LogFAQs > #986062969

adjl posted...

If a developer's got a choice between an expected profit of $10 million and an expected profit of $20 million, obviously they're going to choose the latter. If a developer's got a choice between an expected profit of $10 million or just not doing anything at all, they're going to choose the $10 million. Developers aren't going to stop making any money at all just because they can't make all the money.

This is why I question your contact with reality. A more realistic profit margin would be $1 million for the high end and essentially zero for the low end. And that's after putting $12 million into the project. So risking $12 million to maybe sell for $13 million is the ridiculously high profit margin you think they can shave in half (and that's only if everything goes perfectly). If you cut that in half, you're dropping 8.7% net profits down to 4.35%, which is basically what Treasury bonds are paying right now. The developer would be about as well off buying treasury bonds and building nothing because the returns are the same and there's basically no risk and no work.

adjl posted...

It is if the rent control reflects the actual year-over-year increases in the costs of providing housing

It won't and you damn well know it won't. Certainly it never has in any currently existing rent control scheme.

adjl posted...

4% is massive when the typical target for a healthy vacancy rate is 3-5% and so many cities are struggling to break 1%.

The institutional investors owning 4% does not in any way imply that those properties are empty. Institutional investors are generally in the market for returns, not speculation. That means keeping those units occupied as much as possible.

adjl posted...

My inclination is to go nuclear: Every residentially-zoned property must have a long-term resident registered as living in it within six months of purchase, and cannot go more than six months without a registered long-term resident unless a clear explanation is provided for the vacancy (such as ongoing construction for which there is a definite plan and concrete timetable). If this condition is not met, the property is expropriated, sold for current market value, and the proceeds of that sale go to the previous owner. The numbers obviously need some tweaks (possibly scaling based on local vacancy rate), but the bottom line is to force residential properties to be used for residing.

I know the NYC market the best since it's a world class manual on what not to do, so I'll use that. In many cases that "current market value" is zero. The value of an apartment that needs $50k worth of renovations to bring up to code but due to rent control cannot possibly charge rent high enough to recoup that cost is nothing but a net drain on whoever owns it. The most cost effective way an owner has to deal with it is to turn off all the utilities and take the property tax loss in perpetuity.

How does your utopian plan deal with one totally uninhabitable, economically nonviable apartment in a building full of otherwise rented apartments - knowing that whoever is dumb enough to buy the building is going to be in exactly the same position in six months because your solution doesn't in any way address the issue?