I want to point out some evidence for the theory can be found in Vancouver where the entire city was rezoned for fourplexes (a duplex where each side has a rental unit.)
It has added barely any new supply at all.
I think it didn't go far enough. Rezone for 4-10 story apartment buildings, and now you're getting somewhere.
This single family home thing just doesn't work in cities with as much demand as San Francisco and Vancouver.
If you want to tackle the problem from the supply side, you need to be more aggressive about it. You need for the potential profit to be great enough to justify buying multiple adjacent homes, tearing them down, and combining the lots.
Even then, it might not be enough to solve the problem, but it's a start.
If Vancouver overall is as dense as SF then 4 plexes won't matter much. But there are many other cities - even LA - where I would think it would. Yet LA has vast amount of low rise commercial on 4 lane streets with bus lines that could support widespread 1+5 podium style designed buildings.
Seems to me like in Van this is just a gradual process. Particularly in east van, I'm seeing houses be replaced or renovated to specifically accomodate at least twice the addresses and maintain the feel of the existing neighborhood; I'm living in one. I think something to consider though is that a lot of people were renting the basements anyway, and might instead be renting an intentionally constructed unit on the same property now.
I'm also of course seeing nimbys against tower development at commercial and broadway, which would have the biggest short term impact imo. They want to protect their scarcity.
> I'm also of course seeing nimbys against tower development at commercial and broadway, which would have the biggest short term impact imo. They want to protect their scarcity.
Ugh. We have to put a stop to that if we don't want to end up like San Francisco. The Tokyo model is the one to emulate.
Do you mean put a stop to nimbyism or put a stop to tower development?
I'm not one for completely favouring towers, but in this particular neighborhood, there's basically no new buyable housing stock. If people want to live here, they're either renting or buying one of the endlessly appreciating massive houses. That need to rent and the scarcity drives up the big house value further, and the only people who can get ahead are the ones who cam buy something for 1.7m.
That sounds like an epic value destroyer. It won’t lower prices. Instead it will drive out owners to be replaced by leasers incapable of owning property. The only people that win are owners of multi-tenant properties, which are often commercial businesses.
If they're condos, you can own it, at least as much as you can own half a duplex.
If they're rental units, that's also ok, more supply brings down rents and lower rent causes more landlords to sell. Extra supply does add downward pressure on prices one way or another.
Condos are not advantageous to the owner. You're not building equity or able to borrow on the value, just ensure a very slow growth investment at risk of value destruction at the hands of the condo board.
People say that on here all the time, but I have never seen that happen. Do you have an example where increased housing supply lowered prices aside from a natural or market disaster? Maybe, Detroit where people simply abandoned their homes with no intent to sell.
Japan is the classical example where they have national zoning rules permitting residential development in each zone. You can get a place in downtown Tokyo for like $300K USD. [1]
> While the cost of housing is climbing in many global cities, the average middle-class family in Tokyo can still afford to buy a new, single-family detached home for $300,000. That’s right. The typical Tokyo starter home is a brand new three-bedroom.
Their national zoning rules allow supply to meet demand without city-level meddling. Houses there sell for roughly the cost of construction.
The reason housing is so nuts in SF is because the city added half as many new houses as required to meet demand over the last say 30 years. [2]
However, that Tokyo 3BR is much smaller than anything you'd find in the US. The average house (not apartment) size in Tokyo is 91 sqm, or under 1000 sqft.
That sounds, fwiw, roughly in line with SF or NY 3br apartments. [1] By the way, that's actually part of the value proposition. New houses in the US are twice as big as they were in the 1970s - while costing the same per square foot on an inflation adjusted basis. This means 3br houses are 2x as expensive now as they were back then and is part of the reason folks are priced out of the market entirely. This is also a zoning issue.
We need small 3br houses and apartments. That doesn't mean we can't also have large 3br houses.
Japan is a terrible example. It has near-zero immigration. Its population is now falling is the same as it was 30 years ago. In the 80s it had the highest most unaffordable prices in the world.
I'm not sure any of that is relevant, especially immigration. All it means is that supply is roughly in line with demand. Nothing more, nothing less. When supply is in line with demand, the cost of housing approaches the cost of construction.
We just ran a massive experiment, called Covid-19, which caused about 10% of San Francisco residents to leave the city.
This is not quite the same thing as an immediate increase in supply, but instead a large drop in demand. The net result is the exact same thing: a large increase in the vacancy rate, which resulted in a rapid and dramatic decrease in median rents.
It’s a terrible example though as the people with the most liquid financial situation are the ones that left. The ones that remained can’t even afford to rent they U-Haul to get out of Dodge. They’re stuck treading water and at best will get Newsom to buy their vote^W^W^Wpay their back rent.
It’s a terrible example of housing policy and how we want the city to develop and mature, but it is still a perfect demonstration of how excess supply drives down prices.
Has the decrease at about 22% at one point. Lowest rents since 2013. They seem to have gone back up somewhat since, but that is a big adjustment and reflects excess supply.
That's microeconomics 101, so it's theoretically sound.
Is there some effect in real life that prevents it from working the way the theory predicts?
I don't think so. I would put the burden of proof on you, if you want to go against a solid theory. It seems self evident that more housing supply means houses stay on the market longer (there is lots of evidence for that) and that means sellers have more incentives to lower the price to get a quicker sale (lots of evidence for that too.) Look for historical real estate inventory reports that include prices and you should see the effect when time on market increases.
It's important to note that prices would only fall if the change in supply overwhelmed the change in demand. In cities like Vancouver the demand is increasing at such a rate that increased supply only means prices don't rise as much as they would have otherwise. Time on market is always short. There was a brief dip in prices early in the pandemic and then things compensated back in the other direction.
It has added barely any new supply at all.
I think it didn't go far enough. Rezone for 4-10 story apartment buildings, and now you're getting somewhere.
This single family home thing just doesn't work in cities with as much demand as San Francisco and Vancouver.
If you want to tackle the problem from the supply side, you need to be more aggressive about it. You need for the potential profit to be great enough to justify buying multiple adjacent homes, tearing them down, and combining the lots.
Even then, it might not be enough to solve the problem, but it's a start.