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by mft_
2652 days ago
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> We've already tried this, it doesn't work. Housing is valued exclusively by the value of the housing around it. Building more housing raises the value (and therefore the cost) of all nearby housing, and does so continuously until the economy resets. Really? Maybe I'm being overly simplistic, but surely building enough dwellings to exceed the immediate demand would lead to prices dropping? Could you point towards some links to learn more about this? |
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I thought Toronto was doing a good enough job at building lots of housing, and it still hasn't worked.
The issue is that in order to actually have prices dropping, you need to overbuild by a bit. But prices dropping is an undesirable outcome for real estate developers, who are almost exclusively responsible for building new housing in a city. Naturally they don't want to shoot themselves in the foot, so they will only ever build as much as to satisfy the current demand, but not quite, and try hard not to exceed it.
Even with government-issued social housing, there's no way to solve this: as long as there's any space for developers in a market, their new supply is going to adapt elastically to just underserve current demand.
The only thing that has practically lead to supply-related price drops is an irrational boom followed by a realization that developers have actually (unintentionally!) overbuilt this time. Unfortunately, irrational booms are also accompanied by prior fast price increases and a lot of pain on all sides, so we probably shouldn't advocate for one.
So, I'm not sure what a good solution is to actually provide more supply than needed and have prices dropping, but the free market is not it. Especially as real estate developers get better with forecasting demand.
Maybe demographics will help a bit in 20 years or so.