I'm confused by this objection, if you draw a stereotypical supply and demand curve, you can see how prices settle to an equilibrium point. Of course reality has more complications, but I think your objection is 95% answered by a supply and demand curve. You keep building houses when it is profitable. You stop when it is not. This naturally keeps everything in balance.

Because home builders don't make money by buying and selling houses, they make money by building them and selling them.

As long as the cost to build housing is less than the revenue from selling it, why wouldn't you?

It's not like homebuilders in Austin flee for North Carolina when the margins shift slightly.

There is the possibility that the government builds housing, since the government doesn't have to care about direct profits and can include the overall economic effects of affordable housing in its calculations. We don't expect much direct profits from roads either, but we keep building more and more of them.

It doesn't matter whether prices are going up or down, it matters if the price is more than the cost to build.

It's not necessarily prices falling here but the profitability of [demand] at [price]. Like if prices fall 10% but demand rises 20%, you would want to build more housing.

This is the beauty of the free market because it guarantees three things:

[1] Real estate is generally a good investment and will hold value or appreciate in the long term, because supply will adjust to demand shocks to rescue values

[2] If people want to live somewhere, houses will be built for them to live there

[3] Real estate developers and construction are solid, safe businesses with great unit economics because building may decrease prices, but may still increase demand

It's when you constrain and restrict a market that players have to adjust and then you get crazy scenarios

> already-near-zero margin on real estate development

Why is the margin so low when the prices are so high? Is it because the value of housing is already priced into the value of land?

> The problem is: why would you build more housing as prices fall?

Why would you want to? When you stop being able to sell more houses, that's the sign that you've built enough.

it doesn't matter if prices are falling or rising, it only matters how the ROI of building compares to other investment opportunities

we can also make it cheaper to build. easing taxes on imported materials, bringing in more skilled labor, expediting permits, and even direct subsidies like tax breaks

Why let private developers build at all? The market provides perverse incentive to not house everyone.

This is an empirical claim. It looks like new monthly permits are down from ~4k a month in 2021-2022 to ~3k a month. They're still up significantly from before 2020. The building boom has slowed but it's still elevated. Not particularly close to zeroing out.

The data is here: https://fred.stlouisfed.org/series/AUST448BPPRIVSA.

Huh? In Silicon Valley the objection is usually: even if we build more housing, prices won't fall.

So which way is it now?

In my state, or in my capital city, you say this, but the real estate developers are generally the top 1% in town. If they're running on razor-thin margins, I'm not seeing it - I am seeing them on my Facebook (being friends with the wife of the mayor) doing things like taking their kids on vacation to the French Riviera, Switzerland, Tokyo, the Maldives... well, alongside the City's Planning Committee commisioners and their families...

Construction costs don't scale linearly with rent prices, it's a different market altogether that depends on regulation/worker supply/material costs/equipment/etc.

As long as construction costs remain below the value of the units all-in, there's profit motive for developers to build.

Maybe other real estate savvy people can help me understand this plus two other things I'm confused about in the housing crisis:

1. Houses are unaffordable for many Americans. To get houses to prices where they'd be affordable again would require a housing prices drop that would likely be, market-wide, significantly low enough to put a ton of people underwater on their mortgages. What is society/the government meant to do about that? Is it an insurmountable floor on how low we can get housing prices? That floor feels very close if so.

2. We've been promising the last five generations (or more) of Americans that a house is an Investment, capital I, an excellent place to keep your money. How do we overcome the political pressure to turn a house into a depreciating investment for the length of time required to get housing to be affordable again? What kind of politician would put their neck on the line to piss off every boomer and 75% of gen X and 30% of millennials, or whatever the house ownership distribution is?

It would be far more efficient to simply tax away all rent collected from land instead of grossly warping markets and creating terrible incentives for all involved.

The reason is that you can’t produce more land. Fixed supply will also warp economic markets and create terrible incentives (land speculation).

If you want the best solution, you implement a land value tax. If you want the 2nd best solution, tax property (Land + Building value). If you want the worst solution, implement rent control.

> Rent control is one of the best ideas

It's funny how this question might have the greatest divergence in answer distribution between people who do and don't know what they're talking about

Other candidates are "is debt good" and "is property tax better or worse than income tax"

Rent control is the wrong solution to the right problem (ie affordable housing).

It creates all sorts of problems that wouldn't exist otherwise. For example, if you've been in a rent control house or apartment for 10+ years and are paying significantly less, what happens if you want to move? Or just need a bigger place? It's a huge impeediment to mobility and flexibility.

Also, you have an adversarial relationship with your landlord. They want you to leave so they can raise the rent. They'll skimp on maintenance, turn off the heat (even when it's illegal) and generally make your life miserable until you leave.

The solution to these problems is social housing, meaning the government becomes a significant supplier of affordable, quality housing. The very wealthy and the real estate industry don't want this however because it will decrease profits.

> Property ownership is at the very core of entrenched power,

In the literature, there is a distinction made between private property and personal property. I'm fine with people owning their own home if they want. That's personal property. Private property is when we allow people and corporations to hoard housing. I'm all for making it financiall punitive to own more than one house.

Unless you want to build more sprawl-oriented social housing, you'd still need, in most American cities, to reform zoning codes and building codes (single stair and elevator reform) to get Vienna style social housing.

It's a "yes, and" problem though, mostly. Let the market build what it can, and if you want to pursue social housing, do that too - just don't let the perfect be the enemy of the good and delay the reforms while you try and put together all the social housing pieces.

It’s worth noting that a major confounding factor is that, unlike most cities with a housing crisis, Vienna is well below its population peak and so does not need to build nearly as much housing

The comment is phrased in the greater context of the public discussion about housing, in general. Not the specific information of the article.

You know, like how a discussion about war might reference the various recent wars that everyone knows about; it's not limited to just the content of the article.

Affordable housing is the only type of housing that will ever be built. Builders aren't so stupid as to build products that their customers can't buy. Government intervention is not needed.

In this case affordable housing nets out as a way to overcome policy barriers to market rate housing. So it actually makes the market freer.

Many other implementations of affordable housing further raise the barrier and thus even if any is built it doesn’t help widespread housing affordability issues.

Rent control is just another flavor of housing affordability policy that often (always?) backfires.

Crime, social peace, and economic opportunity are very linked. A lot of house prices in urban areas are wildly distributed and often the increase cost is to buy distance and safety (often just a couple blocks) from high crime areas.

No not really. You just have to restrict the same investor from buying all the housing in an area, and prevent investors from colluding on rents.

35% of Americans rent their homes. And they almost invariably rent from investors. Therefore if more than 35% of homes are owned by investors this drives down rent. If less than 35% are owned by investors rent goes up.

It really doesn't matter as long as someone is living in it.

I dont understand your solution, houses are expensive because there are too few of them in desirable places (otherwise we have plenty). The govt becoming a command economy wrt to housing does not fix the supply. If the govt is just supposed to handle all the supply and demand aspects of housing well I have good news, there is a lot of very cheap housing in former Soviet Republics just not desirable housing.

Also taxing homeowners harder doesnt really solve the problem. CA has insane taxes, SF especially has a giant budget. They just waste it. I dont believe that once the govt raises taxes they will suddenly become efficient and competent.

The idea that the more spread things out the more expensive they are is sound theory. However in practice, per capita taxes in a city are often higher than the rural or suburban regions. One water main should serve more people in a city and its cost amortized across the population should be cheaper.

In practice, cities tend to have tons of programs that drive taxes up. They are free to do that, not necessarily bad, but also not efficient from a tax payer perspective.

You seem to know Houston; alas yes Austin was formerly surrounded by open spaces.

But let's not miss the point of the article. This is a right-ward shift of the supply curve. It means that the economics of building the next unit got cheaper. That's the point.

I've seen a lot of neighborhoods across the USA, and Austin making way for higher-density housing on urban corridors (Lamar) is like, duh, this is more live-able. There are new towers along rail and bus route, townhomes packed in, and behind the tree line it's now possible for some single-family lots to become duplexes or fourplexes. And rather than McMansion ugly, the new Austin residents are dressing those up to look pretty darn cool.

There is a lot more to be done to remove supply-side barriers in every city.

There isn't affordable housing in areas of opportunity. You can easily find cheap housing if you don't care about proximity to jobs or to good school districts.

What do you mean by "economic singularity"? If your goal is being near economic opportunity then Austin has plenty.

It’s not NYC or SF, but this suggests that those would be more affordable if they just built more housing.

It is not affordable if it is located somewhere with no job.

NYC is fairly high density. Has stopped building massive new skyscrapers and has water on two sides. It is also a tier 1 global city culturally AND economically. Its not really reasonable to expect to be affordable.

But where do you draw the limit on moving the line in?

Do I get to demand affordable housing overlooking Central Park in NYC? Beachside in Malibu?

If you want large incentive for development at scale you need to allow developers to make fat margins or else you wont get too many of them. Yes you can use affordable housing to do that. Eg: in the article they got higher density and exceptions (aka “fat stacks”) for building affordable housing units.

This is all policy tradeoffs at the end of the day. Eg: a tent is not “housing”, why? Because of reasonable policy. Same thing with housing codes etc. All directionally wise/good. But at the same time you can have bad affordable housing policy.

I do think housing is elastic and a cities policies around that elasticity determines if they will thrive or stagnate.

I've never seen the evidence where density increases drive down existing land/home values.

A paper came out about this recently: The City as an Anti- Growth Machine.

> Logan and Molotch's “urban growth machine” remains foundational in urban theory, describing how coalitions of landowners, developers, and politicians promote urban growth to raise land values. This paper argues that under financialized capitalism, the dynamics have inverted: asset appreciation now outweighs productive investment, and urban land is increasingly treated as a speculative asset.

https://doi.org/10.1111/anti.70145

>For most Americans, A house is their primary savings account

This is true for California, where people (foolishly) rely on their home value as their retirement plan, which further incentivizes NIMBYism.

But in places like Texas (and other areas with affordable housing), the house is just treated as something you pay off to have a low housing cost in retirement. And your investments are your retirement+savings account.

I'm not sure why new housing devalues old housing. In my mind, higher density generally makes an area more desirable (e.g. because higher density enables more jobs, better infrastructure) and raises the value. Imagine as an extreme example and existing house in the middle of nowhere around which a metropolis is developed. Surely the value of the house, or at least the land it is built on, goes up, even though it loses its "cabin in the woods" appeal.

Fundamentally as a society we need to stop treating housing as an investment. It is and should be a utility.

Suring property prices is a relatively new phenomenon (as in, post-WW2). The true origins of NIMBYism, at least in the US, is (you guessed it) racism. Long before segregation ended, and long after, there was economic segregation. Redlining [1], HOAs [2], the post-WW2 GI Bill [3], where highways were built [4][5], etc.

In fact this is a good rule of thumb: if you're ever confused why something is the way it is in the US, your first guess should pretty much always be "because racism".

[1]: https://en.wikipedia.org/wiki/Redlining

[2]: https://www.furman.edu/fu/placing-furman/what-are-racially-r...

[3]: https://www.history.com/articles/gi-bill-black-wwii-veterans...

[4]: https://www.npr.org/2021/04/07/984784455/a-brief-history-of-...

[5]: https://www.bloomberg.com/news/articles/2017-07-09/robert-mo...

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It’s going to take a SCOTUS decision overturning Ambler vs Euclid in my opinion.

We certainly will not see zoning reform until the Boomers die.

TBF a lot of the complaints are coming from businesses that are _probably_ renting. There is absolutely the chance that their business will go under due to construction disruptions before they can benefit from the increased foot traffic once the development is complete.

And, of course, once the development is complete, and the value of their land goes up, so too does their rent....

Well, in Menlo Park they're just flat surface parking lots, not even multi-story structures. The planned development is multi-story housing with parking underneath.

To be fair, I am boycotting the (similar) underground garage over at Springline because they're clearly made only for people in Range Rovers or whatever. They have those AWFUL ticket machines, set too far back (to avoid getting hit) and too high to access from a normal car.

> To be fair, parking structures always look and feel pretty distopian.

What a lot of the new buildings in Austin are doing is putting an attached garage directly behind a 4 + 1 mixed use development - the street-facing facade is the apartments and shops, and the garage is directly behind (and usually attached) to the apartments. You basically never see them.

Menlo Park has a higher population density than Austin...

The majority of it is not Bel Air...

I'm with you, but many people still question this. Here's a recent pre-print paper that was in the news arguing that inequality, not lack of supply, is the real source of housing affordability: https://osf.io/preprints/socarxiv/95trz_v1

Who are the people that “seriously question basic market pressure being a thing”? Am I missing something?

Housing and immigration are two areas where people just can't accept basic economics. You can see some olympic level mental gymnastics routines all over this comments section.

Eh, people really need to be questioning econ 101 more often.

It's built upon untrue assumptions

- infinite buyers / sellers

- perfect information

- no switching / transaction costs

---

The article itself has 3 different year ranges provided so I'm not sure how you can use it as evidence. Plus overall the rent is still up by a lot since 93% - 4% is still at least 80%.

- Rents increase by 93% from 2010 to 2019

- Housing increase from 2015 to 2024 (this overlaps with when rents increased ...)

- Rents fell from 2021 to 2026 by 4%

> It's difficult to find housing that meets dozens of conditions

Correct. That's why when there's more housing you're more likely to find what you need.

False. Even if you don't move, people move all the time and that moves the needle for everyone.

You need Econ 301 and stats 101 to see Econ 201 is wrong.

Not really, it used to be the case that a full third of Americans moved every year. Obviously life is more complicated than econ 101, but it's also obvious that a current undersupply of housing is one of, if not the primary, drivers of home pricing. Admittedly other factors like the governments interference in the home loan space have also had large effects on the market over the last century.

https://www.theatlantic.com/magazine/archive/2025/03/america...

“People like to drink certain kinds of beer” and “some people don’t drink beer often” are not arguments against supply and demand driving beer prices.

I'm not clear: does Econ 201 inform us as to how demand and supply are not related to price?

OP wasn't talking about free markets but supply and demand.

You should read again. The reforms made the market more free.

> It's foolish and anti-intellectual to insist that the housing market has only two factors

Elasticitiy moderates the effect. It doesn't reverse it. Increasing housing supply decreases housing costs. A lot of people are venally or ideologically motivated against accepting this. Our housing crisis is a political choice. (Note: I'm a homeowner.)

The parent comment never claimed that the housing market only has two factors. You’re arguing against a strawman of your own creation.

This is actually how you start a city though, you build a suburb and wait for it to grow into a city. This takes a really really long time so it's better to build near existing cities.

We don't observe this phenomenon occurring often in the modern day only because cities sprawl rapidly and so the evolution of the suburb becomes a borough of the existing city rather than a brand new city. Otherwise Brooklyn, Jersey City, Weehawken, etc. would all be considered new cities instead of being referred to as the NYC metro.

Sure you can. You just need enough land and money to start basic things like a post office, city hall, courthouse, roads, and a way to get power to the whole thing.

See Starbase, Texas

It obviously wouldn't be successful on day one, and it would take some kind of exceptional pressure to jump start it, but these things have been done in the past in the US and have been done recently in China. Not arguing these were good things, but they have happened before.

Think back to the old "company towns". Lowell, Massachusetts, built for a textile mill. Hershey Pennsylvania, built around a chocolate factory. Fordlandia, Brazil, a rubber plantation town. All of these were essentially cities and towns planned out around a central industry.

Similar things happened with the ghost cities in China with several of the big notable ones eventually actually growing into real, functional cities.

Once again, these have all kinds of messy histories and I'm not saying they're all good ideas. But just pointing out, it can be done.

> Suppose a couple of years ago you took a $500,000 loan to buy a $700,000 house, which you'll be paying off for the next 10 years. Would you like the market value of your house to decline substantially during that time?

No, but when your city proposes a "missing middle" plan, watch who all comes out of the woodwork to scream murder at their research that shows that the projected effect of doing so will lower property values in my town from an 11.5% YoY average increase to a "mere" 9% YoY increase. You'd have thought the city was suggesting executing grandmothers in the streets.

(I cannot personally complain, I put down 10% on my home purchase here in 2021 and was able to get out of PMI due to having 20% equity against appraised value 366 days later, while only making required payments.)

most people posting here are talking about california or texas - desert or near deserts where there isn't enough water.

however there are many places where there is more than enough water. East of the mississippi for example. other continents also have areas where there is plenty.

You could build all the housing first in China until recently…

The problem isn’t the powers that be. A lot of regular homeowners fight new developments tooth and nail. And many blue states unfortunately give them a lot of tools to do so.

It's typically local residents who fight this. There's a "fuck you, got mine" tendency to pull up the ladder once you've made it.

Well, it's easy! Just get the majority of voters to hate each other enough that it's a moral boundary to vote together on any law, effectively limiting any meaningful change.

Over 60% of Americans are homeowners. In any functioning democracy, they ought to be the people in power.

After a few decades in California, I'm pretty sure there are no "people in power".

There are a lot of people with some power, which they use as they see fit. It all adds up to marginal and pseudo-random changes, as the state drifts toward... wherever it's going.

Trump explicitly said he wants to keep prices high [0]. This is the problem with a culture that views housing not as a need or a home, but as an investment. Pathological.

[0] https://www.pbs.org/newshour/politics/watch-trump-says-he-wa...

Did rents in Palms go up because they built housing or because it's a great location in a city with increasing rent almost everywhere?

Or in other words, is there any econometric evidence that building housing increased rents in Palms, or could we be confusing correlation with causation?

Things such as urban form, street experience, long-term adaptability, integration with existing fabric, economic resilience, etc.

I have no idea what any of this is supposed to mean as a negative to people being able to walk around their neighborhood for essentials. It sounds like a classic vague "what about culture" argument that can't be explained.

Rents went down for a couple years then right back up. Except now the city has a bunch of more soulless condos and is horribly congested.

So there were a bunch of people who wanted to live there and now can.

> now the city has a bunch of more soulless condos and is horribly congested

The first bit is a taste thing; obviously lots of people view modern sprawl as "soulless" too.

But the latter point is just plain wrong. Dense housing IMPROVES traffic congestion and shortens commutes, always, everywhere, markedly. And it's for a bleedingly obvious reason: pack people in closer together and they don't have to travel as far to get where they're going. QED.

What you're imagining is some kind of fantasy hometown, which never increased in population and whose economy never developed. I mean, it's true. Forgotten ghost towns have very little traffic and quirky soulful architecture, c.f. Detroit. Everyone agrees that's a bad thing, though.

more soulless condos

If you want soul move to New Orleans. Meanwhile people need comfortable places to live that don't make them indentured servants for the rest of their lives. I'll take a neighborhood with walkability and density over an old drafty brick building with no grocery stores any day.

> Developers not recouping their investment

Last time I did the back-of-the-envelope math, financing permitting delays in San Francisco added 10% to the cost of new housing [1]. (Note: not the cost of permitting. Just the cost of financing the delay.)

This is deadweight loss that everyone in the transaction wins from eliminating. One could absolutely see lower prices and higher developer margins if this waste were cut.

[1] https://news.ycombinator.com/item?id=38664780

They can recoup the investment with volume (especially apartments) I would think? Sell 10 houses at 2 million each or 30 at 1 million each or however it breaks down.

So, do we just need to nationalize housing construction? If the free market apparently just can't handle it?

What evidence is there that developers won't break even or profit? The demand is clearly there, it's a seller's market.

just because rents fell doesn't mean developers couldn't recoup their investment. 2008 was completely different.

It's a balancing act. Build too much and developers make less money. Build too little and poverty and homelessness shoot up. Which side do you want to err on?

As a home owner I don't really care about number go up. I'd rather it go up than down, sure. But staying level would also suit me fine.

Going down might be nice, perhaps I could buy the neighbor's house and combine the lots and make a nice set of row houses ...

House go up being important is really only needed if I'm using it for leveraged appreciation and doing something like dragging the cash out like a piggy bank; but that's a tiger that will have to be dismounted eventually.

As a homeowner, I want number to go up.

These things push against that.

Really, I'd prefer not having policies that tend to push up housing prices or discourage people from moving, but here we are, those types of policies are common.

There's a lot of talking past each other on this issue. Sure there's probably clueless people out there, but a lot of left wing housing activists that are skeptical of free market housing liberalization understand very well economics and the benefits of housing supply, but are concerned about the time horizons involved and concrete near term impacts on low income residents.

It is of overall net benefit over the long term to raze a small three story walkup apartment and build something denser, overall increasing the amount of housing.

However, in the short term it's immediately quite (sometimes existentially) bad for affordability if existing affordable housing is destroyed and replaced by brand new (and thus inherently luxury) housing.

So accordingly we naturally see low income housing activists push back against some redevelopment and ask why development is not occurring in wealthy single family home areas where the amount of people impacted is less and class those that are not remarkably negatively impacted.

Personally I think the data shows that in general it is still really beneficial to build out as much housing as possible and avoid the negative impacts of a shortage, but I do think there are people validly pointing at a real problem of displacement.

Their core argument is that we could increase supply but choose not to, and that we should be maximizing supply (as an ethical and moral mandate, but that is not a tenant of capitalism really) because housing is an essential thing like food and water. FWIW we don't maximize food/water production either for various reasons, which would also drive food/water prices down.

Maximizing supply can mean other things than building like taxing unoccupied homes by large amounts making them unpalatable to own as a second (or higher) home, thus putting them back on the market. However these aren't all good because obviously our economy deals with more effects than just simple supply and demand, like maximizing the amount of loans given to people wanting housing regardless of the ability to repay is known to be a bad idea.

If you throttle the supply you can clearly control the price and the people you're talking about believe there is a concerted effort to control that supply. This can happen directly (choosing not to build as soon as land is available to build on) or indirectly (e.g. politics, mass media influencing people to vote to not increase supply).

What people generally hate is production of essentials not being maximized which would give us the actual lowest price, and maybe we as a society should be maximizing that supply to arrive at the lowest cost for a given house with given features.

And then the rebuttal to that is usually "tough shit lol" which is why people coming out with simple supply and demand replies are generally seen as derisive.

The populists on the right share a similar view, but mostly blame immigration.

It is well known that there was a brief moment in time when people were abandoning San Francisco and “moving to Texas” (mostly Austin) that coincides when the rents peaked in Austin. I’d be not surprised if that was also the time when San Francisco rents were down.

We’re seeing a reversal in trend when SF is hot again and Austin is not. So not exactly a straightforward comparison. It could explain the SF-> Austin and back trend.

Any reasonable landlord/real estate investor will have planned for various results - if your rental empire depends on "rents go up" and can't handle a flat market, let alone a downturn, you're going to be in for a bad time.

A stable market is great; as you can find good deals with some sort of certainty, and focus on where you can actually build value (rehab, etc).

I was apartment hunting in Melbourne in 2015 and I was appalled at the quality of most inner-city apartments. Tiny shoeboxes, no sunlight, paper thin walls.

At the time I didn't think they should have been allowed to be built. But looking back, they probably did keep a lid on rents. A bad roof over your head is better than no roof.

You should be able to identify properties and track them over time; and then even if you argue that "brand new condo" vs "same condo 10/20/30 years later" aren't directly comparable; well you can start to compare other metrics.

Sure they are. What developer wouldn't rather rent out ten apartments for $2k/mo than two apartments for $4k/mo?

I love induced demand. I'm going to use it to get rich - buy up some abandoned town somewhere, and then pay to run a 100 lane superhighway to it; induced demand means the town will fill up instantly and be hugely valuable!

... Your examples seem to undercut your point if I'm understanding what you're trying to say.

In your first example the "cost" in the form of traffic etc. was reduced so more people "buy" in the sense that they go on the road until you reach a new "cost" equilibrium. In practice that equilibrium is quite close to the original cost so it doesn't fix the issue traffic. But if that same number of people had driven before the high way expansion traffic would have been way worse; the cost would have been too high so they previously opted not to drive.

In your second example by increasing the supply of money the money ends up costing less; it becomes worthless due to inflation.

When there's more of a thing it cost less.

To be fair, building more housing can be like highway example. If there's tons of pent up demand of people looking to move somewhere increasing supply dramatically can fail to move the needle on cost because there's many marginal buyers who all have basically the same price. If you've got a million people who want to move somewhere and are all willing to pay up to 500k for a house the price of a house won't fall under 500k until you've built at least a million more homes.

2-3% is a margin of error compared to 20-40+% y/o/y growth. That means the influx ceased, some left, some had babies. Meanwhile housing was built.

Of course rents will crash if everyone anticipates 20-40% growth and it’s suddenly 0 . Let’s see in a few years if the pricing trend continues downward or upward.

If it’s downward, yes we’ve solved the rent problem by “building”. If it’s upward, as it has been, it’s not just about supply .