[eru]

> The fact that housing shortages are widespread in CA makes it a crisis that must be solved at the state level.

In practice you are probably right, but I'm still wondering if you are right in theory.

Let me explain: there's so much pent up demand in SF and SV that any individual location allowing more building won't make much of a dent in overall housing costs.

One can certainly see that as a problem. But it's also an enormous opportunity: real estate developers in that community can build and build and build without worrying about oversupply ever dropping prices.

A booming local construction industry would also create lots of blue collar jobs, even if it never makes a dent in housing prices. Or rather, exactly when it doesn't make a dent in prices: because then the booming local construction industry can just keep on booming forever.

Now my question is: why does it look like all cities in the area are colluding against this? What keeps even one city from breaking ranks and allowing massive amounts of construction?

Is it that they can't find ways to benefit from the extra commercial activity? (I heard that eg property taxes are capped? And they have no creative ideas for how to otherwise benefit?)

Is it that there are bay area wide mechanisms that keep communities from allowing more building?

---

Btw, the whole discussion reminds me when back in the years of the Great Recession after the Global Financial crises inflation was--as hard as that is to believe today--stubbornly low, and people saw that as a problem, instead of an opportunity:

At a minimum you can have your central bank buy up the whole national debt with newly printed money, and if that still doesn't raise inflation, you can start buying up the rest of world dollar for dollar. (Eg index funds are happy to take your newly created money.)

At some point, either your country's central bank owns the world in return for some data base entries, or inflation will pick up. (If inflation picks up too much, you can always soak up some excess money by selling things off your balance sheet. Standard central bank operating procedure.)

Instead of seeing this opportunity, people mostly just.. gave up?

Btw, orthodox economists suggested more or less exactly what I laid out above to Japan during the 1990s Lost Decade, but this was not a popular policy recommendation during the 2010s.

[shiroiushi]

>What keeps even one city from breaking ranks and allowing massive amounts of construction?

Some minor city allowing massive construction isn't magically going to make lots of high-paying jobs appear there. Over time, it might make the place an attractive destination for migration, but it's far from certain. Think about it this way: if Toledo, Ohio allowed massive housing construction, would lots of tech companies flock there and try to get tech employees to move there? Or Fargo, ND? I kinda doubt it.

Even within the Bay Area (which is composed of a bunch of municipalities like SF, Oakland, Cupertino, San Jose, etc.), one city allowing more construction might not help you much if your job is elsewhere, because it's too far to commute and the commuting infrastructure sucks.

[eru]

> Some minor city allowing massive construction isn't magically going to make lots of high-paying jobs appear there.

Yes. The high paying white collar jobs are already there in the bay area.

(My earlier comment mentioned jobs mostly in the context of new blue collar jobs for people during the construction.)

> Think about it this way: if Toledo, Ohio allowed massive housing construction, would lots of tech companies flock there and try to get tech employees to move there? Or Fargo, ND? I kinda doubt it.

I agree, but I don't see how that's relevant for the bay area.

> Even within the Bay Area (which is composed of a bunch of municipalities like SF, Oakland, Cupertino, San Jose, etc.), one city allowing more construction might not help you much if your job is elsewhere, because it's too far to commute and the commuting infrastructure sucks.

I don't even live in the bay area, so it doesn't help me at all. At least not directly. But I also don't see how that question is relevant?

As long as it helps some people enough that they are willing to pay enough to keep local house prices high, my argument still stands.

And the opposite is also ok: if one city building would actually make houses more affordable in that area, then that just invalidates the whole premise of the grand-parent comment that individual cities can't make dent, and that intervention from higher levels of government (like the state) are necessary.

[com2kid]

> Now my question is: why does it look like all cities in the area are colluding against this? What keeps even one city from breaking ranks and allowing massive amounts of building?

The problem is that until all unmet demand at the upper end of the market has been satisfied, builders won't start building at the more affordable ends of the market.

If one small city allows more construction, the overall impact on the market will be tiny, this is why the "urban villages" approach doesn't help bring down housing prices, throwing up a few dozen new apartment complexes doesn't help when thousands upon thousands of new complexes are needed.

[eru]

> The problem is that until all unmet demand at the upper end of the market has been satisfied, builders won't start building at the more affordable ends of the market.

As outlined in my original comment, I don't see how that is a problem?

The whole point is that you can either you can let your real estate developers run wild and make lots of profit (and thus pay lots of taxes) building houses upon houses upon houses without any price drops from over-supply.

Or you'll eventually see price drops, and thus more affordability.

Btw, back in the old days the complaint was that greedy developers would build sub-par units to make money off poor people. Nowadays the complaint is that greedy developers will only sell nice units to the rich. How times have changed.

Any new supply is good. If you don't supply excellent units at the top, you just have rich people outbid the middle class for slightly worse (but still nice) units. And the middle class gets pushed down to outbid the lower class for even worse units.

The other way round, adding units at the top allows everyone on the ladder to move up one rung. All the way to the bottom.

Developers should just concentrate on whatever's most profitable.

> If one small city allows more construction, the overall impact on the market will be tiny, [...]

That's the first of the two cases I outlined above. I would also classify that as a (local) success of allowing more housing.

Being able to add lots of supply to an over-priced market without that dropping prices, is every suppliers' dream.

[com2kid]

> The whole point is that you can either you can let your real estate developers run wild and make lots of profit (and thus pay lots of taxes) building houses upon houses upon houses without any price drops from over-supply.

I think we are in agreement that if enough houses are built, price drops will follow.

One issue we encountered here in Seattle (or at least we believe we encountered!) is that people move, so when housing got too expensive in California, people moved from California to Seattle where housing was cheaper.

Now obviously if California reformed its housing policies, I think they could easily absorb pent up local demand along with some growth. However if a smaller locale like Seattle fixes its housing problems, I worry that Seattle couldn't absorb pent up demand for housing from California.

> Being able to add lots of supply to an over-priced market without that dropping prices, is every suppliers' dream.

Getting filthy rich is supplier's dream. Most builders (and arguably businesses) are short sighted, but if government policy makes them tons of $ they will still try to claim it was all part of their brilliant long term plan.

If every major west coast city replaced its stupid zoning laws with, say, Japan's zoning system (see https://www.mlit.go.jp/common/001050453.pdf), then prices would come crashing down and everyone would make crap-fuck-tons of money.

As a trivial example, on a 10k sqft lot right now in Seattle suburbs, builders are constructing single family homes and selling them for 2 million.

With not-idiotic zoning, that could be 6 flats selling at 600k each.

Never mind the rules that discourage constructing flats and instead push builders towards making 4 story townhomes.... (Perfect for able-bodied couples without kids who are under the age of 40! And no one else...)

[eru]

> Now obviously if California reformed its housing policies, I think they could easily absorb pent up local demand along with some growth. However if a smaller locale like Seattle fixes its housing problems, I worry that Seattle couldn't absorb pent up demand for housing from California.

Are you saying that (A) Californian's won't come, and that's why Seattle won't absorb pent up demand from there?

Or are you saying that (B) Californians will enthusiastically come, thereby preventing any price drop?

Case (A) means Seattle can solve its own housing affordability problem by allowing more building. Case (B) means Seattle's real estate developers can have an endless boom.

> If every major west coast city replaced its stupid zoning laws with, say, Japan's zoning system (see https://www.mlit.go.jp/common/001050453.pdf), then prices would come crashing down and everyone would make crap-fuck-tons of money.

Yes. But my argument is that if just a single town adopted sensible measures, developers could make obscene amounts of money in that city. Especially if the rest of the area persists in their stupidity.

So multiple cities finding sanity at the same time might be required to do anything about broader housing affordability in the Bay Area, but for a construction bonanza with insane profits it's actually better for the city that breaks ranks not to have competition from other cities finding sanity.

So my question is: why does no single city seem to break ranks?

[com2kid]

> So my question is: why does no single city seem to break ranks?

Because city councils don't follow the laws of economics, at all!

City council members only side benefit from economic growth. Heck during the early 2000s housing boom, Seattle City Council members got negative press for "being too friendly to building developers".

As an example of this inanity, cities should be eager to have well funded efficient permitting departments, after all the faster buildings get built, the faster property taxes go up! But no, permitting departments are famously slow and awful to deal with. Simple tasks can take months, and a large complex can take years to get approved.

Every city should increase permitting costs for large projects until the building department is a profit center, and then put into place aggressive service level guarantees on response times to requests.

But that isn't what happens, my 100% ignorant guess would be entrenched power structures in permitting departments, but I honestly have no idea why.

[eru]

That's the kind of explanation I am looking for, but I'm not sure this specific one is sufficient, yet: what you describe is probably accurate for most cities, but only one city would have to break ranks.