[anovikov]

But that is caused by nothing but zoning! That's the only reason. Sure, in a token few places like NYC, probably prices would be sky high even without the zoning, but in the absolute majority of places, not at all. Zoning is a politically pushed limitation of construction for the benefit of incumbents - local property owners who want their housing values to go sky high, and they achieve it. It's example of conseqences of government action.

[mrguyorama]

Permissive zoning doesn't make cheap/affordable housing more profitable than mcmansions.

It's easier and more profitable for a developer to work with a single rich individual to sell them a big overpriced house instead of working hard to make a lot of housing with a small margin (because the purchasers CANNOT AFFORD a high margin).

You know what finally got builders to put up new, affordable housing in my area? Rent control (well, "stabilization"). It means they can only "capture" the cash looking for property in the area by building new property, because otherwise they are limited in the price they can charge. It has caused many area landlords to start huge housing projects because the alternative is a 5% max increase in rent income every year.

[Panzer04]

I would have imagined an apartment block would be by far the most valuable thing a developer could put on a property if permitted and in the right area.

At worst, usually you'll do better with 4-6 units on a single block than a single high-value dwelling. People value having anywhere at all to live quite highly, and further amenties than that significantly less (ie. a 4bd house with 2x the space is not worth 2x a single house with half the space)

[mrguyorama]

I'm not talking total income, I'm talking profit per effort. Does a developer really want to take the big risk of hoping they can find a property management client to take the large apartment building off their hands for a probably minimal profit since they are also a business with strong connections looking to earn maximum profit off minimum work?

It's so much easier for the average development group or individual to just build a single mcmansion, where the profit margin can be easily raised with stupid water fixtures or other pointless things, and with clients that are not at all price sensitive. A single moderately expensive mcmansion is probably also easier to get financing for than a competitively priced apartment building where you basically have to hope you keep a good market position for 15 years to start actually making money.

[anovikov]

Absolutely so. Zoning rules prohibit construction of more units per plot exactly because this is what customers want to buy and developers want to build and what makes the most money to everyone - everyone except the incumbents who own other places because that would increase housing supply in their area and lower valuations of their existing properties. If developers wanted to build a smaller number of bigger houses and customers wanted to buy those, zoning rules won't exist, they won't be necessary.