LogFAQs > #986074558

adjl posted...

Well, I did just make up numbers to illustrate the point of "making less money>making no money," so I'm not terribly surprised they aren't an accurate representation of actual figures. Obviously, the exact figures need to be analyzed in greater depth than anyone is going to do for a post on GameFAQs to figure out what limitations will be appropriate. I'm not specifically suggesting that profit margins be reduced by 50%.

It's not the "reduce profits by 50%" specifically that is the problem, it's that the return on investment is actually fairly low and it doesn't take much tinkering at all to make building anything at all economically nonviable. That's why I pointed out that "affordable" housing generally has to be build as a small fraction of higher income housing, as building "affordable" housing is already economically nonviable without some sort of subsidy or government support. It is literally better to build nothing than build "affordable" housing in most cases, as the return on investment is lower than alternative investments with far less risk.

adjl posted...

There's nothing intrinsic in the concept of rent control that means it can't keep up with the costs of renting out a place

But of course there is, as the politicians who set those rates can run on keeping them as low as possible. The more units that are rent controlled, the more votes that can be bought by keeping rent increases lower than they should be. NYC rent control does have "real bite", to the point where some units are priced 60% below market rates and are (supposedly) calculated to be set to just barely cover costs and minimal profit. In reality those costs are calculated too low and rent controlled units are break-even at best and generally losses in the long term.

adjl posted...

Off-hand, though, one easy provision is to restrict the amount property tax can go up annually on a rent-controlled property, reflective of the limits that rent control places on owners' ability to cover tax increases.

Another example of where politics interferes, as about a third of NYC's budget comes from property taxes. Such a policy would blow a massive hole in the budget that would need to be filled somehow, and alternative revenue sources are likely to be less politically viable.

Again, NYC is simply a case study since it's easier to find relevant numbers for one particular city than to generalize national numbers that treats major cities the same as Bumfuck Iowa.

adjl posted...

Data on speculation seems to be hard to find, though. I'm just seeing some things about the impact of vacancy taxes, which isn't tremendously useful for drawing definite conclusions.

The reason you can't find data is because defining what exactly counts as speculation is hard to do, and people have reasons to inflate how common it is specifically to push policies to tackle a problem that is actually much smaller than they would like you to believe.

adjl posted...

Sometimes, they're fully vacant, other times they abuse weak lease protections to be able to kick people out on short notice

Long-term, that large building will provide a bunch of new housing, but it's usually priced well outside of what existing residents of the neighbourhood can afford, and it'll be several years before that's realized even after all of the properties have been bought/demolished (which can itself take several years).

Somewhat ironically, those properties being held for later development would be ideal for use in the STR market. Sometimes when you have two problems you can make progress on one by solving the other.

It's an unpopular position, but new construction being unaffordable to the existing residents isn't really a bad thing. Overall the city benefits from higher tax revenues and higher economic output from that neighborhood, and the neighborhood doesn't become a multigenerational poverty zone. The issue is the rate at which such turnover occurs, not that it occurs at all. Too high is bad, but so is stagnation.

adjl posted...

That, really, is the issue I have with current development strategies: They're all aiming big and not for the "missing middle" sort of housing that cities generally need more of. More housing is needed *now*, not in the 5-10 years it takes to buy up a block and build an apartment tower. By pushing for smaller, quicker developments, you get that response faster, plus you end up with more local investors instead of large corporations that will be siphoning their revenue out of the community (since you don't need as much capital to buy two houses for a 2-year plan as you do to buy 20 for a 10-year plan).

For even local investors, the capital issue isn't that big a deal. Faster response can be a bonus, but existing residents also means you have bigger NIMBY problems with any development that changes the nature of the neighborhood, regardless of whether that change is a single 8 unit building, multiple 8 unit buildings, or one 200 unit block.

With that level of occupancy difference, it's likely large-scale utility issues come into play, requiring a bigger overall investment to justify the expense. For example, while zoning laws are an issue in NYC the bigger barrier to higher density is that 100+ year old water and sewer systems are at capacity with the current density, and replacing even a few 4 story buildings with 10 story buildings would require $100 million worth of utility upgrades. Sometimes those upgrades wouldn't even be near the construction site, depending on where the service bottlenecks are located. And of course the city doesn't have the money or really the motive to make those upgrades, so the developer would have to pay for it as part of the development cost.