What this article says: *The median apartment rent in Austin has dropped X% over the past 5 years*
What this article does not say: *Apartments in Austin cost X% less to rent now than they did 5 years ago*
It's completely possible for the cost of the average apartment in a city to go down, while the cost of existing apartments increases. How does this happen? The enshittification of rentals. Units get smaller (apartments in Austin are shrinking), they get built near highways (air pollution), they lose amenities like parking, they pop up places where they previously weren't allowed (smaller ADUs, basement units, see article), they get subdivided (landlord throws up a wall and turns a large 1br into a cramped 2br).
If supply and demand were really working the way its heralds claim, then we'd see the price of existing units going down. This article offers no evidence that this is happening. I don't believe for a minute that it is.
Instead, it's the same story as always: your rents will keep going up. You can move somewhere cheaper and shittier if you want. The people who profit will congratulate themselves while decrying the thing they actually fear: rent control.
Its wild how the solution to housing costs is really just:
Build more housing. Keep law and order.
No it doesn’t need to be “affordable”. Yes rent control is a terrible idea.
Just build more housing.
Note: that the US already has plenty of housing and housing costs basically go up in areas of low crime relative to economic opportunity. If you build housing, but allow crime to rise, you have wasted everybody’s time.
The difference is between buying and asset and producing an asset. Even if RAM costs are falling, it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price.
It's entirely different if you're buying the housing already built; there's no productive activity, you're just a rentier and do not benefit at all from falling housing prices.
The differences in interests between an asset holder and a productive builder are night and day.
> it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price.
Right... my point is that the costs are not far below the eventual sales price. That's why construction is slowing down.
And as mentioned several other times, it's actually not as simple as cost > sale price. It's margin > margin of alternative investments of similar scale and risk profile.
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
It matters whether the margin is higher than other investment opportunities of similar scale and risk profile.
Already, the answer is very often no. In Austin, the answer will increasingly be no. That means people will not finance new construction, so if demand continues to grow it will outstrip supply and prices will go back up until the margin on new construction exceeds that of alternative investment opportunities of similar scale and risk profile.
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
> it doesn't matter if prices are falling or rising, it only matters how the ROI of building compares to other investment opportunities
Correct, which it basically doesn't in Austin, which is why construction is decelerating.
> we can also make it cheaper to build
Yep, this is the only structural solution. The "just add supply" runs into the problem of price equilibriums. The reality is the input costs of building housing basically guarantees that housing is hard-to-attain for any local market. We need to address the cost of inputs. Temporary reductions in price are temporary and the market will self-correct back to restrict supply (as we're seeing in Austin) until prices go back up to being hard-to-attain.
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.
> As long as construction costs remain below the value of the units all-in, there's profit motive for developers to build.
Not true
Real estate development is extremely capital intensive and therefore it's a question of all-in cost of capital compared to other investment opportunities.
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?
There's a big difference between land prices and the building prices. When costs rise 5% per year for a house that's untouched, that's almost entirely the land price going up.
You can make housing cheaper by putting more houses on the same amount of land. In high cost areas, the price of land dominates the cost of housing.
Political pressure to change the investment nature of housing can come from various directions, for example establishing a land value tax, which eliminates the financial incentive to speculate on rising land prices by keeping people out of your area, redistributes all those unearned land rents to the population equally, as is only fair, and also results in a lot of people selling land to be redeveloped taht are otherwise hoarding it when the rest of society would be using it a lot better. Of course, in societies with high levels of land ownership, the voting public usually tries to vote away such extremely fair taxes.
Politically, we must stop prioritizing the views of homeowners at the local level. They already got their reward, massive unearned capital gains on their residence, there's no need to give them priority on land use over the general needs of society.
Multiple things can be done at once. The policies you laid out are not mutually exclusive, and have different utility for different communities. But yes, fundamentally more housing is needed for growing populations. Conversions and rezoning are also important parts of the urban equation to “build more housing”, not just exurban McMansion developments.
This comment is phrased as if the article is confirming these points when it either doesn't mention them or even directly refutes them. First there is no mention of either crime or rent control in the article. But more importantly, it states that "A key piece of Austin’s strategy has been to encourage the construction of affordable housing." So why are you concluding that affordable housing isn't needed?
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.
But it didn't reference anything, it stated political opinions like they were confirmed facts, provided zero evidence to support those assertions, and completely ignored the ways in which the article provides counterevidence.
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.
I'm not sure if you're intentionally changing the definition of "affordable housing" in an attempt to make the desire for it seem silly or if you genuinely don't know how the term is typically used. But what you're describing is generally referred to as "market-rate housing" and not "affordable housing".
Affordable housing = housing that regular people can afford
The only silly thing here is that "low income housing" got rebranded as "affordable housing" and absolutely everything else got rebranded as "luxury homes" for political reasons.
"Market-rate housing" is even sillier given that it is literally the opposite of what "affordable housing" policies dictate
Good for whom? If it's good for the residents, that's great. If it's bad for the residents, who get driven out, but good for some developers and outside rich people - that's what gentrification is.
That's not what gentrification is. Relevant to this article, I lived through the gentrification of large parts of Austin in the early 00s.
What happened was that good housing full of artists and musicians and other self-employed creatives began gentrifying, driving up property values, which drove up property taxes, which became unaffordable to the existing residents (who had owned their homes for a long time). Many (actually, most) of these artists had to sell and leave.
They often left for other cities. But hey at least the good houses everyone liked all got torn down to be replaced by McMansions for the influx of techbros.
Austin still has that slogan, "Keep Austin Weird." It failed. Austin isn't weird anymore. The University of Texas still is responsible for a lot of great stuff about Austin, but huge chunks of the city are just boring these days. There's certainly much less interesting culture happening. It's been airbnbified.
> Its wild how the solution to housing costs is really just:
> Build more housing. Keep law and order.
Safety (law and order) increases housing costs, as you say. It's desireable on its own, but it does not solve housing cost. NYC is very safe and very expensive. Crime is way down in most of the US, and housing costs are much higher.
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.
This logic assumes that 35% of Americans WANT to rent their home. Which seems odd to me, if only for financial reasons - why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it?
> why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it
Because the down payment you put into your purchased home could've been put into the stock market and grown faster than property values (this is historically true).
Because you don't want the headache of home maintenance.
Because in the 21st century, job stability doesn't exist so it's a big risk to buy a home fifteen minutes from your current job that might be an hour from your new job after you get fired so a CEO can get more golden parachutes.
Because you might have to change cities a year from now.
My wife and I rented for a long time because it was better than owning for us.
> 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.
This only holds until the percentage owned by the investors becomes a monopolistic chunk. At that point the investors would rather leave some apartments empty rather than see rents go down.
There is affordable housing all over America. Get it through your head. It’s about nearness to the economic singularity that costs so much not the housing itself.
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.
Also "Wipe out a whole boatload of techbros who artificially inflate prices". Nobody is talking about that part of the equation.
Austin was one of the places a lot of tech folks flocked to when everybody was working online. RTO and layoffs have wiped a lot of them out. I'd estimate almost 1/3 of the tech folks that were floating around last year are now in other cities.
without rent control, what economic incentive do renters have to maintain law and order / invest in local community / be a good neighbor? any investment they make is captured by the landlord. in fact, they are incentivized to maintain their neighborhood in as much disrepair as they can stand, for fear of rent increases.
the little old lady living in a rent controlled apartment is a big part of why rents are high in that area: she was part of what made the community thrive. we would do well to compensate her for this.
Meanwhile, California is also trying to build housing near transit, but Menlo Park wants to preserve the character of downtown by preserving dirty, cracked, flat, surface-level parking lots like it's 1950.
NIMBYism has never been about preserving neighborhood characteristic, or noise and traffic concerns. Menlo Park is not Big Sur. Sure, some concerns are reasonable and should be investigated, but most of the time they're bureaucratic distractions that's been weaponized by people who want to delay progress and protect their investment.
For most Americans, A house is their primary savings account, retirement plan, and probably where they keep majority of their wealth. We don't build new housing in old neighborhoods because it would de-value the investment of too many people. Until we can solve this problem (where people are incentivized to pull the ladder up behind them), we will always have housing shortages. It's just too profitable.
> If NIMBYs were primary motivated by making money the prudent thing to do would be to support unrestricted zoning and then develop or sell the lot.
That is highly dependent on what exactly is being built next to your home. Sure, if it's more luxury housing then it'll probably drive the value of your home up. If it's low-income housing then it probably won't. And what we need is more of the latter rather than the former.
> you can take out loans against the value of the equity but this isn’t particularly common.
It's because it's an investment, you're going to get the return once you finally sell your home. Only in a pinch if someone needs a large amount of money to start a business or pay for an emergency will they mortgage their house.
Hate to be the bearer of bad news here, but the boomers will never die. Gen X will become the new boomers, and then the millennials after them. Individual people die, but interests stay the same.
To be fair it is not the city/elected officials who wants to retain the parking lots. The downtown redevelopment would probably make the city a lot of money.
It is the businesses around downtown who are pushing the save downtown campaign. I imagine the businesses contribute a fair chunk of revenue to the city now and have some influence .
Relative to say parts of Redwood City, or Palo Alto. Menlo park has a fair amount of student-ish 4 Unit lots, so it not all zoned SFU.
Menlo Park isn't comparable to Austin though - Austin's equivalent of Menlo Park would be a country club CDP in the Austin Hills like Rob Roy.
A better comparison would be ATX against San Jose.
Just like how the "rich" residents of Santa Clara county know that you want to live in Campbell, Los Gatos, Menlo Park, Los Altos, Loyola, etc, similarly rich Texans and Austinites live in the Hills.
The reality is the residents of Menlo Park and Rob Roy don't want your type, and in a lot of cases tend to be the same people as there aren't many places left where you can trail run, bike, eat Michelin star ramen, and not pay income tax.
Just because we make good money in tech, it doesn't make us "them". I highly recommend reading the works of Pierre Bourdieu with regards to cultural capital.
Menlo Park was never a "middle class" town. The 101 was always the (literal) redline.
The median household income is $210K [0] and it's the same demographic, unlike historically lower middle class but now upper middle class San Mateo [1].
A Menlo Park home address that is on the correct side of the 101 opens the same doors in the Bay that a Bel Air address does in Los Angeles or an Austin Hills address does in Austin.
Rich doesn't equal conspicuous, especially in the Bay Area - "Wealth is quiet, rich is loud, poor is flashy"
280 to El Camino is "oldish rich" (made their millions in the 1980s-2000s), the El Camino to 101 is "new rich" (made their millions in the 2000s-2010s), and 101 to Meta used to be a Samoan ghetto (literally, redlining was legal until the 60s and unofficially the norm until the 90s) until they were gentrified out.
The old money (rich before tech) to the West of 280 in Woodside and Portola Valley.
To be fair, parking structures always look and feel pretty distopian.
I like the approach of making downtowns walkable and having a bit of parking at the periphery of downtown, along with good public transit. Encourages people to use public transit to get to town in the first place. Downtown residents can use transit or a zipcar or equivalent when the need to get out of town, instead of devoting a ton of space downtown for storing their cars.
Not sure if that approach is really practical, but if it can be made to work it is much nicer.
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.
The global capital of technology has absolute horrid infrastructure and is not on the forefront of any municipal technologies.
There's a big disconnect from people building new projects and local governance, and it's growing. When tech companies started even providing buses for their employees, because local government is too fractured and incapable of running needed bus routes, and can not coordinate across county and city borders, local activists were extremely upset that tech workers were not driving their personal cars and instead using environments-saving and traffic-reducing transit.
I would bill by ticket machine too if it was my job to collect money on the parking. I’m guessing that the amount of people who never pay is much higher than zero so it really only makes sense when you have such high throughput that the slowdown is detrimental (such as the Bay bridge).
Super easy unless you have moved recently, then you don't get the bill and end up years later in collections for the original amount plus a million late fees added on.
The reasons why the Bay Area is the global capital of technology are absolutely totally unrelated to the quality of infrastructure or the policies of local government there.
It’s mainly due to the state of US technological advancement decades ago when the whole thing got started, the general US-level business-friendly environment, and the presence of an extremely prestigious (especially in science and tech fields) university nearby.
The specific reason is that William Shockley's mother lived in Palo Alto. Stanford gets the credit but in reality it had nothing to do with the decision.
> They have those AWFUL ticket machines, set too far back (to avoid getting hit) and too high to access from a normal car.
Are you sure it's the ticket machines? Around here, the ticket machines have stayed the same, but it's now impossible to use them without stopping the car and getting out, because car manufacturers have decided I need eight inches of empty space between myself and the side of the 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.
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
There was article on HN front page a few months ago which stated(paraphrased) "building more housing to reduce prices is a right wing ideology that doesn't match reality" or some such. I'll reply here if I find it.
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 ...)
- the main input (land) is also an output, so when the price of the output goes up, so does the value of the input.
- economies of scale don't really work, due to the impracticality of transporting the good (houses) and fitting the good inside a machine (in house "factories", normal workers go inside the house and work on it by hand; not a lot changes compared to traditional construction)
- more supply in one area increases the value (and therefore demand) in that area, so it's not actually clear-cut whether building more would reduce the price more than it increases it, at first glance.
Ah yes, that 150 year old meme reflexively copy-pasta'd by internet commenters since the days of usenet to refute basic concepts like supply and demand.
"Lol economists are dumb they think humans are robots!"
No they don't. Sorry, we won't be throwing away an entire field of human endeavor based on a straw man caricature that isn't true.
We don't call physicists dumb and throw out their ideas because the real world isn't a perfect vacuum either. They know this, don't be silly.
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.
There's loads of other inefficiencies as well. Moving is a huge hurdle. It's difficult to find housing that meets dozens of conditions, and even then you don't respond to supply + demand imagined equilibrium, you pay more or pay less to live near friends or family. It's something you only do a handful of times in your whole life. Trying to use the same analysis as for buying a can of beans is absurd. You might need to take econ 201 before you understand why econ 101 is wrong about housing.
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.
Prices in massively inefficient markets do not follow the supply + demand equilibrium. Beer is not an inefficient market. You're doing the absurd comparison.
It's more correct to say supply and demand still drive the overall average, but in a high-friction market of unique items, every single case is still a unique case. It's not like moving wheat bushels or RAM chips. When they sell oil, they mix up all the oil from different producers in the same reservoir, in the same tanks. Electricity travels in the same wires. Housing is nothing like that.
So, if instead of installing a bunch of apps, setting up search filters, and refreshing browser tabs on my phone ever 15-30 minutes, then the instant something meets my parameters I immediately leave work and, if possible, make a deposit on a new place, I open an app and find 5000 places meeting my requirements, meet them when I'm not working and on my time, and tell them I like a different one better so I'll hold off before making a decision, makes no difference on the price?
They also teach you about elasticity in econ 101. It's foolish and anti-intellectual to insist that the housing market has only two factors, while simultaneously condescending about your understanding of economics shows that you really don't understand economics, it's more about your ego.
> 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.)
This reminds of a fun fact I remember learning in university.
Elasticity is the relationship between demand and supply, and there are actually very rare instances where it can be negative (where demand increases with price).
Inelastic demand is when a good is demanded so much, that an increase in price has little affect on the total quantity (people still demand it, think like addictive substances)
So a perfectly inelastic product would be a straight line where any amount is demanded at any price.
So having the curve keep going it would get a positive slope, where higher price makes demand go up.
If I remember the example I was given was food during a famine. Supply is already low, but an additional pressure on price is the known shortage. The idea being that as the price goes up people see it as harder to get.
It’s been so long since I studied the subject so I might have gotten some things wrong here.
The terminology is actually split; sometimes they're called Giffen goods and sometimes they're called Veblen goods.
The two types have identical behavior, so there's no good reason to have two different names, but in concept Giffen goods are something poor people buy, while Veblen goods are something rich people buy.
(There is a difference if you're willing to look at responses to changes other than a change in the price of a good: if you give a household more money, it will increase consumption of Veblen goods, but decrease consumption of Giffen goods.)
The urban orthodoxy is around demand rationing. Supply-side arguments are incredibly new. The evidence cuts in one direction. (Unless we want a hukou system.)
Dumb question, many cities suffer from extremely high property (i.e. land) prices. I understand the NIMBY barrier. But I don't understand why it isn't more common to simply.. start a new city. Especially in countries like Australia where property prices are sky high and alternative places for setting up a new city are abundant. Maybe internet connectivity was previously a barrier, but now.. starlink.
I put this question to grok; its response:
> Unfortunately, Australia's legal, regulatory, financial, and practical systems make this extremely difficult (bordering on impossible at any meaningful scale).
Crazy that the reason we can't have an order-of-magnitude reduction in the cost of the most important thing people need (shelter) is not due to resource constraints, but man-made ones.
You can't start a new city. I city exists for all the things you can do. Your new city will have nothing to do because nobody lives there and there are no jobs to attract anyone to move.
that is why we build suburbs - they get anound this by being right next to a place with everything you want in a city
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.
Starbase TX isn't a city in any sense other than a legal designation. It's a massive SpaceX industrial facility that has its own municipality similar to the way Disney World has one for its park.
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.
> Crazy that the reason we can't have an order-of-magnitude reduction in the cost of the most important thing people need (shelter) is not due to resource constraints, but man-made ones.
You say that as though reduction in cost of housing is a universal desire, but it isn't.
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?
If there's enough of the population bought into property, it won't be politically feasible to allow the value of homes to decline.
> 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.)
In this hypothetical, who is the individual or group of people that you envision would take the initiative to start a new city? What is their incentive to do so?
People move to where there is jobs and money. You can't build the housing first, in our society you need capitalists to invest into building businesses to make people want to move there. And because we have spent decades killing small business in favor of corporations, you need corporations to decide to build where there are no people and they have to pay a small short term premium to attract workers. Except corporations don't like doing that because it is a longer term investment and they are worried about next quarter's numbers and maximizing executive level bonuses which means short term planning.
Why would you think that the same thing preventing density and new development in cities won’t stop your new city from growing before any building taller than 2 stories is built?
No it's not. It's 2 cherry picked data points with a sample size of 1 of a complex system with multiple confounding factors such as a pandemic
You can look at other neighborhoods such as palms in Los Angeles, which has the most aggressive housing build out in all of California. Median rent has increased - sometimes more housing can create more demand
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?
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.
People want to blame the 1% for massive wealth ineqality, but when it comes to unaffordable housing, a basic necessity of life, the villain is actually about 30% of the population that is rich enough to own homes, act like rentiers, and block access to neighborhoods and opportunities.
The greatest inequality difference is that between those with housing assets and those without. Yes the 1% are a problem but they are not the reason that young people can no longer afford housing without generational wealth, that's all due to the seemingly normal guy that's enforcing a class system based on home ownership versus non-ownership.
I think the majority of the electorate very much blame the people you're talking about. Who do you think progressives and MAGA refer to when talking about neoliberals? They're talking about the corporate class; those that care more about money but willing to play up useless culture war issues that impact small amounts of people.
> A lot of regular homeowners fight new developments tooth and nail.
In a system where those with more capitol have more power, homeowners are the powers that be. They're more likely to vote and have more money for discretionary spending - like donating to politicians.
I'm not blaming individual homeowners, there are very strong incentives for treating homes like retirement investments. It's an issue of policy, but we do have to address that it is also causing rent to rise and contributing to the homelessness crisis.
Don’t know why this is being downvoted, that’s exactly right. One needs only to attend a local city meeting about any smallest step towards more development to see how the voters think.
- many new building being very ugly (side note: ugly buildings no matter how green get torn down and are this not as green as building that are beautiful)
- increasing density bringing increased crime
- increased density actually turning out to be less efficient on a per capita tax basis (this is always wild to me, cities should be spending much less per capita than rural areas but arent)
They are the ones who show up at local political fundraising galas and constantly report local issues influencing municipal/state priorities.
Although it's not just NIMBY. There's a million rules about building housing and developing land from zoning, environmental, indigenous, or social ends. Which are arguably luxury self-benefiting priorities for people who already own houses. Plus all the activists who think the government can both make development extremely expensive via endless rules while affording to fund mass government housing at the same time.
It is more complicated than that. A few years back when my youngest entered 1st grade, I attended some meetings where the superintendent talked about school expansions in the pipeline due to confirmed property development projects.
Namely, when new housing is added, there are infrastructure considerations and corresponding expenses that translate to higher taxes. Civil planners have formulas for how much the student population will grow based on the housing density/type.
Schools built on parcels based on 1970's population now have to expand to fit more students or the township has to find and acquire new land to build a new school.
That requires raising taxes for bonds. A new school is several million dollars and then hiring staff. NJ has a legal limit of 25:1 in elementary. Add 100 students and you add at least 4 teachers that have to be supported by taxpayers. Expand the lunchroom, build a new gym, purchase new computers, all the ways up the chain for the next 12 years.
If you ever look at your municipal tax bill, you will find that education is going to be the biggest expense by far.
On top of that, roads may need to be widened. New roads have to be built and maintained. Municipal staff may need to increase.
Some services may actually benefit from economies of scale (waste collection). Most will not.
Imagine you bought a house in 1970 (i.e. my development) and you were paying $1000 annual property taxes. Now your property taxes are $12000 because of the increased spend on infrastructure and increased assessed value. You're a retiree and you've paid taxes for 2 or 3 generations of students. You live on a fixed income and your property taxes are a higher and higher proportion of your income. What do you do? Mortgage the house to pay taxes to fund more growth?
The problem is exacerbated because obviously people want to go where the good schools are, where it's low crime, good infra, easy access to transportation. That drives demand and puts pressure on services while also raising taxes to pay to fund municipal bonds for growth.
End of the day, my personal belief is that housing is a right. But I can also see why middle class folks, retirees end up pushing back when they get the bill in the form of increased property taxes. I've lived in my house 10 years now and my taxes have gone up ~$3500 in that time. Every school in the township had to expand to meet population growth with the additional units. Sure, my home value went up as well, but I can't cash that out. I can't imagine how it feels for retirees that are living in a family home here.
This is a really well-thought out comment, and I agree with just about everything in it. One comment I'd like to call out for additional consideration is the comment on retirees being priced out due to rising property taxes.
In my experience, most retirees have more rooms/land than they can make productive use of. I feel that there should be some pressure for them to sell that property to families who can use it more productively. That's the stick, but I feel there needs to be a carrot, where builders are constructing homes that these retirees will be drawn to. There are retirement communities in the southern US like "The Villages" https://www.thevillages.com/, but as the population here ages, we need to build these everywhere so retirees can move into the communities that meet their needs without being forced to leave their cities.
> I feel that there should be some pressure for them to sell that property to families who can use it more productively.
I agree to extents. One lives in NY/NJ/CT because this is a big finance and pharma hub and it makes sense to live here while one works and eventually leave when that resource is no longer necessary.
But there's nuance here, too: families. My wife's side is a big Italian family. Everyone's here. What do you do if your grand kids are all here? How do you support your adult kids and help them achieve financial security? Or leave and secure your own? Neither is an easy choice.
> There are retirement communities...
There are here as well. The reason they work here, as far as I understand it, is that they count towards "affordable housing" units that are mandated by state law here in NJ. But I put that in quotes because these units in 55+ communities are often honestly still quite expensive, especially if you've already paid off your mortgage decades ago.
The real issue seems to be the top-heavy tax system that forces local governments to rely on property taxes. A local income tax would make them more capable of building and maintaining infrastructure, but that would require lowering taxes at higher levels. (Income taxes are superior to wealth taxes in the sense that income tends to correlate better with the ability to pay tax.)
If the demand for housing is high, zoning fees can also be used to make developers pay for the infrastructure upfront. If done properly, their impact on housing costs should be minimal, as they mostly extract some of the added value created by the zoning from the landowner.
> If the demand for housing is high, zoning fees can also be used to make developers pay for the infrastructure upfront...
It's not that simple because these often end up as legal battles and in some cases, there are laws already on the books at the state and municipal level that would have to be changed.
The developer for sure does not want to build a school and even if they build the school, they are not going to be paying for the teachers that are going to need to support the increased student body for every decade into the future; that's on the taxpayers.
The underlying assumption is that laws will be changed when necessary. If it's not possible to do that, most issues probably can't be fixed.
More fundamentally, this is related to the principle of subsidiarity that is occasionally popular in the EU. Everything the government does should be done by the lowest level that can reasonably do it. And to enable that, local and state governments should have sufficiently wide tax bases.
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.
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.
I just hope that people remember this is just one factor affecting quality of life and making a city work.
"Density at all costs" ignores a huge set of tradeoffs that are equally as damaging to a city. Things such as urban form, street experience, long-term adaptability, integration with existing fabric, economic resilience, etc. These are the things that make a city work in the long term.
I’m a big proponent of building more housing. But a lot of it is being doing in very short sided ways that lead to huge externalities.
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.
Developers not recouping their investment will discourage less housing in Austin in the future and it will become expensive again. A lot of our current housing shortages are from the build up in 2008 and an implosion of the entire industry (so that crafts people did not really exist for the next need for housing).
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.
I thought about that. But a bank would rather lend in lots of high-confidence, low-duration deals than a small number of high-margin deals. The only people who lose when housing is built are incoment landowners. Because prices go down.
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.
Their land, labor, and material costs aren’t trivial. If thy were pulling a 10-20% margin before, how will increasing volume (which increases costs) make it up?
Seems like a free market issue, any profit resulting from development is a free market issue. Your profit margins mean worse quality housing for people, and we can see what actual public housing programs look like with Singapore and Vienna where rents can typically cost less than 20% of median salaries:
As renown corporate welfare recipient Bezos would say: "your margin is [our] opportunity."
If the only thing stopping development is that rich developers want to make more money, then maybe we should get rid of the rich developers and let the public decide what to build. It couldn't be worse and it'd be 20-60% cheaper too.
Did Austin really have any constraints holding it back? It’s still Texas. People still look at Houston as the canonical example of a city with no artificial constraints.
Public housing projects were and sort of still are a thing. Glass Amendment limits the number of units that can be produced but most areas are well below those limits and the larger issue is that there's no budget or political willpower for social housing projects right now.
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?
We could but it’s not always just “good” to make things dense.
My hometown has had a huge push to add more housing to make things more affordable. What happened? 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.
Sometimes preserving things and keeping them nice and simple even if it’s costs a bit of a premium is better.
> 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.
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.
The laws of supply and demand don't apply to housing in the Bay Area.
We need affordable housing, not more housing for rich people, made by rich developers. Just because my house is worth $3M and I have $3M in stock options doesn't mean I'm rich. I'm working class, I had to come back from paternity leave to log-in to Slack on my laptop every damn day, and tell Claude how to write this damn software!
Did you sign the petition to block the apartment building down the street? It would RUIN our neighborhood!!
As an aside, I am not part of the problem!! I care about poor people!!! I am a good person!!!!
Oh you want proof? Look at my front lawn: "In this house we believe black lives matter, science is real, love is love..."
Proof point 2: look at my Tesla! "I bought this Tesla before I knew Elon was crazy!"
Plus I voted for Kamala. I'm GOOD. People in Kansas are DUMB and BAD.
>>> The city changed zoning regulations to allow construction of large apartment buildings, particularly near jobs and transit. In 2018, voters approved a $250 million bond measure to build and repair affordable housing. Permitting processes were reformed to speed development and reduce costs.
All three of the five things most economists say about house building - and each one will hit house owning voters hard making it hard to replicate.
If you are in your terminal home, then yes, selfishly one would want the value to go up. But if you ever plan on moving to another home, sure dropping prices mean you get less, but it also means you pay less for your next purchase.
If you are in your terminal home, you also want low prices until the week before you eventually sell your house, as Texas has a high property tax rate to make up for the lack of state income tax.
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.
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.
As a homeowner, I want cities to be livable and affordable for those who want or have to live there. I don't care if the value of my home changes one cent. It's honestly kind of useless, because it's not like I can sell the house and buy a nicer one. All the houses are more expensive so it's always going to be a lateral trade. It only helps if you sell and move to a lower cost of living area.
It's kind of a sham that we have been conditioned to treat housing as an investment. Housing is where people live, it shouldn't be a commodity to be hoarded.
You can arbitrage markets for retirement, which is largely why people want their home values to increase. Their home is another form of 401k, and those mortgage payments aren't going to the bank or a land loed, they're going to their future.
It's a minority of people who are ok never capitalizing on their home value.
As a home owner in Austin, I want my friends to be able to afford homes too and not feel like they have to move to have a yard and a family. Bring on the new construction.
As a former homeowner in Texas, I wanted the number to go down for lower property taxes. Taxes accounted for almost 1/3 of my monthly mortgage payments by the time I sold, and are a significant barrier to affordability of homes when values tend to vastly outstrip the rate of inflation leaving typical households struggling even with the homestead tax exemption.
The only people in the low income neighborhood I grew up in that could afford to weather this wave of out-of-state and investment banking homebuyers were those who were of retirement age and had their property taxes “frozen” at an affordable level.
Anecdote: I lived in Austin from 2017 to 2021. My rent was always very cheap (my baseline is Brooklyn which I guess makes everything feel cheap. But my rent went up $50 for the first 3 years and then down $200 during Covid and I checked recently and my aptmnt is still the same price). Around the time I left everyone was buying up houses to rent and Airbnb. Very palpably felt the growing supply when it came to bnb's (the owners having a harder time competing for renters etc). It's hard not to be surprised in spite of the tremendous growth in that city
> In December 2021, Austin’s median rent was $1,546, near its highest level ever and 15% higher than the U.S. median ($1,346). By January 2026, Austin’s median rent had fallen to $1,296, 4% lower than that of the U.S. overall ($1,353).
For comparison, in San Francisco December 2021, the median one bedroom was $2810. In San Francisco March 2026, it was $3597, an increase of 28%.
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.
Idk about rent, but even as of a year or two ago, Austin metro housing index was lower than its 2016 level. Rent following a similar trajectory wouldn't be super surprising to me.
It's almost as though the well-known and proven method of building more housing works!
Similarly, the tested and proven solution to homelessness is providing housing up front. Don't have any requirements (employment, sobriety, etc) blocking housing. Those things are easier to achieve with a roof over your head.
Unfortunately, there's a lot of people -- especially further left -- who fight this kind of reasoning. They insist that the housing market is different, and that just building more private housing won't help.
No amount of evidence will convince these people, because they already made up their mind ahead of time: their ideology says the market can't help, so the market can't help, period. Any evidence to the contrary is a plot by billionaires or something.
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.
Another part of this - higher interest rates really put the brakes on home values. We own a rental property and the home value has more or less been locked in since 2022. In our otherwise hot metro area, nobody has raised their rental rates on similar properties in 4 years.
It's a win-win for our tenants. Prices seem to be stable and there's no rush for them to lock down a house RIGHT NOW.
It's sure not good for my bottom line as a landlord for them to keep adding homes and keeping rates up. But it sure seems like a no brainer for society at large.
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).
If you are smart, you throttle up investments just before a boom starts and throttle them back just before a boom ends. At least you try to up your margins during good times so you can survive bad times. The trick is keeping your talent employed during the bad times so they are trained up and still in the industry for good times. Stability is obviously preferable.
I'll admit ignorance here, but I've been skeptical of the claim that new construction drives rents down. What I actually see is: a luxury apartment building goes up, surveys the market, and sets its rents 30% higher for the privilege of living in a new building with a gym for dogs or ball pit or whatever. Then the older buildings say, "Well, we can raise our rents 20% and still be the best deal in town," and so on.
Maybe if you flood the market with 30% more housing units like Austin you get the Econ 101 effect. On the other hand, apartment owners realized intentional vacancy is a profitable strategy, which alone seems to defy that basic interpretation.
what you're neglecting to consider is what would have happened if someone moved to Austin (say a wealthy person from SF) and that expensive new apartment didn't exist.
The mechanism by which new construction drives down rents is that people that need a new apartment are in less competition with existing residents in older worse apartment buildings.
So the newcomer from SF moves into the expensive new apartment, which means that there's less competition for decades old apartments, which means that when one of those is vacated there is less price appreciation on that product.
If there is a scarcity of apartments what happens is that when a decades old apartment is vacant it is filled by a wealthy newcomer and the landlord increases the rent accordingly.
> a luxury apartment building goes up, surveys the market, and sets its rents 30% higher for the privilege of living in a new building with a gym for dogs or ball pit or whatever. Then the older buildings say, "Well, we can raise our rents 20% and still be the best deal in town," and so on.
I think that might not be the right cause and effect relationship. The actual cause is increased demand. This creates both the increased pricing of existing stock and an incentive to build new stock.
In my neighborhood in NYC, I've also observed that rents increased after luxury apartments were built here. In fact my landlord cited the increased median rent in the neighborhood as a reason to raise my rent.
My understanding of the situation is that luxury apartments do indeed gentrify neighborhoods (i.e. they increase the local rent and drive displacement of locals that can't keep up with those rent increases).
However, across the entire city, it slightly eases rent pressure by providing additional housing supply.
So, like you mentioned, if you get enough housing across many neighborhoods, you can drive down rents. Otherwise, that luxury complex in your neighborhood might only be helping ease rent pressure in other neighborhoods.
There were a ton of apartments built in lower-cost areas outside of the urban center as well - the Parmer area (near the new Apple campus), the Tech Ridge area near I-35, and out by the airport and Tesla factory as a few examples. It wasn't only high-end, lots of mid-level stuff was built too.
Your scenario is simply describing a massive under-supply problem, and mis-attributing causality for price increases.
If the older buildings are able to raise prices 20% with no increase in vacancies after the new build, the new build not coming in would mean those older buildings rent would be bid up more than 20%.
The people moving in who could have afforded the 30% more expensive luxury units will just have to pick from the older units and outbid lower income people for spots in this low supply, growing city (under no other scenario could you crank up rent on aging stock 20% without losing to competing landlords).
> I've been skeptical of the claim that new construction drives rents down.
It can, but not in isolation.
It requires a couple additional variables such as population demand (rate of growth of Austin has reduced since the COVID boom [0]), existing stock (Texas had a building boom and bust in the 1980s [1] that decoupled it's housing market from the rest of the US), and a shift from buying to renting.
That said, the peers I have who work in professional real estate (not realators - as in actual MDs for REITs or multi-generational landlord families whose parents went to school with Governers and Mayors) are starting to shift away from real estate to equities because of headaches around succession planning and reduced margins.
What is ending up happening is megacap REITs like Equity Residential, Essex, Avalon, etc are buying out older groups, taking stakes in new developments, and shifting away from selling condos to perpetually leasing. At their size they can afford to have significant amounts of unleased units becuase they would have made up the cost via higher rent on leased units, tactically building high margins condos and SFHs in high appreciation geographies, or loss harvesting in order to subsidize commercial buildouts like data centers.
Naively saying only construction will reduce prices is false, and if the consolidation aspect is not solved (and sadly, it won't be) it would only lead to an even worse situation.
Additionally, these are hyperlocal problems and what may work for Austin may require significant retooling for Chicago.
Can it be also related to demand not catching up or even declining? If place is in high demand and prices go down shouldn't it cause even more people coming to it (compensating for a possible price change). (Note: not an expert on this, I'm just curious how it really works - besides obvious thing: more supply -> price goes down).
> Can it be also related to demand not catching up or even declining?
The Austin metro area's population has been monotonically increasing [1]. Increasing housing supply decreases prices. If you want to reduce housing costs, flood the system with housing.
Same has been happening in Melbourne, Australia. The state government has basically steamrolled the boomers and allowed highrise construction next to existing train stations. Despite having huge population growth, rents are some of the most affordable in the country.
One of the things I like about the reporting in this Austin article, is they break down by building class.
In Melbourne I've never found a good source for this, only general averages; and my suspicions are that we just build shitboxes and claim the rent is lower on average, capturing something like shrinkflation rather than affordability.
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.
the problem in sf is building is incredibly expensive, and projects that have been planned, land acquired, are simply sitting as empty lots because developers don’t have the money.
interest rates for construction loans, reduced funding, labor and material costs, all contribute to the amount of housing built.
there is a bond being debated in the ca senate now that will help by giving loans for construction.
Anyone ever drive around Austin, its highways and its endless new construction of new superhighways, to the point that Google Maps is confused?
As annoying as NYC (and driving) are, there are downsides to unlimited housing and lack of zoning - as it turns out, the same states that do this sort of thing we all praise, are the same laissez-faire philosophies that oppose communal public transportation and walkable urban communities.
I mean… duh? Genuinely baffled at people struggling to understand this. When there’s more of a thing, it costs less. Which is good when that thing is essential, like housing.
Not sure the idea of housing being an asset which endlessly accrues value is good for anybody involved, long-term. Open to disagreement, though! I’m no economist.
I guess the confounding factor is that the population isn't fixed. Greater construction could result in population growth which cancels out the gains from greater supply. You'd have to build faster than population growth to lower prices. And generally developers aren't looking to do that.
Developers usually want to buy land, build house/apartment, and sell house/apartment.
They want to flow as much as possible - so if there are unlimited building spots you get a smattering of various options being built as they all find there niche.
If the building lots are rare, then they all will be built into the most expensive possibility.
Depends what the situation is, if the rents are absurdly high where you can undercut them and still profit then of course they would rather build more. If they are getting close to cost price, developers won't build more to lower it beyond that. At that point if you want to lower prices more you'd have to look at lowering the cost of construction.
If you try to take any local action that might lower housing prices or even keep them steady, you will likely be stymied by a large contingent of people that deny that new housing could ever raise rents.
The idea that supply and demand don't apply to housing is quite popular:
Even when it's not peer-reviewed and contradicts a ton of more serious research attempts, a bid of research which rarely gets popular press coverage.
It's like climate denialism, there's huge demand for denialist positions and very little research to back it up, so the press does not reflect the research.
People are quick to point out that induced demand exists - especially people that aren't fond of change.
Very broadly speaking, people mis-estimate effect sizes in economics by orders of magnitude. Induced demand is just their foothold to claim an effect exists, before they go about claiming the effect size they want to see.
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!
It doesn’t work unless there is currently repressed demand for living in that abandoned town because not enough housing or other factors.
No one is complaining about a housing shortage today in buffalo which used to have twice as much housing stock as it does today, because the demand simply isn’t there now.
Exactly - induced demand is just a misnomer/misunderstanding. "Pent-up demand" would be a much better way to explain it - but that would reveal that at some point the demand ceases; even SF has some limit - once all 12 billion people live there, demand will level off.
Good analogy. I've always considered induced demand a bit of a fantasy.
New businesses the sprout up that market themselves certainly induce a bit of demand, but more lanes and stoplights doesn't exactly motivate people to want to go somewhere.
Yeah, and when we add lanes to roads, the average speeds increase and commutes get shorter. Right?
Also, if the government gives me $1 billion, then I'll be rich. But what happens if the government gives everyone $1 billion? Everyone will be rich, right?
... 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.
> ... Your examples seem to undercut your point if I'm understanding what you're trying to say.
That perhaps you shouldn't assume that kindergarten-level theories always correctly describe complex markets?
> 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.
So go on, do continue this line of thinking. You built more houses.... then what?
> what they didn't mention is that supply didn't impact rents until the large remigration back out of Austin
This has been studied to death. But just like soybean farmers in Idaho voting for tariffs on China it seems a category of urban renter is more wedded to ideology than self interest.
The Austin metro area's population is up [1][2]. Austin's GDP is up [3]. Migration per se doesn't explain a phenomenon that is robust across cities, countries and centuries.
Sigh. NO it didn't. One fact of life: new construction does NOT lead to lower housing prices. Sad, but true.
So what did? Likely COVID. The _only_ way to decrease the housing prices is to decrease the population. As proven by countless cities, including the world's most liveable Copenhagen.
So does my prediction hold for Austin? Let's see.
Austin TX population in 2019 (ACS estimate, data series ACSDP1Y2019.DP05): 979263.
2021 (ACSDP1Y2021.DP05): 944658
2023 (ACSDP1Y2023.DP05): 979700.
2024 (ACSDP5Y2024.DP05): 979539.
So yep, my prediction holds true. The housing prices in Austin were stagnant because its population decreased during COVID and barely recovered to pre-COVID levels.
Want another prediction? Seattle's home prices will fall down, because its population is now (likely) decreasing. Not because of a rush of new construction. We'll see updated population released stats in April.
You say progress, I say enshittification.
What this article says: *The median apartment rent in Austin has dropped X% over the past 5 years*
What this article does not say: *Apartments in Austin cost X% less to rent now than they did 5 years ago*
It's completely possible for the cost of the average apartment in a city to go down, while the cost of existing apartments increases. How does this happen? The enshittification of rentals. Units get smaller (apartments in Austin are shrinking), they get built near highways (air pollution), they lose amenities like parking, they pop up places where they previously weren't allowed (smaller ADUs, basement units, see article), they get subdivided (landlord throws up a wall and turns a large 1br into a cramped 2br).
If supply and demand were really working the way its heralds claim, then we'd see the price of existing units going down. This article offers no evidence that this is happening. I don't believe for a minute that it is.
Instead, it's the same story as always: your rents will keep going up. You can move somewhere cheaper and shittier if you want. The people who profit will congratulate themselves while decrying the thing they actually fear: rent control.
https://www.statesman.com/story/business/real-estate/2025/05...
Its wild how the solution to housing costs is really just:
Build more housing. Keep law and order.
No it doesn’t need to be “affordable”. Yes rent control is a terrible idea.
Just build more housing.
Note: that the US already has plenty of housing and housing costs basically go up in areas of low crime relative to economic opportunity. If you build housing, but allow crime to rise, you have wasted everybody’s time.
New construction has already decelerated in Austin due to falling prices, which compresses already-near-zero margin on real estate development.
So yes, it really is "just build more housing." The problem is: why would you build more housing as prices fall?
Because home builders don't make money by buying and selling houses, they make money by building them and selling them.
This 1000x. Folks don’t get that the primary market != secondary market. Same as pre-IPO stock holder != IPO time buyer.
And... how is this relevant?
I'm not sure what you're trying to imply here. You should spell it out explicitly.
The difference is between buying and asset and producing an asset. Even if RAM costs are falling, it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price.
It's entirely different if you're buying the housing already built; there's no productive activity, you're just a rentier and do not benefit at all from falling housing prices.
The differences in interests between an asset holder and a productive builder are night and day.
> it can still be profitable to produce more RAM, as long as the costs are far enough below the eventual sales price.
Right... my point is that the costs are not far below the eventual sales price. That's why construction is slowing down.
And as mentioned several other times, it's actually not as simple as cost > sale price. It's margin > margin of alternative investments of similar scale and risk profile.
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
> Like if prices fall 10% but demand rises 20%
Not as a developer you wouldn't...
You already have razor thin margins. Prices going down 10% means you cannot get financing for your project.
Holding real estate is generally a good investment. Developing real estate actually is not.
> Real estate developers and construction are solid, safe businesses with great unit economics
No they are not lol
Can you define razor thin? Grocery stores have very small margins, as little as 1%.
Homebuilders make at least an order of magnitude more on a very expensive item.
It doesn't matter whether prices are going up or down, it matters if the price is more than the cost to build.
No, not really.
It matters whether the margin is higher than other investment opportunities of similar scale and risk profile.
Already, the answer is very often no. In Austin, the answer will increasingly be no. That means people will not finance new construction, so if demand continues to grow it will outstrip supply and prices will go back up until the margin on new construction exceeds that of alternative investment opportunities of similar scale and risk profile.
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
> it doesn't matter if prices are falling or rising, it only matters how the ROI of building compares to other investment opportunities
Correct, which it basically doesn't in Austin, which is why construction is decelerating.
> we can also make it cheaper to build
Yep, this is the only structural solution. The "just add supply" runs into the problem of price equilibriums. The reality is the input costs of building housing basically guarantees that housing is hard-to-attain for any local market. We need to address the cost of inputs. Temporary reductions in price are temporary and the market will self-correct back to restrict supply (as we're seeing in Austin) until prices go back up to being hard-to-attain.
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...
Well you see, we clearly need to armor the parts of the planes that have bullet holes in them upon return!
I get what you mean, but I doubt corruption is good for building good housing
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.
> As long as construction costs remain below the value of the units all-in, there's profit motive for developers to build.
Not true
Real estate development is extremely capital intensive and therefore it's a question of all-in cost of capital compared to other investment opportunities.
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?
There's a big difference between land prices and the building prices. When costs rise 5% per year for a house that's untouched, that's almost entirely the land price going up.
You can make housing cheaper by putting more houses on the same amount of land. In high cost areas, the price of land dominates the cost of housing.
Political pressure to change the investment nature of housing can come from various directions, for example establishing a land value tax, which eliminates the financial incentive to speculate on rising land prices by keeping people out of your area, redistributes all those unearned land rents to the population equally, as is only fair, and also results in a lot of people selling land to be redeveloped taht are otherwise hoarding it when the rest of society would be using it a lot better. Of course, in societies with high levels of land ownership, the voting public usually tries to vote away such extremely fair taxes.
Politically, we must stop prioritizing the views of homeowners at the local level. They already got their reward, massive unearned capital gains on their residence, there's no need to give them priority on land use over the general needs of society.
Multiple things can be done at once. The policies you laid out are not mutually exclusive, and have different utility for different communities. But yes, fundamentally more housing is needed for growing populations. Conversions and rezoning are also important parts of the urban equation to “build more housing”, not just exurban McMansion developments.
This comment is phrased as if the article is confirming these points when it either doesn't mention them or even directly refutes them. First there is no mention of either crime or rent control in the article. But more importantly, it states that "A key piece of Austin’s strategy has been to encourage the construction of affordable housing." So why are you concluding that affordable housing isn't needed?
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.
But it didn't reference anything, it stated political opinions like they were confirmed facts, provided zero evidence to support those assertions, and completely ignored the ways in which the article provides counterevidence.
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.
I'm not sure if you're intentionally changing the definition of "affordable housing" in an attempt to make the desire for it seem silly or if you genuinely don't know how the term is typically used. But what you're describing is generally referred to as "market-rate housing" and not "affordable housing".
Affordable housing = housing that regular people can afford
The only silly thing here is that "low income housing" got rebranded as "affordable housing" and absolutely everything else got rebranded as "luxury homes" for political reasons.
"Market-rate housing" is even sillier given that it is literally the opposite of what "affordable housing" policies dictate
And yet, gentrification.
God forbid bad parts of town ever get good.
Good for whom? If it's good for the residents, that's great. If it's bad for the residents, who get driven out, but good for some developers and outside rich people - that's what gentrification is.
That's not what gentrification is. Relevant to this article, I lived through the gentrification of large parts of Austin in the early 00s.
What happened was that good housing full of artists and musicians and other self-employed creatives began gentrifying, driving up property values, which drove up property taxes, which became unaffordable to the existing residents (who had owned their homes for a long time). Many (actually, most) of these artists had to sell and leave.
They often left for other cities. But hey at least the good houses everyone liked all got torn down to be replaced by McMansions for the influx of techbros.
Austin still has that slogan, "Keep Austin Weird." It failed. Austin isn't weird anymore. The University of Texas still is responsible for a lot of great stuff about Austin, but huge chunks of the city are just boring these days. There's certainly much less interesting culture happening. It's been airbnbified.
> Its wild how the solution to housing costs is really just:
> Build more housing. Keep law and order.
Safety (law and order) increases housing costs, as you say. It's desireable on its own, but it does not solve housing cost. NYC is very safe and very expensive. Crime is way down in most of the US, and housing costs are much higher.
You have to restrict investors buying up that newly built housing too.
Homes for people. Not investors.
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.
This logic assumes that 35% of Americans WANT to rent their home. Which seems odd to me, if only for financial reasons - why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it?
The numbers you are using are not common at all.
If you invent a scenario where the mortgage is half the rent then buying is a no-brainer. Does that reflect reality?
> why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it
Because the down payment you put into your purchased home could've been put into the stock market and grown faster than property values (this is historically true).
Because you don't want the headache of home maintenance.
Because in the 21st century, job stability doesn't exist so it's a big risk to buy a home fifteen minutes from your current job that might be an hour from your new job after you get fired so a CEO can get more golden parachutes.
Because you might have to change cities a year from now.
My wife and I rented for a long time because it was better than owning for us.
> 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.
This only holds until the percentage owned by the investors becomes a monopolistic chunk. At that point the investors would rather leave some apartments empty rather than see rents go down.
See: all the current RealPage lawsuits
It really doesn't matter as long as someone is living in it.
There is affordable housing all over America. Get it through your head. It’s about nearness to the economic singularity that costs so much not the housing itself.
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.
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.
It is not affordable if it is located somewhere with no job.
> Just build more housing.
Also "Wipe out a whole boatload of techbros who artificially inflate prices". Nobody is talking about that part of the equation.
Austin was one of the places a lot of tech folks flocked to when everybody was working online. RTO and layoffs have wiped a lot of them out. I'd estimate almost 1/3 of the tech folks that were floating around last year are now in other cities.
without rent control, what economic incentive do renters have to maintain law and order / invest in local community / be a good neighbor? any investment they make is captured by the landlord. in fact, they are incentivized to maintain their neighborhood in as much disrepair as they can stand, for fear of rent increases.
the little old lady living in a rent controlled apartment is a big part of why rents are high in that area: she was part of what made the community thrive. we would do well to compensate her for this.
Meanwhile, California is also trying to build housing near transit, but Menlo Park wants to preserve the character of downtown by preserving dirty, cracked, flat, surface-level parking lots like it's 1950.
NIMBYism has never been about preserving neighborhood characteristic, or noise and traffic concerns. Menlo Park is not Big Sur. Sure, some concerns are reasonable and should be investigated, but most of the time they're bureaucratic distractions that's been weaponized by people who want to delay progress and protect their investment.
For most Americans, A house is their primary savings account, retirement plan, and probably where they keep majority of their wealth. We don't build new housing in old neighborhoods because it would de-value the investment of too many people. Until we can solve this problem (where people are incentivized to pull the ladder up behind them), we will always have housing shortages. It's just too profitable.
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> If NIMBYs were primary motivated by making money the prudent thing to do would be to support unrestricted zoning and then develop or sell the lot.
That is highly dependent on what exactly is being built next to your home. Sure, if it's more luxury housing then it'll probably drive the value of your home up. If it's low-income housing then it probably won't. And what we need is more of the latter rather than the former.
> you can take out loans against the value of the equity but this isn’t particularly common.
It's because it's an investment, you're going to get the return once you finally sell your home. Only in a pinch if someone needs a large amount of money to start a business or pay for an emergency will they mortgage their house.
> It's because it's an investment
The home you live in isn't an investment; it's a store of wealth.
Many lives were ruined by thinking your primary home is an investment.
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.
Hate to be the bearer of bad news here, but the boomers will never die. Gen X will become the new boomers, and then the millennials after them. Individual people die, but interests stay the same.
To be fair it is not the city/elected officials who wants to retain the parking lots. The downtown redevelopment would probably make the city a lot of money.
It is the businesses around downtown who are pushing the save downtown campaign. I imagine the businesses contribute a fair chunk of revenue to the city now and have some influence .
Relative to say parts of Redwood City, or Palo Alto. Menlo park has a fair amount of student-ish 4 Unit lots, so it not all zoned SFU.
I don't expect Menlo Park to keep it character for long as Silicon Valley CEOs are fleeing the state.
If you owned a 600sqm allotment in Menlo Park surely you'd want it to stay a parking lot and not become vibrant apartment blocks.
Menlo Park isn't comparable to Austin though - Austin's equivalent of Menlo Park would be a country club CDP in the Austin Hills like Rob Roy.
A better comparison would be ATX against San Jose.
Just like how the "rich" residents of Santa Clara county know that you want to live in Campbell, Los Gatos, Menlo Park, Los Altos, Loyola, etc, similarly rich Texans and Austinites live in the Hills.
The reality is the residents of Menlo Park and Rob Roy don't want your type, and in a lot of cases tend to be the same people as there aren't many places left where you can trail run, bike, eat Michelin star ramen, and not pay income tax.
Just because we make good money in tech, it doesn't make us "them". I highly recommend reading the works of Pierre Bourdieu with regards to cultural capital.
Menlo Park has a higher population density than Austin...
The majority of it is not Bel Air...
> The majority of it is not Bel Air...
Menlo Park was never a "middle class" town. The 101 was always the (literal) redline.
The median household income is $210K [0] and it's the same demographic, unlike historically lower middle class but now upper middle class San Mateo [1].
A Menlo Park home address that is on the correct side of the 101 opens the same doors in the Bay that a Bel Air address does in Los Angeles or an Austin Hills address does in Austin.
Rich doesn't equal conspicuous, especially in the Bay Area - "Wealth is quiet, rich is loud, poor is flashy"
[0] - https://www.census.gov/quickfacts/fact/table/menloparkcityca...
[1] - https://www.census.gov/quickfacts/fact/table/sanmateocitycal...
Which side is the rich side?
280 to El Camino is "oldish rich" (made their millions in the 1980s-2000s), the El Camino to 101 is "new rich" (made their millions in the 2000s-2010s), and 101 to Meta used to be a Samoan ghetto (literally, redlining was legal until the 60s and unofficially the norm until the 90s) until they were gentrified out.
The old money (rich before tech) to the West of 280 in Woodside and Portola Valley.
South of 101
To be fair, parking structures always look and feel pretty distopian.
I like the approach of making downtowns walkable and having a bit of parking at the periphery of downtown, along with good public transit. Encourages people to use public transit to get to town in the first place. Downtown residents can use transit or a zipcar or equivalent when the need to get out of town, instead of devoting a ton of space downtown for storing their cars.
Not sure if that approach is really practical, but if it can be made to work it is much nicer.
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.
Is the Bay Area really dealing with ticket machines? The global capital of technology? Just bill by plate or something.
The global capital of technology has absolute horrid infrastructure and is not on the forefront of any municipal technologies.
There's a big disconnect from people building new projects and local governance, and it's growing. When tech companies started even providing buses for their employees, because local government is too fractured and incapable of running needed bus routes, and can not coordinate across county and city borders, local activists were extremely upset that tech workers were not driving their personal cars and instead using environments-saving and traffic-reducing transit.
I got billed by plate at gravel parking lots in places in Iceland where there were probably more sheep nearby than human residents. Embarrassing.
I would bill by ticket machine too if it was my job to collect money on the parking. I’m guessing that the amount of people who never pay is much higher than zero so it really only makes sense when you have such high throughput that the slowdown is detrimental (such as the Bay bridge).
Or develop 12 competing apps that each only work in different lots.
A fellow Swede I presume?
It's extra silly cause I once parked in central Oslo and got the ticket mailed to my sthlm address. No fuss, no problem, super easy!
We got a lot to learn from our neighbours....
Super easy unless you have moved recently, then you don't get the bill and end up years later in collections for the original amount plus a million late fees added on.
The reasons why the Bay Area is the global capital of technology are absolutely totally unrelated to the quality of infrastructure or the policies of local government there.
It’s mainly due to the state of US technological advancement decades ago when the whole thing got started, the general US-level business-friendly environment, and the presence of an extremely prestigious (especially in science and tech fields) university nearby.
The specific reason is that William Shockley's mother lived in Palo Alto. Stanford gets the credit but in reality it had nothing to do with the decision.
I don't know if that's a boycott, or just going some place you like better.
> They have those AWFUL ticket machines, set too far back (to avoid getting hit) and too high to access from a normal car.
Are you sure it's the ticket machines? Around here, the ticket machines have stayed the same, but it's now impossible to use them without stopping the car and getting out, because car manufacturers have decided I need eight inches of empty space between myself and the side of the 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.
They put it in the middle usually. It’s literally called the “Texas Doughnut” — a 5 over 1 surround a parking garage.
Ha, today I learned.
So glad we don't need to re-write the first chapter of almost every economics 101 textbook!
it's crazy that people nowadays seriously question basic market pressure being a thing
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
The black pill about that story isn't that a (crappy) preprint exists, it's that it got coverage in the press and was viral on social sites.
Who are the people that “seriously question basic market pressure being a thing”? Am I missing something?
There was article on HN front page a few months ago which stated(paraphrased) "building more housing to reduce prices is a right wing ideology that doesn't match reality" or some such. I'll reply here if I find it.
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%
Housing is also really weird:
- the main input (land) is also an output, so when the price of the output goes up, so does the value of the input.
- economies of scale don't really work, due to the impracticality of transporting the good (houses) and fitting the good inside a machine (in house "factories", normal workers go inside the house and work on it by hand; not a lot changes compared to traditional construction)
- more supply in one area increases the value (and therefore demand) in that area, so it's not actually clear-cut whether building more would reduce the price more than it increases it, at first glance.
Ah yes, that 150 year old meme reflexively copy-pasta'd by internet commenters since the days of usenet to refute basic concepts like supply and demand.
"Lol economists are dumb they think humans are robots!"
No they don't. Sorry, we won't be throwing away an entire field of human endeavor based on a straw man caricature that isn't true.
We don't call physicists dumb and throw out their ideas because the real world isn't a perfect vacuum either. They know this, don't be silly.
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.
There's loads of other inefficiencies as well. Moving is a huge hurdle. It's difficult to find housing that meets dozens of conditions, and even then you don't respond to supply + demand imagined equilibrium, you pay more or pay less to live near friends or family. It's something you only do a handful of times in your whole life. Trying to use the same analysis as for buying a can of beans is absurd. You might need to take econ 201 before you understand why econ 101 is wrong about housing.
> 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.
Prices in massively inefficient markets do not follow the supply + demand equilibrium. Beer is not an inefficient market. You're doing the absurd comparison.
It's more correct to say supply and demand still drive the overall average, but in a high-friction market of unique items, every single case is still a unique case. It's not like moving wheat bushels or RAM chips. When they sell oil, they mix up all the oil from different producers in the same reservoir, in the same tanks. Electricity travels in the same wires. Housing is nothing like that.
I'm not clear: does Econ 201 inform us as to how demand and supply are not related to price?
Yes, you learn why supply + demand curves do not actually describe many markets
So, if instead of installing a bunch of apps, setting up search filters, and refreshing browser tabs on my phone ever 15-30 minutes, then the instant something meets my parameters I immediately leave work and, if possible, make a deposit on a new place, I open an app and find 5000 places meeting my requirements, meet them when I'm not working and on my time, and tell them I like a different one better so I'll hold off before making a decision, makes no difference on the price?
it says "it's complicated".
Yes, it describes human nature better than psychology. We can’t fight even knowing about it.
the snark is quite rich when reading beyond the headline makes clear this was anything but a free market solution.
OP wasn't talking about free markets but supply and demand.
You should read again. The reforms made the market more free.
They also teach you about elasticity in econ 101. It's foolish and anti-intellectual to insist that the housing market has only two factors, while simultaneously condescending about your understanding of economics shows that you really don't understand economics, it's more about your ego.
> 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.)
This reminds of a fun fact I remember learning in university.
Elasticity is the relationship between demand and supply, and there are actually very rare instances where it can be negative (where demand increases with price).
These are called Giffen goods.
https://en.wikipedia.org/wiki/Giffen_good
Explanation (that I remember)
Inelastic demand is when a good is demanded so much, that an increase in price has little affect on the total quantity (people still demand it, think like addictive substances)
So a perfectly inelastic product would be a straight line where any amount is demanded at any price.
So having the curve keep going it would get a positive slope, where higher price makes demand go up.
If I remember the example I was given was food during a famine. Supply is already low, but an additional pressure on price is the known shortage. The idea being that as the price goes up people see it as harder to get.
It’s been so long since I studied the subject so I might have gotten some things wrong here.
> These are called Giffen goods.
The terminology is actually split; sometimes they're called Giffen goods and sometimes they're called Veblen goods.
The two types have identical behavior, so there's no good reason to have two different names, but in concept Giffen goods are something poor people buy, while Veblen goods are something rich people buy.
(There is a difference if you're willing to look at responses to changes other than a change in the price of a good: if you give a household more money, it will increase consumption of Veblen goods, but decrease consumption of Giffen goods.)
Cool! Thanks!
> A lot of people are venally or ideologically motivated against accepting this.
That’s the story of the last 10 years among certain types that keep regurgitating obviously wrong concepts.
> That’s the story of the last 10 years
The urban orthodoxy is around demand rationing. Supply-side arguments are incredibly new. The evidence cuts in one direction. (Unless we want a hukou system.)
The parent comment never claimed that the housing market only has two factors. You’re arguing against a strawman of your own creation.
Dumb question, many cities suffer from extremely high property (i.e. land) prices. I understand the NIMBY barrier. But I don't understand why it isn't more common to simply.. start a new city. Especially in countries like Australia where property prices are sky high and alternative places for setting up a new city are abundant. Maybe internet connectivity was previously a barrier, but now.. starlink.
I put this question to grok; its response:
> Unfortunately, Australia's legal, regulatory, financial, and practical systems make this extremely difficult (bordering on impossible at any meaningful scale).
Crazy that the reason we can't have an order-of-magnitude reduction in the cost of the most important thing people need (shelter) is not due to resource constraints, but man-made ones.
You can't start a new city. I city exists for all the things you can do. Your new city will have nothing to do because nobody lives there and there are no jobs to attract anyone to move.
that is why we build suburbs - they get anound this by being right next to a place with everything you want in a city
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
Starbase TX isn't a city in any sense other than a legal designation. It's a massive SpaceX industrial facility that has its own municipality similar to the way Disney World has one for its park.
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.
> Crazy that the reason we can't have an order-of-magnitude reduction in the cost of the most important thing people need (shelter) is not due to resource constraints, but man-made ones.
You say that as though reduction in cost of housing is a universal desire, but it isn't.
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?
If there's enough of the population bought into property, it won't be politically feasible to allow the value of homes to decline.
> 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.)
Water. You need clean water to grow a city. There isn't much of that to spread around anymore.
In this hypothetical, who is the individual or group of people that you envision would take the initiative to start a new city? What is their incentive to do so?
You can, but it is damn difficult.
https://www.volts.wtf/p/is-the-brand-new-city-in-california
You might enjoy the novel A Town Like Alice by Nevil Shute.
People move to where there is jobs and money. You can't build the housing first, in our society you need capitalists to invest into building businesses to make people want to move there. And because we have spent decades killing small business in favor of corporations, you need corporations to decide to build where there are no people and they have to pay a small short term premium to attract workers. Except corporations don't like doing that because it is a longer term investment and they are worried about next quarter's numbers and maximizing executive level bonuses which means short term planning.
You could build all the housing first in China until recently…
Why would you think that the same thing preventing density and new development in cities won’t stop your new city from growing before any building taller than 2 stories is built?
There is no shortage of cheaper existing cities in Australia, but everyone wants to live in Sydney, Brisbane, Melbourne and Perth.
The existing smaller cities just slowly wither.
Existing homeowners of the capitals have little interest in real estate prices dramatically dropping - would you?
Good news - experimental verification of the law of supply and demand!
I'm sure the analysis is welcome though and I hope policy makers try to learn from this. We could densify most american cities quite a lot more.
No it's not. It's 2 cherry picked data points with a sample size of 1 of a complex system with multiple confounding factors such as a pandemic
You can look at other neighborhoods such as palms in Los Angeles, which has the most aggressive housing build out in all of California. Median rent has increased - sometimes more housing can create more demand
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?
What if the people in power don't want prices to go down?
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.
People want to blame the 1% for massive wealth ineqality, but when it comes to unaffordable housing, a basic necessity of life, the villain is actually about 30% of the population that is rich enough to own homes, act like rentiers, and block access to neighborhoods and opportunities.
The greatest inequality difference is that between those with housing assets and those without. Yes the 1% are a problem but they are not the reason that young people can no longer afford housing without generational wealth, that's all due to the seemingly normal guy that's enforcing a class system based on home ownership versus non-ownership.
I think the majority of the electorate very much blame the people you're talking about. Who do you think progressives and MAGA refer to when talking about neoliberals? They're talking about the corporate class; those that care more about money but willing to play up useless culture war issues that impact small amounts of people.
> A lot of regular homeowners fight new developments tooth and nail.
In a system where those with more capitol have more power, homeowners are the powers that be. They're more likely to vote and have more money for discretionary spending - like donating to politicians.
People have been steered for decades into using their home as a vehicle for retirement. Of course they want to protecet it.
I'm not blaming individual homeowners, there are very strong incentives for treating homes like retirement investments. It's an issue of policy, but we do have to address that it is also causing rent to rise and contributing to the homelessness crisis.
> A lot of regular homeowners fight new developments
Which is self interested. The paradox is renters being turned against their own interests by large landlords pitching anti-gentrification.
Don’t know why this is being downvoted, that’s exactly right. One needs only to attend a local city meeting about any smallest step towards more development to see how the voters think.
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.
It's just as much "change is scary" and "I like this as it is." It's a very human reaction.
I dont think its just that. Nimbys also see:
- many new building being very ugly (side note: ugly buildings no matter how green get torn down and are this not as green as building that are beautiful)
- increasing density bringing increased crime
- increased density actually turning out to be less efficient on a per capita tax basis (this is always wild to me, cities should be spending much less per capita than rural areas but arent)
They are the ones who show up at local political fundraising galas and constantly report local issues influencing municipal/state priorities.
Although it's not just NIMBY. There's a million rules about building housing and developing land from zoning, environmental, indigenous, or social ends. Which are arguably luxury self-benefiting priorities for people who already own houses. Plus all the activists who think the government can both make development extremely expensive via endless rules while affording to fund mass government housing at the same time.
It is more complicated than that. A few years back when my youngest entered 1st grade, I attended some meetings where the superintendent talked about school expansions in the pipeline due to confirmed property development projects.
Namely, when new housing is added, there are infrastructure considerations and corresponding expenses that translate to higher taxes. Civil planners have formulas for how much the student population will grow based on the housing density/type.
Schools built on parcels based on 1970's population now have to expand to fit more students or the township has to find and acquire new land to build a new school.
That requires raising taxes for bonds. A new school is several million dollars and then hiring staff. NJ has a legal limit of 25:1 in elementary. Add 100 students and you add at least 4 teachers that have to be supported by taxpayers. Expand the lunchroom, build a new gym, purchase new computers, all the ways up the chain for the next 12 years.
If you ever look at your municipal tax bill, you will find that education is going to be the biggest expense by far.
On top of that, roads may need to be widened. New roads have to be built and maintained. Municipal staff may need to increase.
Some services may actually benefit from economies of scale (waste collection). Most will not.
Imagine you bought a house in 1970 (i.e. my development) and you were paying $1000 annual property taxes. Now your property taxes are $12000 because of the increased spend on infrastructure and increased assessed value. You're a retiree and you've paid taxes for 2 or 3 generations of students. You live on a fixed income and your property taxes are a higher and higher proportion of your income. What do you do? Mortgage the house to pay taxes to fund more growth?
The problem is exacerbated because obviously people want to go where the good schools are, where it's low crime, good infra, easy access to transportation. That drives demand and puts pressure on services while also raising taxes to pay to fund municipal bonds for growth.
End of the day, my personal belief is that housing is a right. But I can also see why middle class folks, retirees end up pushing back when they get the bill in the form of increased property taxes. I've lived in my house 10 years now and my taxes have gone up ~$3500 in that time. Every school in the township had to expand to meet population growth with the additional units. Sure, my home value went up as well, but I can't cash that out. I can't imagine how it feels for retirees that are living in a family home here.
This is a really well-thought out comment, and I agree with just about everything in it. One comment I'd like to call out for additional consideration is the comment on retirees being priced out due to rising property taxes.
In my experience, most retirees have more rooms/land than they can make productive use of. I feel that there should be some pressure for them to sell that property to families who can use it more productively. That's the stick, but I feel there needs to be a carrot, where builders are constructing homes that these retirees will be drawn to. There are retirement communities in the southern US like "The Villages" https://www.thevillages.com/, but as the population here ages, we need to build these everywhere so retirees can move into the communities that meet their needs without being forced to leave their cities.
But there's nuance here, too: families. My wife's side is a big Italian family. Everyone's here. What do you do if your grand kids are all here? How do you support your adult kids and help them achieve financial security? Or leave and secure your own? Neither is an easy choice.
There are here as well. The reason they work here, as far as I understand it, is that they count towards "affordable housing" units that are mandated by state law here in NJ. But I put that in quotes because these units in 55+ communities are often honestly still quite expensive, especially if you've already paid off your mortgage decades ago.The real issue seems to be the top-heavy tax system that forces local governments to rely on property taxes. A local income tax would make them more capable of building and maintaining infrastructure, but that would require lowering taxes at higher levels. (Income taxes are superior to wealth taxes in the sense that income tends to correlate better with the ability to pay tax.)
If the demand for housing is high, zoning fees can also be used to make developers pay for the infrastructure upfront. If done properly, their impact on housing costs should be minimal, as they mostly extract some of the added value created by the zoning from the landowner.
The developer for sure does not want to build a school and even if they build the school, they are not going to be paying for the teachers that are going to need to support the increased student body for every decade into the future; that's on the taxpayers.
The underlying assumption is that laws will be changed when necessary. If it's not possible to do that, most issues probably can't be fixed.
More fundamentally, this is related to the principle of subsidiarity that is occasionally popular in the EU. Everything the government does should be done by the lowest level that can reasonably do it. And to enable that, local and state governments should have sufficiently wide tax bases.
Except you get exactly the same opposition in places where schools are funded by a higher level of government
and if anything you taxes will go down because they are now spread across more households.
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...
I just hope that people remember this is just one factor affecting quality of life and making a city work.
"Density at all costs" ignores a huge set of tradeoffs that are equally as damaging to a city. Things such as urban form, street experience, long-term adaptability, integration with existing fabric, economic resilience, etc. These are the things that make a city work in the long term.
I’m a big proponent of building more housing. But a lot of it is being doing in very short sided ways that lead to huge externalities.
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.
Developers not recouping their investment will discourage less housing in Austin in the future and it will become expensive again. A lot of our current housing shortages are from the build up in 2008 and an implosion of the entire industry (so that crafts people did not really exist for the next need for housing).
> 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
> everyone in the transaction wins
Nobody ever thinks of the poor banks!
> Nobody ever thinks of the poor banks!
I thought about that. But a bank would rather lend in lots of high-confidence, low-duration deals than a small number of high-margin deals. The only people who lose when housing is built are incoment landowners. Because prices go down.
Usury-as-a-Service.
At scale banks only win as a facilitator of economic growth. As the adage goes they can only 3-6-3 if someone is making at least 7.
For the everyman banks not winning is catastrophic.
It's always been a service.
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.
Their land, labor, and material costs aren’t trivial. If thy were pulling a 10-20% margin before, how will increasing volume (which increases costs) make it up?
They reinvest that generous 10% to buy more tools and hire more talent to build 10x as many homes at 2%. Seems pretty straightforward to me
you should go into real estate development and make a fortune while solving a serious social problem for your country!
Taking on those liabilities is very risky when the next downturn happens and you're stuck with inventory.
So, do we just need to nationalize housing construction? If the free market apparently just can't handle it?
It’s not a free market construction issue at all, it’s a regulatory zoning and permitting issue.
Read the article and the peer comments here; Austin’s boom came about from reducing regulatory constraints.
Nationally remove the artificial restrictions and the supply side will fix itself.
Seems like a free market issue, any profit resulting from development is a free market issue. Your profit margins mean worse quality housing for people, and we can see what actual public housing programs look like with Singapore and Vienna where rents can typically cost less than 20% of median salaries:
https://www.youtube.com/watch?v=LVuCZMLeWko
As renown corporate welfare recipient Bezos would say: "your margin is [our] opportunity."
If the only thing stopping development is that rich developers want to make more money, then maybe we should get rid of the rich developers and let the public decide what to build. It couldn't be worse and it'd be 20-60% cheaper too.
Did Austin really have any constraints holding it back? It’s still Texas. People still look at Houston as the canonical example of a city with no artificial constraints.
Public housing projects were and sort of still are a thing. Glass Amendment limits the number of units that can be produced but most areas are well below those limits and the larger issue is that there's no budget or political willpower for social housing projects right now.
There wasn't, but given the housing market right now, I don't know that there isn't.
Maybe? Obviously boom bust cycles that come from a free market are not very efficient.
We already have that. They're called "housing projects".
What evidence is there that developers won't break even or profit? The demand is clearly there, it's a seller's market.
Not so much any longer. The sales tap really turned off a while back and prices have been dropping a while here in Austin.
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?
We could but it’s not always just “good” to make things dense.
My hometown has had a huge push to add more housing to make things more affordable. What happened? 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.
Sometimes preserving things and keeping them nice and simple even if it’s costs a bit of a premium is better.
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.
Nobody lives there anymore, it's too expensive. /s
> 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.
The laws of supply and demand don't apply to housing in the Bay Area.
We need affordable housing, not more housing for rich people, made by rich developers. Just because my house is worth $3M and I have $3M in stock options doesn't mean I'm rich. I'm working class, I had to come back from paternity leave to log-in to Slack on my laptop every damn day, and tell Claude how to write this damn software!
Did you sign the petition to block the apartment building down the street? It would RUIN our neighborhood!!
As an aside, I am not part of the problem!! I care about poor people!!! I am a good person!!!!
Oh you want proof? Look at my front lawn: "In this house we believe black lives matter, science is real, love is love..."
Proof point 2: look at my Tesla! "I bought this Tesla before I knew Elon was crazy!"
Plus I voted for Kamala. I'm GOOD. People in Kansas are DUMB and BAD.
It's wild how the solution to housing is: stop the government from stopping housing from being built.
>>> The city changed zoning regulations to allow construction of large apartment buildings, particularly near jobs and transit. In 2018, voters approved a $250 million bond measure to build and repair affordable housing. Permitting processes were reformed to speed development and reduce costs.
All three of the five things most economists say about house building - and each one will hit house owning voters hard making it hard to replicate.
But none the less a triumph of common sense :-)
If you are in your terminal home, then yes, selfishly one would want the value to go up. But if you ever plan on moving to another home, sure dropping prices mean you get less, but it also means you pay less for your next purchase.
If you are in your terminal home, you also want low prices until the week before you eventually sell your house, as Texas has a high property tax rate to make up for the lack of state income tax.
> and each one will hit house owning voters hard making it hard to replicate
In a negative way?
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.
> As a homeowner, I want number to go up.
Which is myopic.
As a homeowner, I want cities to be livable and affordable for those who want or have to live there. I don't care if the value of my home changes one cent. It's honestly kind of useless, because it's not like I can sell the house and buy a nicer one. All the houses are more expensive so it's always going to be a lateral trade. It only helps if you sell and move to a lower cost of living area.
It's kind of a sham that we have been conditioned to treat housing as an investment. Housing is where people live, it shouldn't be a commodity to be hoarded.
You can arbitrage markets for retirement, which is largely why people want their home values to increase. Their home is another form of 401k, and those mortgage payments aren't going to the bank or a land loed, they're going to their future.
It's a minority of people who are ok never capitalizing on their home value.
So you are saying you are a reactionary? Did you even try to read my entire comment?
As a home owner in Austin, I want my friends to be able to afford homes too and not feel like they have to move to have a yard and a family. Bring on the new construction.
What do you think the big paragraph at the end meant to convey?
As a former homeowner in Texas, I wanted the number to go down for lower property taxes. Taxes accounted for almost 1/3 of my monthly mortgage payments by the time I sold, and are a significant barrier to affordability of homes when values tend to vastly outstrip the rate of inflation leaving typical households struggling even with the homestead tax exemption.
The only people in the low income neighborhood I grew up in that could afford to weather this wave of out-of-state and investment banking homebuyers were those who were of retirement age and had their property taxes “frozen” at an affordable level.
Anecdote: I lived in Austin from 2017 to 2021. My rent was always very cheap (my baseline is Brooklyn which I guess makes everything feel cheap. But my rent went up $50 for the first 3 years and then down $200 during Covid and I checked recently and my aptmnt is still the same price). Around the time I left everyone was buying up houses to rent and Airbnb. Very palpably felt the growing supply when it came to bnb's (the owners having a harder time competing for renters etc). It's hard not to be surprised in spite of the tremendous growth in that city
At a glance, I'm a bit skeptical. It looks like they're cherry picking the high point for rent (the COVID spike).
> "Rents fell. In December 2021, Austin’s median rent was $1,546, near its highest level ever and 15% higher than the U.S. median ($1,346)."
Of course having more housing should, all things equal, lower rent. But all things certainly weren't equal, especially during this time period.
> In December 2021, Austin’s median rent was $1,546, near its highest level ever and 15% higher than the U.S. median ($1,346). By January 2026, Austin’s median rent had fallen to $1,296, 4% lower than that of the U.S. overall ($1,353).
For comparison, in San Francisco December 2021, the median one bedroom was $2810. In San Francisco March 2026, it was $3597, an increase of 28%.
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.
Yeah this would be the interesting thing to try to normalize the data against somehow.
If you just compare it to other cities you can see that Austin did much better in prices.
Idk about rent, but even as of a year or two ago, Austin metro housing index was lower than its 2016 level. Rent following a similar trajectory wouldn't be super surprising to me.
You haven't factored in Inflation.
It's almost as though the well-known and proven method of building more housing works!
Similarly, the tested and proven solution to homelessness is providing housing up front. Don't have any requirements (employment, sobriety, etc) blocking housing. Those things are easier to achieve with a roof over your head.
You mean to tell me that increasing supply lowers price? Fascinating.
Unfortunately, there's a lot of people -- especially further left -- who fight this kind of reasoning. They insist that the housing market is different, and that just building more private housing won't help.
No amount of evidence will convince these people, because they already made up their mind ahead of time: their ideology says the market can't help, so the market can't help, period. Any evidence to the contrary is a plot by billionaires or something.
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.
> FWIW we don't maximize food production
We kinda do, through farm subsidies.
Food supply is most definitely maximized
The populists on the right share a similar view, but mostly blame immigration.
Who would've thought?!
Another part of this - higher interest rates really put the brakes on home values. We own a rental property and the home value has more or less been locked in since 2022. In our otherwise hot metro area, nobody has raised their rental rates on similar properties in 4 years.
It's a win-win for our tenants. Prices seem to be stable and there's no rush for them to lock down a house RIGHT NOW.
It's sure not good for my bottom line as a landlord for them to keep adding homes and keeping rates up. But it sure seems like a no brainer for society at large.
This balanced perspective on what’s good for someone personally vs what’s good for society at large is what’s missing from the world.
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).
If you are smart, you throttle up investments just before a boom starts and throttle them back just before a boom ends. At least you try to up your margins during good times so you can survive bad times. The trick is keeping your talent employed during the bad times so they are trained up and still in the industry for good times. Stability is obviously preferable.
I'll admit ignorance here, but I've been skeptical of the claim that new construction drives rents down. What I actually see is: a luxury apartment building goes up, surveys the market, and sets its rents 30% higher for the privilege of living in a new building with a gym for dogs or ball pit or whatever. Then the older buildings say, "Well, we can raise our rents 20% and still be the best deal in town," and so on.
Maybe if you flood the market with 30% more housing units like Austin you get the Econ 101 effect. On the other hand, apartment owners realized intentional vacancy is a profitable strategy, which alone seems to defy that basic interpretation.
what you're neglecting to consider is what would have happened if someone moved to Austin (say a wealthy person from SF) and that expensive new apartment didn't exist.
The mechanism by which new construction drives down rents is that people that need a new apartment are in less competition with existing residents in older worse apartment buildings.
So the newcomer from SF moves into the expensive new apartment, which means that there's less competition for decades old apartments, which means that when one of those is vacated there is less price appreciation on that product.
If there is a scarcity of apartments what happens is that when a decades old apartment is vacant it is filled by a wealthy newcomer and the landlord increases the rent accordingly.
> a luxury apartment building goes up, surveys the market, and sets its rents 30% higher for the privilege of living in a new building with a gym for dogs or ball pit or whatever. Then the older buildings say, "Well, we can raise our rents 20% and still be the best deal in town," and so on.
I think that might not be the right cause and effect relationship. The actual cause is increased demand. This creates both the increased pricing of existing stock and an incentive to build new stock.
> Then the older buildings say, "Well, we can raise our rents 20% and still be the best deal in town,"
They can only get away with that when there is a housing shortage.
In my neighborhood in NYC, I've also observed that rents increased after luxury apartments were built here. In fact my landlord cited the increased median rent in the neighborhood as a reason to raise my rent.
My understanding of the situation is that luxury apartments do indeed gentrify neighborhoods (i.e. they increase the local rent and drive displacement of locals that can't keep up with those rent increases).
However, across the entire city, it slightly eases rent pressure by providing additional housing supply.
So, like you mentioned, if you get enough housing across many neighborhoods, you can drive down rents. Otherwise, that luxury complex in your neighborhood might only be helping ease rent pressure in other neighborhoods.
> if you flood the market with 30% more housing units like Austin you get the Econ 101 effect
According to TFA, it seems so.
Which is great, because it's further evidence that we should do the same thing everywhere.
There were a ton of apartments built in lower-cost areas outside of the urban center as well - the Parmer area (near the new Apple campus), the Tech Ridge area near I-35, and out by the airport and Tesla factory as a few examples. It wasn't only high-end, lots of mid-level stuff was built too.
Your scenario is simply describing a massive under-supply problem, and mis-attributing causality for price increases.
If the older buildings are able to raise prices 20% with no increase in vacancies after the new build, the new build not coming in would mean those older buildings rent would be bid up more than 20%.
The people moving in who could have afforded the 30% more expensive luxury units will just have to pick from the older units and outbid lower income people for spots in this low supply, growing city (under no other scenario could you crank up rent on aging stock 20% without losing to competing landlords).
> I've been skeptical of the claim that new construction drives rents down.
It can, but not in isolation.
It requires a couple additional variables such as population demand (rate of growth of Austin has reduced since the COVID boom [0]), existing stock (Texas had a building boom and bust in the 1980s [1] that decoupled it's housing market from the rest of the US), and a shift from buying to renting.
That said, the peers I have who work in professional real estate (not realators - as in actual MDs for REITs or multi-generational landlord families whose parents went to school with Governers and Mayors) are starting to shift away from real estate to equities because of headaches around succession planning and reduced margins.
What is ending up happening is megacap REITs like Equity Residential, Essex, Avalon, etc are buying out older groups, taking stakes in new developments, and shifting away from selling condos to perpetually leasing. At their size they can afford to have significant amounts of unleased units becuase they would have made up the cost via higher rent on leased units, tactically building high margins condos and SFHs in high appreciation geographies, or loss harvesting in order to subsidize commercial buildouts like data centers.
Naively saying only construction will reduce prices is false, and if the consolidation aspect is not solved (and sadly, it won't be) it would only lead to an even worse situation.
Additionally, these are hyperlocal problems and what may work for Austin may require significant retooling for Chicago.
[0] - https://www.bizjournals.com/austin/news/2026/01/28/austin-be...
[1] - https://www.nytimes.com/1986/09/14/business/john-connally-s-...
Can it be also related to demand not catching up or even declining? If place is in high demand and prices go down shouldn't it cause even more people coming to it (compensating for a possible price change). (Note: not an expert on this, I'm just curious how it really works - besides obvious thing: more supply -> price goes down).
> Can it be also related to demand not catching up or even declining?
The Austin metro area's population has been monotonically increasing [1]. Increasing housing supply decreases prices. If you want to reduce housing costs, flood the system with housing.
[1] https://www.macrotrends.net/global-metrics/cities/22926/aust...
Same has been happening in Melbourne, Australia. The state government has basically steamrolled the boomers and allowed highrise construction next to existing train stations. Despite having huge population growth, rents are some of the most affordable in the country.
One of the things I like about the reporting in this Austin article, is they break down by building class.
In Melbourne I've never found a good source for this, only general averages; and my suspicions are that we just build shitboxes and claim the rent is lower on average, capturing something like shrinkflation rather than affordability.
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.
the problem in sf is building is incredibly expensive, and projects that have been planned, land acquired, are simply sitting as empty lots because developers don’t have the money.
interest rates for construction loans, reduced funding, labor and material costs, all contribute to the amount of housing built.
there is a bond being debated in the ca senate now that will help by giving loans for construction.
https://calmatters.org/politics/2026/01/2026-housing-agenda/
Certainly, that can't be true?
Increased supply lowered prices for the same levels of demand?
Seems unlikely.
This is democracy in action: give the people what they want (and need)!
This reads like some triumph but rent was up 100%+ from 2010, and it is merely back down 15%.
Even adjusting for inflation, and even if the measurement of inflation is decent, it would still need to go down by another 20%.
Anyone ever drive around Austin, its highways and its endless new construction of new superhighways, to the point that Google Maps is confused?
As annoying as NYC (and driving) are, there are downsides to unlimited housing and lack of zoning - as it turns out, the same states that do this sort of thing we all praise, are the same laissez-faire philosophies that oppose communal public transportation and walkable urban communities.
Germany could learn a lesson or two here...
Similar phenomenon in several cities: https://substackcdn.com/image/fetch/$s_!vg94!,f_auto,q_auto:...
Austin is a good reminder that supply does matter — but also that it needs to be added at scale before people actually feel it.
Small incremental changes probably just get absorbed without visible impact on rents.
Supply glut aside... Quality of life down... Traffic up... Kind of makes sense rents are down. Density needs transit investment too
Supply glut aside... Quality of life down... Traffic up... Kind of makes sense rents are down.
I mean… duh? Genuinely baffled at people struggling to understand this. When there’s more of a thing, it costs less. Which is good when that thing is essential, like housing.
Not sure the idea of housing being an asset which endlessly accrues value is good for anybody involved, long-term. Open to disagreement, though! I’m no economist.
I guess the confounding factor is that the population isn't fixed. Greater construction could result in population growth which cancels out the gains from greater supply. You'd have to build faster than population growth to lower prices. And generally developers aren't looking to do that.
Sure they are. What developer wouldn't rather rent out ten apartments for $2k/mo than two apartments for $4k/mo?
Developers usually want to buy land, build house/apartment, and sell house/apartment.
They want to flow as much as possible - so if there are unlimited building spots you get a smattering of various options being built as they all find there niche.
If the building lots are rare, then they all will be built into the most expensive possibility.
Depends what the situation is, if the rents are absurdly high where you can undercut them and still profit then of course they would rather build more. If they are getting close to cost price, developers won't build more to lower it beyond that. At that point if you want to lower prices more you'd have to look at lowering the cost of construction.
If you try to take any local action that might lower housing prices or even keep them steady, you will likely be stymied by a large contingent of people that deny that new housing could ever raise rents.
The idea that supply and demand don't apply to housing is quite popular:
https://www.jstor.org/stable/27397156
And the very few academic articles that try to refute housing supply lowering prices get a lot of press:
https://hellgatenyc.com/take-that-ezra-klein/
Even when it's not peer-reviewed and contradicts a ton of more serious research attempts, a bid of research which rarely gets popular press coverage.
It's like climate denialism, there's huge demand for denialist positions and very little research to back it up, so the press does not reflect the research.
People are quick to point out that induced demand exists - especially people that aren't fond of change.
Very broadly speaking, people mis-estimate effect sizes in economics by orders of magnitude. Induced demand is just their foothold to claim an effect exists, before they go about claiming the effect size they want to see.
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!
It doesn’t work unless there is currently repressed demand for living in that abandoned town because not enough housing or other factors.
No one is complaining about a housing shortage today in buffalo which used to have twice as much housing stock as it does today, because the demand simply isn’t there now.
Exactly - induced demand is just a misnomer/misunderstanding. "Pent-up demand" would be a much better way to explain it - but that would reveal that at some point the demand ceases; even SF has some limit - once all 12 billion people live there, demand will level off.
Good analogy. I've always considered induced demand a bit of a fantasy.
New businesses the sprout up that market themselves certainly induce a bit of demand, but more lanes and stoplights doesn't exactly motivate people to want to go somewhere.
> When there’s more of a thing, it costs less.
Yeah, and when we add lanes to roads, the average speeds increase and commutes get shorter. Right?
Also, if the government gives me $1 billion, then I'll be rich. But what happens if the government gives everyone $1 billion? Everyone will be rich, right?
... 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.
> ... Your examples seem to undercut your point if I'm understanding what you're trying to say.
That perhaps you shouldn't assume that kindergarten-level theories always correctly describe complex markets?
> 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.
So go on, do continue this line of thinking. You built more houses.... then what?
Feel free to refer to my explanation: https://news.ycombinator.com/item?id=47433743 - as usual, downvoted by people who can't face the truth.
Water, still wet.
Thats cool. Now do LA. Sorry but I want beaches and housing options.
what they didn't mention is that supply didn't impact rents until the large remigration back out of Austin
> what they didn't mention is that supply didn't impact rents until the large remigration back out of Austin
This has been studied to death. But just like soybean farmers in Idaho voting for tariffs on China it seems a category of urban renter is more wedded to ideology than self interest.
The Austin metro area's population is up [1][2]. Austin's GDP is up [3]. Migration per se doesn't explain a phenomenon that is robust across cities, countries and centuries.
[1] https://www.macrotrends.net/global-metrics/cities/22926/aust...
[2] https://en.wikipedia.org/wiki/Austin,_Texas#Demographics
[3] https://fred.stlouisfed.org/series/GDPALL48453
show pop stats
Sigh. NO it didn't. One fact of life: new construction does NOT lead to lower housing prices. Sad, but true.
So what did? Likely COVID. The _only_ way to decrease the housing prices is to decrease the population. As proven by countless cities, including the world's most liveable Copenhagen.
So does my prediction hold for Austin? Let's see.
Austin TX population in 2019 (ACS estimate, data series ACSDP1Y2019.DP05): 979263.
2021 (ACSDP1Y2021.DP05): 944658
2023 (ACSDP1Y2023.DP05): 979700.
2024 (ACSDP5Y2024.DP05): 979539.
So yep, my prediction holds true. The housing prices in Austin were stagnant because its population decreased during COVID and barely recovered to pre-COVID levels.
Want another prediction? Seattle's home prices will fall down, because its population is now (likely) decreasing. Not because of a rush of new construction. We'll see updated population released stats in April.
how surprising, never would have seen that coming