[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.

[ProfessorLayton]

They're sitting on empty homes because there's not enough supply. Without solving the supply issue the wealthy will keep using residential real estate for investment purposes.

The wealthy aren't waiting around to buy/sell houses per se, they're trying to get a maximum return on investment. Adding enough supply so that housing isn't an investment vehicle removes those incentives.

[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.

[steveBK123]

You can't take national vacancy rates because housing is extremely local.

There's areas of the country with out-migration, lack of jobs, but tons of housing. Post industrial cities in the midwest are like this.

There's areas of the country with high paying jobs, but no housing being built. Areas of NY & CA are like this. It is then no surprise that we have 60k homeless in NYC when even people working for banks or tech can barely afford to live there.

There's also areas of the country with decent paying jobs, but lots of housing.. with lots of in-migration. Sunbelt is like this.

All three of these types of areas have vastly different vacancy rates and homeless rates. Taking national averages confuses the matter.

Quick googling points to vacancy rates of: Manhattan 2%, Boston 3%, SF 7%, Detroit (12% owner vacancy / 7% rental vacancy), Miami (3% owner / 7% rental), Austin (1% owner / 6% rental) etc.

FRED has some good charts you can see state by state the levels and even shapes are totally different in terms of trends and averages. Expensive northeast- https://fred.stlouisfed.org/series/NYRVAC https://fred.stlouisfed.org/series/NJRVAC https://fred.stlouisfed.org/series/CTRVAC

Midwest https://fred.stlouisfed.org/series/MIRVAC https://fred.stlouisfed.org/series/MNRVAC https://fred.stlouisfed.org/series/ILRVAC

Sunbelt https://fred.stlouisfed.org/series/GARVAC https://fred.stlouisfed.org/series/FLRVAC

Northwest https://fred.stlouisfed.org/series/ORRVAC https://fred.stlouisfed.org/series/WARVAC

Basically everywhere thats expensive has vacancies around 4% or less while areas that have been building its closer to 8%..

> why do you assume a wealthy family will only buy one house, or could be outbid by a poor family? I was responding to this post that seemed to assume all new housing will be bought by the rich as like extra homes..

People underestimate how much "trickle down" kind of is real in RE. In the absence of nice new construction (which seemingly always gets called "luxury"), people with money will move further and further down the market, to buy & renovate. So the option is build more homes to increase supply, or see the dollars chase existing supply & raise its value (and cost).