This is good news. Is more apartment availability also curbing the recent price increases for owner-occupied detached home sales? They're rather different goods, but the effects from lower apartment rents might spill over to some extent.
The article says that the increasing numbers of For Rent signs were all found on older suburban houses, which includes owner-occupied detached homes. So it seems they are all feeling pressure to reduce prices.
I don't see that in the article. The article features For Rent signs in front of older apartments:
"More new apartments are coming on line, and now for rent signs are more plentiful than mushrooms after the first autumn rains. Take a look:
a bunch of pictures
We photographed these signs in the space of about an hour on a recent sunny afternoon in Portland’s close-in East side neighborhoods. These signs are all in front of existing, older apartments."
The article's inflation chart is just for multi-family rental pricing. Hence my follow-up question if anyone knows of pricing effects on detached home sales. (I'd like to move back to Portland, but housing prices appear to be way up since I left a decade ago. And I now have too many pets for an apartment.)
Detatched homes, or HUDS, have a really aggressive tax policy in Portland making them very expensive to rent out as apartments. The policy promotes using these units as airBnB rentals in place of longer term housing for residents.
Yea, I don't see any mention of that here. I recognized several of the apartments from the pictures and these are all Inner Portland apartment complexes.
It tends to work well enough over broad stretches, including the end points.
Since the model for the last couple generations was expanding in to the "green field" suburbs and that model is now breaking down due to the distances finally becoming too insane / growth boundaries being enforced, there has now been a building pressure that is finally being re-directed in to other areas.
Unfortunately civic codes are focused more on preventing the loss of life than on making life a quality affair. I would really love to have actual peace and quiet at home; being completely unable to hear those on the other side of the walls, and requiring that build in appliances be similarly quiet instead of the cheapest possible and least effective exhaust fans.
I think people see exceptions and make too much of them. The law of gravity is not falsified by the existence of birds, planes, or rockets. To think otherwise would say more about the naivety of the attempt to apply it than the law itself.
I also think people dismiss "economics" as a whole, when a distinction really needs to be made between micro and macro. Macroeconomics is really hard, and in terms of its ability to apply to the real world, I can make a solid case for calling it a "crock". By contrast, microecon is about as solid as you could ask for for a science as removed from physics as it is [1], and anyone who proposes an economic theory of either variety that fundamentally violates its tenants is starting out behind the eight ball as far as I'm concerned. It is conceivable that building more houses, once examined through the lens of a rich exterior world with countless forces acting every which way on every time scale in crazy, arbitrarily-complicated ways might raise housing prices for some period of time. But it's going to be something overwhelming the still-existing underlying trend that building more housing is going to drop prices, and as the amount of housing added limits to infinity, basic supply and demand will eventually overwhelm those other forces.
[1]: https://www.xkcd.com/435/ That is to say, I recognize that microecon is not necessarily "solved" nor is it completely accurate; for instance, while "homo econimus" is a bigger problem for macroecon, it can still bite at the micro level. But for what it is, it's solid enough to be worth paying attention to, a case I can not always make for macroecon.
Every time you talk about building more housing in a desirable place, there's always someone who brings up the argument "But if you build more housing then even MORE people will want to move here". Nothing wrong with some empirical evidence.
Actually the usual argument, as per the article, is more like "only rich people can afford to live in new housing, therefore building new housing doesn't help poor people", which is of course false.
Edit: Unsurprisingly, the top post on this very page is now a form of this argument.
Build near mass transit and in walkable neighborhoods and restrict the number of parking spaces. Make streets safer to walk and bike. Adding more housing units doesn't need to mean a linear increase in cars as well.
That works if you have the land to do that. The Virginia side of the DC area has lots of high rise apartments and skyscrapers built around the metro station and it definitely works to keep cars off the road but I don't know of the same thing can be done in the bay.
> I don't know of the same thing can be done in the bay.
Walk by any of the BART stations in the East Bay (even Downtown Oakland), and you'll see vacant fields and mostly empty parking lots. The area near MacArthur BART could be densified to a crazy degree without displacing a soul.
They're not wrong. There will be more people moving there if prices are lowered, and over the long run unless Portland can absorb the entire movable population whatever it is, it will be helping to lower rent everywhere in the country. So thanks!
What I think you're saying is, prices drop in Portland, so people move there from city X, which drops demand in X, so prices drop in X.
One problem, though, is "stickiness". I wouldn't move to a different city for $1/month. I probably wouldn't move even for $100/month. Why not? Well, I'm not single, and I have kids. It's not just that I'd upset everyone's routine - I'd also have to move all this stuff. I'd also have to sell my place and buy (or rent) a new one. Total cost to me: Probably in the $20,000 range. I'm going to do that for $100/month? No way. Even for $1000/month, it would take 20 months to pay back, not counting the time and aggravation.
So cities are "sticky". I'm stuck here; it takes a seriously better situation to break me loose.
Many people have lower thresholds than I do; but for most people, the threshold is some way above zero. (Exceptions do exist; if the current situation is socially or emotionally difficult, they may move to something even if it's economically worse.)
No, the number of people who want to move there will probably not increase,. There will be more people actually moving there, which is a different thing. Wanting to move there is what raises the prices.
> The housing crisis prompted the City to adopt an ill-advised inclusionary zoning ordinance, and led the state to flirt with authorizing rent control.
Politicians and their supporters routinely believe they can repeal the laws of supply and demand.
I think they were just wondering why this is the #1 ranked link on HN right now because it's so obvious. Honestly, I was wondering the same thing when I saw the headline of the article.
Yes, but a lot of people, for various reasons, either believe that econ 101 arguments don't apply in this situation or that even if they do, the effects of building market rate housing are still undesirable.
Their actual stated arguments tend to be delivered in unconvincing ways, but Julia Galef (who I gather does believe in the econ 101 take) took a stab at steelmanning that side in https://juliagalef.com/2017/07/13/should-we-build-lots-more-..., and it's definitely worth a read.
What I'd add to her points is a fourth, that while some people believe that either overall affordability or total number of below market rate units are the right metrics to measure success by, some people care more about the percentage of affordable units than the number. An extreme version of the argument says that having 100 affordable units out of 200 total is better than having 200 affordable units out of 1000 total, because the second scenario will mean a strong demographic shift in the neighborhood (a "whitening"), not to mention an increase in density that will change the feel of the area. This is not an economic argument, but one about values, so it's not going to be resolved by numbers.
This is especially the case in San Francisco where programs such as rent control, inclusionary zoning, and other programs split renters into non-market partitions who mostly would not directly benefit from added supply (see Kim-Mai Cutler’s article for details on this https://techcrunch.com/2014/04/14/sf-housing/).
I suspect, Alot of SF residents would be extremely surprised by this article if they actually read it, even with their highest degrees per capita population.
1) Some areas have geographic or legal limits to constructions (maximum building hight, water, etc). There is simply no way to build more building without first demolishing existing buildings, which is costly.
2) Most people want to live close to work, and work tends to be close to the centre. A house that is an hour commute away will not influence the price in the immediate vicinity.
If space was infinite, it would be Econ 101, but given that space is not, elected officials need to protect the voting population from inflation, through whatever means possible.
All American cities have huge amounts of unbuilt land dedicated to surface parking, usually required by law. This land can be redeveloped with parking underground, or on rooftops.
If anything, the laws demands everyone subsidize parking through higher prices / rents. London recently got rid of parking laws and to no one's surprise, developers built a lot less parking.
Parking is a perfect example of bad zoning manifesting in the misallocation of resources - we simply have more parking than we want to pay for.
You can almost always build more housing on a given lot though. My detached single family home uses 1/5 or less of the land on my lot. You could build four town homes of the same size as my house on the same lot. If you went to four stories, eight units of 2,000 square feet each.
This isn't rocket science. It's about density of units per amount of land.
First, you have to sell your home, which is not always a reality. Then, a construction company has to buy your expensive house and build enough stories to make up for the difference of buying, demolishing and building again. Finally, the municipality has to allow a building of that height. That's why in many areas you see townhouses that go up in price, but no developer wants to turn them into 4+ storey buildings.
The only hard part about that is the municipal permitting. Home construction is not rocket science! This is a mature industry and purchase, demolition, and new construction all have predictable costs.
Some areas have geographic or legal limits to constructions (maximum building hight, water, etc). There is simply no way to build more building without first demolishing existing buildings, which is costly.
But not as costly as sticking to the status quo - if you account for opportunity costs.
Most people want to live close to work, and work tends to be close to the centre. A house that is an hour commute away will not influence the price in the immediate vicinity.
that's not true at all. Look at commuter suburbs and exurbs that get developed.
If space was infinite, it would be Econ 101, but given that space is not, elected officials need to protect the voting population from inflation, through whatever means possible.
Space is not the issue - space utilization absolutely is and zoning laws produce suboptimal space utilization. There should be a lot more residental sky scrapers in the bay area than there currently are. If San Fran adopted the zoning of say Dallas, things would be different and probably more affordable.
> that's not true at all. Look at commuter suburbs and exurbs that get developed
It's only through the construction of highways that suburbs can be accessible. There was a great study done to show that the cost of highways is mostly subsidized by the inner city, not the suburbs themselves.
This is what I mean about keeping inflation low through use of the government: only the resources of a centralized government can undertake the construction of highways that keep the cost of downtown areas "low". In effect, this is one of the strategies to reduce inflation: infrastructure.
For the space issue, see my answer below to bmcusick
It's only through the construction of highways that suburbs can be accessible. There was a great study done to show that the cost of highways is mostly subsidized by the inner city, not the suburbs themselves.
Are you intentionally confusing separate issues? An hour away from the city is an hour away from a city, infrastructure can change the distance you can travel in an hour (e.g in countries with high speed rail, it's not uncommon for people to commute over 100 miles, that'd be a very long commute anywhere in America).
The highways extend the amount of land that's available for commuters, maybe cities should pay for them as the highways make it possible for cities to get away with inefficient zoning.
> Space is not the issue - space utilization absolutely is and zoning laws produce suboptimal space utilization. There should be a lot more residental sky scrapers in the bay area than there currently are. If San Fran adopted the zoning of say Dallas, things would be different and probably more affordable.
Another point is that the land under a building may not support a building taller than a certain height.
Subject to economic / technical constraints. But when there's money at stake, construction companies find a way. The petronas towers have pylons driven deeper than 100 meters [0].
You're right that the land matters and a San Fran to Dallas comparison is challenged in many dimensions but I think San Fran's housing market would be more reasonable if it were money / technology constrained, not zoning law constrained.
The housing being built in Portland over the past handful of years is of a specific type and a certain price range. I regularly check the rental rates for units in these new complexes as they come on line and I have yet to find units that I can afford.
Portland is very lax with it's high density zoning, or strict depending on how you look at it. They promoted high density housing by disincentivizing alternative zoning types (making it extremely difficult to find non retail commercial spaces).
The lack of rent control combined with the proliferation of high-end retail + housing spaces contributes to housing as an investment opportunity which in turn makes low end rent unstable and rare. This past year over half of the renters on my block were kicked out of their homes when owner decided to sell.
Sure, there's a glut of $1,500 studios and one bedroom units available, but there's a real lack of rooms or units below $1,000.
I'm sorry you're so delusional about the reality of how density actually works in some of America's cities, that the comment flew over your head. Now why don't you mind your own business?
Alas, since I moderate this place, it is my business. You've posted many more unsubstantive comments than that one, and worse, many uncivil ones. We ban accounts that do that, so would you please read https://news.ycombinator.com/newsguidelines.html and follow them from now on?
> The housing being built in Portland over the past handful of years is of a specific type and a certain price range.
This is true for every city. Developers don't really build low-end units. They build high-end units and rely on the age/deterioration of other buildings to eventually turn them into lower-end buildings.
This is sort of working out because people are generally moving back into cities and are willing to pay a premium for it.
The reason why I think this article about Portland is interesting is either their influx of people into the city has slowed/stopped, or they've built so many units that its outpaced the influx. A common narrative in cities is "we're building so many units yet prices are still high!!!" But clearly the equation should be rate of new units coming into the market vs rate of change of city population.
Which also feels like common sense. But maybe its more like, this article is interesting because it shows there's light at the end of the tunnel.
My concern is if and how high density zoning promotes growth models and patterns that detract from them availability and creation of affordable housing. It's also sad to realizing that affordable housing in the metropolitan US also typically means low-end.
The median family income in Portland (the city proper, not the metro area) was $77k in 2015 according to http://www.deptofnumbers.com/income/oregon/portland/. $1500/month is totally within the bounds of the typical 40:1 income to rent ratio, so it's unsurprising that available rents tend to be in that range. If you want something cheaper than that, then yes, it's going to be low-end.
I'm not really sure what you're hoping for. Rents were creeping further upwards until building started to catch up with people moving in, and now they're coming down.
Are you really trying to argue that the best move, in light of this evidence, is to build less?
What part of "age/deterioration" makes units lose value, exactly? Is it just that buildings aren't built to last, or is it that newer buildings have newer amenities?
If the former, would a trend of "over-engineering" buildings—or more rigorous building codes—mean that buildings will take longer to lose value, and so there will be fewer low-value units on the market at a time?
If the latter, would a lack of recent domestic innovations mean that new units are basically "just like" old units, and thus stall the aging-down process?
Houses have general wear and tear that need to get fixed.
Housing designs and styles go out of date. Code gets updated to add new standards such as better insulation, earthquake resistance, plumbing. Roofs need to be replaced, walls need to be repainted, floors need replacement after general wear and tear. Electrical standards change since our demands have changed over generations. And most units don't keep all of this stuff up to date through renovation other than the bare minimum. Like a used car.
Since buildings last a long time, a 1920s-1970s building is what is considered an aged building. 1980s is on the edge and 1990s is relatively new. A older building that was overengineered will retain better value and so on.
> What part of "age/deterioration" makes units lose value, exactly? Is it just that buildings aren't built to last, or is it that newer buildings have newer amenities?
My place is (San Francisco) affordable, but:
- 2 people have been shot & killed on my block in the last year
- there's regularly poop on the sidewalk in front of my building
- one of the two elevators in my building is often out of service (and occasionally it's both!)
- my apartment has no kitchen
- the plumbing is old (aka leaks)
- the door to my bathroom doesn't quite close
- the paint is peeling in some noticeable places
- some places in the common areas never get dusted
- random people walk in and steal packages from time to time
- there's no air conditioner (don't really need it tough)
- the heater barely works (don't really need it tough)
- the electrical outlets are in funny places
- the main window never stays open quite all the way
- there are small gaps under the fake hardwood flooring
- my bathtub looks like it was attacked by a 5 year old with a sharpie
It's nice a primo place. Don't get me wrong, I love where I live. But I wouldn't pay primo prices for it. I'm just talking about "age/deterioration", since you asked.
portland has special problems. The state constitution prevents property taxes from going up in proportion to the value of the property as long as you don't do any renovations on it. This means that the only economical reason to develop land is because you intend to charge a lot more for renting it, since any construction will cause your property taxes to spike.
It is infinitely frustrating that because of this - that developers only ever build at worst medium end housing - that you either end up with roommates and no privacy or way more square footage than you need on your own.
The article addresses exactly this "myth" in the 3rd to last paragraph.
A different way of stating what you're saying is that the new supply hasn't existed long enough, which is probably true, but it's not necessarily an indication of a problem with the market.
Sure, but what's the alternative? Magically conjure more supply into existence?
Or, you mean, enforce policy that artificially controls rent, which as mentioned in other comments on this post, is basically a fancy way of pretending the problem doesn't exist and has knock-on bad side-effects.
I don't mean to say don't build high density housing. I think it's a strong part of keeping housing affordable. However I think it's important to keep in mind that building a ton of units and not having other policies in place isn't going to magically get us lower rents.
The $1000 units are gone, forever. If Portland builds enough to keep up with demand, eventually inflation will cause the rent in real terms to be equivalent to $1000 2017 dollars, but the sticker price for these units will never be $1000 again.
There's a real financial incentive for developers to not take lower rents than they budgeted for - those rents need to cover the payments on the loans they took out to finance the construction of the building. It's why it's usually much more attractive for them to offer incentives like a free month of rent - sure, they take a hit up front, but the long term financial viability of the project is intact. But if they take on a bunch of leases with lower rents than they projected, now they have a building which is just losing money every month.
Also, be careful what you wish for - the way you would get back to $1000 a month rents is Detroit-style depopulation, and that really sucks.
Maybe we could have something in the middle, a bit like Berlin. There's got to be a middle ground between Detroit's $500 rent and most popular cities' $1500+ for 1 bedrooms.
Uh, NL sucks. Unless you're local and you get put from birth on the waiting list (which you can now only apply on 18 years). So by 40 you may get cheap housing.
You have a lot of people fleeing expensive places like SF, LA, and NYC to Portland and Austin. Those rents are still cheaper and you get the same city amenities and some good places to work. So there's demand and until people see that it's not worth it to move there then it will probably continue to rise. Same with housing prices. I know people that were looking in both LA and Portland at the same time. They probably would've gone with Portland had there not been factors beyond money at play.
A $1,000/mo rent unit is affordable for someone earning $40k. If that's a new housing unit in a decent location that's going to buy you, what, 200 sq ft microhousing hell?
I can certainly understand why growing cities would not want to building out anything even remotely like that. What's that going to look like 10 years later?
> I regularly check the rental rates for units in these new complexes as they come on line and I have yet to find units that I can afford.
The whole point of this article is not that new affordable units are being built, but that the construction of new high-price units causes older units to become available at lower prices. The link is indirect, because markets are indirect.
It seems like you either didn't read the article, or don't fully comprehend supply and demand.
> The more apartments stand vacant, and the longer they go unfilled, the greater the pressure on landlords to drop prices. Already, some newer apartments are offering move-in bonuses, like a months’ free rent. It’s a sign that the market is turning.
Am I the only one who doesn’t understand what actually was done to stop rents to grow from reading the article?
Seems like this one sentence may be the key:
prompted the City to adopt an ill-advised
inclusionary zoning ordinance, and
led the state to flirt with authorizing rent control
But it’s unclear whether that was just a flirt or some control was actually implemented? Did the “prompting” result in “city adopting”? What’s “ill-advised” in this context?
What has happened is all the large multi-apartment buildings under construction for the last 2 years have come online. There's a lot more that will be ready to move into starting 2018 and into 2019. These are quick construction 4 to 6 story 100+ unit buildings that are being built everywhere in portland. Heck, home owners are event getting into the game, where they are making ADUs out of existing garages and basements. The city has waived a bunch of the development fees normally associated with ADUs. Not a game changing number coming online every year, maybe 100 or so, but the combined effect is that rental units are popping up everywhere.
Side note: many of these large buildings are built around a model that includes staggering the release of units over two years, so as to not flood the market with new units, lowering the price. I wouldn't be surprised if a few of these projects scheduled for move in late 2018 or early 2019 turned less of a profit than planned, given the sheer quantity of them being built.
Side note: We've had more than one random person looking into our business our office from the hall, who upon questioning, turned out to be a random wealthy dude from CA or NY, who is looking for some real estate in which to park a few million dollars, lead around by a hawkish businessy looking person, neither of which even know the term triple net. It's a wild market here right now, it'll be interesting to see how it all turns out.
Additional housing supply came online faster than the population increased. This is basic supply and demand economics. Landlords (supply) simply cannot increase rents if there aren't tenants willing to pay it (demand).
Why should we have density? The US is a huge country with vast empty lands. The new economy with air travel and internet means jobs require no specific geography like easy access to ports, waterways, or railroads. Why should people be packed into a few places living like rats? Keep the rent high and let economics take care of jobs going elsewhere to new, livable settlements and perhaps cities. Whatever happened to the pioneering spirit?
Density provides many benefits. For example - how much is an hour worth to you? How many hours a day do you commute? How many hours are just sitting in a car watching traffic (or the countryside) driving back and forth to work? That certainly isn't a zero dollar impact.
It would be nice if telecommuting was an option, but even most computer-based programming positions don't have a lot of telecommuting flexibility.
Surely density has some benefits, but not unmitigated by detriments like crowding and lack of freedom. These things go in cycles. Plus, the opposite of "density" like NYC isn't suburban sprawl. There is some middle ground.
I'm responding to your question of "Why should we have density?" I do not care to quibble about the number of benefits, merely to state there are measurable ones.
Lol air travel is nowhere near being an economically efficient means of transporting workers on any other timescale than every few months at the shortest
This does not make me feel any better about losing the best home I ever had when it got sold in the 2015 buyout race, with “plans to remodel” which were later rescinded just before being put back on the market at 180% the rent I paid.
2014 and 2015 was hell for many of the city’s residents and put family’s literally sleeping on the streets. If this is “how markets work” then we need to stop wondering why socialism is becoming such a popular notion.
I think if you're wondering why it's becoming popular you've got wool over your eyes. Events that hurt people due to how the market works like you've described, are not rare
It's potentially useful for forecasting rent drops - if there were no "for rent" signs last year and there are this year, but rent hasn't dropped in the meantime, it may signal a market correction.
The market can never provide housing as cheaply as a properly functioning local/state government.
* The state can borrow money far cheaper than private developers.
* The state has far fewer regulatory risks (getting permits, etc).
* The state does not need to make a profit but only needs to pay the bond payments.
* The state profits even when it doesn't make immediate profits on the particular housing development. It does so by increased local spending (by housing tenants who pay affordable rents instead of every penny they earn, etc) and also by higher taxes on increased incomes/output due to higher productivity, the higher productivity due to reduced stress and churn in the community caused by a lack of funds for life expenses due to high rents. (Remember lower income tenants spend _all_ of their money, with a high proportion spent locally. High earning landlords are exactly the opposite. A much larger proportion of their income flows internationally, to wherever capital gets the highest return, or whereever luxury goods are made)
* The state gets an implicit discount on labour costs in development since it gets tax income from the workers.
With all of these incentives in play the state can provide housing for less than the state borrowing cost of the money for labour/materials to build an apartment. Since in Portland it costs 175-200/sqft to build multifamily units, a 1000sqft 1BR should cost the equivalent of state borrowing costs/month for $175k at 2.2% = $320. Imagine how much better life would be if we had a government that used all of these incentives to provide well-built housing for its people.
There is also the cost for land but the state owns a lot of land, and it has the ability to get land by rezoning, and also by using eminent domain as a last resort. At any rate for high density buildings, this is not the dominant cost.
But the state also has no competitive pressure to be economically efficient, or to design units that aren't staggeringly ugly, or to not line the pockets of a buddy who's a contractor, or...
The general historical evidence is that government operations are not paragons of efficiency.
The general story, told by who exactly? Oh right, the corporate press.
I live in the UK. For every careless ugly tower (there are some) there are solidly build, even solidly designed housing units that hold up over time. Many built in the 60's in a more politically active era won design awards.
In general the initial construction quality of the public housing is much higher than private construction. From the thatcher era on maintanence was cut drastically which led to much of the decay.
The problem of insider graft and corruption is a real one. But it is fixable if citizens have real power and there is transparency and accountability instead of corporate funded elections which guarantee a disenfranchised population.
Also it's natural that public housing is at least somewhat more expensive. They have to follow code and not take shortcuts. Also there isn't the predatory, crushing, pressure to exploit the workers on the job in the same manner as in the private sector.
In general the difference is not very big. The bigger problem is graft and corruption.
You will find these are not far off industry average.
I don't know of a quantative model of the local financial system that fully implements the factors I mention, but these ideas are getting more traction because of the practically western-world-wide housing crisis.
I guess decent models are forthcoming to study these effects.
Your argument is clearly flawed because it goes way too far. It applies to literally any sort of economic activity it's possible to be engaged in. For example, I could make all your arguments as reasons why the California state government should take over pornography production from private producers. We know from experience that private industry is more successful than the government at many things…including building housing:
Top down state organisation is prone to corruption. It takes effort to keep that at bay. The public oversight required is an overhead that should only be used in select tasks.
The state is not suited for all tasks, especially those with rapid iteration, experimentation, low capital costs, and low cost of failure.
Housing technology moves slower and is dominated by capital and bureaucratic concerns. It is also one of the dominating costs in modern life. The state is capable of doing this task and the public oversight burden is warranted.
For products and services that do not absolutely require the state, I believe worker cooperatives, incentivised by the state are a much better solution
These points apply to many other economic activities, especially larger scale ones (like car manufacturing) and this is basically the argument for communism. Alas, it doesn't actually work.
They do absolutely apply. And they work. Look at two incredible examples. Russia, post 1917, went from a third world feudal economy (albeit with incredible land resources and considerable intellectual institutions) to the second largest industrial economy in the world in 30 years. China: I will leave off their incredible growth curve over the last 40 years.
There are obviously downsides to top-down centrally controlled economies but to say they don't work is ridiculous.
I don't want to live in a top-down economy. It's too oppressive. I would prefer bottom-up socialism based on worker cooperatives.
But there are some services that are so critical that they cannot be left to the market with it's wealth-centralisation and pay-to-play politics leaving the vast majority in destitution.
I volunteer you to be one of the millions who perish in such a great leap forward.
The bloodbaths required for such endeavors literally boggle the mind, and in the end they still only managed to go from mass poverty and serfdom to a point where they are clinging to middle income by their fingernails. If that is what counts as working out for you then it is no wonder the far left has no credibility whatsoever. Better for you to use examples like Singapore or Korea, and I wonder why you avoided them as examples?
For the USSR, what is the counterfactual? In retrospect, economic growth in the USSR was not particularly impressive compared to other poor, industrializing economics (which historically have often performed very well due to catch-up effects).[1][2]
Yes, China has experienced dramatic GDP growth over the past 40 years. By coincidence, 39 years ago, Deng Xiaoping began reforming much of the Chinese economy based on market principles.[3] Not necessarily a glowing recommendation for top-down, centrally controlled economies, especially considering the preceding few decades, which featured more central planning as well as economic stagnation and famine death tolls in the tens of millions.
All these rent signs point to is people being pushed out by rent increases due to a perceived demand provided by people with higher incomes. It doesn't point to a change in the housing crisis at all. I lived in this area about 6 years ago and prices were already becoming highly unaffordable for the 'unprofessional' set back then.
119 comments
[ 2.4 ms ] story [ 232 ms ] thread"More new apartments are coming on line, and now for rent signs are more plentiful than mushrooms after the first autumn rains. Take a look:
a bunch of pictures
We photographed these signs in the space of about an hour on a recent sunny afternoon in Portland’s close-in East side neighborhoods. These signs are all in front of existing, older apartments."
The article's inflation chart is just for multi-family rental pricing. Hence my follow-up question if anyone knows of pricing effects on detached home sales. (I'd like to move back to Portland, but housing prices appear to be way up since I left a decade ago. And I now have too many pets for an apartment.)
Since the model for the last couple generations was expanding in to the "green field" suburbs and that model is now breaking down due to the distances finally becoming too insane / growth boundaries being enforced, there has now been a building pressure that is finally being re-directed in to other areas.
Unfortunately civic codes are focused more on preventing the loss of life than on making life a quality affair. I would really love to have actual peace and quiet at home; being completely unable to hear those on the other side of the walls, and requiring that build in appliances be similarly quiet instead of the cheapest possible and least effective exhaust fans.
I also think people dismiss "economics" as a whole, when a distinction really needs to be made between micro and macro. Macroeconomics is really hard, and in terms of its ability to apply to the real world, I can make a solid case for calling it a "crock". By contrast, microecon is about as solid as you could ask for for a science as removed from physics as it is [1], and anyone who proposes an economic theory of either variety that fundamentally violates its tenants is starting out behind the eight ball as far as I'm concerned. It is conceivable that building more houses, once examined through the lens of a rich exterior world with countless forces acting every which way on every time scale in crazy, arbitrarily-complicated ways might raise housing prices for some period of time. But it's going to be something overwhelming the still-existing underlying trend that building more housing is going to drop prices, and as the amount of housing added limits to infinity, basic supply and demand will eventually overwhelm those other forces.
[1]: https://www.xkcd.com/435/ That is to say, I recognize that microecon is not necessarily "solved" nor is it completely accurate; for instance, while "homo econimus" is a bigger problem for macroecon, it can still bite at the micro level. But for what it is, it's solid enough to be worth paying attention to, a case I can not always make for macroecon.
Edit: Unsurprisingly, the top post on this very page is now a form of this argument.
Walk by any of the BART stations in the East Bay (even Downtown Oakland), and you'll see vacant fields and mostly empty parking lots. The area near MacArthur BART could be densified to a crazy degree without displacing a soul.
One problem, though, is "stickiness". I wouldn't move to a different city for $1/month. I probably wouldn't move even for $100/month. Why not? Well, I'm not single, and I have kids. It's not just that I'd upset everyone's routine - I'd also have to move all this stuff. I'd also have to sell my place and buy (or rent) a new one. Total cost to me: Probably in the $20,000 range. I'm going to do that for $100/month? No way. Even for $1000/month, it would take 20 months to pay back, not counting the time and aggravation.
So cities are "sticky". I'm stuck here; it takes a seriously better situation to break me loose.
Many people have lower thresholds than I do; but for most people, the threshold is some way above zero. (Exceptions do exist; if the current situation is socially or emotionally difficult, they may move to something even if it's economically worse.)
Isn't this actually true?
I would love to pay less rent, and don't mind having higher density. But I can also see why someone doesn't want those.
Politicians and their supporters routinely believe they can repeal the laws of supply and demand.
Edit: And just today in the news:
http://www.independent.co.uk/news/new-zealand-foreigners-buy...
Their actual stated arguments tend to be delivered in unconvincing ways, but Julia Galef (who I gather does believe in the econ 101 take) took a stab at steelmanning that side in https://juliagalef.com/2017/07/13/should-we-build-lots-more-..., and it's definitely worth a read.
What I'd add to her points is a fourth, that while some people believe that either overall affordability or total number of below market rate units are the right metrics to measure success by, some people care more about the percentage of affordable units than the number. An extreme version of the argument says that having 100 affordable units out of 200 total is better than having 200 affordable units out of 1000 total, because the second scenario will mean a strong demographic shift in the neighborhood (a "whitening"), not to mention an increase in density that will change the feel of the area. This is not an economic argument, but one about values, so it's not going to be resolved by numbers.
This is especially the case in San Francisco where programs such as rent control, inclusionary zoning, and other programs split renters into non-market partitions who mostly would not directly benefit from added supply (see Kim-Mai Cutler’s article for details on this https://techcrunch.com/2014/04/14/sf-housing/).
1) Some areas have geographic or legal limits to constructions (maximum building hight, water, etc). There is simply no way to build more building without first demolishing existing buildings, which is costly.
2) Most people want to live close to work, and work tends to be close to the centre. A house that is an hour commute away will not influence the price in the immediate vicinity.
If space was infinite, it would be Econ 101, but given that space is not, elected officials need to protect the voting population from inflation, through whatever means possible.
Parking is a perfect example of bad zoning manifesting in the misallocation of resources - we simply have more parking than we want to pay for.
This isn't rocket science. It's about density of units per amount of land.
But not as costly as sticking to the status quo - if you account for opportunity costs.
Most people want to live close to work, and work tends to be close to the centre. A house that is an hour commute away will not influence the price in the immediate vicinity.
that's not true at all. Look at commuter suburbs and exurbs that get developed.
If space was infinite, it would be Econ 101, but given that space is not, elected officials need to protect the voting population from inflation, through whatever means possible.
Space is not the issue - space utilization absolutely is and zoning laws produce suboptimal space utilization. There should be a lot more residental sky scrapers in the bay area than there currently are. If San Fran adopted the zoning of say Dallas, things would be different and probably more affordable.
It's only through the construction of highways that suburbs can be accessible. There was a great study done to show that the cost of highways is mostly subsidized by the inner city, not the suburbs themselves.
This is what I mean about keeping inflation low through use of the government: only the resources of a centralized government can undertake the construction of highways that keep the cost of downtown areas "low". In effect, this is one of the strategies to reduce inflation: infrastructure.
For the space issue, see my answer below to bmcusick
Are you intentionally confusing separate issues? An hour away from the city is an hour away from a city, infrastructure can change the distance you can travel in an hour (e.g in countries with high speed rail, it's not uncommon for people to commute over 100 miles, that'd be a very long commute anywhere in America).
The highways extend the amount of land that's available for commuters, maybe cities should pay for them as the highways make it possible for cities to get away with inefficient zoning.
Another point is that the land under a building may not support a building taller than a certain height.
You're right that the land matters and a San Fran to Dallas comparison is challenged in many dimensions but I think San Fran's housing market would be more reasonable if it were money / technology constrained, not zoning law constrained.
[0]: https://en.wikipedia.org/wiki/Petronas_Towers
The housing being built in Portland over the past handful of years is of a specific type and a certain price range. I regularly check the rental rates for units in these new complexes as they come on line and I have yet to find units that I can afford.
Portland is very lax with it's high density zoning, or strict depending on how you look at it. They promoted high density housing by disincentivizing alternative zoning types (making it extremely difficult to find non retail commercial spaces).
The lack of rent control combined with the proliferation of high-end retail + housing spaces contributes to housing as an investment opportunity which in turn makes low end rent unstable and rare. This past year over half of the renters on my block were kicked out of their homes when owner decided to sell.
Sure, there's a glut of $1,500 studios and one bedroom units available, but there's a real lack of rooms or units below $1,000.
We're trying for a somewhat higher quality of discussion here.
This is true for every city. Developers don't really build low-end units. They build high-end units and rely on the age/deterioration of other buildings to eventually turn them into lower-end buildings.
This is sort of working out because people are generally moving back into cities and are willing to pay a premium for it.
The reason why I think this article about Portland is interesting is either their influx of people into the city has slowed/stopped, or they've built so many units that its outpaced the influx. A common narrative in cities is "we're building so many units yet prices are still high!!!" But clearly the equation should be rate of new units coming into the market vs rate of change of city population.
Which also feels like common sense. But maybe its more like, this article is interesting because it shows there's light at the end of the tunnel.
I'm not really sure what you're hoping for. Rents were creeping further upwards until building started to catch up with people moving in, and now they're coming down.
Are you really trying to argue that the best move, in light of this evidence, is to build less?
If the former, would a trend of "over-engineering" buildings—or more rigorous building codes—mean that buildings will take longer to lose value, and so there will be fewer low-value units on the market at a time?
If the latter, would a lack of recent domestic innovations mean that new units are basically "just like" old units, and thus stall the aging-down process?
Housing designs and styles go out of date. Code gets updated to add new standards such as better insulation, earthquake resistance, plumbing. Roofs need to be replaced, walls need to be repainted, floors need replacement after general wear and tear. Electrical standards change since our demands have changed over generations. And most units don't keep all of this stuff up to date through renovation other than the bare minimum. Like a used car.
Since buildings last a long time, a 1920s-1970s building is what is considered an aged building. 1980s is on the edge and 1990s is relatively new. A older building that was overengineered will retain better value and so on.
My place is (San Francisco) affordable, but:
- 2 people have been shot & killed on my block in the last year
- there's regularly poop on the sidewalk in front of my building
- one of the two elevators in my building is often out of service (and occasionally it's both!)
- my apartment has no kitchen
- the plumbing is old (aka leaks)
- the door to my bathroom doesn't quite close
- the paint is peeling in some noticeable places
- some places in the common areas never get dusted
- random people walk in and steal packages from time to time
- there's no air conditioner (don't really need it tough)
- the heater barely works (don't really need it tough)
- the electrical outlets are in funny places
- the main window never stays open quite all the way
- there are small gaps under the fake hardwood flooring
- my bathtub looks like it was attacked by a 5 year old with a sharpie
It's nice a primo place. Don't get me wrong, I love where I live. But I wouldn't pay primo prices for it. I'm just talking about "age/deterioration", since you asked.
A different way of stating what you're saying is that the new supply hasn't existed long enough, which is probably true, but it's not necessarily an indication of a problem with the market.
There's a lack of affordable housing. Isn't that a problem with the market?
Or, you mean, enforce policy that artificially controls rent, which as mentioned in other comments on this post, is basically a fancy way of pretending the problem doesn't exist and has knock-on bad side-effects.
No, that will actually "magically" get you lower rents, for some definition of "a ton".
There's a real financial incentive for developers to not take lower rents than they budgeted for - those rents need to cover the payments on the loans they took out to finance the construction of the building. It's why it's usually much more attractive for them to offer incentives like a free month of rent - sure, they take a hit up front, but the long term financial viability of the project is intact. But if they take on a bunch of leases with lower rents than they projected, now they have a building which is just losing money every month.
Also, be careful what you wish for - the way you would get back to $1000 a month rents is Detroit-style depopulation, and that really sucks.
Many European countries, do, or have at some point in the past, had extensive social housing production, which does help ease pressure.
I can certainly understand why growing cities would not want to building out anything even remotely like that. What's that going to look like 10 years later?
The whole point of this article is not that new affordable units are being built, but that the construction of new high-price units causes older units to become available at lower prices. The link is indirect, because markets are indirect.
It seems like you either didn't read the article, or don't fully comprehend supply and demand.
> The more apartments stand vacant, and the longer they go unfilled, the greater the pressure on landlords to drop prices. Already, some newer apartments are offering move-in bonuses, like a months’ free rent. It’s a sign that the market is turning.
Note: the previous title was worded to imply that rents were falling.
Seems like this one sentence may be the key:
But it’s unclear whether that was just a flirt or some control was actually implemented? Did the “prompting” result in “city adopting”? What’s “ill-advised” in this context?Lots is unclear
Side note: many of these large buildings are built around a model that includes staggering the release of units over two years, so as to not flood the market with new units, lowering the price. I wouldn't be surprised if a few of these projects scheduled for move in late 2018 or early 2019 turned less of a profit than planned, given the sheer quantity of them being built.
Side note: We've had more than one random person looking into our business our office from the hall, who upon questioning, turned out to be a random wealthy dude from CA or NY, who is looking for some real estate in which to park a few million dollars, lead around by a hawkish businessy looking person, neither of which even know the term triple net. It's a wild market here right now, it'll be interesting to see how it all turns out.
American Property Management leaves them out front of all units and just funnels you to wherever they have an opening.
It would be nice if telecommuting was an option, but even most computer-based programming positions don't have a lot of telecommuting flexibility.
The end goal is to have vertical farming inside cities as well.
2014 and 2015 was hell for many of the city’s residents and put family’s literally sleeping on the streets. If this is “how markets work” then we need to stop wondering why socialism is becoming such a popular notion.
Why would you measure the number of pictures of rent signs and then assume this means that prices will fall or not?
I would understand if counting pictures of signs were harder than collecting rent data, but it seems to be the opposite.
* The state can borrow money far cheaper than private developers.
* The state has far fewer regulatory risks (getting permits, etc).
* The state does not need to make a profit but only needs to pay the bond payments.
* The state profits even when it doesn't make immediate profits on the particular housing development. It does so by increased local spending (by housing tenants who pay affordable rents instead of every penny they earn, etc) and also by higher taxes on increased incomes/output due to higher productivity, the higher productivity due to reduced stress and churn in the community caused by a lack of funds for life expenses due to high rents. (Remember lower income tenants spend _all_ of their money, with a high proportion spent locally. High earning landlords are exactly the opposite. A much larger proportion of their income flows internationally, to wherever capital gets the highest return, or whereever luxury goods are made)
* The state gets an implicit discount on labour costs in development since it gets tax income from the workers.
With all of these incentives in play the state can provide housing for less than the state borrowing cost of the money for labour/materials to build an apartment. Since in Portland it costs 175-200/sqft to build multifamily units, a 1000sqft 1BR should cost the equivalent of state borrowing costs/month for $175k at 2.2% = $320. Imagine how much better life would be if we had a government that used all of these incentives to provide well-built housing for its people.
There is also the cost for land but the state owns a lot of land, and it has the ability to get land by rezoning, and also by using eminent domain as a last resort. At any rate for high density buildings, this is not the dominant cost.
The general historical evidence is that government operations are not paragons of efficiency.
I live in the UK. For every careless ugly tower (there are some) there are solidly build, even solidly designed housing units that hold up over time. Many built in the 60's in a more politically active era won design awards. In general the initial construction quality of the public housing is much higher than private construction. From the thatcher era on maintanence was cut drastically which led to much of the decay.
The problem of insider graft and corruption is a real one. But it is fixable if citizens have real power and there is transparency and accountability instead of corporate funded elections which guarantee a disenfranchised population.
You live in UK? Come visit the Eastern Europe sometimes.
Also it's natural that public housing is at least somewhat more expensive. They have to follow code and not take shortcuts. Also there isn't the predatory, crushing, pressure to exploit the workers on the job in the same manner as in the private sector.
In general the difference is not very big. The bigger problem is graft and corruption.
1) Motivation 2) Corruption
Private development has tons of #1, and little of #2, while public housing development is all #2 with very little #1.
#1 is how you find ways to build faster and better without taking shortcuts. It's called greater productivity.
(not trolling) Are there any examples that support this claim:
>The market can never provide housing as cheaply as a properly functioning local/state government.
You will find these are not far off industry average.
I don't know of a quantative model of the local financial system that fully implements the factors I mention, but these ideas are getting more traction because of the practically western-world-wide housing crisis.
I guess decent models are forthcoming to study these effects.
https://en.wikipedia.org/wiki/Public_housing_in_the_United_S...
The state is not suited for all tasks, especially those with rapid iteration, experimentation, low capital costs, and low cost of failure. Housing technology moves slower and is dominated by capital and bureaucratic concerns. It is also one of the dominating costs in modern life. The state is capable of doing this task and the public oversight burden is warranted.
For products and services that do not absolutely require the state, I believe worker cooperatives, incentivised by the state are a much better solution
There are obviously downsides to top-down centrally controlled economies but to say they don't work is ridiculous.
I don't want to live in a top-down economy. It's too oppressive. I would prefer bottom-up socialism based on worker cooperatives.
But there are some services that are so critical that they cannot be left to the market with it's wealth-centralisation and pay-to-play politics leaving the vast majority in destitution.
Housing is one of these critical services.
The bloodbaths required for such endeavors literally boggle the mind, and in the end they still only managed to go from mass poverty and serfdom to a point where they are clinging to middle income by their fingernails. If that is what counts as working out for you then it is no wonder the far left has no credibility whatsoever. Better for you to use examples like Singapore or Korea, and I wonder why you avoided them as examples?
Yes, China has experienced dramatic GDP growth over the past 40 years. By coincidence, 39 years ago, Deng Xiaoping began reforming much of the Chinese economy based on market principles.[3] Not necessarily a glowing recommendation for top-down, centrally controlled economies, especially considering the preceding few decades, which featured more central planning as well as economic stagnation and famine death tolls in the tens of millions.
[1] https://artir.files.wordpress.com/2016/03/all19301.png
[2] http://voxeu.org/article/stalin-and-soviet-industrialisation
[3] https://en.wikipedia.org/wiki/Chinese_economic_reform