(Re-posting here, because too many people think this.) I hear this argument a lot, but it completely ignores the fact that development can allow more housing and continue to increase the value of existing housing.
The key is that more housing isn’t going to look like existing housing: it’s going to be condos and other apartments. Older folks in single-family homes are not going to see their houses lose value — if anything, the increase will continue, because now a developer can buy their house and turn it into four apartments.
Here’s how it would work: family buys single family home in year A for $100k. Lives there for a while, then sells in year B for $200k. The buyer is a developer, who then constructs a larger building on that same lot consisting of 4 apartments that now each sell for $100k again. Original family gains in wealth, developer makes tidy profit, new families can still buy a place to live for $100k. All numbers inflation-adjusted, you pick A and B to make whatever return you think is reasonable.
This is how densification happened almost everywhere until zoning laws spread mid-century.
Note what you don’t get out of this arrangement: a neighborhood that doesn’t change for 40 years; the ability to live in the same type of house your parents did, in the same neighborhood, for the same price. But you could have the same amount of (indoor) space they did, and outdoor space through public parks and the like.
What’s not sustainable is everyone having a suburban style detached single family home without increasing density in perpetuity.
The non-density alternative is sprawl, where prices rise in long-established neighborhoods, and outlying new developments are where you can buy new houses for less—which is what you observe all over California.
This is an excellent argument for local rezoning. The people who live in the place being rezoned for higher density do well.
But if housing costs go down, somebody has to be getting less money, and it's the people who live in the place that isn't rezoned. Because the people who move into those new condos are no longer bidding up the price of their existing houses.
Those people might still want to fight you. Though if they want money then what they should really be fighting for is to be the ones who get rezoned for higher density.
> But if housing costs go down, somebody has to be getting less money, and it's the people who live in the place that isn't rezone
I think you may have missed my point: housing costs go down, but the cost of existing established housing does not — what goes down is the cost of having, e.g., a 2-br unit in a neighborhood — specifically NOT the cost of an existing 2-br detached house, but of a 2-br condo newly built in that neighborhood, where that type of housing did not previously exist.
People are not making the decision to act in a “NIMBY” way for purely economic reasons — the “preserve the character of the neighborhood” is not a smokescreen for economic interests, it often really is a desire to preserve a way of life that seems incompatible with a 20-story tower plopped in the middle of it. (Ask me how I know!)
> Because the people who move into those new condos are no longer bidding up the price of their existing houses
The reality is that most of those people are just priced out, and not moving into the neighborhood — they’re not in a position to “bid up” the prices of the existing houses because they can’t afford it.
> housing costs go down, but the cost of existing established housing does not — what goes down is the cost of having, e.g., a 2-br unit in a neighborhood — specifically NOT the cost of an existing 2-br detached house, but of a 2-br condo newly built in that neighborhood, where that type of housing did not previously exist.
The argument for why existing housing goes up rather than down even though the housing supply is increasing is that a developer will pay you more so they can replace your house with condos. But that only applies to houses that are now zoned to allow them to be replaced with condos.
> The reality is that most of those people are just priced out, and not moving into the neighborhood — they’re not in a position to “bid up” the prices of the existing houses because they can’t afford it.
Priced out of what? Living indoors? They live somewhere now. Demand will be reduced there if supply is increased in the place they actually want to live and they move.
> But that only applies to houses that are now zoned to allow them to be replaced with condos.
Literally what I’m talking about and what is often fought against. But really any development constrain, zoning or not, has this effect.
And: Priced out of the whole area in many cases — folks are absolutely leaving NYC and the SF Bay Area for cheaper locales. Just ask anyone in the Central Valley, Portland, or Pittsburgh.
This is a good point, which I think you could boil down to "land [not housing] can be a good investment, and compatible with affordability if it a city is allowed to evolve and change".
>Housing cannot provide return only at inflation, that would mean nobody would want to invest in real estate.
Well sure, but that's sort of the point. Housing is, ultimately, a durable good. It's more like a car or a refrigerator than like a stock. It has use-value, but its only capital appreciation comes from charging ground-rent on access to nearby economic activity in which the housing itself doesn't participate.
Fair point, but that's a different model than "buy a house and watch its value skyrocket". It's more akin to what you'd find in a place like Germany, where you buy a second housing unit, rent it out, and it pays for itself over time and you can sell it off, even if it may not have appreciated in value a bunch.
Calling houses a durable consumer good is too one-dimensional. If I have a laundromat with 20 washing machines, that's far more useful located in NYC than in the middle of Kansas since there's far more people around to utilize the machines.
A huge part of the context of a house (and its value) is what it's located around.
Buying a house with the expectation of it doing anything other than housing you reliably as long as you maintain it is just a bad decision.
A huge part of what a house is located around is predicated on zoning laws that can change at any time.
A huge part of the business of booming areas is predicated on large business in the area. For instance: being an Amazon employee and living in Seattle makes buying a house unappealing. As far as 'investments' go, housing is not a stable proposition, doesn't help diversify against risk for the average use case, and doesn't promote tangible economic benefits that support its own appreciation.
Regardless -- durable goods are often more valuable in certain situations. That doesn't make it an investment to keep one that's more valuable and hold it.
If you're going to invest, at least treat it like a poor speculative investment
It can be but not at the personal ownership level. Owning an apartment building or rentals can pay dividends - although that assumes sufficient demand but that goes for essentially every investment.
The key is that more housing isn’t going to look like existing housing: it’s going to be condos and other apartments. Older folks in single-family homes are not going to see their houses lose value — if anything, the increase will continue, because now a developer can buy their house and turn it into four apartments.
Here’s how it would work: family buys single family home in year A for $100k. Lives there for a while, then sells in year B for $200k. The buyer is a developer, who then constructs a larger building on that same lot consisting of 4 apartments that now each sell for $100k again. Original family gains in wealth, developer makes tidy profit, new families can still buy a place to live for $100k. All numbers inflation-adjusted, you pick A and B to make whatever return you think is reasonable.
This is how densification happened almost everywhere until zoning laws spread mid-century.
Note what you don’t get out of this arrangement: a neighborhood that doesn’t change for 40 years; the ability to live in the same type of house your parents did, in the same neighborhood, for the same price. But you could have the same amount of (indoor) space they did, and outdoor space through public parks and the like.
What’s not sustainable is everyone having a suburban style detached single family home without increasing density in perpetuity.
The non-density alternative is sprawl, where prices rise in long-established neighborhoods, and outlying new developments are where you can buy new houses for less—which is what you observe all over California.