[eliasmacpherson]

A definition of demand: Demand is an economic concept that relates to a consumer's desire to purchase goods and services and willingness to pay a specific price for them.

The poor do not have the willingness to pay a whole category of prices, as they are unable to finance it. Creating luxury accommodation can increase supply, but as the decrease in price does not necessarily put the older accommodation within reach, the owners of captial can choose to retain it.

[ecshafer]

If there are 10 houses available and there are 12 families looking to buy then the they will bid up and the 10 wealthiest families win. If you build 2 luxury homes, it doesn’t matter if poor families 11 and 12 can’t afford them, because 1 and 2 can, which makes them not bid on normal house 1, 2, …, n lowering all housing prices.

[michaelmrose]

Poor people don't buy accommodations they rent them in your example where demands exceeds supply owners of accommodations can jack up prices to whatever the poor people can pay without living on a street corner hoovering up any benefit obtained in your example.

[eliasmacpherson]

why do you assume a wealthy family will only buy one house, or could be outbid by a poor family?

[zeroonetwothree]

What will the wealthy family do with their 3 houses? If they rent them out that’s still good for the poor family (indeed perhaps they couldn’t afford to buy anyway).

[eliasmacpherson]

on the other hand, if they don't rent them out they can let them appreciate in value, wait for more wealthy families to show up.

[ProfessorLayton]

This is circular reasoning because homes are rising in value due to lack of supply. With enough supply it would not make sense to sit on an empty home as it would not make a good investment.

[eliasmacpherson]

Why do people sit on empty homes then, in the face of rising supply of luxury homes? The demand side of the equation is unable to finance a purchase. The wealthy can wait until they get the gains they want. There's nothing circular about it.

[steveBK123]

Are things made better or worse by building the 11th & 12th houses when there are 12 families in need of houses?

[eliasmacpherson]

Made better, in that case with those numbers.

Given rental vacancy rates of ~5.8% in the USA in 2022 it is more akin to a hypothetical of building a 12th and 13th house, while an 11th already lies unoccupied.

I am not sure in this more realistic case that building improves matters, unless an unhoused family can gain access to one.

[steveBK123]

1) You can't take national vacancy rates, RE is extremely local, as is homelessness.

2) Is it easier for unhoused to gain housing when vacancy is 1%/5%/10%/20% ?

For example, Manhattan has 2% vacancy. Even in peak covid dread it never got much above 4%. And you know what - pricing updated very quickly to get those units filled. Lots of tales of people getting crazy deals, including people I know. Of course when the world was no longer ending & everyone moved back.. prices snapped back.

So even a 2% to 4% move can have huge pricing impacts. Imagine building enough in HCOL areas to move the needle.

[eliasmacpherson]

1) can you explain why I can't take national vacancy rates, as it was a hypothetical in response to an unrealistic hypothetical? Surely national averages are better than looking at Manhattan of all places? I don't know how to have a reasonable conversation about this global problem using Manhattan as the point of interest.

2) at a certain point squatting sets in. I believe the answer to your question depends on how much capital is held by the rich/poor, and how well property is protected by law enforcement and private security. If you look at the parent comment I was responding to, it mentioned not building so much that it flooded the market.

[watwut]

Undesirable areas are full of cheap mansions, slowly decaying because no one wants to live in a place with no jobs.

Housing is not that special, when there is a lot of it, it gets cheap.

[eliasmacpherson]

Nobody with enough capital to buy/rent them wants to live there.