The Urbanist Cult
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Anonymous
You are no economist - that’s for sure. But maybe it makes sense on your home planet that building expensive homes makes housing cheaper. |
Anonymous
Would you care to point out where I'm wrong? |
Anonymous
Expensive duplexes don’t make housing more affordable. That might be true if there was relatively low demand, but not in this market where demand so far outstrips supply that bidding wars erupt over multi- million dollar properties. Duplex helps individual developers build more inventory for a high end market. They don’t make housing cheaper for anyone else. There is no knock-on impact - at least in DC. There are hundreds of condos coming online in ward 3 over the next year and prices will continue to rise in the high single digits. |
Anonymous
So what? Here is what expensive duplexes undeniably do: provide more housing on the same land. Indeed, that's one reason why people object to them. It's that scary "density" thing. Another thing that expensive duplexes do: cost less per unit than an expensive single-plex on the same property would cost. |
Anonymous
Who do you think moves into high end housing, especially low-tier high end housing like a duplex? It's not just millionaires shuffling around to various properties. More high end housing means more supply which means lower prices (maybe not significantly but still lower) which means more people can afford to upgrade from middle-end housing which means more middle end housing availability and so on and so on until you get to the bottom of the property ladder. It boggles the mind that people don't understand such a simple concept as "more supply = lower prices." |
Anonymous
DP...supply and demand, if you have two houses where there was once one, there are two families that can live there, not just one. More housing in general moderates the costs of housing. Restricting housing drives the costs up. Maybe stay in your lane. |
Anonymous
Of course there are knock-on effects. Why wouldn't there be? Consider the family that moves in to the hypothetical Ward 3 duplex. Where did they come from? Were they competing in the market for other houses, or were they spontaneously generated? If they were participating in the housing market, did the family whose offer on a house in Arlington that was lower than what the Ward 3 duplex family was willing to pay end up writing an offer for more money just for fun, or was the closing price lower because the Ward 3 duplex family no longer made an offer? I guess if you believe that housing buyers are created out of thin air then sure, there are no knock-on effects. Personally, I don't find people being created out of thin air to be particularly plausible. And sure, housing prices in Ward 3 will keep going up even though there are condos in the pipeline. That's not evidence that the supply of housing doesn't have anything to do with housing prices. All that tells me is that there is still a mismatch between supply and demand. Pointing out that prices are rising in the face of new construction is not illustrative. It's more illustrative to ask the counterfactual: how much more expensive would housing be if those condos were not being delivered? |
Anonymous
Like I said, you are no economist. |
Anonymous
Cool, we've reached the point where instead of engaging, you're slinging around insults and shouting down people who disagree with you. I thought ~scary urbanists~ were supposed to be the ones doing that? |
Anonymous
That’s a nice theory in practice but the market dynamic is more complex. Let’s say we allow triples on lots currently zoned for SF and the cost of a lot is $1 million. Building costs for any of the three options are about $1 million including financing and permitting costs, but a little more for the double and a little more again for the triple. At market, the developer can reasonably expect to sell the one unit for $2.3 million pretty quickly. Let’s say the developer can get $1.15 million for each unit in a two-over-two. Which would you build? I would build the SF because the risk of not selling all of my inventory is lower when I only build one unit. So to build two units, the developer would need to get a higher price — maybe $1.2 or $1.25 or more — for each unit. The risk premium would be even higher for the triple because even to recover the initial investment, the developer would need to sell all three units, one of which probably would be an English basement. In effect, the expected sales price for the SFH establishes the acceptable floor for the price of other types of dwellings. And as you reduce SFH inventory, prices will go up, driving up the minimum acceptable prices for duplexes and triples. Now think about the demand side. Buyers who can pay $1.15 million have a lot of options and will be making tradeoffs that consider the cost of the dwelling, commuted, schools, and aspirations. I’d be willing to bet that most buyers who can pay $1.15 million will choose not to share a roof with people they don’t know. The persistent high demand for SFH, even in exurbs, suggests this is the case. Thus, despite high overall housing demand, there’s a substantial risk you won’t be able to sell both units at $1.15 because the market in that income range is soft for the type of unit you’re delivering. The funny thing about the urbanist school of thinking is that it says de-regulation will automatically result in more density. But because competition is imperfect (limited by land ownership and access to capital), the housing market does not function the way you learned in your introductory economics class. What the housing market needs is a different kind of regulation. I’m for increasing allowable density (most lots in NW and close-in suburbs are big enough to support quads), but to get more housing, the government will need to find ways to make building one unit where three are allowed more expensive, and it will need to make delaying projects or doing AirBnB conversions to limit inventory more expensive. |
Anonymous
Your example of a $2.3m SFH vs two $1.15m duplexes is contrived and unrealistic. Nobody is suggesting that developers build a duplex or triplex and sell all of the units for the same total as a SFH would. There is, as you say, a risk premium built in to the costs of duplexes and triplexes, but also keep in mind that the pool of buyers of $2.3m homes is much smaller than the pool of buyers of $1.15m (or $1.25m, or $1.3m, etc) homes. In any event, developers care less about selling all of their inventory and more about their bottom line. You're going to have a hard time convincing me that the carrying costs of one unit that doesn't sell in a duplex are larger than the carrying costs of a SFH that doesn't sell. As to the demand side, DC is lousy with $1.15m (and up!) rowhomes, whose owners most certainly share roofs and walls with people they do not know, so I'm not sure that your case is as strong as you think it is. Finally, your example of SFH demand being high in the suburbs is not particularly strong evidence of consumer preferences. SFH demand is high because suburbs are predominately exclusively zoned for SFH. So of course that's what people buy, because for the most part, it's the only thing developers are allowed to build. |
Anonymous
Your supply-side thinking is getting in the way of good reason. SFH demand is high -- and not just in the suburbs, but in the city as well -- because people want SFHs, not because construction alone has induced demand (construction + marketing + conditioning, yes). If there weren't demand, new SFHs wouldn't be built, and rent for family-sized apartments wouldn't be effectively capped by the monthly cost of a SFH mortgage. If supply determined demand, then people would be moving to apartments in droves, because there are more vacant apartments (6-8 percent) than SFHs (basically turnover vacancy and not much more). The point of the example wasn't that the sum of the unit prices would equal the SFH price. The point of my example was that the risk premium would eat into the savings gained by sharing land while producing a less desirable (as evidenced by the lower price) housing product (albeit twice as many of them). My case gets stronger the higher you set the price for the MF unit (and I think $1.25m or $1.3m is a more realistic floor for a duplex in light of the risk premium) because people at that income level have more options. A duplex is more desirable than a triple, and I'd have to price the above-grade units in a triple around between $1.1 million and $1.2 million so I could capture profit similar to a SFH without having to rely on selling the basement. I think the market for a unit in a triple is pretty thin. Plus, with the SFH it's a lot easier to control supply and avoid getting caught long. I can't build one unit in a duplex at a time. Finally, you seem to have missed the point, which is that governments need to disentivize underutilizing land to get more housing in addition to upzoning. Carry costs have been low for some time because interest rates are so low, reducing the imperative to move projects through the pipeline quickly. I am for upzoning, but because of additional risks associated with MF development, SF development will continue to be a better deployment of capital on a risk-adjusted basis in areas currently zoned for SF unless the government also penalizes underutilization. |
Anonymous
DC also has quiet leafy neighborhoods that are 'suburbs in the city". We moved here cos we like it. We get made fun of for being boring and fuddy duddy (not U street), and our "punishment" is more dense housing. If we protest we are pearl clutchers. |
Anonymous
it's funny that Ward 3 is so "boring" but supposedly everyone wants to live there. Why is that? |
Anonymous
If you like it, why would you care if other people consider you boring and fuddy duddy? Also, people are not advocating for duplexes AT you. But yes, when you talk about duplexes as punishment, then some people are likely to consider you overdramatic. On the other hand (as above), why would you care about their opinion? |