[vkou]

Easily.

Many of those people have a correct observation in that new construction is just luxury housing, which is obviously unaffordable for people struggling with rent.

What they fail to miss is that for every luxury unit that's built and is occupied, some well-off person moved into it... And out of a shitty, cheap unit that's now on the market.

[tptacek]

Almost all new construction is luxury housing; it's what pencils out. The mechanism by which it reduces prices is by reducing demand pressure on older housing stock, which would otherwise be bought up and rehabbed by the same people moving into the "luxury" housing. The constraint that makes this work is increased density: so long as you're adding net units to the market, new construction at any price level will reduce prices in the market.

[EduardoBautista]

As someone who grew up in San Diego and now lives in Dubai, I point towards how much of the construction companies in Dubai are partly government owned and were at once fully owned before the government sold shares in their IPOs.

I really don’t understand why the California government doesn’t just build luxury condos at a large scale for profit. The state will get revenue and lower housing costs overall.

[anal_reactor]

Private companies are good at removing inefficiencies. As long as there is competition, private companies will offer better service at lower price. State-owned companies work better in cases where maintaining healthy competition is not possible, or where inefficiencies are not a concern.

In particular, Gulf states have virtually unlimited money, which means that it doesn't matter whether a new construction costs $400k or $800k or what.

It's very rare to find state-owned companies which main goal is to provide service to the citizens and they turn a profit without some form of government subsidies along the way. Let me ask - if you think there is huge market for new construction and it's easy to make profit, why don't you start a construction company?

[mothballed]

It's 'easy' if you have inside connections with the planning and zoning committees and utility companies. I recently developed a property worth about $250k for about $100k. The building process itself is relatively cheap (land + cost construction way cheaper than value of a finished property) and straightforward, everything else is not.

The only reason why I was able to get it done as a random person was because I used a non-commercial loophole to not have to get the inspections that are used as hostile clamp on disfavored competition, and the utility companies that could have charged me a gazillion dollars saw that I was just a guy with a family and took pity on my situation (they are used to dealing with large commercial developers) and gave me the easiest out at every opportunity.

If you are a favored developer you can get things done as easily and almost as cheaply as I did and make vast profits. If not you are fucked and you barely break even because either government workers, or government franchised utility monopolies fuck you at every turn. I lost count of how many times I basically saved $20k-$30k because someone decided not to fuck me that day over some inane detail that in the end doesn't actually make any meaningful difference (the only time I got unlucky -- a utility worker made me redo a survey which cost thousands and then LOLed later that I never needed it, eventually it turned out this person was literally just making shit up which is an astonishingly common tactic when some asshole just wants to delay dealing with you. I was only able to fire this utility company because I was on the border between two monopoly lines which created an unusual point of actual competition, and the next one used a ton of creativity to get the same thing done for relatively next to nothing).

[anal_reactor]

Okay so basically the problem is a system of overly complex rules that don't serve any purpose besides cementing the current influence zones. Creating a state-owned company to navigate these rules won't make the whole process cheaper, only changing the rules themselves will.

[underlipton]

I am begging you to write a detailed overview of how all of this played out.

[gcanyon]

Except Medicare disproves this as a universal case. Government can run efficiently.

[wallst07]

Not a bad idea, should have started with a 2 family house before trying to build a high speed train.

[refurb]

Why? The level of graft would be breathtaking. No doubt some major builders would get preference for cost plus budgets on inflated numbers. Politicians would steer money to their supporters.

They’d like be building at 1.5 to 2 times what private does.

[mothballed]

Because government bureaucrats need to be let in on the take to make it worth their time. Graft is how that gets done. Otherwise they usually just stonewall housing.

Paying $1 to government shills and corrupt capitalists for every $1 spent on actual housing is still a hell of a deal compared to not being able to build anything, which is the status quo in many locked up parcels. A moral standoff and resting on your principles of not funding graft sounds nice, but doesn't accomplish anything.

[wallst07]

>Paying $1 to government shills and corrupt capitalists for every $1

And then some forensic accounting happens and a paper is published citing that government built homes cost twice as much as privately built, and the program stops.

[mothballed]

It doesn't seem to stop all the other graft-ridden wasteful parts of government.

Personally I despise the idea of public housing, but once something is there, it becomes easier to develop. There has to be some way of enticing all the factions stopping housing with productive greed rather than anti-productive greed. If public built housing gets something where there was nothing until the first paper gets published or whatever, maybe it's worth doing a deal with the devil.

[omnimus]

Because that's communism

[underlipton]

This is the common refrain, however, consider:

There were two shitty, cheap units. The people in the first were forced to move out when a developer bought it, tore it down, and built the luxury unit. They have been homeless/going into debt renting a third slightly-less-shitty third unit. Without the first shitty, cheap unit, the second's competition was that third slightly-less-shitty unit; they raised their prices commensurately.

The well-off person moved into their nice new unit. The poor person's choice is staying in the unit they can't afford, or spending thousands on moving costs to go to a shittier unit that they also can't afford. Oh, and the city "motivated" the luxury unit's development with tax incentives. A larger percentage of the poor person's check is now going toward paying that back.

This is the reality once you get past simple narratives and reconcile with the fact that building tons of luxury units hasn't actually moved the needle.

[marssaxman]

The whole point of this article is that building tons of new "luxury" units actually did lower rents, moving the needle exactly as predicted.

The zoning code in the location of your anecdote must be completely suffocating, or that developer would not have left so much money on the table by failing to add more units.

Where I live, a developer recently tore down the cheap, shitty house on the corner and built not one new "luxury" townhouse, but eight of them. Across the street, a larger building was recently demolished, and now they're putting in twenty-one new units. Two cheap homes lost: but a net of twenty-seven homes gained. That represents a whole lot of competitive pressure taken off the lower end of the market.

[underlipton]

See https://news.ycombinator.com/item?id=47858770

It's not traditional development lowering rates. Think about the math. You've replaced two cheap homes with twenty seven "luxury" homes. How would that lower the average price? You've weighted the average rate with an order of magnitude more samples on the top half of the range. The only way to see a drop is for there to be a precipitous drop in low-end rates, or a significant increase in low-end, non-traditional development. I think it's the latter, because California has uniquely supportive ADU policy, and implemented it on a timeline that tracks with the rate decreases.

EDIT: Also the end of ZIRP and refinancing finally coming around.

Oh, wouldn't it be funny if lower rates had nothing to do with building volume, and everything to do with landlords having to pull units out of warehousing because their interest rates increased recently?

[tharmas]

Thank you. Too many people genuinely believe it is a simple supply and demand problem. Housing is a much more complicated "commodity" than people want to concede.

[TheCoelacanth]

Where do you see developers buying up units to tear them down and replace them with the same number of units?

When I see properties getting redeveloped it's usually a tiny house getting replaced with an apartment building. Often it's a strip mall or surface parking lot that wasn't housing anyone getting replaced.

I don't think I've ever seen a redevelopment that doesn't significantly increase the amount of living space.

[underlipton]

>Where do you see developers buying up units to tear them down and replace them with the same number of units?

DC. And when there are more units afterwards, they're luxury. Building more units doesn't magically lower rates; it has to drive landlords of older units to lower their rates. Did that actually happen? You'd have to prove it. Something else could have, like increased non-traditional competition or the end of ZIRP and refinancing horizons coming to bear.

[TheCoelacanth]

That's nonsense. DC has gone from 297k housing units in 2010 to 369k housing units in 2024[1][2].

Developments generally involve more units than what they are replacing.

[1] https://www.census.gov/data/tables/time-series/demo/popest/i...

[2] https://www.census.gov/data/datasets/time-series/demo/popest...

[underlipton]

Row houses often become more expensive row houses. It may not be the bulk of "new" housing in DC, but you asked where it happens, and that's where. So, chill.

In any case, gentrification, infamously kicked thousands of families out of projects, subsidized housing, and regular rentals, replacing them with... definitely not affordable housing. Rent has only gone up. And unless you're a builder, the goal is not building, it's only a means to the end of putting people in affordable homes. If building isn't doing that, it's a policy failure, and other avenues need to be pursued.

[BrenBarn]

The question is whether the well-off person moved in from the same market, or from elsewhere. (Also, whether they vacate their previous unit or, e.g., keep it as a vacation home.)

[mpyne]

None of those are really pertinent because it doesn't change the fact that the well-off person is going to occupy an additional housing unit in this scenario no matter what.

The question is whether it's going to be new construction that they occupy or existing construction. If you're not well-off you'd want that decision to end up with "new construction" so you can move into "existing construction" at a lower rent/mortgage than if new construction didn't exist.

[BrenBarn]

I don't think that is necessarily true. I believe there are, for instance, many reasonably wealthy people who live somewhere outside California and would not move into a dumpy old apartment in LA or SF but might move into a fancy new one. In other words, they will not occupy an additional housing unit (in a given market) unless it is "nice" enough.

I am in favor of building new housing, but I'm even more in favor of reducing wealth inequality. I think we can do both, but we need to be deliberate about it.

[mpyne]

> I believe there are, for instance, many reasonably wealthy people who live somewhere outside California and would not move into a dumpy old apartment in LA or SF but might move into a fancy new one. In other words, they will not occupy an additional housing unit (in a given market) unless it is "nice" enough.

That's the point, the "dumpy old apartment" was never going to be the thing stopping the rich person from moving in.

Due to overlap in preferences amongst a multitude of people, the rich person would free up the housing they like by buying it from whoever, who would then free up slightly-less-good housing in the area by kicking out someone else (with money, to be clear) and so on down the chain until you get to the "dumpy old apartment", whose rent now rises because there are more people interested in moving into it due to lack of other options.

New housing, even if it's new 'luxury' housing, breaks this chain of housing migrations in the area before it gets to buying people out of their dumpy old apartments.

[bombcar]

Taken to extremes you'll have all wealthy people living in California, and the rest of the country available to us plebs.

The greatest tool we have to reduce wealth inequality is make it so people can buy homes - and the biggest levers we seem to have there are making supply available in general, and making jobs available where there's already supply.

[tsimionescu]

> Taken to extremes you'll have all wealthy people living in California, and the rest of the country available to us plebs.

Which is exactly what people are afraid of happening, and what they mean by the crisis of housing affordability.

You can go and buy or rent a cheap house today in probably 90% of the localities of the USA. Of course, if you already live in those places, you probably don't have the money, because good work is very hard to find.

The problem of housing is that regular people want to live in NYC, and Chicago, and LA, and all of these places, and relatively near to where their jobs are, and they're seeing the rich own more and more of the space that could have allowed them to do so.

[wallst07]

"The problem of housing is that regular people want to live in NYC, and Chicago, and LA, and all of these places, and relatively near to where their jobs are"

It's not clear in your phrasing, but it sounds like this is a casual correlation. It's not... Many people only want to live in these cities because it's the ONLY way to get work, given a choice they would quickly move out.

[wallst07]

>I am in favor of building new housing, but I'm even more in favor of reducing wealth inequality. I think we can do both, but we need to be deliberate about it.

... And that's why nothing gets done.

[afpx]

luxury housing? I see miles and miles of $650k townhouses that look like government housing. It would be much easier to cut demand.

[tsimionescu]

> What they fail to miss is that for every luxury unit that's built and is occupied, some well-off person moved into it... And out of a shitty, cheap unit that's now on the market.

Ah yes, good old trickle down economics, applied to housing. It's obviously always true that the people moving into a new luxury home are coming from existing lower-luxury homes in the same part of the same city, and will immediately sell or rent those homes off at prices no larger than what they themselves had paid for them and no more.

And we're basing all of this on a tiny decrease in the prices of new rent offers in one of the most expensive in the USA, which built a tiny amount of extra homes recently, not even clear of what type. Clear causation well established.