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noldshit t1_j4mf908 wrote

Another one of those "they spent research money on this?!?"

Let's see, supply and demand. New building, more supply.


spitefulcum t1_j4mhocq wrote

in progressive circles there is a lot of rhetoric about new housing increasing rent prices. gotta slap down those nonsense claims from time to time.


Hour-Watch8988 t1_j4od9yc wrote

It’s not totally insane to think that amenity effects of development might outweigh supply effects on price at a hyper-local level. Some prior research sometimes showed this. But more housing supply always helps bring down rents at the regional level, so we should be doing it anyway.


DawnOnTheEdge t1_j4o37r0 wrote

Whereas conservatives seem much more comfortable saying, “I know that building more housing will make housing cheaper, and I don’t want that because I’m selfish.”


invisiblink t1_j4o8ev8 wrote

It’s not just conservatives. It’s anyone with investments in housing, especially when it’s a significant source of their income. People can be selfish all across the political spectrum.


sjandixksn t1_j4otpwu wrote

I'd say lay people with houses yes but not people with investments. I wish they would change zoning laws. I'd be happy to provide more housing, but you can only put 4plexes so many places so we're forced to buy SFH.

If you let us we would build 4plexes on every lot. They're actually worth more than SFH and are valued based on math reasons. Any actual investor wants this because we would actually make more money providing more housing.


stu54 t1_j4p12il wrote

You'd make more money, but your competitors would make less. That is what this research states, and why we won't see more multiplexes.


sjandixksn t1_j4q3zwi wrote

Not competitors but everyday homeowners. It would certainly increase the wealth of the 1% but you all would have more cheap housing.

Or play the game as is and normal people can buy homes and get into the middle the class that's basically the trade.


stu54 t1_j4sbf78 wrote

Everyday homeowners don't build housing developments. You might say that they don't control the means of production. Landlords and developers create an environment of legal restriction to ensure that competition does not cut into the profits of their business model. Nimby homeowners just jump on the bandwagon.


sjandixksn t1_j4skibl wrote

I literally was saying the opposite.

Real estate professionals would love for there to be nk environmental restrictions. You can't put that on us. That's your average homeowner. Not your re investor or developer.

If you think it is you don't understand as much as you think you do.


stu54 t1_j4st38u wrote

What I meant by "environment of legal restriction" was strict building codes, stubborn approval processes, and zoning. I wasn't talking about environmentalism.

Environmental restrictions can fulfill that function of restricting supply in a way that benefits landlords, but the developers would be burdened with extra costs for surveys.


Jake_FromStateFarm27 t1_j4oqy1k wrote

I often see the discussion being framed as the supply for housing never meeting the demand therfore prices continue to rise steadily, which is mostly true and larger metro areas like NYC/New Jersey metro area. There hasn't been any new construction enmasse to meet the demand on top of the fact this tri-state area is a highly desirable area to live in with some of the largest population density per capita. Move somewhere else like cleavland or Atlanta and you have a very different story, where the demand to move there is far and few so development actually helps reduce costs of homes/rent (although Georgia in general has been starting to see major increases in population the past few years due to corporate tax breaks resulting and many major companies to move offices to the state).


cantdressherself t1_j50phig wrote

Not as effective as we would hope, you can't logic someone out of a position they didn't logic into.


[deleted] t1_j4mwxbv wrote

is it really about the supply?

if they're building in low-income areas then they know they can only charge low rent. this creates affordable supply.

if they built those apartments & charged higher rent then I dont think you would see rent drop & would probably see it go up

for example, they built a large apartment complex by me but they are more expensive than my house. let's say I'm charging $1.6k for my house but those apartments are $2k. why wouldn't I raise my prices to $1.9k knowing im cheaper & bigger than an apartment & there's no other options?


vermillionmango t1_j4n0xbs wrote

Because there are only so many people who will pay a particular price point.

They will build in low income areas and charge high rents if people will pay it. It happens in most cities, and it's what 90% of anti gentrification stuff is about.

Why would you wait to charge 1.9? Why not charge that before the apartments go up? In fact why not charge 2.5 or 3? Who is your competition? The only reason you would keep your price at 1.9 is because people can choose your drafty victorian or a new apartment.

Now what if another couple apartment buildings went up and to entice renters the first building lowered their rent to 1.7? Would you drop to 1.6?

The only difference between affordable and luxury housing is supply. Should the rise in egg prices mean we stop breeding egg laying hens? Do we have a shortage of eggs or are eggs now luxury eggs?


SerialStateLineXer t1_j4ohx65 wrote

>if they built those apartments & charged higher rent then I dont think you would see rent drop & would probably see it go up

If they could charge higher rent and still get tenants, they would. They're charging as much as the market will bear, and it still lowers prices on surrounding housing.

If they charged rent so high that nobody was willing to rent the apartments, then it would have no real effect on the price of surrounding housing, but doing that would be a tremendous waste of money.


[deleted] t1_j4piylk wrote

so how does the more expensive apartment building by me lower housing prices? it's more expensive than houses, what is the incentive for housing prices to drop? why would someone choose a tiny expensive apartment over a large less expensive house? wouldn't it create demand for people who want houses & therefore increase house prices?


cantdressherself t1_j50xbv4 wrote

Apartments are substitute goods to houses. Raising rents due to new building can happen but only in specific areas.

Building luxury apartments next to affordable houses has no affect on the demand for affordable houses, unless it pulls a few tenants that really wanted luxury in that location but couldn't get it before.

It can raise property valuations and drive up taxes and attract higher paying renters, (gentrification) but that assumes the supply of renters is endless, which is not the case in most areas.


[deleted] t1_j50xnak wrote

yes so simply saying "more housing = lower rent" is obviously not the entire equation


cantdressherself t1_j61sjwn wrote

I mean, it will lower the rents somewhere. Maybe not right next door, but someone somewhere lost a buyer or a renter.


Hour-Watch8988 t1_j4ofnh9 wrote

You’re completely ignoring the supply effect in your neighborhood. Apartments don’t just set prices; they take prices based on the demand dynamics and the other options available to renters and homebuyers in the area. More options for renters and homebuyers means landlords and home sellers need to accept lower prices to compete.

I think you’re getting confused by the fact that new apartments are new and people are generally willing to pay a substantial premium for that.


[deleted] t1_j4pjio6 wrote

im not getting confused im just trying to lead the conversation. lead to the conclusion that there are other factors and its not purely "supply/demand", nothing is that simple. such as the fact that many people choose to pay a premium.

someone could flood the market with a million apartments, if they own all the apartments they have no incentive to lower the prices. & thats a lot of the type of real estate we're seeing, one company buying everything up

the same way you can have a million gas stations but they're always basically the same cost because the supply only comes from like 3 different places


cantdressherself t1_j50xjvy wrote

I fantasize sometimes about becoming a billionaire and buying up apartments and setting the rent below market rate.


[deleted] t1_j50y9kz wrote

i have a similar dream haha. Id love to win the lottery and build beautiful walkable affordable mixed zone neighborhoods that promote small businesses

I honestly don't think itd be profitable but if I had the money I'd pay people to bring their business there. like butchers and bakeries and grocery and coffee shops. they probably can't survive on the business of 1 neighborhood but id just pay them to stay haha


Hour-Watch8988 t1_j4qo7xl wrote

We aren’t anywhere close to the point where individual owners have monopolistic power over housing supply. Even if an individual company flooded the market with a bunch of units, they’d still have to compete with existing stock.

I’m sorry but I have to ask: what’s your training in economics?


[deleted] t1_j4qt3cz wrote

The company Invitation Homes (owned by Blackstone) already owns 90% of the homes in some areas of Atlanta & a total of 12,555 homes in Atlanta in general. they have many other real estate purchases across the country as well

investors accounted for 24% of all homes purchased in 2021 as well

corporations & investment firms are buying up real estate & it won't be long until there are monopolies all over the country


jeffwulf t1_j4pd7mp wrote

It's really about the supply.


[deleted] t1_j4plxmb wrote

I think there are more variables than that. for example, i think it also matters who provides that supply. we're seeing a lot of corporate real estate movement. if 1 entity controls the supply, I dont see an incentive to lower prices.


jeffwulf t1_j4qrehf wrote

It only matters who provides the supply if it's all highly concentrated in a single provider.


[deleted] t1_j4qsu1p wrote

yes. and if you've been paying attention to the news corporations & investment firms have been buying up housing

24% of all houses sold last year were bought by investors

The company Invitation Homes (owned by Blackstone) owns nearly 13,000 homes in Atlanta alone and 90% of the homes in some specific areas


jeffwulf t1_j4qupjg wrote

Most investors are mom and pop landlords. Institutional investors own less than 1% of housing.


[deleted] t1_j4qvhh4 wrote

right now, sure, but it's increasing. & it also depends on the area. housing supply in California doesn't help anyone in Georgia & like i said, some areas of Atlanta are 90% owned by 1 institutional investor

"In the Atlanta metro area, 42.8% of for-sale homes went to institutional investors in the third quarter of 2021"


jeffwulf t1_j4r3lk9 wrote

They own about 300k houses country wide versus housing stock over 100 million. They don't meaningfully effect prices and have no meaningful market power. However, we do know from their shareholder reports that the reason they're investing in single family homes is because they think that local homeowners have successfully put in policies that prevent new housing from being built so their profits will be protected and the largest risk to their portfolio is new housing supply being built.


Your article even says as much.

After all, investors are driven to rental-family homes because of existing demand and limited supply, while housing cost burdens among low-income people have been rising for decades.
“Private equity firms and other institutional investors benefit from tight housing supply, but they did not create the problem. Local governments across the U.S. have adopted policies that make it difficult to build more homes where people want to live,” Schuetz said. “Zoning rules that limit the construction of small, moderately priced homes are politically popular with existing homeowners and local elected officials.”


[deleted] t1_j4r47o0 wrote

the idea of entire areas owned 90% by 1 company doesn't set off any alarms for you?

when highrise apartment buildings are built it's not like there's that many millionaires to choose from who could possibly afford to build & own it.


jeffwulf t1_j4r7jhh wrote

Depends on how big an entire area is. It would have to be pretty sizable before it's meaningful.

There's like 30,000,000 millionaires in the US alone.


[deleted] t1_j4r8xv3 wrote

psh regular retirees are millionaires, that means nothing. especially if you'd have to liquidate every investment & property to get that $1mil.

an average, basic 100 unit apartment building would cost $37+ million to build. so an individual building an apartment building would probably have $100+ million net worth. high end apartments could cost $100 million to build & require someone with $250million.

and then they need to charge like it cost $370 million or they'll never make their money back

but in reality, that's rare, a billion dollar corporation is going to be the one building these apartments. similarly, if youve ever seen a new neighborhood built, every house is built by 1 company. the difference is that the houses are sold to individuals, creating diverse suppliers. where the apartments/rentals continue to be owned by the rich & who then have the opportunity to control the market since not many people can afford to compete with billionaires


teabagalomaniac t1_j4pj10o wrote

It really shouldn't require a study. Unfortunately, in the wild many people have observed a correlation between rising rents and new construction. If an area has become more desirable to live in, for some exogenous reason, then rents are likely to increase while new construction is likely to also occur. This doesn't mean that the new construction is driving the rent increases, it's actually likely that it's the other way around, but they do happen at roughly the same time. In fact, it should be easy to imagine that if the exogenous demand increase occurred and new housing was prohibited how rent increases might be even larger than they otherwise would be.


LiveLaughLie t1_j4or714 wrote

Oh my god, those poor landlords.


spitefulcum t1_j4mhjl3 wrote

who could have known, truly


DoomGoober t1_j4n61t4 wrote

There is a belief that adding new market rate rental units causes an area to "gentrify", essentially more restaurants and services move into the area, making an area more desirable, and driving up rents for everyone who lives nearby.

In fact, that belief is explicitly called out (and disproven) in the linked paper:

>If buildings improve nearby amenities, the effect is not large enough to increase rents.

So, this paper is reactionary to a subset of housing advocates who claim that market rate housing does not help lower/mid income folks and insist the only lower/mid income housing can help lower rents and oppose market rate housing.


fighterpilottim t1_j4o1trx wrote

Thank you for an actual substantive comment. And some reasoning to go with it. :-)


va_str t1_j4toj58 wrote

The argument around gentrification is usually about replacing affordable housing, while displacing the current low-income tenants, not building extra housing.


DoomGoober t1_j4tvi3a wrote

Here is a blurb from Shelter Force:

>Even worse, however, new construction actually fuels displacement in the short term, even when no already existing housing is knocked down. Why? Numerous studies show that market-rate housing development has price ripple effects on surrounding neighborhoods, driving up rents and increasing the burden on lower-income households. Many residents in communities transformed by gentrification can already attest to the connection between for-profit development, rising living costs, and the mass exodus of lower-income residents.

Note they explicitly call new market rate construction "gentrification" even with the disclaimer "no already existing housing is knocked down."

I don't know who or what Shelter Force is, but clearly this group (which I found with a simple Google search in like 2 seconds) does not only consider replacing low income housing as the only form of gentrification.

It considers simply adding market rate housing as a form of gentrification that causes rents to rise. (Which is disproven by the linked post, if it is to be believed.)

Edit: my Google search was: "adding market rate housing gentrification". And Shelter Force is:

>Shelterforce is the only independent, non-academic publication covering the worlds of community development, affordable housing, and neighborhood stabilization.

Uh... Not exactly a ringing endorsement for their bona fides but they have been around since 1975.

I have heard many housing advocates repeat the same idea that even adding market rate housing drives up prices for everyone. I just provided one specific example to prove I am not making it up.


va_str t1_j4u8fzl wrote

Fair enough, I guess I can mostly only speak from my own experience. I come from the perspective where community members are forced out of their homes by rent-increases specifically to clear the properties for re-development, and the union steps in. That's exclusively where we use the term and oppose gentrification. I don't recall any case where we would have opposed entirely new properties being built.


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AckieFriend t1_j4p90r7 wrote

Not the case when affordable housing is demolished and replaced with luxury apartments. There are hundreds of luxury apartments going up with 1 bd units renting for $6k and yet rents at all apartments is going up, up and up with no end in site.

I would submit that a large number of these luxury apartment developments with rents far above market rates are in reality parking places for oligarchical wealth.


kittenTakeover t1_j4qasfp wrote

This is dumb. Obviously, due to supply and demand, adding new housing, with all other factors held constant, would lead to lower rents. However with gentrification all other factors are not held constant. Gentrification happens when the household income of an area goes up due to migration. In this situation the demand side goes up, which can push up rent, especially if the shift happens by replacing low income housing with higher income housing, which is common. This study appears to try to refute peoples concerns about gentrification, but instead it comes off as unempathetic and misleading to me.


Sweet-MamaRoRo t1_j4qg47p wrote

I mean if they aren’t fixing prices this might be true but wasn’t there just a big story about how landlords are price fixing and raising rents in unison? They need to be regulated.


yokaihigh t1_j4qznrc wrote

Mmm, explain San Francisco 2012-2017...


Traciatim t1_j4te40j wrote

More supply causes price decreases. Why has no one ever thought of this before?


0llie0llie t1_j4p4w96 wrote

Doesn’t actually lower the rent, just reduces the speed at which it’s jacked up


NefariousnessNo484 t1_j4oki2o wrote

Um, what about the housing that was destroyed to make the new apartment buildings?


somefunmaths t1_j4p40ak wrote

Depending on the location, there may be nothing (occupied) currently there. Even in the case that there were dwellings, it’s easy to see how a modestly sized building (e.g. 20 stories) would greatly increase available inventory.

If you’re replacing parking lots or vacant buildings, then even something like a little 5 story building would add substantial inventory.