Are they both not housing? Can I not renovate one into another over a few weeks? I give developers more credit. If they want to make money, they need to figure out what the market will bare. And it's not their fault if only enough housing is being allowed that they can get away with making luxury only housing. If more was allowed without BMR conditions, there would be a much less price difference between what you find at avalon vs craigslist. The difference is actually not that much, everything is just very high and unaffordable period. Hence the dilemma we're in.
If you could build 2 $100,000 apartments or 1 $1,000,000 apartments, which would you do? You know there's a massive shortage of housing and whatever you build will definitely sell. The cost of making the luxury apartment is not actually that much higher than making the other 2.
You'd be a complete idiot to build the affordable housing.
Planning laws and NIMBY are limiting the amount of buildings builders can make all around the world, so naturally the only buildings they bother making are the luxury ones with the big, fat, juicy returns, unless they are forced.
This is complete nonsense in so many ways. Multi-unit housing is mostly illegal to build, and even projects that do meet zoning requirements can get blocked by endless red tape. Fix that and housing becomes cheaper to build and it won’t all be “luxury”.
Also, “luxury” is just a nimby boogeyman and doesn’t mean anything. Older housing is still very expensive, because there is simply not enough housing. Even if new housing does come with a small premium over older, people move out of older housing into the newer housing freeing up space in the slightly less expensive older units for lower income residents, and the market as a whole gets less expensive as you build enough housing to meet demand.
I'm in a very densely populated area, and I'm watching a ton of formerly affordable housing being converted into luxury housing.
I've been told that building luxury housing would free up existing housing, but that doesn't seem to be the case. Developers and owners seem to be in a desperate race to convert their non-luxury properties into luxury housing, reducing the stock of affordable housing altogether.
I don't see a problem with these real estate developers that are building and managing large apartments complexes themselves. Seems like they're doing a lot to add supply at the lower end. Even if they do maintain a certain vacancy rate.
What we typically see is fighting to maximize price-controlled units as a percentage of development while still minimizing overall development. A small, 100% affordable project preferred over a large, 20% affordable project, even if the latter yields more affordable homes.
If you believe that market-rate units accelerate gentrification, this even makes sense, as the more market-rate units you have, the more affordable units you'll need. The first priority is to minimize disruption to existing communities; BMR units are just a way of partially mitigating it when it does happen. Hence "we can't build our way out the housing crisis."
"De-commodify housing" is a lot sexier than "find the optimal BMR percentage requirement."
In earlier times, when it was easier to get permits for building, the common charge was that building cheap housing was more profitable than building decent yet alone luxury housing.
Yes, we want developers to go and seek profit. Build, build and build, until the market price for housing is roughly in line again with actual construction costs.
If luxury housing is most profitable, that's fine: those rich folks don't just pop into existence, they leave some slightly lower market housing behind when they move. (And then someone else moves to that, etc, down the chain.)
The total amount of housing is more important to affordability at the low end than the type of housing.
Why not let the market decide what needs to be built?
Edit: Built too many luxury apartments and those come down I price and are the new middle class apartments. It's the developers loss. Built tons of tenements and either people are happy over cheap housing out no one moves in and they get upgraded or even cheaper. It's magical!
How do you tell a luxury condo from any other kind of condo?
- By price? Then all housing in a hot market is luxury, even what everyone would agree is a dump. Wanting to stop development because the market is hot is exactly backwards.
- By price relative to the market? New construction is usually more desirable than old construction, today's cheap housing was luxurious when new, and we'd better make more so that there will be cheap housing still standing in 50 years.
- By marketing language? Then developers can appease community concerns by changing their brochures a little.
- By square feet? That'd be one truly enormous condo to have a square footage that's offensive when compared to a typical house, although I guess it could be what's happening. If the units turn out to be too big for the market, can't they be subdivided later?
- By amenities? I can speak from experience that media rooms, demo kitchens, event spaces, etc. are not that exciting and certainly not worth even a few hundred extra per month. Most people would rather go to a real gym.
- By interior finishings? Isn't this, like, a few tens of thousands of dollars per unit at the high end? Compared to an overall unit price of $500k+ this doesn't seem like a huge deal.
I've always been confused about what this category means and why it's a useful separator of acceptable vs. bad development.
>Houses over $5million aren't selling like they once did. That doesn't do anything for working people looking to rent apartments.
Do you think we're going to meet demand at $200k without also meeting demand at $4m?
It's not surprising that they prioritize higher margin housing, since 'luxury' apartments are barely any different than affordable housing units. It doesn't cost a developer that much extra for them to dress up a basic apartment as luxury with a stainless steel fridge and granite counter top when they're doing it in bulk.
In which case another developer will build them. Assuming the numbers make sense.
Either way refusing to allow apartments to be built because you fear they will be "luxury" is dumb. It just means that the only people who get to live there are the really rich who can afford a full-sized house.
BMR units should not be required by private developers. This is a public problem that private developers are being forced to solve and many are just refusing to build more housing because they cant make a profit. Instead of requiring them to build BMR units just require all apartments to rent out 25% of units to section 8 housing and the city can subsidize the rent of low income people. The more barriers to housing you put in the more developer leave the market. If you want BMR units then have the city build them and they can build 100% BMR complexes
They can only do that as long as there is market demand. And there would be an increased demand in regular housing if you tore those down. Eventually (or immediately) the demand for regular homes would exceed the demand for luxury homes. Then it becomes a greater risk to build luxury homes vs. regular ones. So the developers choose the lower risk option..
And the ones that do get built are promoting “luxury living” when people just want “basic living”. None of the new construction is no-frills apartments, they’re all glitz and glam with stupid high rents - 2br is about 5K in some of these places. That’s ridiculously high. There’s even an apartment complex that advertises a redwood grove in the center - that’s just extra cost that could have been saved and passed on to the renters.
Lots of developers choose to build luxury buildings because it can take several years for the construction to be approved. We could build more starter homes like we used to, but it's hardly worth it for developers.
Seems off to call someone’s reply unsubstantial when their very argument is that a simple model is sufficient.
Of course developers are going to build high-margin housing. But why is it high margin? Because there is high demand and low supply. “Luxury” housing is only marginally more expensive to build than “affordable” housing. The expensive parts of development are the land, labor, and construction materials, not the light fixtures, appliances, and flooring. Shouldn’t we be celebrating that developers are building a much better product then they could be if they cut a few corners?
To the second point, developers are not in collusion to keep supply down, and the suggestion is absurd on the face of it. They are developers. They make money by increasing supply. The more they develop, the faster they develop, the more money they make. Developers generally sell properties once they finish them and move on, because they are not in the business of property management. Maybe there’s a non-absurd argument to be made that property management companies are in collusion to keep supply down, but they aren’t. Aside from the fact that it’s illegal, it would be impossible. There are too many of them and the market is too fragmented for a cartel to form, and defecting is too easy.
New luxury housing is not used as comps for older housing, at least in California. There is always a massive price premium for newer housing over older housing, contrary to your claims.
reply