[dodobirdlord]

Seems off to call someone’s reply unsubstantial when their very argument is that a simple model is sufficient.

Of course developers are going to build high-margin housing. But why is it high margin? Because there is high demand and low supply. “Luxury” housing is only marginally more expensive to build than “affordable” housing. The expensive parts of development are the land, labor, and construction materials, not the light fixtures, appliances, and flooring. Shouldn’t we be celebrating that developers are building a much better product then they could be if they cut a few corners?

To the second point, developers are not in collusion to keep supply down, and the suggestion is absurd on the face of it. They are developers. They make money by increasing supply. The more they develop, the faster they develop, the more money they make. Developers generally sell properties once they finish them and move on, because they are not in the business of property management. Maybe there’s a non-absurd argument to be made that property management companies are in collusion to keep supply down, but they aren’t. Aside from the fact that it’s illegal, it would be impossible. There are too many of them and the market is too fragmented for a cartel to form, and defecting is too easy.

[WalterBright]

Developers normally borrow money to finance the development. That means they have major incentives to sell as fast as possible. Savvy buyers know this and can work that to get a better price.