence for neighbors. “Local government,” says Junichiro Okata of University of Tokyo, “has almost no power over development.” Meanwhile, Houston is the great exception to North American zoning regimes, with no conventional zoning at all inside city limits... both rental and for-sale homes in greater Chicago are, if not as cheap as in Houston, still available at fire-sale prices compared with Seattle (to say nothing of San Francisco)... Chicago is conventionally zoned and governed, but its pro-housing policies—faster permitting, less-restrictive zoning—make homebuilding far easier and housing choices far more numerous than in many similarly blue US cities... Consider Montreal Canada’s second most populous metro area is vastly less expensive than greater Vancouver, BC–––less than half as much for a typical house. It’s even cheaper than much-smaller cities such as Saskatoon. Part of the explanation, as in Chicago, is that population is growing more slowly than in Cascadia’s large cities and their tech-booming counterparts elsewhere. But this difference amounts to less than you might think. For one thing, Montreal is growing, as traffic engineer and Montreal blogger Simon Vallee points out: Montreal in recent years has grown 1.2 percent a year, while Vancouver has grown 1.3 percent a year. Not a staggering difference! More important is that greater Montreal keeps building residences, adding more homes over the last decade not only than Vancouver, BC, but also than similarly sized US metro areas such as Seattle and San Francisco, according to US and Canadian census data. Beyond the numbers alone, Vallee argues, is that much of the metropolitan area is dominated by land zoned for low-rise—typically three-story—flats and mid-rise apartment buildings... Montreal demonstrates the power of “missing middle” housing on a massive scale... 70 to 80 percent of new housing construction in Vienna is publicly subsidized. Compared with Seattle (or Vancouver), Vienna’s housing is much denser: the city is mostly apartments and lacks even one acre of single-family zoning. At the same time, its parks and open space are four times as ample, covering half of the city. And its development process is both more streamlined and more participatory. Most housing is developed through competitions among developers, judged by committees of experts based on a set of criteria. Among these criteria are social cohesion and integration (to make racial, nationality, and class disparities matter less), environmental sustainability, beauty, and community. Because Vienna’s dense, walkable neighborhoods mix incomes, nationalities, and races, they provide more equitable access than Cascadian cities to parks and public spaces, public schools and libraries, and job openings: the Viennese housing market does not ration opportunity the way Cascadia’s housing market does. Vienna’s housing model is impressive, if no panacea. Of course, the city, like Tokyo, operates in a completely different political context than Cascadia. City government controls huge areas of land, which it can award to homebuilders with strings attached. Rental laws nationwide in Austria function like rent stabilization programs, giving tenants predictability. At the same time, home ownership is rarely a path to financial gain in Austria, and private property rights are less sacred than in North America. Massive expenditures from the national government bolster Vienna’s housing. (Astute observers may note that the same is true in the Northwest states, through the US mortgage interest deduction and other tax preferences, which funnel hundreds of billions of dollars to US homeowners. The difference, of course, is that Austria subsidizes construction of housing, while the United States subsidizes mortgage borrowing. Naturally, Vienna gets more homes, and the Northwest gets more mortgage debt. Furthermore, in Austria, the subsidies increase as you go down the income ladder, while the US subsidies flow up the ladder.)... Housing prices are dramatically lower in Europe’s cornerstone economy than in hot housing markets elsewhere in Europe or North America: more like Houston than San Francisco or London. Like in Houston, German home prices have declined, not increased, over the past three decades. The explanation is that Germany encourages homebuilding, lots of it. For each increment of population growth in recent years, for example, Germany has built three times as many new homes as has the United Kingdom. For one thing, public funding flows to local government in proportion to local population, so local agencies have a strong incentive to make land available for housing and to keep regulations tuned for efficiency... The key lesson of San Francisco is that the city’s own closely held social-democratic values have made the city a housing nightmare... San Francisco’s antideveloper politics have dug it into a self-perpetuating cycle of self-righteousness and displacement."
Coby on Twitter - "What we prioritize shapes our world in profound ways. On the same block, with the same amount of homes, we can either have: 1) Car-oriented, anonymous, & imposing buildings Or 2) A walkable, beautiful, sustainable, fine grained community with lovely character & personality!... In the left graphic, there are 165 bedrooms, & 165 units. In the right, there are 185 bedrooms, & 120 units"
Case Study — A Vision for Civic Conservation - "GUIDING GROWTH IN CHARLESTON'S HISTORIC DISTRICT. A Case Study prepared by Bevan & Liberatos."
Ironic. Sometimes liberals claim that density is good. Also the comparison is dishonest as it doesn't tell you how big the housing area is in both cases or how much the housing would cost (naturally, liberals love to bitch about a shortage of affordable housing).
A meme I saw didn't even disclose the number of units in both cases, just how many bedrooms there were (in reality, the higher structure has more units).
If the high density construction got even more storeys, it would be even more superior
A family of 5 lives in a car as they save for housing in a good school district - "Some families sacrifice nearly everything so their kids can go to the "right" schools. In eastern Pennsylvania, Veronica Vargas and her longtime partner, Alex, put their sons to bed most nights in their car in the parking lot of the Walmart where they work. They're doing it to keep their 11-, 13- and 14-year-old boys in a sought-after public school district that's nearby... But they're in an area where affordable rentals can be hard to get... Combined, Vargas and Alex make more than the median household income in the U.S., which is around $67,000 a year"
Liberals claim that this shows that capitalism has failed, the US sucks, that the minimum wage needs to be raised, all schools should be funded equally etc. When in reality it shows what happens when you have non-competitive schools with admission based on address, which means rich people buy housing near good schools, driving up the cost of housing in those areas
Four reasons why more public housing isn’t the solution to affordability concerns - "Land availability and local zoning are the main obstacles to subsidized housing . Building subsidized housing—or for that matter, market rate rental housing—iss illegal in most parts of the U.S. Local zoning laws prohibit structures other than single-family detached homes on the majority of land across cities and suburbs... Public housing developed from the 1950s through 1970s was largely built in poor, racially segregated neighborhoods, because that’s where government agencies could acquire land—and where middle-class white voters didn’t protest too vehemently...
Public agencies aren’t designed to be real estate developers. Proposals for “the government” to build public housing are often vague about which agency or department they mean. While funding for public housing originates at the federal level, the properties are operated by more than 3,300 local housing authorities across the country. And most of them don’t have recent experience with new construction—a long, complicated, risky business under the best of circumstances. Public agencies operate under more rigid rules and processes than private sector companies as well; for instance, procurement and labor requirements that make construction substantially more difficult and more expensive. Today, nearly all new subsidized housing is built and managed by specialized nonprofit or for-profit developers. So, despite those calls for “the government” to build more housing, most housing authorities don’t have the capacity or the desire to undertake new construction projects.
High-quality subsidized housing needs a long-term commitment, not a brief flirtation. As any homeowner knows, maintaining a home in good condition requires ongoing investments of time and money. In that sense, most existing public housing properties have been slowly deteriorating for decades, plagued by water damage, mold, vermin infestations, and aging mechanical systems. In 2017, Housing and Urban Development (HUD) Secretary Ben Carson was famously trapped in a malfunctioning elevator while visiting a Miami high-rise project. With that in mind, why would housing authorities sign up to build more apartments when they already face enormous maintenance backlogs and insufficient capital funds? The federal government’s history of infrastructure funding is like parents who buy their 16-year-old a new car, then refuse to chip in for insurance, gas, or repairs. (See also: unmet capital needs for roads, bridges, and subways.)...
Other types of housing subsidy give taxpayers more bang for their buck. Constructing new housing is expensive, especially in coastal metro areas where affordability problems are most acute. Developing subsidized housing is—paradoxically— more expensive than market rate housing, because of the complexity of assembling financing. New construction is also slow: It can take a decade or longer to complete subsidized apartments in tightly regulated markets. If the goal of federal policymakers is to help as many low-income households as possible, then a strategy of newly constructed public housing is perhaps the least effective path. Increasing funds for housing vouchers or for the acquisition and rehabilitation of existing apartments through the National Housing Trust Fund would stretch subsidy dollars to cover many more households more quickly, and often in higher-opportunity neighborhoods. Shoring up the long-term physical and financial viability of existing subsidized properties—such as through HUD’s Rental Assistance Demonstration (RAD) program—would also be more cost effective than new construction."
Density Makes Housing Less Affordable, Not More - "High land prices make housing expensive. Developers can build higher‐density housing, but — as California developer Nicholas Arenson testified before a regional planning commission — buildings more than three stories tall require more steel, concrete, and elevators, making the construction cost per square foot much higher than single‐family homes. A comparison of the density of American urban areas with their housing affordability shows a clear correlation: density makes housing less affordable, not more."
This is stupid. This pretends that land cost is $0 because so many Americans fetishise single family homes and hate density, not to mention that other costs (e.g. roads to serve the new building) are lower for high density developments. And it assumes that they're the same size. Weird how denser housing is cheaper than less dense housing, if it costs more to build
Are Private Equity Firms to Blame For Rising Home Prices? - "Concerns over high housing prices have been ubiquitous this past year. Even the White House is talking about it. Finger-pointing has increased commensurately to pin blame on the rise. Explanations have ranged from low interest rates, a lack of supply, and pent-up demand (likely a combination of these factors), to inflation run amok and wealthy families snapping up extra bonus homes. But dig a little deeper into the finger-pointing, and eventually, perhaps inevitably, Wall Street emerges... the Internet collectively lost its mind over coverage of BlackRock’s foray into single family homes (SFRs)... Since 2011, cumulative acquisitions from institutional investors has approached 400,000 single family homes. By 2017, it was estimated that institutional holdings of SFRs were ~$33 billion. While these might seem like large numbers, and a sign that we’ve found our culprit for rising prices, they only represent a fraction of the market. According to the latest data from the American Housing Survey, there are nearly 86 million single family homes in the US. Institutionally owned SFRs represent less than a half of a percent of this market. If we were to narrow our focus solely to the rental market of single family homes, of which there are 16 million, institutionally backed firms only own 2.5% of the market. While investors purchase 20% of all homes nationally today, only 1–2% of homes are bought by larger investment firms. Most rentals are owned by small investors. From a value perspective, the numbers get even smaller. Amherst Capital has estimated that the value of all single family homes in the country in 2017 was $26 trillion. Institutional holdings are barely more than a tenth of a percent of this number. For the $3.5 trillion single family rental market, institutional investors only control 1%. When looking to the entire housing market, which Zillow has estimated to be $36.2 trillion, the proportionate value gets even lower. The value of SFRs owned by institutionally backed firms as a percentage of the entire housing market is likely less than a tenth of a percent. This is hardly paradigm shifting. With numbers this small, private equity firms don’t appear to be materially impacting nation-wide affordability... Beyond their limited market share, institutionally backed investors usually aren’t competing for the same types of properties as traditional homeowners, as they target assets in areas with low rates of homeownership that require extensive repairs. John Burn and Rick Palacios Jr. agree, arguing “we are not in an investor-induced bubble today (largely due to low rates).”... According to some estimates, pensions are $6 trillion behind on funding obligations. That’s almost one third of our entire GDP. The only ways to address this shortfall are to raise taxes, cut services, or seek higher returns. As cutting services and raising taxes are broadly unpalatable, that leaves pensions scrambling to achieve higher returns in alternative investments. This is potentially dangerous. In any investment, higher returns are available to those who risk more. But seek returns too high, and risks are unsustainable... only 2% of foreclosed homes from 2007 to 2011 were bought by institutionally backed single family home companies. What’s more, the homeownership rate actually increased to nearly 68% in 2020, equalling the rate before the Great Recession in 2007... NIMBYs, the derisive (but fair!) term given to those who oppose increasing housing in their neighborhoods, are incentivized to combat new construction. The lower the supply is in a desirable area, the more expensive homes will be. Any attempt to add new housing represents a perceived threat to the economic security homeowners have built. Somewhere along the way, the notion of a home as a residence first has been co-opted to convince Americans that homes are investments that should increase in value, regardless of the exclusionary means of getting there. If private equity is putting returns above the living conditions of one’s neighbors, it’s coming from single family homeowners — not Wall Street! In hiding behind antiquated zoning laws, high prices are foisted on those least able to support them, who in turn have fewer resources to dedicate towards all other facets of their lives."
One claim presented to me was that companies are snapping up starter homes, leaving new homeowners unable to get onto the property ladder, but of course there was no evidence presented for this
What does economic evidence tell us about the effects of rent control? - "DMQ find that rent-controlled buildings were 8 percentage points more likely to convert to a condo than buildings in the control group. Consistent with these findings, they find that rent control led to a 15 percentage point decline in the number of renters living in treated buildings and a 25 percentage point reduction in the number of renters living in rent-controlled units, relative to 1994 levels. This large reduction in rental housing supply was driven by converting existing structures to owner-occupied condominium housing and by replacing existing structures with new construction"
Someone got upset when I said the policies that people who complain about expensive housing support lead to more expensive housing. When I listed environmental protection, more regulation on developers, keeping single family housing zoning and rejecting even mild densification, rent control, pro tenant laws, high developer fees, opposing renewal of housing stock as "gentrification", opposing urban sprawl, affordable housing quotas in new developments, opposing high rise housing and opposing new housing that isn't dedicated affordable housing, he demanded specific policies, then when I threw 3 sources at him he stopped replying
Meme - "I was finally able to afford to buy my own home! *home mounted on bicycle*"
This exists: Roadtrip in a Homemade Bike House! - YouTube
New Housing-Affordability Crisis - The Atlantic - "mortgage-affordability numbers are all different, and though some lenders use them to approve mortgages, they are basically guesstimates... Despite hearing the 30 percent figure from many of the experts I talked with, I was surprised to learn that most current homeowners actually spend much less on their housing. So do most renters. The median homeowner with a mortgage spends 16 percent of their gross income on their house payment, including taxes and insurance. That number is higher—24 percent—for low-income households, but it’s still less than 30 percent. Renters spend an average of 26 percent of their income on housing. In other words, if you take the mortgage calculators at their word and spend 28 percent, you’re paying much more for a house than the average American does. But in today’s market, it’s extremely difficult to buy a house for just 16 percent of your income—or 28, or 30. The average new homebuyer today, according to Zillow, will spend 34 percent of their income on housing—the highest amount since 2004, which is as far back as Zillow’s data goes. That’s if they have a 20 percent down payment. If they don’t, the cost burden will be even higher. Prices are still high because housing stock is so low... a large monthly payment could nevertheless prevent you from saving for retirement, maintaining an emergency fund, visiting far-flung family, or having as many kids as you want. It could keep you from indulging in the many pleasures of life that aren’t a house. This possibility, of being “house broke,” can knead away at your thoughts as you click through DocuSign screens of enormous numbers... the staggering cost of homeownership today is making renting look less bad by comparison. Right now, for a typical home, owning costs about 25 percent more a month than renting, and there are only four metro areas where buying is currently cheaper than renting, according to Redfin: Detroit, Philadelphia, Cleveland, and Houston. And because interest rates are so high, today’s homebuyers are not building equity at the same clip that someone with a 3 percent rate would be. Especially if you don’t plan to stay in one city for at least three years, renting is reasonable... The reason it’s so hard to get a straight answer on this—how much to spend? To buy or to rent?—is that buying a home is not purely rational. It’s also emotional, evoking feelings of stability and community, and potentially, of stasis and strain... some experts suggested a different kind of mortgage calculator, what’s known as the “eight-hour rule”: “Don’t do anything where you’re not going to be able to sleep at night”"
More Flexible Zoning Helps Contain Rising Rents - "Studies show that adding new housing supply slows rent growth—both nearby and regionally—by reducing competition among tenants for each available home and thereby lowering displacement pressures. This finding from the four jurisdictions examined supports the argument that updating zoning to allow more housing can improve affordability. In all four places studied, the vast majority of new housing has been market rate, meaning rents are based on factors such as demand and prevailing construction and operating costs... The evidence indicates that adding more housing of any kind helps slow rent growth... Each of these places kept rent growth minimal relative to the U.S. overall, even while demand for housing continued to grow. Between 2017 and 2021, the four jurisdictions saw their total number of households grow between 7% and 22%, while the total households nationally increased by 6%. More households require more homes, and a housing shortage relative to demand drives up rents. So, how did these high-demand areas keep rents from spiking? The evidence indicates that more flexible zoning helped these places add new housing faster than new households formed or moved in to fill the homes. And that helped slow rent growth"
Weird. Leftists keep insisting that adding supply is useless because investors just buy everything up and the solution is to ban property investment and build social housing
City-wide effects of new housing supply: Evidence from moving chains - "We study the city-wide effects of new, centrally-located market-rate housing supply using geo-coded total population register data from the Helsinki Metropolitan Area. The supply of new market rate units triggers moving chains that quickly reach middle- and low-income neighborhoods and individuals. Thus, new market-rate construction loosens the housing market in middle- and low-income areas even in the short run. Market-rate supply is likely to improve affordability outside the sub-markets where new construction occurs and to benefit low-income people."
Strange. Leftists are forever claiming new housing supply won't reduce housing costs because no one will be able to afford million dollar mansions, and the only solution is more affordable housing and more public housing
Keywords: ripple effect
We Can Have Beautiful Public Housing
Of course, this is Jacobin, so there're the omissions you'd expect (plus they criticise the successful public housing they highlight for not being leftist enough)
Book Review: Municipal Dreams: The Rise and Fall of Council Housing - "The second period, from 1945 to the late 1970s, is the apotheosis of council housing in England. Squalor was one of the ‘five evils’ identified in the Beveridge report, which provided the framework for the post-war welfare state. And to banish it from England’s green and pleasant land, council housing was one of the ‘five giants’ created by Clement Attlee’s government and sustained by consecutive administrations. During this era, central government subsidised local authorities to build millions of new homes. Millions of people were lifted out of cramped, unhygienic slums and rehoused. As a parallel programme of slum clearance destroyed almost as many dwellings, the parties again competed to build more and more. As a result, quality and space standards were reduced, and developers raced to build what they could, using untested and ultimately unsustainable methods of system-building. The third period, from the late 1970s to the present day, is the story of the fall of council housing. Once a step up the social ladder, by the late 1970s, council housing had become stigmatised and residualised (that is, catering to a small number of people with no other housing options). "
Damn capitalists!
Meme - "Which is the real problem?
*Condo* 4% Vacant
*Area above house* 1OO% Vacant"
Condo haters don't want more housing (despite their excuses that no one can afford the condos or that they're all bought up by investors) - they just hate condos
Death of the balcony: Why an outdoor space of one's own may soon be a luxury in condoland - "Kesik compared the Canadian market to Scandinavia, where balconies are often enclosed with a retractable glazing system large enough to comfortably accommodate a dinner table and chairs for the whole family. “Inhabitants are shielded from the wind, rain and snow, and when closed up provide a safe place for children and pets no matter how high they are up in a building. Surveys of high-rise building inhabitants indicate that a significant proportion are afraid of heights and find their balcony environments uncomfortable most of the time”"
LILLEY: Calls for huge tax hikes as Toronto begins budget planning : TorontoRealEstate - "Toronto has the lowest property tax rates in the province."
LILLEY: Calls for huge tax hikes as Toronto begins budget planning : TorontoRealEstate - "This comment keeps being posted and when explained in detail… Which is was less than a week ago. People ignore it.
TLDR. There’s a reason for Toronto’s lower property taxes. We get double taxed with land transfer taxes and have higher home valuations on less land. Why is someone in a condo supposed to pay as much in taxes as someone with a 5 bed detached elsewhere in the country? The majority of the tax for the entire province comes from toronto. In fact, people living in the core of cities are how the rest of the province survives financially. The suburbs are literally draining the rest of toronto and had it not been for amalgamation the rest of “Toronto” couldn’t survive with subsidies from the core."
Left wingers promote housing density, saying that it's cheaper to provide services to a denser population. Then they keep complaining that property taxes are too low. But of course they don't understand the difference between rates and dollar values
