> I spent time in Bangkok and Shanghai and why does it seem really easy to rent a centrally located place in a quality tall building, as if it's just normal, and without a prices that seems insanely disproportionate to other life expenses? Yet in the US, it's very rare. There's not enough demand? Labor costs are too high? Laws like building hight limits in the US prevent it?
There aren’t enough of them because in huge swaths of the country it’s illegal to build anything denser than a single-family home. There’s plenty of demand for it, there’s just not enough supply.
Doesn’t even have to be high-rises, in most places it’s illegal to build the sort of mid-rises that are everywhere in European cities.
EDIT: Oh, and it’s also usually illegal to put a business in a residential area, which forces things further apart and forces people to drive to get to anything.
>The existing problem is that multi-family dwellings are illegal in many high demand areas
This is technically correct but the areas mentioned are the size of a block or a subdivision so it's hardly the limiting factor. You can build high rise apartments in any big city and multi-family anywhere. The reason prices on housing go up is that it costs a lot to build housing and it's pretty hard to secure financing for a housing project which you plan to sell/rent below cost. It's combined code compliance, materials, labor, and financing. If it costs $300 to build a square foot just in the labor and materials then it comes up at $150K for a tiny 500 sqf 1br and you'd need to rent that for more than $2000 per month to break even on the commercial loan you took. Throw in maintenance, lapses in occupancy and some profit and you are looking at close to $3K for a 500 sqf 1br. Unless it's on Manhattan or on an ocean beach somewhere, it's going to be very hard to find tenants.
It appears that America had ran up its credit card to the limit. Mass produced goods from China are still cheap but the hoses are just expensive, can't ship those in containers from Shenzhen. Playing with zoning is rearranging chairs on the deck of Titanic, it's not going to lower the cost of construction. And yes, adding more housing would lower the price but the problem is that adding housing is held up by the cost mostly and the developers only want to build in very limited prestigious areas where they hope to get tenants/buyers willing to pay their cost. It's not sustainable.
> I thought in the US you guys are more liberal when it comes to building highrises.
Even in a no-zoning "paradise" like Houston, short-term economics rule the roost. Approximate rule of thumb in the US I've heard is if a Single Family Residence is 1X cost per unit living area, a Multi-Family Residence (about 3-4 stories) is 3X, and a high-rise is 6X. Developers turn over inventory way faster at the 1X multiplier by selling to a bigger market. This is also confounded by American expectations of living space; they're not tempered much if at all by moving into apartments and high-rises, so costs go up.
US residential growth planning is all kinds of dumpster fire ugly, so these are by far not the only factors that contribute to why we don't see more high-rise developments in American cities. Just the tip of the seriously messed-up iceberg.
> Shortages of buildings are not the only reason that property prices can be high.
It pretty much is - everything else is window dressing. Pretty much every single city in China is 3-10x more dense than any area in the US, so lack of land is a reason I find continually uncompelling. Our lack of density, zoning practices, NIMBY attitudes and car dependency all contribute to this, with the result being a lack of construction.
Here's a grad student on tiktok who does good, well-sourced analysis on this front (he has an entire playlist on the issue of vacancy rates given how frequently it comes up): https://www.tiktok.com/@divasunglasses?lang=en
> There aren't enough homes _where people want to live_ and you solve that buy building more homes _where people want to live_.
You mean, if we had the density of Manhattan or Shanghai, our housing would be as cheap as Manhattan or Shanghai? I'm not sure people would like that (given that those places are more expensive in general). The best example in the states is Houston, but it is horrible sprawl (so housing isn't being built exactly where people want to live, but continues to build outward). Tokyo is the best example internationally, but they have special conditions (housing depreciates since second-hand houses are not popular, decreasing population, liberal definitions on what is needed to call something a home).
I think because real estate investors have enough capital to take over cool areas.
A stark counterexample is Japan where you can own a freestanding house in a dense urban environment near public transit for $300k -- what would that cost you in London, NYC, Berlin? It seems like Japan is one of the few major cities where you could have a large family (or large studio) and live an urban life -- everywhere else you are stuck with a 2BR or 3BR apt (if your rich).
> There are much better, much cheaper housing options than the huge luxury apartment buildings
If land is expensive, the only route to cheap housing is to (a) increase density or (b) limit immigration (e.g. Beijing's hukou [1]).
> There are more options than just 'buy a house' and 'rent in a huge apartment building'
This is a false dichotomy. Nobody is arguing for buying versus renting. The debate is about density. Apartment buildings are tremendously more land efficient than the two- and three-story condos San Francisco seems to prefer.
>Rising rents are almost entirely because of local restrictions on creating more housing.
If those restrictions are a constant, then foreign purchases can still play a huge role in pent up demand.
Plus, there are limits to how much you can (and want to) built. You don't want to cover every inch of land with buildings, or grow into sprawling third-world style megacities...
> It's not possible to create an insane level of supply for appartment rentals
This is technically true, but not for the reasons you list, and it isn't the case here.
You can always build up. 150 floor buildings are not possible - if rent goes high enough they are worth building. Nobody is going to build that if they don't expect a return on investment though.
It isn't a problem in reality because jobs face the same pressures. eventually some company will decide rent in those dense neighborhoods (sometimes cities as well) are too high, and move. That moves some housing demand with it.
Secondly, studies have shown that 10% increases in supply lead to 1% decreases in price, more or less. Coupled with 4% rent increases over inflation every year, it's just not feasible to rely on additional supply.
That doesn't follow. To build more supply the question how much it costs to build vs how much you can rent for. A a landlord the total profit in rent for the city isn't my concern it is my marginal profit that matters. Even if we double the supply of apartments in the city, my building 100 more isn't going to make much a difference in that, but I get a larger share of that 10% decrease in price and so my profit is still higher building 100 apartments than zero.
I don't know what is going on in Berlin (I can guess). I know in San Francisco the city has for many years refused to allow building at anywhere close to demand. Thus more people want to live in the city than actually can get an apartment there. Plenty of builders are willing to build more supply, but they are not allowed to under reasonable terms so they don't. (as a result of this there is a lack of experienced people in construction and so even if SF allowed unlimited building in practice there would only be a gradual uptick in building over 10 years while the industry gets experienced people back)
> The issue is oligopolies. Few large businesses that own the majority of available rentals and thus can set prices to whatever they like to rake in the profits.
Even if it's true that a few large businesses own most rentals, that kind of oligopolistic behavior should be undercut by new people entering the market by building more apartments - unless there's a big barrier to entry, like the difficulty in building things when there's restrictive zoning!
> There's no federal zoning laws, so why would everywhere from California to Idaho see the same drastic spikes in home prices?
The incentives that produce NIMBYs - wanting to keep supply low so that housing prices stay high, and not wanting to deal with any of the annoyances of increased density - are the same everywhere.
> Why are existing units that have existed since at least 2010 (and I believe back to 2005) commanding $400 premiums over what inflation would dictate? Do you think back in 2010 they were losing money renting to me?
No, but now there are more people who want to live there and they haven't built enough housing to keep up, so the bidding is more intense.
> How do you design a home that someone living below the poverty line can afford
Why not rent a flat instead? Wouldn't that be much more economical (no property prices, lower heating costs, less maintenance work, less risk, not built on the cheap)?
I don't understand the fixation on owning a house / living in a single-family house many americans seem to have.
Row house are dense housing. No yards, they don’t take up much space on the ground. If you are comparing it to people who live in apartments sure, not as dense, but the SFHs you think exist in SF don’t really, the neighborhoods are all fairly dense given the land costs involved.
> And idk if you’ve noticed, but China has had an insane urbanization rush for the last 20+ years, so high housing costs in their cities isn’t surprising.
How is that different from “The popular place everyone wants to live should build enough housing to support that affordably”? Consider:
IDK if you’ve noticed, but a lot of people want to live in Seattle in the last 20+ years, so high housing costs in Seattle isn’t surprising.
Are you just using another standard for China, or do you mean the situation is truly different?
> For the price of a big 4 - 3 bedroom house in an mid income zip code in a moderate to low cost of living city in the US, I could buy a smallish 2-3 bedroom apartment in my country's capital city, in a similarly nice area.
I think this has to do with the high costs of capital cities, rather than comparisons across countries. European capitals for example, especially dense ones, have typically been very expensive - see London, Paris, and recently Berlin; the spread with other major cities in the same country is in the range 2/2.5x, or even more.
> Do these concepts really model the reality well, or perhaps more importantly lead us towards the reality we want to see? Isn't this high-density housing also just another way for real estate people to speculate?
Thinking about it. China itself is a good example. A fifth of the entire housing stock are vacant concrete boxes despite China having the biggest construction boom in human history for 20 years in a row (Chinese construction industry builds one California worth of housing every 2-3 months.)
Rents are very low though, rent to buy ratios above 100 are not rare.
>About 20 years ago they began densifying like crazy. 2-3 story houses for 8 people became 8-floor apartments and studios. And you know what? Rent is higher than ever! Everywhere!
So developers started building houses, which caused more people want to move there and rising rent prices? You sure you have the right cause and effect there? It sounds like 20 years ago demand for housing prices started to rise and the supply never kept up.
> Where I live they have not been able to build new housing fast enough to keep up with rising population over the last thirty years.
Yes, because rules in the US handicap new housing growth.
> The prices increase directly proportional to the current velocity of new housing availability at any given moment.
Yes, because they have the same cause: demand increasing.
Imagine that every car maker was heavily constrained in how many cars they could make. As demands for cars rise, they find every angle to try and produce more cars, but the price keeps going up. Did the new supply cause the price to rise? No, they just have the same cause.
There have been myriad studies on this, almost every economist finds that new housing in booming areas makes housing prices less bad than they would be otherwise.
> You can’t make more land but you can always build more houses irrespective of demand.
This isn't true. Zoning severely handicaps more housing in the places people want to live.
Well, except for Houston (sorta), and indeed, rent there seems substantially lower than other major cities in Texas like Dallas and Austin.
> The way to affordable housing is high density, mid-to-high rise condos.
How though? Density sounds good on paper, and has tons of side benefits, but (as the blog post explains) the cost of land + construction jumps significantly.
I know here in the US, there basically is no such thing as "affordable high density condos". High density urban housing is expensive, by definition. So much so that there isn't a single unsubsidized affordable high-density urban housing unit in my entire state.
The only place I'm aware of that has affordable urban housing is Japan. And that's mainly due to a combination of having no meaningful population growth, and having excellent public transit literally everywhere. Two things the US simply can't have in our lifetime
> Luxury apartment at $4k a month? No insulation between units, and the guy above you comes home at 2am and never takes his shoes off.
With this one you're getting into the intersection with US cities' rabid opposition to actually building enough housing, so new units become labeled 'luxury' whether or not they're actually luxury, because zoning and permitting requirements push the prices of new units into the stratosphere.
If the real problem was always zoning, wouldn't dense cities like NYC and Shanghai be cheaper than average, not way over average?
> Check out Japan housing CPI - a market where supply meets demand thanks to federal zoning rules, and is also centrally banked.
Japan went through a huge bubble in the 1980s. Also, housing (the structures at least) rapidly depreciates in Japan, which prevents them from being used a speculative asset as in countries (even then they still went through a huge bubble in the 80s). It is definitely an alternative model to our own, but I'm not sure how many people will want to experiment with that. Japan also much more strictly restricts immigration than other countries, which makes it, for example, a bad place for Wenzhou house wife real estate speculation.
> Jokes aside, why the prices are so high in some countries?
This is localized to specific cities, not the entire country. (Though country-wide home prices are also up, just not into the millions like this).
The reason is that people want to live in these specific places, but they can't build upward fast enough to hold everyone who wants to move in. So instead, new buyers compete over the same housing inventory and the current residents never want to sell because they're afraid they may never be able to buy back into the city in the future.
Seattle does have some major problems right now, but it's not literally a lawless wasteland. I think most of us believe that the city will get on top of the social issues eventually, at which point it becomes even more attractive to live in Seattle and the prices go up even more.
There aren’t enough of them because in huge swaths of the country it’s illegal to build anything denser than a single-family home. There’s plenty of demand for it, there’s just not enough supply.
Doesn’t even have to be high-rises, in most places it’s illegal to build the sort of mid-rises that are everywhere in European cities.
EDIT: Oh, and it’s also usually illegal to put a business in a residential area, which forces things further apart and forces people to drive to get to anything.
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