Due to fire code, to divide a high-rise into 4 corner units, you need to take up almost ~50% of the space for elevators, stairs and hallways.
So you'd probably end up with close to 5k square foot condos - which isn't too ridiculous.
You'd probably do 4 corner units and 4 non-corner units for a total of eight, and end up with each being between 2000 and 2500.
The problem is, they'd be ridiculously expensive for a number of reasons. And when you're paying that much money, you probably don't want to live in a building that wasn't even designed to be lived in...
Given the Boston market this will still help everyone. My household is making north of 300k and was still having trouble bidding on home where there were dead cockroaches visible during the showing.
It feels wrong to build luxury housing when regular folk are suffering but if you build luxury housing to the point that the rich stop bidding on regular housing, or even better there’s so much luxury housing that everyone can get a good living space, it’s a net improvement for all of society
Somerville around Sullivan square. Was paying 3200 a month all in on a 1200 sq ft townhouse. Looked at a few of the homes around our street and they were selling for 700k-1million and off market in a few days after posting. This was all a few months before covid.
We found some places we could afford but they either made our commute fairly long(>1 hour each way), would stretch our budget to have zero tolerance for emergencies, or both
People also have a lot of received wisdom of how they were brought up in the burbs and just assume you HAVE TO buy.
There's plenty of markets where prices/rent are upside down and you might as well rent indefinitely.
People forget you are either renting housing or renting money to "own" housing.
If you are disciplined enough to save the difference, renting can be better in some markets.
Mostly its HCOL coastal cities where people are accepting ridiculously low rental yield because they are banking on price appreciation.
If you don't know if you want to be in X location for the next 5.. probably more like 10 years, there's not always a solid reason to buy.
That was where we ended up on the math. We liked the idea of owning our own home and building equity in it, but the cost was too high and like you said, we couldn’t conclude we’d be in the area in even 2 years. Covid hitting a few months after we started looking also definitely helped solidify that opinion and things might have turned out differently if we didn’t have a worldwide plague causing me and my wife tons of uncertainty in the future
It's not clear that you can meaningfully effect availability of "regular" housing by building any reasonable number of luxury homes. Slightly reducing the cost of luxury apartments may attract more buyers from outside the city, average the rate of vacancy may increase without the price going down much. They can be purchased by the rich to be used as unlicensed hotels aka airbnb. They can be ought up as "investments" and not effectively rented out effectively enough as long as you don't build so much you literally flood the market.
Even if the price of expensive apartments does go down a little because more people are able to afford "luxury" you don't necessarily have to let the little guy in on the savings you can as an industry collude to keep the price as high as the market can bear without literally becoming homeless. You don't even have to actually collude in an illegal fashion if your interests are actually sufficiently aligned that you all act in lockstep without overt coordination. Any real savings can be virtually entirely absorbed by the owner class.
> They can be purchased by the rich to be used as unlicensed hotels aka airbnb. They can be ought up as "investments" and not effectively rented out effectively enough as long as you don't build so much you literally flood the market.
There's a natural floor to this though. For example, if Boston built 3 housing units for every human being on the planet, there would hardly be any problem even if every person wanted to live in Boston and own multiple units. This is obviously absurd, but hints at the greater point. There's a point along the supply/demand curve where prices will end up falling, no matter how much external demand or AirBnb rentals come into the area.
The argument I think you're making is that there's no way to build enough housing units in a reasonable amount of time to meaningfully affect non-upper-end housing. There's not much controversy about that in practice (though weirdly enough there is a lot online.) California (and many Californian cities sweeten these deals) specifically offers developers many benefits for varying percentages of affordable housing mixes in their units. Boston also seems to have income-restricted housing as well. Most pro-housing policymakers agree that housing isn't just a build-build-build game but that incentives need to be offered to ensure affordable units are built along with upper end luxury housing.
We really just need to build in the Boston area. I’m politically pretty close to full on communist but all the policies I’ve seen around creating affordable housing are failures from my analysis.
Rent control changes who gets a home from a decision of whose wealthiest to whose luckiest which isn’t any morally or functionally better. Subsidizing or requiring developers to have “affordable” units in developments either offloads the cost to the other purchasers which will increase the average unit price in the area, which will cause people who used to be able to afford a home to slide down into too poor to afford one. All that’s doing is just moving around who gets to lose when it comes to this scarce resource.
The only answer to a scarce resource with high demand is to produce more of it. Unfortunately Boston, like most US cities, is full of nimbyism. It’s exacerbated by the fact that existing homeowners tend to have more political power just by virtue of the fact that they are more tied to the location and have a vested interest in voting in the area, vs renters who are more likely to up and move instead of invest time in local politics.
I also harp on the luxury housing building quite a bit. Emotionally it hurts to see only luxury housing being built when there is a housing crunch hurting the poor or middle class. The pragmatic bit however is that developers are always going to be incentivized to build luxury housing since it nets them the most profit. These building eventually turn into non luxury housing as the building age and the owners decide to not repair the unit to spec, or standards change and what is considered high end today isn’t in 20 years. We should stop fighting the natural incentives here with developers and lean into them to just build build build, imo.
The policy decisions that I think require actual thought are more along the lines of zoning and standards. Policies that require parking spots for every unit even when they are next to subway stations for instance hurt density a lot. Zoning being in the hands of towns who can act in a parasitic manner is also something that needs to be addressed, with my preference being something more along the lines of Japan’s zoning policies
Yup its all about making it easier to build, easier to build more density.. and build anything else you need to support that - schools, transit, parks, etc.
Everything becomes luxury housing when theres a shortage and it gets bid up by dollars. And the existing government housing has not covered itself in glory such that we should look to that as a solution (paging NYCHA).
This stuck-in-amber Euro-ficiation of US HCOL urban coastal areas is not going to work in the longterm, especially as we continue to have growing population unlike many of the quaint European cities people like to visit.
> not clear that you can meaningfully effect availability of "regular" housing by building any reasonable number of luxury homes
Most of New York's affordable housing is former luxury townhouses subdivided. You saw similar subdividing in Phoenix post crash. Every time people study this, they find building housing–any housing–eases prices. Yet every time a debate about building housing in high-cost areas comes up, someone comes out with this and throws a wrench in the gears. (The marginal property in a high-cost area will always be luxury. That's what high cost means.)
Anecdote: I've negotiated down my rent in New York based on new luxury developments nearby. I tallied up the cost of their amenities, saw how much I spend, compared the floor plans and showed my work to the landlord. Two units had already left, and I knew one had sized up to the luxury. Based on the math, it made sense–$200 for far more square footage. Landlord delayed but eventually agreed and reduced my rent to keep me.
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.
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.
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.
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).
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.
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.
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.
The wealthy will not solve the supply issue of luxury apartments as they do not want to flood the market, the parent I responded to initially mentions this.
Who will add luxury apartments or affordable apartments except for the already wealthy? Who has the incentive to build enough luxury apartments, to stop housing behaving as an investment vehicle?
"The wealthy" are only partially contributing to the housing crunch. The majority of home purchases are not made strictly for investment purposes even if it does happen. All types of housing stock is needed, not just luxury — The reason luxury is what's getting built is because those are the projects that "pencil out" due to high costs.
There are many many factors that are contributing to high costs like euclidean zoning that took off when the US had less than half of its current population. It's literally illegal to build multifamily housing in vast swaths of the US.
It's very clear that some sort of housing reform is going to be needed, as overly restrictive zoning, suburban sprawl, and it's associated housing costs have become unsustainable.
This isn't some fantasy either, Japan has very reasonable zoning and housing is generally not an investment vehicle there. Sure there's other contributing factors like a declining population, but it all leads back to supply and demand!
The point I've made, is that demand is not just people wanting houses, it's also their ability to pay. There's some magical thinking out there that if investors build 'enough' luxury homes the poor will be able to afford homes. This is a falsehood.
I can't speak to Japan, however I don't think it ever accepted the level of homelessness that the west takes for granted. I would wager that the Japanese government builds more housing projects for the poor than the west.
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.
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.
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.
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.
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).
You were content to talk about a hypothetical where there were 10 houses and 12 families. Now you are discontent unless I discuss luxury accommodation in specific property markets within the US. It's worth noting how close each of the metro averages you give is to 5.8%.
All newly build luxury housing will by definition be bought be the rich. There is no assumption about that. The discussion was whether they decide to hoard, rent out or sell their old residence. The trend (global) is clear, e.g. NY, CA, SF and further beyond. https://old.reddit.com/r/toronto/comments/14zdsia/housing_pr...
The decider onto luxury housing being a benefit is whether the poor can in aggregate afford what the rich want for their old accommodation, increasingly, they cannot.
It's not some sort of conspiracy that nice new construction is called 'luxury', whereas less nice new construction is called 'affordable'.
>The problem is, they'd be ridiculously expensive for a number of reasons. And when you're paying that much money, you probably don't want to live in a building that wasn't even designed to be lived in...
<owners of $5 million Tribeca lofts have entered the chat>
As for expensive-ness, IDK. You’d THINK “the longer it sits, the cheaper it gets.”
I know of several big, high-rise office buildings that are 75% empty since the pandemic. We’re talking a few years now!
But then again, greed is real. My current office building is getting more and more empty by the day. And they refused to budge on the rent for my company even so.
So you'd probably end up with close to 5k square foot condos - which isn't too ridiculous.
You'd probably do 4 corner units and 4 non-corner units for a total of eight, and end up with each being between 2000 and 2500.
The problem is, they'd be ridiculously expensive for a number of reasons. And when you're paying that much money, you probably don't want to live in a building that wasn't even designed to be lived in...