> evidence that for every 10% increase in the housing stock, rents decrease 1% and sales prices also decrease within 500 feet. In addition, I show that new high-rises attract new restaurants, which is consistent with the hypothesis about amenity effects. However, I find that the supply effect is larger, causing net reductions in the rents and sales prices of nearby residential
properties.
The consequences people derive from the amenity effect are horrifying. One would come to the conclusion that any improvement in a city at all is going to make the city unaffordable
The paper has evidence to the contrary: "I show that new high-rises attract new restaurants, which is consistent with the hypothesis about amenity effects. However, I find that the supply effect is larger, causing net reductions in the rents and sales prices of nearby residential properties. "
Not really to the contrary. It’s possible for the aggregate rent to go up, the rent rate to go down (higher numerator over an even more-increased denominator), and the overall increased rent “cash flow” to still go to landlords.
I wonder about the opposite effect... Rent in some areas has become so high, that some businesses get priced out of the area. Probably not a big deal for huge efficient businesses, but what happens to necessary but low margin businesses like where you get a haircut?
Those low margin businesses stay low margin, but with higher prices to reflect their higher costs. I don't know of any city in the world that doesn't have a hairdresser, even if it's expensive (and in that case it's proportionate to the rent).
Think ski resort towns full of million dollar winter dachas that ban poor people housing, ending up full of vacationing millionaires who are wondering why the four-star steakhouse is now only open three days a week. (It's because nobody working there can afford to live in town. And because the vacationers are, for some reason, unwilling to man the grill. Or pay $120 for a steak.)
The problem isn't ski resorts per se, it's that Crested Butte, CO isn't Aspen, where they do have $145 steakhouses. People who like to ski/snowboard aren't all millionaires who don't mind paying $145 for steak and are only renting a place for a week via AirBNB and the lift passes are expensive these days. Give Crested Butte time to gentrify (no one goes to Aspen any more, there are too many people there) and things should top out. More expensive than it was before, but hey, inflation.
As some like to say, supply and demand. If the market decides a haircut in that location is now $200 instead of $20 then its just the free market working as intended.
Hair salons raise prices (e.g. from $20 to $30) and people pay them.
Or, hair salons move to a cheaper nearby neighborhood to keep prices the same (e.g. $20), because customers would rather travel nearby if it means a cheaper haircut.
Or in reality some of both -- some raise prices and some move, since some people can afford to pay and some would rather travel further instead.
This is what always happens as rent rises. Services and goods get more expensive as well or their providers move geographically.
If adding housing supply actually increased the value of surrounding housing, you could generate unlimited wealth by building more and more housing in a city!
It sort of works (see Manhattan, and most downtowns), but proximity is limited. You can go upwards only so far, and building out more areas takes areas further and further away from other parts of the city. Density is limited. It does not necessarily make a large city split into a desirable "center" and less desirable "periphery" (see Tokyo), but avoiding that takes skill and determination which is not always there (see e.g. São Paulo).
Obviously that would be ridiculous in a general sense, but it can definitely happen in certain neighborhoods. But it's not only the value of the existing housing that increases, it's the value of the land under it. Once the gentrification begins in an area, developers want to get in on the action to add amenities, renovate existing buildings, and replace older housing with newer, more expensive housing.
However, if the newer housing is better than the older housing elsewhere in the city, which is usually the case, that older housing should become less attractive.
An extreme historical example of that is the decay of urban cores caused by white flight to suburbs (which were often only a short drive away from the urban cores, and therefore part of the same overall housing market with the same pool of buyers) in the postwar period. Some of the areas now being gentrified in major cities are becoming desirable for the second time.
Gentrification is a real thing and it's why a lot of people with low incomes oppose new construction where they live. NIMBYism isn't just a suburban or homeowner phenomenon, it also happens when people are afraid of getting priced out of their rental housing.
At the same time, gentrification is inevitable when neighborhoods become more desirable. Better housing, amenities, schools etc. will inevitably attract people who would not have previously wanted to live there.
In cities without a lot of demand pressure on housing, building new housing makes the older housing less attractive. That can at least give displaced renters a place to go. But in cities where demand outstrips supply, it takes a lot of new housing to make a noticeable dent in rents. (I suspect this is where the impression comes from that new housing doesn't help with prices -- in places where demand outstrips supply by a lot, prices can go up even while new housing is being built -- but without that new housing the prices would have gone up even more!)
There are not easy solutions to this. Rent control might appear to be a good solution but in the long term it makes things worse. Building new housing often does change the character of neighborhoods economically, demographically, etc. But if we let that stop us, nothing new will get built except on unused land.
Housing was affordable in the past without land value taxes. I don't see why those are needed now either.
Supply and demand really does work for housing. We are just in a massive backlog on supply, which has built up over decades, and it will take decades to build our way out of it. During that time it will look like the new building isn't helping very much -- but that's because of how bad the backlog is.
For example, in the San Jose area tons of new housing is being built, on unused shopping centers like Cambrian Plaza and former industrial areas like Santa Clara Square. It's dense housing for the area too -- 3-5 story apartment blocks with their own underground parking, sometimes shops and restaurants on the first floor. Thousands of units are coming online. But I still expect rents and housing prices to increase next year. They would have increased even more if we hadn't built that housing, but the backlog is decades deep and demand is also still increasing.
So no improvements should ever be made because they weren't made in the past? What kind of strange way of thinking is that. You can't time travel back to the 50s and recreate the situation then.
I generally agree with your comment overall however.
If you want to solve the housing crisis you need to reverse the bad policy and add good policy.
Land value tax is one such policy. There are many other, changing in regulation for housing, changes in land use policy, like minimal parking requirements, changes in urban design, changes in transport priorities, the list goes on.
Some of the most beautiful and most admired parts of old cities like Boston are all illegal to build now. Policy has mostly made it impossible to build the kind of places people travel to other arts of the world to experience.
The tax wouldn't affect all properties equally. It would punish undeveloped / under-developed land much more. Those owners could try to pass it on to the renter, if there is one, but the renter can move to better developed land that would be able to provide lower rents. The theory is that this would encourage the owner to develop the land into more units or sell it to someone else who will be under the same pressure.
The motivation to develop land and rent it out for more money is already firmly established simply by the laws of supply and demand. Anyone who is sitting on a vacant lot in a city knows they could make more money with it if they could build something more desirable on it. They don't do it because we make it really hard to do that.
San Francisco is an extreme example, but many other cities are bad about this too.
With a land value tax we are basically telling landowners that they aren't allowed to build and also they will be taxed for not building. Stop hitting yourself! Stop hitting yourself!
A land-value tax would be a lot more reasonable if we allowed people to do what the tax incentivizes them to do.
That might be. But honestly, anything is better then a parking lot. And going from a property tax to a land value tax is much preferable.
> With a land value tax we are basically telling landowners that they aren't allowed to build and also they will be taxed for not building. Stop hitting yourself! Stop hitting yourself!
Ok, and with the current system you hurt the people who have managed to build things even more.
Its not like actually impossible to make something productive with your land.
Land value tax, any way you look at it, is fairer and better for society then property tax.
But yes, regulation are also a problem. But just because bad regulation exists, shouldn't mean you should not improve the tax system.
The land value tax would replace the property tax. So it would hurt some people, like owners of parking lots and help other people, like owners of apartment buildings.
> it takes a lot of new housing to make a noticeable dent in rents
Eh. My landlord is already stuck unable to raise rent because there are ~4 brand new mid-rise complexes within a 3 block radius.
Why would I agree to their rent increase, if for that same price I can just move to a brand new managed property? So every year we negotiate and rent stays about sameish. Actually lower now than when we moved in pre-pandemic.
If it wasn't in SF the landlord would probably sell your building to a developer who would raze it and build another new mid-rise. In SF that seems to be very difficult to do -- although those other new mid-rises must be replacing something that was there before.
A lot of times they are just finally replacing lots that have sat empty for years or decades. Due to some unknown reason, SF has quite a few lots that are simply stuck in time. No development can be done, they can't be bought or sold, they're just there, waiting for a change that will never come. The local papers like Mission Local probably has somebody who knows what's up with that though.
The reason is not unknown. It takes an average of over two years to get construction approved in SF. Almost anyone can slow it down a project they don't like it, for a variety of reasons. Sometimes even members of the Board of Supervisors personally intervene to prevent it.
> In cities without a lot of demand pressure on housing, building new housing makes the older housing less attractive.
This bit is only situationally true. It's true for infill development: the 2018 condo next door to a 1918 brownstone is likely going to sell for more. But generally "next door" doesn't happen.
In fact in most large urban areas, the more central and accessible areas (SF, say) with (by definition) older housing stock are the most expensive. The new construction in Livermore or Concord is where the cheap housing is.
I was under the impression that the submission title had to match the title of the linked page/paper. Agree this is a much more relevant summary/title.
> please use the original title, unless it is misleading or linkbait
I think it would be in keeping with that to change the title to, “New Housing Units in Your Backyard Lower Your Rent”, though I don’t mean to bite your head off for using the verbatim one.
Agreed, the title is very deceptive. From the abstract:
> There is a growing debate about whether new housing units increase rents for immediately surrounding apartments... I provide event study evidence that within 500 ft, for every 10% increase in the housing stock, rents decrease by 1%; and for every 10% increase in the condo stock, condo sales prices decrease by 0.9%. In addition, I show that new high-rises attract new restaurant ...
If a city added 10% more housing, it would be extremely surprising to see rents only decrease 1% assuming no other micro or macro economics changes. It is not very surprising that a new condo building next door only slightly decreases the rent of neighbors since people are usually willing to rent anywhere in a general area and not constrained to a specific 7 hectare area (500ft radius circle).
Hopefully dang can change the title to the original "Do new housing units in your backyard raise your rents?"
If landlords wanted to collectively agree to keep prices low, in the interest of not taking money from the poor to line the pockets of the rich, they could.
If I had a billion dollars, I'd totally be interested in spending $300 million of it creating a bunch of studio housing in Silicon Valley and renting it out at $500/month and watching neighboring greedy landlords cry.
The current crop of billionaires are themselves greedy, though.
It's mostly not greed. If you had a billion dollars, and are willing to lose money on a housing project in support of the poor by operating it against market forces, I think that would be a noble thing to do if you would actually follow through. It's easier to say than do though, and I don't think it would work out the way you think it would. If you think about the evolutionary forces driving such a system, that type of philanthropy would be unsustainable and would have a tendency to die out. And eventually that housing would get taken over and become subject to normal market forces again.
It's pretty hard to fight against the market consensus on value, no matter how good your intentions are, unless you could establish some sort of monopoly. In the absence of that, if you sell something for less than its value, you'll end up creating some weird dynamics. You'd invite scalpers, corruption as people compete for access to the resource, and people would probably create secondary markets anyway where they hold the lease and sublet for more than its cost. (Whether legal or illegal.)
There's a reason why home prices in the form of a 30-year mortgage on a home historically have a monthly price close to, but slightly less than, the price of rents. Being a landlord involves financial risk, maintenance costs, liability, and work. That work, the willingness to take on the risk, etc. has a value. That value is approximately the monthly price of rent minus the monthly mortgage cost.
...And actually, historically, it's not even a great value. Renting, and investing spare cash that would otherwise be tied up on a down payment has in many cases been a better investment.
> hold the lease and sublet for more than its cost
University dorms don't generally permit sub-leasing, and even my alma mater only permitted sub-licensing to other students and only at or lower than the rent price I paid.
Couldn't similar things be enforced on such a system? Sub-lease and you get disciplinary action i.e. kicked out and shamed in the front lobby. Or maybe even wailing noises and automatic fart spray through the HVAC if the room is sensed to be occupied and the official tenant doesn't check in periodically.
Could this simply be reflecting the popularity of a region? New housing will be constructed in response to more demand, and rents will also go up in respond to demand?
This is almost certainly what is happening. All else being equal, developers choose to build new homes in areas that expect will high demand so the can charge the highest rents. There are reasons why developers don’t put up high rises in the middle of a Kansas cornfield miles from the nearest town.
Seems like it must depend a lot on how much pent up demand there is for housing. Add 10% to the Bay Area and it's not going to make a dent. Add 10% in Detroit and you just add 10% more vacant units, but probably little change in rents because they're already bottomed out. They might actually increase the average rent in this case if you build more desirable units that have a mortgage to pay off.
I doubt your intuition. A 10% increase in supply in the Bay Area would radically lower rents. That would be as if we added 3 years of the whole state's construction, just to the Bay Area, with only 1/5th the state population. Or in other words, 15 years the typical recent pace of construction.
In Berkeley we lost only 2% of the population but that knocked 10% off real-dollar rents.
Exactly, came her to say this. It obviously can't be linear, its just the slope at a point, but that didn't stop the headline writer. For "every" 10%, really? I'm pretty certain that for even just the next adjacent 10%, rents wouldn't just fall 1%.
I bet broad-based 10% increases in a city are rarely even seen in the data. The authors are just interpreting their regression model coefficients for the media.
What happens when you double the housing supply? Who knows. Not a single data point in that regime.
> Zero chance this is linear. A 20% increase would be expected to create more than a 2% decrease.
I think this effect is probably complicated by generated demand.
Think about a city like SF or Seattle. Adding a lot of vacancies may not drop prices much for a while. Instead, it'll suck in a lot of people from the surrounding area. It's only after there is enough new construction to overcome that effect that people will see price declines in the city.
Of course, if SF or Seattle is sucking in people from the surrounding areas, then the price of real estate in those areas will decrease substantially. It's all about what you measure.
Intuitively this makes sense. People predominantly decide move to city/area because of a job, not because of a shiny new apartment building. New construction is a reflection of a high demand area, not a cause.
I wonder how this holds up in areas where there the majority of rentals are owned by a single company, or landlords collude to artificially drive up rental prices by keeping units vacant [0].
I've looked through the Constitution and the entirety of US laws and I simply can't find where people have the "right" to live in the city center of fashionable mega-cities for cheap. I've looked and looked, and can't find this anywhere. Can anybody explain to me why they feel this is a right?
>I've looked through the Constitution and the entirety of US laws and I simply can't find where people have the "right" to afford to eat nutritious food instead of gruel and instant ramen. I've looked and looked, and can't find this anywhere. Can anybody explain to me why they feel this is a right?
Not very insightful, yeah? Perhaps it would be good for things to be a certain way in our country without literally enshrining them in our Constitution. Cities are the economic backbones of modern nations, so it’s probably good for young people to be able to afford to live and work there.
People don't want tenaments popping up in their nice single family neighborhoods. Why not create one of those magical 15 minute walkable cities from scratch? A brand new, carless EXTREME density city? If it's such a dream come true, people will be sure to move in. Right? It seems pretty obvious that the folks who own property in cities which exist now don't want ultra-dense housing in their nice quiet neighborhoods, so let's put the WEF dream city concept to the test and create one from scratch.
“Just build an entirely new city from scratch bro. How hard can it be”
Network effects is the answer. Anyway, not sure what this would prove. There is clearly enormous demand for existing cities to be densified, as demonstrated by our densest, most walkable cities (NYC, SF, etc) having by far the highest rents and property values in the country, as well as the greatest economic outputs.
If you’re a free market economist, you should view it as a massive failure that regulatory capture and vested interests are able to prevent willing property sellers and developers from making this a reality.
> I provide event study evidence that within 500 ft, for every 10% increase in the housing stock, rents decrease by 1%; and for every 10% increase in the condo stock, condo sales prices decrease by 0.9%.
This is... a silly thing to examine. 500 ft is nothing. A 10% increase in a 500 ft area is a tiny, tiny, tiny increase in the NYC housing stock overall.
The cause and effect between housing stock and rents operates at a combination of city level and large neighborhood level mainly. When people shop for an apartment they're usually considering lots of neighborhoods, not a tiny 500 ft area.
Anything you observe at the 500 ft level is more likely than not to just be noise.
Also the HN title is wrong, because it sounds like it's a universal law, when the study is meant to be about a certain snapshot of NYC only.
Terminology: a "row" is the buildings on one side of 1 block of an ~E/W street in Manhattan.
A 500 ft radius circle around an apartment building in the middle of a row in Manhattan includes about 6 full rows and and about half of 2 more rows, so about 7 rows worth of buildings total.
That seems like it would include enough buildings to see more than just noise.
It's not about the number of apartments being sampled, it's about the cause and effect happening at a larger scale, not the local scale.
In other words, rents changing in a 500 ft area is due to housing stock changing citywide. Not housing stock changing within 500 ft.
The noise I referred to isn't the noise of statistical measurement, it's that housing stock within 500 ft is mostly random noise when compared to the change in stock citywide.
In NYC people will often or usually be considering multiple entire neighborhoods when apartment hunting. They'll be weighing trade offs of the locations with trade offs of the specific apartments available at the moment.
Very few people pick a tiny area and then only look for availability within it. That's just not how the city works.
I'm kinda surprised that the evidence is for such a narrow radius. The abstract says NYC, not Manhattan, but 500 ft is like only 2 blocks north or south, and less than 1 block east or west. Depending on neighborhood, there may not even be that many new tenants during a period shortly following the completion of a new building, right? And I'm guessing very very few people can target so narrow a neighborhood when shopping for new housing. Overall I would have expected both the mechanism of the effect and the easiest means of measurement to be for a wider area.
If you want to say what you think is important about an article, that's fine, but do it by adding a comment to the thread. Then your view will be on a level playing field with everyone else's: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...
For every increase in the housing stock, the population increases 10% in the medium term and more than that in the long term. It’s the same with highways and traffic.
Almost everyone has housing, and buildings aren't built unless they can be occupied. The notion that somehow increasing house "supply" will lower prices is absurd.
Housing is a rivalrous good. People will generally pay as much as they can afford. Introduce 30-year mortgages? House prices will go up 50%.
The best single predictor of house prices is population density. Building more units is likely to be a sign of rising prices. Case in point: Most people complaining about prices in the Bay area could have had cheaper housing back home but moved here instead.
I have read so many of these posts on HN, and invariably it turns into an argument between:
A. Housing should be available for everyone in large cities at a price they can afford; and
B. There is no right or economic solution to affordable housing for everyone who wants it, especially in a dense city.
I don’t intend to choose a side in this argument, but here are the “facts” (or approximations) that must be considered in this argument:
1. Land in the U.S. is generally owned by individuals, or by businesses with shareholders (ie. people), not the government.
2. Individuals owning land and buildings are just regular people (or groups of regular people as investors) in many cases, not “bilyunares”.
3. How do regular people own property and buildings? There are three ways:
a. People invest in Real Estate Investment Trusts (REIT) through their savings and/or 401k or other retirement accounts.
b. People invest in banks, or deposit money in banks, which is used to create loans (mortgages) to purchase land and buildings.
c. People pay taxes, and a portion of those taxes goes toward tax credits and Housing and Urban Development (HUD) Section-8 subsidies. The U.S. government spends $6 billion per year to finance new housing for qualifying people.
4. Rents and escalations are both market-based and contractual. The rent collected pays for the cost of upkeep and routine maintenance as well as the mortgage obligations and taxes. With inflation, the cost of everything goes up, and this must be reflected in rents.
5. The most desirable locations will have the highest land prices and correspondingly the highest rents. Desirability results from weather, safety, activities, travel or transportation options, and most importantly: work opportunities.
It would be refreshing to see more of these “facts” (and many more I haven’t mentioned) included as part of the debate.
94 comments
[ 2.7 ms ] story [ 37.0 ms ] thread> evidence that for every 10% increase in the housing stock, rents decrease 1% and sales prices also decrease within 500 feet. In addition, I show that new high-rises attract new restaurants, which is consistent with the hypothesis about amenity effects. However, I find that the supply effect is larger, causing net reductions in the rents and sales prices of nearby residential properties.
https://www.nature.com/articles/s41467-022-31572-1
and you might even come to the conclusion that you should actively make life in a city worse to make it affordable to the poor.
https://en.wikipedia.org/wiki/Henry_George_theorem?wprov=sft...
Think ski resort towns full of million dollar winter dachas that ban poor people housing, ending up full of vacationing millionaires who are wondering why the four-star steakhouse is now only open three days a week. (It's because nobody working there can afford to live in town. And because the vacationers are, for some reason, unwilling to man the grill. Or pay $120 for a steak.)
That's surprising. I see $120 steaks on the menu in Las Vegas restaurants. Why not at the ski resort?
> million dollar winter dachas
Perhaps because the alternative to a $120 restaurant steak is buying nice groceries and cooking at the dacha?
Dunno, but if you've figured out why, you should get in touch with the guys in this article.
https://www.outsideonline.com/culture/essays-culture/how-to-...
That's, I think, the heart of these economic dislocation problems. The destination is fine, but the transition is painful.
Hair salons raise prices (e.g. from $20 to $30) and people pay them.
Or, hair salons move to a cheaper nearby neighborhood to keep prices the same (e.g. $20), because customers would rather travel nearby if it means a cheaper haircut.
Or in reality some of both -- some raise prices and some move, since some people can afford to pay and some would rather travel further instead.
This is what always happens as rent rises. Services and goods get more expensive as well or their providers move geographically.
Land ownership beyond the home you live in is effectively equivalent to a privatized, purchaseable license to tax others.
Each new building adds to the total value of the city, but also competes with the other buildings.
However, if the newer housing is better than the older housing elsewhere in the city, which is usually the case, that older housing should become less attractive.
An extreme historical example of that is the decay of urban cores caused by white flight to suburbs (which were often only a short drive away from the urban cores, and therefore part of the same overall housing market with the same pool of buyers) in the postwar period. Some of the areas now being gentrified in major cities are becoming desirable for the second time.
At the same time, gentrification is inevitable when neighborhoods become more desirable. Better housing, amenities, schools etc. will inevitably attract people who would not have previously wanted to live there.
In cities without a lot of demand pressure on housing, building new housing makes the older housing less attractive. That can at least give displaced renters a place to go. But in cities where demand outstrips supply, it takes a lot of new housing to make a noticeable dent in rents. (I suspect this is where the impression comes from that new housing doesn't help with prices -- in places where demand outstrips supply by a lot, prices can go up even while new housing is being built -- but without that new housing the prices would have gone up even more!)
There are not easy solutions to this. Rent control might appear to be a good solution but in the long term it makes things worse. Building new housing often does change the character of neighborhoods economically, demographically, etc. But if we let that stop us, nothing new will get built except on unused land.
Supply and demand really does work for housing. We are just in a massive backlog on supply, which has built up over decades, and it will take decades to build our way out of it. During that time it will look like the new building isn't helping very much -- but that's because of how bad the backlog is.
For example, in the San Jose area tons of new housing is being built, on unused shopping centers like Cambrian Plaza and former industrial areas like Santa Clara Square. It's dense housing for the area too -- 3-5 story apartment blocks with their own underground parking, sometimes shops and restaurants on the first floor. Thousands of units are coming online. But I still expect rents and housing prices to increase next year. They would have increased even more if we hadn't built that housing, but the backlog is decades deep and demand is also still increasing.
I generally agree with your comment overall however.
If you want to solve the housing crisis you need to reverse the bad policy and add good policy.
Land value tax is one such policy. There are many other, changing in regulation for housing, changes in land use policy, like minimal parking requirements, changes in urban design, changes in transport priorities, the list goes on.
Some of the most beautiful and most admired parts of old cities like Boston are all illegal to build now. Policy has mostly made it impossible to build the kind of places people travel to other arts of the world to experience.
Why would a tax increase on rentals lower rents?
Consider San Francisco, where it takes years just to get permission to build housing: https://www.sfchronicle.com/opinion/openforum/article/sf-hou...
San Francisco is an extreme example, but many other cities are bad about this too.
With a land value tax we are basically telling landowners that they aren't allowed to build and also they will be taxed for not building. Stop hitting yourself! Stop hitting yourself!
A land-value tax would be a lot more reasonable if we allowed people to do what the tax incentivizes them to do.
> With a land value tax we are basically telling landowners that they aren't allowed to build and also they will be taxed for not building. Stop hitting yourself! Stop hitting yourself!
Ok, and with the current system you hurt the people who have managed to build things even more.
Its not like actually impossible to make something productive with your land.
Land value tax, any way you look at it, is fairer and better for society then property tax.
But yes, regulation are also a problem. But just because bad regulation exists, shouldn't mean you should not improve the tax system.
Eh. My landlord is already stuck unable to raise rent because there are ~4 brand new mid-rise complexes within a 3 block radius.
Why would I agree to their rent increase, if for that same price I can just move to a brand new managed property? So every year we negotiate and rent stays about sameish. Actually lower now than when we moved in pre-pandemic.
This is in SF.
A) illegal, and
B) would have to be extremely widespread to not just serve to keep those units unrentable.
The more vacancies across the city, the more difficult collusion is.
I imagine the various property owners in an area see each other more as competition than buddies. Or even targeting different demographics.
Why would owners of a big building collude with some rando who happens to own a place or two?
More than that, and somebody always breaks the pact fairly soon.
There is a good rundown here, written earlier this week: https://www.sfchronicle.com/opinion/openforum/article/sf-hou...
This bit is only situationally true. It's true for infill development: the 2018 condo next door to a 1918 brownstone is likely going to sell for more. But generally "next door" doesn't happen.
In fact in most large urban areas, the more central and accessible areas (SF, say) with (by definition) older housing stock are the most expensive. The new construction in Livermore or Concord is where the cheap housing is.
> please use the original title, unless it is misleading or linkbait
I think it would be in keeping with that to change the title to, “New Housing Units in Your Backyard Lower Your Rent”, though I don’t mean to bite your head off for using the verbatim one.
> There is a growing debate about whether new housing units increase rents for immediately surrounding apartments... I provide event study evidence that within 500 ft, for every 10% increase in the housing stock, rents decrease by 1%; and for every 10% increase in the condo stock, condo sales prices decrease by 0.9%. In addition, I show that new high-rises attract new restaurant ...
If a city added 10% more housing, it would be extremely surprising to see rents only decrease 1% assuming no other micro or macro economics changes. It is not very surprising that a new condo building next door only slightly decreases the rent of neighbors since people are usually willing to rent anywhere in a general area and not constrained to a specific 7 hectare area (500ft radius circle).
Hopefully dang can change the title to the original "Do new housing units in your backyard raise your rents?"
If landlords wanted to collectively agree to keep prices low, in the interest of not taking money from the poor to line the pockets of the rich, they could.
If I had a billion dollars, I'd totally be interested in spending $300 million of it creating a bunch of studio housing in Silicon Valley and renting it out at $500/month and watching neighboring greedy landlords cry.
The current crop of billionaires are themselves greedy, though.
It's pretty hard to fight against the market consensus on value, no matter how good your intentions are, unless you could establish some sort of monopoly. In the absence of that, if you sell something for less than its value, you'll end up creating some weird dynamics. You'd invite scalpers, corruption as people compete for access to the resource, and people would probably create secondary markets anyway where they hold the lease and sublet for more than its cost. (Whether legal or illegal.)
There's a reason why home prices in the form of a 30-year mortgage on a home historically have a monthly price close to, but slightly less than, the price of rents. Being a landlord involves financial risk, maintenance costs, liability, and work. That work, the willingness to take on the risk, etc. has a value. That value is approximately the monthly price of rent minus the monthly mortgage cost.
...And actually, historically, it's not even a great value. Renting, and investing spare cash that would otherwise be tied up on a down payment has in many cases been a better investment.
University dorms don't generally permit sub-leasing, and even my alma mater only permitted sub-licensing to other students and only at or lower than the rent price I paid.
Couldn't similar things be enforced on such a system? Sub-lease and you get disciplinary action i.e. kicked out and shamed in the front lobby. Or maybe even wailing noises and automatic fart spray through the HVAC if the room is sensed to be occupied and the official tenant doesn't check in periodically.
In California, housing will not be constructed in response to more demand.
In Berkeley we lost only 2% of the population but that knocked 10% off real-dollar rents.
0% of YIMBY plans plan for reality.
> 0% of YIMBY plans plan for reality.
I mean, if it were up to me, I'd add 5 million bedrooms to San Francisco. And if that isn't enough, up it to 10 million.
There's only ~330 million people in the US. If we build enough, eventually supply will outstrip demand. Even for big costal cities.
What happens when you double the housing supply? Who knows. Not a single data point in that regime.
I think this effect is probably complicated by generated demand.
Think about a city like SF or Seattle. Adding a lot of vacancies may not drop prices much for a while. Instead, it'll suck in a lot of people from the surrounding area. It's only after there is enough new construction to overcome that effect that people will see price declines in the city.
Of course, if SF or Seattle is sucking in people from the surrounding areas, then the price of real estate in those areas will decrease substantially. It's all about what you measure.
https://www.upjohn.org/research-highlights/new-apartment-bui...
Intuitively this makes sense. People predominantly decide move to city/area because of a job, not because of a shiny new apartment building. New construction is a reflection of a high demand area, not a cause.
[0] https://news.ycombinator.com/item?id=33317414
Not very insightful, yeah? Perhaps it would be good for things to be a certain way in our country without literally enshrining them in our Constitution. Cities are the economic backbones of modern nations, so it’s probably good for young people to be able to afford to live and work there.
Network effects is the answer. Anyway, not sure what this would prove. There is clearly enormous demand for existing cities to be densified, as demonstrated by our densest, most walkable cities (NYC, SF, etc) having by far the highest rents and property values in the country, as well as the greatest economic outputs.
If you’re a free market economist, you should view it as a massive failure that regulatory capture and vested interests are able to prevent willing property sellers and developers from making this a reality.
This is... a silly thing to examine. 500 ft is nothing. A 10% increase in a 500 ft area is a tiny, tiny, tiny increase in the NYC housing stock overall.
The cause and effect between housing stock and rents operates at a combination of city level and large neighborhood level mainly. When people shop for an apartment they're usually considering lots of neighborhoods, not a tiny 500 ft area.
Anything you observe at the 500 ft level is more likely than not to just be noise.
Also the HN title is wrong, because it sounds like it's a universal law, when the study is meant to be about a certain snapshot of NYC only.
A 500 ft radius circle around an apartment building in the middle of a row in Manhattan includes about 6 full rows and and about half of 2 more rows, so about 7 rows worth of buildings total.
That seems like it would include enough buildings to see more than just noise.
In other words, rents changing in a 500 ft area is due to housing stock changing citywide. Not housing stock changing within 500 ft.
The noise I referred to isn't the noise of statistical measurement, it's that housing stock within 500 ft is mostly random noise when compared to the change in stock citywide.
How much housing stock increase do you get from a new condo building near the train station or the local elementary?
Or multiple ADUs on a desirable neighborhood?
Very few people pick a tiny area and then only look for availability within it. That's just not how the city works.
https://news.ycombinator.com/newsguidelines.html
If you want to say what you think is important about an article, that's fine, but do it by adding a comment to the thread. Then your view will be on a level playing field with everyone else's: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...
Housing is a rivalrous good. People will generally pay as much as they can afford. Introduce 30-year mortgages? House prices will go up 50%.
The best single predictor of house prices is population density. Building more units is likely to be a sign of rising prices. Case in point: Most people complaining about prices in the Bay area could have had cheaper housing back home but moved here instead.
A. Housing should be available for everyone in large cities at a price they can afford; and
B. There is no right or economic solution to affordable housing for everyone who wants it, especially in a dense city.
I don’t intend to choose a side in this argument, but here are the “facts” (or approximations) that must be considered in this argument:
1. Land in the U.S. is generally owned by individuals, or by businesses with shareholders (ie. people), not the government.
2. Individuals owning land and buildings are just regular people (or groups of regular people as investors) in many cases, not “bilyunares”.
3. How do regular people own property and buildings? There are three ways:
a. People invest in Real Estate Investment Trusts (REIT) through their savings and/or 401k or other retirement accounts.
b. People invest in banks, or deposit money in banks, which is used to create loans (mortgages) to purchase land and buildings.
c. People pay taxes, and a portion of those taxes goes toward tax credits and Housing and Urban Development (HUD) Section-8 subsidies. The U.S. government spends $6 billion per year to finance new housing for qualifying people.
4. Rents and escalations are both market-based and contractual. The rent collected pays for the cost of upkeep and routine maintenance as well as the mortgage obligations and taxes. With inflation, the cost of everything goes up, and this must be reflected in rents.
5. The most desirable locations will have the highest land prices and correspondingly the highest rents. Desirability results from weather, safety, activities, travel or transportation options, and most importantly: work opportunities.
It would be refreshing to see more of these “facts” (and many more I haven’t mentioned) included as part of the debate.
Have fun and carry on!