Should Affordable Housing be prioritized for 60-100k/yr households?

[ChargerCarl]

Originally Posted by lio45

Because it's the easiest and clearest example to illustrate the effect on property prices of an out-of-scale pool of external buyers; the same phenomenon actually plays a role in expensive global cities such as San Francisco and Manhattan, as badrunner pointed out.

Rent isn't that expensive in Vancouver.

If Chinese demand for condos was driving US housing demand we'd expect rising home prices to outpace rent, which isn't what we see in the data.

[badrunner]

Originally Posted by ChargerCarl

1% a year is more than twice as fast as cities like SF/LA/NY build. Tokyo averages 2% a year.

Not an apples to apples comparison. Tokyo is not adding housing at 2% annually in the city center.

Nothing you've said can't be explained by a basic supply and demand model. You think whenever the supply curve shifts out its accompanied by a shift in the demand curve.

Not what I said.

I think thats wrong, or its at least decreasing to scale, but its not like its this crazy complex process.

You need to read more carefully. I already said it's not a linear effect. If you add a million new units to a high demand city, supply and demand prevails and prices drop. But if you add a thousand new units to a high demand neighborhood, counter to your prediction, prices can actually increase. Property values in the whole neighborhood and adjacent areas can be buoyed by the influx of new housing. No, this isn't some crazy complex process, nor can it be explained by your basic supply and demand model.

Building a house is just like building a widget in a factory, except its outside. All of the things you think make housing "special" are just as applicable to manufacturing!

No it isn't. For starters, housing isn't a commodity that can be mass produced and shipped out to meet demand, where the free movement of goods and people allows for quick and efficient market equilibrium. The housing market, in contrast, is almost in a state of permanent market imbalance in high demand metros. In these areas housing is a finite resource approaching its carrying capacity.

Already built out urban areas simply cannot add more housing at a reasonable cost. Any future gains will be incremental and increasingly expensive. Unlike mass produced widgets, one cannot simply increase supply to meet demand. And the economy of scale isn't there either. The cost of housing increases the more you pack into a given area, not just because of the aforementioned network effect, but the material/labor cost also increases with higher density. You said it yourself - high density housing is more expensive than low density housing. Then there's the need for expensive transit and infrastructure improvements to support the higher density. The bottom line is, adding housing to an already dense area is not easy or cheap.

Just to be clear, the market forces of supply and demand are still at work here, but if those are the only factors you are inputting into your oversimplified model, you know what they say - garbage in, garbage out.

[Crawford]

Originally Posted by badrunner

Not an apples to apples comparison. Tokyo is not adding housing at 2% annually in the city center.

Tokyo doesn't really "add" any homes. They aren't growing.

There's just a cultural norm in Japan that values newness and where housing is a depreciating asset, and so RE is basically treated like cars.

Also, housing in Japan consumes a much higher proportion of household income, so not a good example. The U.S. wouldn't be better served by such a policy.

[Crawford]

Originally Posted by ChargerCarl

If Chinese demand for condos was driving US housing demand we'd expect rising home prices to outpace rent, which isn't what we see in the data.

The U.S. isn't Canada. We don't really have favorable policies for foreign RE investment. There's no point to buying RE in the U.S. unless you actually want to spend time here. It's a generally bad option for just hiding money.

And I doubt there's much Chinese impact on U.S. residential RE outside of Coastal CA and NYC (and even in those places, it's nothing like Vancouver or Toronto).

[osmo]

Zoning has been the biggest roadblock to creating more affordable options for middle class and families. You get better-priced options with cheaper construction options for townhomes, flats, walk-ups, detached, and duplexes and triplexes. You build quality modest homes in areas where land values are not that expensive and this is how you get affordable family and workforce housing. The issue is as many have pointed out is nearly impossible to build much of this stuff in cities today as Zoning has outlawed much of it.



-edmonton realestate pro

^^^ In Canada, this used to be the standard for market created modest family housing. These non-detached townhome courts and duplex courts were the preferred methods of building in the 50s 60s and 70s in many Canadian cities. For many young families, or immigrants and newcomers into Canada after this was the next step in housing after the apartment got too small for the growing family. I grew up in this type of housing and I remember having all my friends to play on the playground in the centre of the court.

In the USA in many places such as Houston, Dallas, etc you still get this type of housing being built. The USA has kept this going as many developers will build these apartments to spec in well-positioned areas with good access knowing that families and young people will scoop them up.

-Houston WestEnd Realtors

In Canada though and older USA cities, this style of housing is now far too complicated to build these days which is a shame. This family style of density is banned in many family-oriented neighbourhoods.

There just isn't enough housing being built. Housing only becomes "affordable" if put up with a discount on land and materials or if it is older housing stock. Places that have cheap housing either build lots of it, having lots of old housing still around or in a perfect world both.

***

Of course, like clock-work the predictable Canadian arguments of mystical shadow Chinese money that is the sole reason of housing unaffordability when simply Canadian large cities are just not building enough housing. Vancouver and Toronto are not doing anything just bringing a few units to market each year.

You won't find examples of the type of housing I just posted in Vancouver or Toronto. Point towers condos and SFH won't ever make a city affordable.

[Crawford]

That housing above is soul-crushing and horrifically ugly. There are other public policy considerations besides affordability.

And Toronto doesn't build housing? You could have fooled me. It looks like Shenzhen-on-Lake-Ontario coming in on the QEW/Gardiner. Forests of giant, anonymous glass condo towers of recent vintage. And in the nicer Toronto neighborhoods off Yonge, basically every other home is a newer teardown.

[JManc]

New townhouses in Houston (and Dallas, Denver, etc) are not comparable to older housing stock in Canada or northern US cities as most of the ones here start out around $500k and go way up from here, less in areas newly gentrifying and transitioning. The examples in that photo are ugly, cheaply built and are in a shit area surrounded by freeways and they are still are around $300k.

[osmo]

Originally Posted by Crawford

That housing above is soul-crushing and horrifically ugly. There are other public policy considerations besides affordability.

This is subjective as it does not matter what one thinks is nice or ugly. Many families raise kids in those types of housing and it suits them just fine. Design and form can be fixed. I have just shown those examples because they are familiar to forum posters here.

Originally Posted by Crawford

And Toronto doesn't build housing? You could have fooled me. It looks like Shenzhen-on-Lake-Ontario coming in on the QEW/Gardiner. Forests of giant, anonymous glass condo towers of recent vintage. And in the nicer Toronto neighborhoods off Yonge, basically every other home is a newer teardown.

It isn't enough.

Toronto and the general GTA area is growing at breakneck speed. A couple of point towers with 300 units a year in them isn't doing the job. I forget the magic number, but it is around 6000 units that Toronto needs to satisfy its housing demand (which oddly enough is about the number of its record year of for housing coming online). Toronto essentially has to keep up record construction growth to even get close to balance.

More needs to be built.

Originally Posted by JManc

New townhouses in Houston (and Dallas, Denver, etc) are not comparable to older housing stock in Canada or northern US cities as most of the ones here start out around $500k and go way up from here, less in areas newly gentrifying and transitioning. The examples in that photo are ugly, cheaply built and are in a shit area surrounded by freeways and they are still are around $300k.

Nothing new is going to be "affordable" in the sense. Again, what one may think is ugly is fine for young people and families. There is obviously a demand for those "ugly" units as they sell well. There is obviously an appetite for it. They are quick and cheap to build. The only other cheap alternative is sprawl SFH which you can put up for next to nothing.

Missing Middle type housing is the only stuff that is cheap to put up that you can get scale on. It won't always be the nicest but you can produce the quality simple housing with this style that can house lots of different types of people.


-architecturemedia.net

[mhays]

My metro is typical...very little land allows "missing middle" housing. So that land is really expensive.

In fact it's common to pay six figures just for the land. Just anecdotally, often a house will be purchased for $500,000 or $600,000 and replaced with three or four units.

[subterranean]

I work in the affordable housing industry and I thought I'd just point out a couple of things that some people don't realize. Aside from the price of land, one of the larger contributors to high costs are system development charges. Here in metro Portland, the suburbs do not waive system development charges for affordable housing. So you have the water district, the county, the parks district, the schools, and then a cities all imposing system development charges, which add enormous per-unit costs.

A few other things that make affordable housing far, far more expensive to develop:

-Federalized projects sometimes require prevailing wages, and so do states under certain circumstances. This adds at LEAST $17 per square foot in this region.
-Environmental requirements on federalized projects. For instance, HUD likes us to prioritize projects near transit. However, if the noise onsite is above 65 dB, then the building materials (windows, walls) must attenuate the noise down below 45 dB, which adds cost. NOAA also requires that either a) all stormwater is infiltrated 100% onsite, OR b) the onsite conveyance system removes heavy metals and controls for flow and water quality even BEFORE it gets to a municipal system. The cost to multifamily projects has been upwards of an additional $250,000 on some projects.

These are just a few issues that make affordable housing so difficult to develop. The capital stacks on these deals are also very complex compared to market rate developments, often utilizing 7 or 8 funding sources, all with their own requirements, just to make them pencil. And of course, each funder has their own lawyers that need to get paid.

[chris08876]

Appreciate the discussion that occurred. Thanks.

Some good thoughts and ideas here to expand on the topic. Always good to get second thoughts on a discourse.