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the best way to increase supply of lower cost housing is to build that. To advocate building boffo pricey housing, and then rely on the machinations of the 'complex and multi-faceted' market dynamics to provide lower-cost housing, is perverse.

Well, no.

There are two things here - First, there's lowering the cost of market-rate housing by adding supply. That's what I'm talking about here. In an efficient market, we would expect the price of new housing to roughly match the cost of construction, but that's not what we see. The price vastly exceeds the cost, therefore showing us that demand outstrips supply, raising prices in the market. Adding supply would, all else being equal, lower the price of market-rate units.

The reason why the market rate prices are so high here (and in other cities) is largely due to restrictions on adding new supply, such as zoning, NIMBYism, and so on.

The second part is about 'affordable housing,' defined as subsidized housing. In other words, below-market-rate priced housing.

If you add more supply and therefore lower the market-rate base price, then you reduce the need for subsidized, below-market-rate pricing. Middle class folks will be able to afford market rate rents and prices, and therefore they will not need to be subsidized and those subsidies can be more effectively directed to other affordable housing needs.

Considering that, DTSSER has a point that you are not addressing.

No, not really - and that's my point. You need to look at the price of housing in the market, not the price of single new units in any given project.

The reason is simple, as I've tried to explain: housing prices are set in a market, and attempting to isolate individual projects from those market dynamics is a foolhardy exercise.

by Alex B. on Sep 7, 2012 12:34 pm • link • report

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