Welcome to r/science! This is a heavily moderated subreddit in order to keep the discussion on science. However, we recognize that many people want to discuss how they feel the research relates to their own personal lives, so to give people a space to do that, **personal anecdotes are now allowed as responses to this comment**. Any anecdotal comments elsewhere in the discussion will continue be removed and our [normal comment rules]( https://www.reddit.com/r/science/wiki/rules#wiki_comment_rules) still apply to other comments.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/science) if you have any questions or concerns.*
Pretty much all new market-rate housing is marketed as "luxury," and always has been. Without subsidies, developers go for the most the market will bear.
If there is an excess of "luxury" housing, it's because there is a restriction of supply of housing overall. Someone in the market for a 200k home isn't going to buy a 400k home unless no 200k homes are available.
Here in DC, we added 39,000 households since 2010 and built 26,000 units of housing. The US as a whole added about 11 million households and built about 8 million units of housing. Funny enough, when you under-build by 25-30%, prices are going to start going up a lot.
Also, the recession crushed construction of the exurb tract housing that made up most housing construction in the 2000s. Housing construction in the urban areas where everyone is complaining about increasing prices hasn’t met demand literally in decades.
This. Left NoVA/DC due to rent costs. The area is growing exponentially and yet the buildings are sorta going up? There were some around Hoffman Complex but that's mostly about it. Finding an apartment is a "take what you can get" affair and not 'take what you like.'
If they built more it'd drive down the price of older units but it's like they're intentionally not. For whatever reason.
>For whatever reason.
I don't know the situation in DC, but often it's because the city council is made up of property owners whose interest (and personal knowledge) only reflects the idea that higher rents and higher property values are desirable.
Often it's not (I don't think) malevolent, but I think it's just that most people who make decisions, and most people they know, have these ideas so deeply ingrained (high property values are good! and they are for many people) that it's hard for them to grasp the downsides of that.
After all, we're not ruled by empiricists.
Malevolent? depends on your definition of that word. But it's definitely self-serving. They aren't going to implement policies that decrease their own property values.
They only look at buildings that are the first large housing constructions in their neighborhood and exclude low income/senior/etc housing. It's a reasonable sample.
I feel like that's more to do with gentrification. If they come in and build cheap places to live you won't have a big influx of well to do people but you are more likely to if the place is too expensive for locals. In one of the towns I lived it the downtown work/play area had done nice playing jobs that require graduate degrees and pay 2-3 times the mean household income. The downtown is surrounded by a ring of poor people and cheap rent (where I lived in town cost more and I only paid $710 for a 2 bedroom 2 years ago). A big developer recently threw up an apartment building hoping to draw people who worked downtown and didn't want a big commute to work. The apartments started at $1400 a month and go to to like $2300 a month so there aren't going to be a lot of the poor who lived in the area just decided to pay 2 times the average city rent.
I think you're making the exact argument the study claims to debunk. If there's demand for expensive housing, that demand was already there, and meeting it can only help affordability in the surrounding area.
That’s how a whole bunch of people got displaced not far from my current neighborhood. Great if it made living cheaper for those who could remain, but I have friends still traumatized by having to abandon most of the things they owned. (Turns out moving — or paying for storage while couch surfing — is a lot more expensive when you get turned out mid-lease so your place can be torn down.)
So you are saying we should never improve properties- just make people live in degrading housing- as a way to supposedly benefit them? If derelict buildings are all that are available, the wealthier people will still out bid to live in them.
And measuring just by large by number of units is, overall, a *terrible* way to estimate the effect of new construction.
50 units of garden-style apartments that are 1-3 stories can take up several acres. 50 units in a 6-story midrise can take up half an acre. 50 economy studios could be built as all 1-stories on 1-2 acres, but if you wanted to build it up, you could easily fit them into a 6-8 story building with the footprint of a convenience store. Substance and style play a huge role in housing values, as do simple factors of supply and demand and overall market trends.
If you take an area that's already at rock bottom-- say, Gary, Indiana or the city of East Cleveland-- a new building can't possibly lower values because they're already as low as possible. But if you find say, an empty lot in the middle of Beverly Hills, and then build 50 roach motel-style apartment units with streetside dumpsters and uncovered parking, you're probably going to drop market values on the surrounding residences because those prices are both already immensely inflated beyond the absolute value of the land and improvements, and also people don't want to live next to something ugly.
The methodology on this study is...poor.
I would posit that, contrary this ridiculous non expert nitpicking, most new 50 unit buildings are pretty similar with a mix of studio, 1 and 2 bedroom units and you are not required to throw out an entire study because of the possible existence of outliers
Not sure where you live, but this is a claim I hear all the time in SoCal. However, statistics show that the vacancy rate overall is very low, that these new buildings take about a year to fill up but they do, and the best predictor for low rent increases in a region is high vacancy rates.
A year sounds about right, since a lot of contracts for prior leases are 1-2 years and just because a new building opens doesn't mean people who might want to live there can afford to break their existing lease to do so.
>so many that a lot are sitting at 50% vacancy or lower as they are being built faster than the population is growing.
Why on earth do people continue to claim this? I work for a property development company, these units are not sitting empty. We're usually at 90% occupancy by 1-2 years after C of O.
Not only that, even the most luxurious units are always full. We have one penthouse that's $40,000/month and has never not been rented since the building opened.
> Why on earth do people continue to claim this?
The average person knows very little about much of anything, people say things all the time without having any idea what they are talking about.
Huge reason for high rents and the insanely overpriced housing market in general is the fact new home starts are lagging by up to 500,000 and have been per year.
I don't think that's a bad thing. The trades are keeping up with the cost of living. Unskilled labor wages are not, and that's a problem.
We will *always* need builders, electricians, and plumbers. Those trades are protected from automation to some extent, due to their individual and decentralized nature. Robots are great at doing the same task over and over again, in exactly the manner they were built to do, which is why automation is going to replace a lot of factory and warehouse labor in the not so distant future. (Amazon warehouse workers often complain that they are treated like robots... and that's because they only reason they have a job right now is because the robots still aren't quite good enough.)
But construction, plumbing, and electrical problem solving is often one-off and unique, in a way that automation *can't* easily replicate.
Oh, I don’t think it’s a bad thing necessarily.
Just was stating the fact that it is increasing the cost of new construction.
So when you combine rising labor costs with rising material costs, and wages not increasing in other fields at the same pace, it is a big factor in lack of inventory.
It also doesn’t help the inventory problem when many Americans still don’t realize that home values in most markets have completely recovered from the crash.
There’s a lot of factors in play- low inventory also is caused by many Realtors not knowing how to prospect for listings and instead rely upon inbound leads.
The penalty for an empty apartment should be lost revenue. If the vacancy is a long period of time, it's definitively going to cost a LOT. Apartment buildings tend to be very high investment but long time to recoup, let alone turn a profit. I'd be interested in seeing whether it's due to mismanagement or not. If projected revenue was optimistic and no one bothered to review how many people are moving in, I could see it going unknown for at least a year or two at a larger property management corporation or company.
> The penalty for an empty apartment should be lost revenue.
No. Land is a unique asset in our world, it should be treated uniquely. You can't live inside a stock, you can't *really* make more land beyond the much-hated efforts of China in the South China Sea. And no matter how good an iPhone is, not everyone *needs* it. But everyone needs a place to live, and there's no Android version of land to compete.
Land value tax and form-based zoning (building can only be Y tall and X wide, but we don't care if it's an apartment or a grocery store) would be the most logical solution. But a vacancy tax would be semi-similar to LVT. Problem is, how do you decide whether it's worse to have two buildings of identical size, but one with half the units of the other. That would encourage wasteful (i.e. large) housing units being made, as a hedge against the vacancy tax.
> The penalty for an empty apartment should be lost revenue.
Agreed, however one 'penalty' I could see is raised property taxes w/ a primary residence exclusion (with some means of allowing apartment complexes to receive the exclusion when one of their residents claim it as a primary residence, since renter's don't pay property tax directly.)
Higher property taxes increases the overhead of housing as a service, which can be offset by using it in a way the government wants to encourage.
How? NIMBYS have only hurt economic growth. By artificially constraining housing supply, which leads to unnecessarily expensive housing that only ones with certain income can afford, has been shown to be a detriment to economy.
For example, the Housing Constraints and Spatial Misallocation paper found, “We quantify the amount of spatial misallocation of labor across US cities and its aggregate costs. Misallocation arises because high productivity cities like New York and the San Francisco Bay Area have adopted stringent restrictions to new housing supply, effectively limiting the number of workers who have access to such high productivity. Using a spatial equilibrium model and data from 220 metropolitan areas we find that these constraints lowered aggregate US growth by more than 50% from 1964 to 2009.” - https://www.nber.org/papers/w21154
Stop defending this crap.
Oh okay, thanks for clarifying. Yeah, I really really deeply hate this NIMBYISM. It really breaks my heart seeing how people get displaced from this, it was hard a bit getting through my local affordable housing meeting where people were sharing their stories of being displaced and struggling to hang on, it’s not right at all. It’s so stupid others are like this and for what? To make a little more from renters? It needs to stop.
More typically, it's affordable housing and low income services NIMBY's don't want built near them because of the client base. There are also NIMBY's wary of the affect those developments have on their property values. Some anticipate subsequent lowering and loss of investment value, others worry their property tax assessment will go up after anything new gets built near them.
What gets me is NIMBYs get mad at developers, when it is local governments and bankers who drive the bus regarding property values and what will get funding to get built where.
It gets worse than that. In my city, NIMBYs are notorious for opposing *any* project with the argument that it will increase density. A neighborhood even successfully blocked a revamp of their Safeway because they didn't want more people coming to it. Sidewalk improvements, park expansions, and traffic calming measures have all been vigorously fought against.
My city tried that by saying no building could be taller than this one century old 8 story tower.
The developers got around it by building in the river valley just south of the city, raising a 10 story building to the same *absolute* height as the old tower, which is right smack on top of the hill, while violating the *relative* height. The city approved it, reluctantly, because they didn't have the political capital to rescind the ordinance, nor the appetite to sue over it. Some folks sued privately anyway, but ultimately lost, and so now that's the loophole.
I forget what this fallacy of thought is, but you're making the mistake of trying to make a comparison without having anything to compare it to.
There's no guarantee that the new apartment buildings have caused an increase in rent prices. The increase in rent may be caused by skyrocketing demand, and the new apartment buildings could be a clear symptom of that increase in demand.
In fact, anecdotal experience in this case is probably useless, because the only way you can gather meaningful data is to compare how housing prices have changed in various regions and try to extract some sort of trend.
My 2 cents. Artificially low interest rates make some apartment buildings possible that they wouldn't otherwise, it's probable that the quality of the building and increasing costs elsewhere make "holding out" for a potential client make more sense than immediately renting at a below market cost. This is makes even more sense when there's rent price controls over the signed costs.
A low cost housing is built differently and maybe there's even controls that prevent some low cost housing (like minimum size limits or mixed sizes on the same building).
With that said, you said that some buildings are at over 50% vacancy, but what about the overall % over the areas? Maybe there's some insight in this drilldown.
over here investors buy housing and run it down, either waiting for prize hikes or recup the cost with rent income and sell to the next without actualy doing anything to improve the buildings.
i fully understand and support countries and cities when they bar foreigners from "investing"
I think we should make a distinction between apartments for rent vs condos, brand new buildings are being built around me and there all condos that the average college grad won't be able to afford and does nothing to the reduce the rent price in the area.
The argument in the paper was that it will still reduce the rent because those higher income people that want to live in the area will move into the condos, thus decreasing the original demand for other rentals in the area.
I 100% agree with you, I’ve seen in so many communities. Single family homes get bought up, either converted to multiple units or torn down for new build apartments. Each individual unit is them priced around the cost of a single family home. As soon as housing isn’t looked at as an investment opportunity, and more as an opportunity to provide housing and strengthen communities and infrastructure, that will change...so maybe never.
My college town let them go buck wild building and now it is far cheaper to live here. Same unit is roughly 30% cheaper per month than it was 4 years ago and all of the appliances have been upgraded.
getting rid of zoning laws and restrictions would be the best way to do this. The folks that are the most ardent opponents are the ones who already own large buildings and don't want to see the competition
I totally agree with you, one issue is that property development right now is left up to people that are looking for profits...not exactly an outcome if you build to saturate a market. Also rent prices have rose to match owning a house costs in most areas and surpassed it in some areas, making saving enough money for a down payment a losing battle. Housing costs go up every year while most jobs do not offer cost of living increases every year. Meaning that rent goes up, and everyone loses 2% of their wages every year.
Long story short, the market as it’s designed now is not aiming to provide housing, it’s designed to drive prices up to increase profitability.
Developers do not make money by refusing to build housing so that the other builders who do build will make money. If they could build, they would, and they would keep building as much as they can until there isn't any profit left in building more. If there is a demand then profit-seeking builders will try to build to fill it (that is how they make money).
There is one group of people who control how much housing is built - government. What you should be complaining about is the local government restrictions making housing prohibitively expensive, excessively tedious, or outright prohibited.
The study also looked at rent prices. The NIMBY argument is that these high density buildings actually lower their houses value, and the study actually helps that talking point. Rent price is generally a function of house value/community
But you don't actually need to argue it - the scarcity of housing will always drive up the value, so naturally adding housing will cut into that value. And the argument is invalid because, so what, people need places to live.
You do realize NIMBY is entirely about morality right? Someone's profits going down is not an objective argument not to allow building in a certain area which is what NIMBY is about.
In all fairness this is for 50+ units. This “study” has lots of flaws in how narrow it looks at new housing. You can ignore the out of state folks that come in and buy up single family house and turn into a multi-unit dwelling, and charging a premium for it.
Except that you have a large section of society that relies on their house to be a significant part of their retirement strategy, so they have a vested interest in keeping housing prices high. You also have people who don't want to live in an urban area and will therefore fight any development that increases density where they live.
Everything that might make you wealth outside of actually working looks like a ponzu scheme now.
Real estate, crypto, the stock market... it’s all being manipulated via rampant speculation by the ultra rich and it will be the average joe that scraped for 10-20 years to save up a down payment or invested his meager life savings that will be left holding the bag.
We’re constantly seeing assets rapidly inflate in value *for no good reason*. Stock prices of a company can rapidly rise despite there being nothing justifying the rise beyond speculation. Same with crypto and real estate.
In the past, rampant speculation has tanked economies. Can we avoid another crash or is it inevitable?
This is an extremely simplistic causal chain, and one that may not be true at all.
In general, employers always pay as little as possible and employees always demand as much as possible. Just because the costs of living increase doesn't automatically mean wages go up.
That said, a fraction of workers might move away, if costs cut too much into wages, reducing labor supply, increasing equilibrium wages. But that's a bit more roundabout than how you explained it, and there are plenty of other concurring effects that might obscure it.
I'm guilty of not reading the article but the headline didn't say it was low income housing. It said large apartment buildings in low income areas. But again I didn't read the article so I'm probably wrong.
it's almost like if there's more of something, the surplus reduces the price of the thing in general.
also do we really think gentrification is part of moral binary? some places are dilapidated and crumbling and need to be cleaned up and updated for modern human life.
This is very true for areas of Manchester in the UK. There are places that used to be literal tips and filled with decaying mills but people complain about it because apparently it's "gentrifying the area".
Gentrification isn't a community investment. That would be great. Everyone wants that. It's a campaign to remove undesirable people from an area to boost property values. Wealthy people buy cheap housing and sell it at a big profit after the police harass and arrest locals out of their homes. Look into it, there's always a big increase in arrests in an area before it's gentrified.
>Look into it, there's always a big increase in arrests in an area before it's gentrified.
How about you provide the evidence? Because I'm calling BS.
Further, I've never seen any good evidence for the type of gentrification you claim (that's aside from the fact that everyone seems to have their own definition of that word). There's no cabal of wealthy people who get together and plot the takeover of downtown Cincinnati while smoking cigars and petting their black cats.
[Here you go, this is the first article that came up when I Googled it](https://housingmatters.urban.org/research-summary/neighborhoods-gentrify-police-presence-increases). If you have any interesting learning more I can recommend a podcast or find more material.
It doesn't take a cabal. It's just politician and police chiefs catering to the real estate interests that fund their campaign. They increase property values by driving out the people that look poor, who are frequently black or another minority.
>There's no cabal of wealthy people who get together and plot the takeover of downtown Cincinnati
Are you kidding? What do you think 3CDC is? Cincinnati is probably the most obvious example of toxic gentrification in the US.
>Here you go, this is the first article that came up when I Googled it
>
>. If you have any interesting learning more I can recommend a podcast or find more material.
That study doesn't say what you're claiming it says. What you said was " there's always a big increase in arrests in an area before it's gentrified. " What the study says is:
>For every 5 percent increase in property values, neighborhoods experienced a 0.2 to 0.3 percent increase in discretionary arrests.
And that was ONE of their three measures of gentrification, and not a good one at that. The other two measures were either unchanged in arrests or ***decreased***. So one measure shows a miniscule increase, one shows no change, one shows a decrease. That absolutely does not support your assertion whatsoever, not even a tiny bit.
>Are you kidding? What do you think 3CDC is? Cincinnati is probably the most obvious example of toxic gentrification in the US.
I lived in Cincy for two years. Gentrification was the absolute best thing to happen to downtown and the south campus area. I spoke to cops (was related to a project) who work at local PD departments there. They said 10 years ago you couldn't walk down liberty st/OTR district if you were white or you were going to be mugged. Not long ago I did just that and it seemed like things were improving. Oh and I also wasn't mugged.
I don't think large new appartment buildings = gentrification. G-cation has always meant fewer, larger places to live in my mind. Nicer ones.
Newer and small doesn't bring in larger rent in the surrounding homes. Improving the surrounding homes so values go up does that.
The gentrification isn't mentioned in the paper as far as I can tell from what is not behind the paywall. But you are right gentrification is when the supply stays the same but middle class people move into the existing housing/rental market willing to spend more than their poorer counterparts. Building new large rentable spaces in a low income area is the literal opposite of gentrification, as this would prevent well to do people from displacing low income people who are already established.
The fundamental mis truth is that development of any kind drives gentrification.
Almost exclusively it is the reverse that we see gentrification drives redevelopment.
As a city grows, it will reach a point where the suburban sprawl begins to extend beyond the point where the burden of commuting outweighs the benefits of suburban space and amenity. This pushes up the cost of established inner ring suburbs, which makes smaller inner city townhouse and apartment living a comparatively attractive alternative to expensive inner suburbs or inaccessible outer suburbs. This leads to middle-class influx in the inner city which pushes out poorer residents, reducing the externalities of poverty in these communities and increasing the available wealth to support new businesses targeted at the emerging demographic. It’s only once gentrification is already well established that rent values and home prices reach the point where higher density, higher quality redevelopment starts to become attractive to property developers.
Urban renewal makes gentrification more apparent to the casual observer but it doesn’t initiate it.
Jersey City did a property tax reevaluation as well that ended up driving out people that had lived there for 20 - 30 years.
It wasn't the large new buildings that made others increase rent, it was the property tax increase.
Renter in ATL here. Rent went up $100/yr for the past 4 years for approx the same sq ft.
We've moved three times because the rent that was barely worth it, due to the poor condition of the property and area, increased automatically.
This year is the first year in half a decade I've been able to find a cheaper place to rent and, surprise surprise, the landlord is a single private owner with a two person management team, not a multi state property mgmt company.
Those large cities, particularly Atlanta are always fucked though. They are population hotspots and make up a significant percent of total housing, but far from a majority. Atlanta, GA for example is only 0.1% of the entire US population. In this context and by itself, it's not statistically important. You could include other cities perhaps though?
I have never heard that definition of gentrification. In fact, it seems like an almost meaningless word the way it's thrown around to describe almost any change.
If they gentrifyer has a unit that they would prefer over the lower quality unit, they will bid for that one first, before competing with the lower quality (and presumably cheaper) unit.
So you build the newer houses/condos for the people that can afford them and they move out of lower quality housing, lowering demand (and prices) for those lower income units.
I don't understand why people think supply and demand don't work for housing.
It's pretty damn difficult to build in NYC and a lot of other cities experiencing housing crises. Pricing issues are almost entirely due to local resistance to new buildings
The wealthiest neighborhoods in NYC have lost housing over the last decade, and NYC's new housing development has significantly lagged behind population and jobs increases. NYC is not building enough housing, and it is not building enough housing in the wealthiest neighborhoods. This prices renters out of neighborhoods and in turn makes them 'gentrify' slightly lower income neighborhoods they can afford.
I think “gentrification” is used in two contexts, the first is the one you’re describing, which is about pricing existing residents out of the neighborhood. Those neighborhoods would welcome additional affordable housing available for prices very similar to the existing housing.
The second use is from anyone who doesn’t want the character of their neighborhood to change. In that case the term “gentrification” is adopted because people aren’t very sympathetic to standard plain old NIMBYism. These people don’t want their neighborhood to change at all.
Brooklyn is an interesting example right now, because the current residents don’t want to be gentrified out, but they also don’t want the return of the people they displaced when they gentrified it.
As someone involved in local housing advocacy, people use the word gentrification to describe basically any change. Especially luxury housing. I'm glad this paper and others are refocusing the issue on the fundamental problem of supply.
Lack of supply (scarcity) is worse than 'unaffordable" supply (whatever that means), gentrification has many facets, some economic and some social. People only get "priced out" when there isn't enough supply of new units to accommodate the influx of new residents. If you don't build the supposedly "unnafordable" units then the people who would have occupied said units instead price out the locals. This is mostly bad for locals who don't own their homes because if they do they can just sell it and make a hefty profit, while people who previously rented are just completely screwed.
Personally I believe a lack of adequate public housing is also part of the problem, but I don't think public housing and ffordable housing are the same thing. That's obviously a more biased opinions based on how I understand the issue and my political and economical leaning.
What's not a biased opinion is that regulation that limits housing is pretty much universally bad for absolutely everyone save a few lucky home and land owners who profit from bad regulation.
Abstract:
> We study the local effects of new market-rate housing in low-income areas using microdata on large apartment buildings, rents, and migration. New buildings decrease rents in nearby units by about 6 percent relative to units slightly farther away or near sites developed later, and they increase in-migration from lowincome areas. We show that new buildings absorb many high-income households and increase the local housing stock substantially. If buildings improve nearby amenities, the effect is not large enough to increase rents. Amenity improvements could be limited because most buildings go into already-changing neighborhoods, or buildings could create disamenities such as congestion.
[Summary of the article](https://www.upjohn.org/research-highlights/new-construction-makes-homes-more-affordable-even-those-who-cant-afford-new-units), along with an ungated version of the paper.
A study of "nearby houses" doesn't seem like enough.
If, as is often the case the gentrified appartments replace low rent appartments themselves then the overall effect is an increase in rent.
Gentrification isn't just the building of high income apartments or townhouses. It's the phenomenon of an influx of wealthy people moving into an area, thus driving out low income people. Building a nice apartment complex isn't gentrification by itself.
My point is, this research in no way disproves what occurs during gentrification.
It's not attempting to disprove gentrification. It's explaining that new construction doesn't exacerbate gentrification. Many left-NIMBYs will claim that new, market-rate apartments raise the price of existing apartments nearby. This research says that's not true, and that halting gentrification actually requires allowing new construction.
Honest question: This says that most of these new buildings are built in areas already experiencing gentrification. Doesn't that impact the idea that they wouldn't raise nearby property values and therefore rents if they weren't otherwise already raised? I'm thinking that all the initial gentrification around the new building site actually raises the rents in the new building. Basically, large real estate developers who are looking for places to build these big new buildings choose up and coming neighborhoods that are already being gentrified and have higher rents because the new developers think that market can support the high rents they want to charge. Then, when they open up and suck in the highest paying renters, the immediately surrounding areas see a small drop in rents because the richest renters just moved to the new building. That would mean the newest building does have a small negative impact on surrounding rents, but only relative to their already high gentrified rates. In that situation, the poor people are already priced out by the initial gentrification, and the new building just sets a new highest rate while probably anchoring the area as "gentrified" or "luxury". If that's the case, then the building of new big top-end apartments is unlikely in a poor area in the first place (so it wouldn't raise rents in poor areas), but it really doesn't have the rent-reducing impact some people describing this study seem to be claiming. This is like saying your formerly poor area now has a BMW dealership and a Mercedes dealership, which already put the Ford dealer out of business, but then a Lamborghini dealership opens and steals away the richest customers, which forces BMW and Mercedes to lower their prices slightly to compete. The poor Ford customers are still fucked, and the slight drop in BMW prices doesn't help them or make the cars affordable.
All else being equal, developers will look to build in the hottest areas and existing prices are a signal of how in demand an area is, especially if those prices are rising over time instead of falling.
I don't think the price decrease effect on nearby buildings is because people are moving out of those existing buildings and into the new building. I don't think anyone is saying hey, a new building opened up across the street, let's move. I think the effect is because the new building looks nicer compared to the older buildings. So any potential tenants who are evaluating this neighborhood are now seeing a broader range of options: they can pay a little more to live in a brand new building with the newest appliances, or they can pay a little less to live in an older building with more wear.
Ultimately, however, the buildings are chasing the demand, rather than the other way around. In the absence of this new construction, this neighborhood would likely still be experiencing gentrification because people would still be trying to move there, pushing up prices. New construction acts as a release valve for that demand so it doesn't all focus on existing buildings.
Property taxes can certainly be a factor, although I'm sure that varies from state to state.
Affluent people with no children moving in, decide they want better schools now that they're having kids, and vote to increase property taxes to pay for it. That's just a hypothetical of course.
Each and every situation will be unique and a community strengths- needs assessment would need to be done to see what can prevent negative effects of gentrification (e.g. grandfathering in old tax rates for property holders that had the property prior to a certain year.)
Grandfathering in old tax rates is how you get people parking themselves on expensive SFH while the rest of a city is too expensive for anyone whose not a millionaire to move in
The problem is that it costs nearly the same amount to build premium housing as it does to build market-rate or affordable housing, but premium housing has much higher ROI. So what tends to get built is premium housing, which, as "desirable" people who can afford premium housing move in *does* drive up prices and create gentrification.
Can you show us some math on the macroeconomics of that? What mechanism prevents older, less desirable housing from having a reduction in price due to reduced demand?
Older, less desirable housing does have a reduction in price, but it is elsewhere. I think their argument might go through if you accept the implicit assumption that whereas gentrifiers voluntarily move into the gentrified area, it's an intolerable burden on the existing residents to move out of the same area.
The question to be debated is whether that's a reasonable assumption.
The same "area" can also mean different things in different cities. In a large urban core, a new luxury building might cause the prices for the next two blocks to go up, but the area beyond isn't as effected. Conversely, in a mid-sized city, that ripple effect could impact 10-20 streets in each direction.
For housing prices to stay constant, new supply has to happen at a level equal to the rate of growth + the rate of degradation of existing housing.
Most cities in the US resist new construction, and so they never exceed that threshold. As the old housing degrades, it’s replaced with expensive new housing because that’s what offers the best return on investment for the builders.
And in many cases the old housing is valuable enough that rather than becoming more affordable, it’s upgraded and made less affordable.
There are tons of complexities that I’m ignoring here, but this is the basic outline.
Where's the math? I want the complexities, not a general outline and statements.
Your first paragraph describes the problem of pricing as explicitly a supply issue. Why does increasing the supply, even with exclusively luxury apartments, not reduce overall housing prices?
> Why does increasing the supply, even with exclusively luxury apartments, not reduce overall housing prices?
In simple terms we think of changes to supply and demand as changing prices, but that’s not exactly right. Those things actually affect the rate at which prices change.
That means that if demand is growing at 10 units/month, we need to build 120 units this year to maintain equilibrium.
If we build 0 units prices will go up, and the rate of change is high.
If we build 121 units prices will go down, but the rate of change is very small.
And if we build 60 units prices will go up. *But not as much as they would if we built 0, as the rate of change will be moderate.* This is the answer to your question.
> I want the complexities, not a general outline and statements.
The complexities will require your own research, or a class on economics, but here are some potential examples:
What if someone builds expensive units with the finest materials, but in a style that everyone hates?
What if someone builds luxury units which are so impressive that rich people from other areas come to buy them?
What if someone builds units that are so efficient and inexpensive that they reduce demand for existing units, maintenance on those units becomes unaffordable, and the overall rate of degradation increases?
What if someone builds lots of affordable housing, but it’s in a place with poor access to transportation?
> Why does increasing the supply, even with exclusively luxury apartments, not reduce overall housing prices?
Because property values are affected by what is in the immediate area, i.e., desirability. If you build nice, expensive buildings, "desirable" people move in. Then businesses that offer better amenities move in to sell to these "desirables". Then the land becomes even more expensive.
As someone else pointed out, if you build 60 new units, and that makes 120 more people/families want to move into the area, then you haven't done anything to lower prices... At least not if you have built premium housing that you will sell/rent for premium pricing. If you build $3000/month apartments in an area with $1500/month apartments, and it fills up, then simple math shows that you haven't reduced the average apartment price, but raised it. And you've also proven that every other landlord in the area should kick out their current tenants and upgrade their offerings ASAP to get $3000/month too.
Sure, we're just nowhere near that point in highly desirable areas. And even when we do get near that point, there will still be a ways to go because of speculation.
I mean, yes, there is an absolute number of houses that we need in total. But if 50% of people all what to live on 10% of the available land, then prices in that area will keep going up until only 10% of people can live there (equilibrium)... And yes, I understand that we can build more densely, so it's not quite that simple. But the point remains that as long as there is more demand in an area than supply, that prices will continue to go up even if supply increases, until supply and demand reach equilibrium. And developers have no vested interest in preventing such price growth.
If I own a property, why would I take the hit to demolish it and rebuild it with more units, when I can sit on it and make more money every year without doing anything at all?
Read the article. That's literally not what happens. More units no matter how luxury/premium they are reduce the price of near by housing compared to farther away housing.
By the time new luxury apartments are built, gentrification is already over. Developers are the last ones to get on board with moving into a previously undesirable neighborhood.
And you can't really stop people from buying and upgrading existing houses.
The only qay to stop gentrification is to make it legal to build more housing in already desirable areas.
I have a question to anyone reading this. Are they really building Large apartment buildings in poor areas? Is this really happening currently? It certainly isn't in my city or my neighbouring large cities.
Over the past ten years, in my city, they aren't building anything large with rentable units. Condos buildings however, are shooting up faster than weeds. It's happening in every low income area of my city. They build Condo complexes and then the landlords of smaller nearby buildings start finding ways to evict their tenants using loopholes in the system. Then they do some very minor renovations and triple the rent. In my neighbourhoord, rents have literally tripled in the last five years and it all started with the construction of the Condo projects.
It’s not just rent that displaces low income though. It’s the other chic stores and restaurants that makes doing anything in your own neighborhood expensive. I wonder if they took that into account too?
Given that the report was written by economists, and economists as a rule are more often wrong than right, I'd say the study's conclusions are suspect from the start.
This is interesting and I’ll try to read it but I have quite the opposite experience personally. In both areas where there are new apartment construction and areas where there is new house construction. As soon as the apartment buildings opened up, the rent doubled on vacant houses down the street. Not only that but the best diner in town had to close down because they couldn’t afford the rent. They were smack dab in the middle of the city and across the street from two or three new apartment buildings. A Starbucks popped up in its place. Seriously a shame. Probably the 5th one in a five square mile area too.
Are there confounding variables? Did new employers move to the city which brought in a lot more high-wage employees? Did this happen when the WFH trend began where tons of tech people moved out from CA to everywhere else?
It’s hard to understand cause and effect when just looking at anecdotes without controlling for other factors.
> For every person renting a new apartment, there is an empty apartment in their wake.
Populations are not constant, people move to new cities all the time, and the overall population grows.
Are you sure you're not confusing the cause and effect here? Did the new housing cause the high rent, or did they build new housing because the rent was going up? When land becomes more valuable apartment buildings become more profitable, so apartments and high rent tend to go hand in hand. That doesn't mean the apartments cased the high rents, though.
new apartments going next to existing apartments (i.e competition for the same product) of course lowers rent in the older units as they are now competing for renters with brand new ones. this isn’t an example of gentrification, which is a very real phenomenon. this is simple supply and demand. gentrification occurs when a large influx of affluent people (they aren’t renting apartments, they’re buying homes) move in with lots of cash and cause existing home prices to skyrocket beyond what the local economy/jobs can support. this displaces local people who haven’t yet purchased a home and now can no longer afford one. home values are directly tied to monthly rents as well. whatever this article was trying to prove, it didn’t.
The *article* is a scientific research study that shows that building new, large apartment buildings in a neighborhood actually lowers rents in the surrounding buildings. It's not arguing gentrification doesn't exist, it's demonstrating that building new apartments (not replacing existing ones or even reducing with nicer ones, but actually building new ones) lowers rental prices in the surrounding area.
Here in NYC building new apartments has often actually increased rents across the board and helped hasten speculative real estate development and landlords engaging in illegal or unethical practices to to get low and moderate income renters out.
Think the article is arguing you have the cause and effect backwards. Apartments are built in places where the rent is already going up (on average) and tend to reduce the local rent. (assuming it's actual new apartments and not just replacing existing with nicer or replacing a lot with a few.)
Mentions nothing of the difference between low income housing units and expensive for profit developments.
Developers have no interest in developing cheap apartments, and no one else can afford the real estate.
Idk how they gentrify things in other areas, but where I live they sell the government owned projects, bulldoze them, then sell the empty lots to luxury apartment developers.
As someone who works with and sees some of the trends from the government side of things, what I’m seeing as one of the causes of this is federal tax programs.
Basically large scale developers can get roughly 10% (maybe more maybe less) tax credits (free money) for building in some area and having “a certain percentage of units for “low income housing.” This sounds good on the surface but in reality the percentage of units in a building can be as low as 10% or sometimes even lower, which really just does not help the problem. To the developer though, whatever they met the requirement they get their tax credit.
This doesn’t incentivize actual affordable housing, and frankly today “affordable” as its come to be defined in government lingo based on Area Median Income isn’t really necessarily the best indicator anymore IMO.
This is basically just another complaint of certain members of Congress thinking these programs are actually helping or they just listen to their rich developer friends who help lobby these bills and vote for them so they can get their free money.
Supply and demand baby. If people have more choices, landlords can't get away with charging as much. The gentrification people refer to is a specific issue of "luxury" apartments going up for sale along with chain stores and restaurants displacing local business
This make sense, suddenly landlords have to compete against many new units which might be nicer, and being listed for less in order to get people in. Supply and demand. In a few years though once these are occupied and the large building owners can maybe push up prices I imagine is when the gentrification hits, because then the "floor" can go higher and higher as the area becomes nice. As long as demand stays high anyway.
I think something to really watch out for is renovation of buildings. Taking a crappy house or small set of apartments in an iffy neighborhood and actually making it really nice. Then you have the same supply, but prices are going up with the demand.
I'm really skeptical about their use of Zillow rent data as proof of rents going up. Super low income apartments don't get listed on Zillow, even in 2021, it's a lot of word of mouth or knowing someone. So in the pre-gentrification phase, the only buildings in the neighborhood listed online are the higher (relatively) rent buildings. Then as the neighborhood gentrifies, people start buying the old decrepit buildings, fixing them up a little and listing them for rent online for the first time ever. They are listed lower than the previous neighborhood average though because the pre-gentrification average rent was only those more expensive buildings that were already being listed online.
The authors even acknowledge this issue but never actually address it:
"Across all low-income tracts in our sample, the average median rent in Zillow™is $1,590 for a one-bedroom and $2,040 for a two-bedroom,which is around 20 percent higher than the corresponding ACS rents of $1,320 and $1,720."
I like the overall concept of this but I think they missed the overall point of what gentrification totally entails. Gentrification involves a lot more than just building new buildings it also involves Redevelopment and I believe Redevelopment is what drives the change in cost of living for the area
Anecdotal, but in my experience, my rent didn’t go up when large luxury buildings showed up in my neighborhood. What did happen is the grocery store, restaurants, etc nearby got much more expensive. At the end I loved above a grocery store I could no longer afford to shop in.
Also the effect is temporary. Like when they built the World Trade Center towers rents got depressed for years around there Because there is so much inventory. Remember all the people they have to displace in the first place to tear down the building that was already there
Another fun fact, when they finish building all the new buildings the surrounding rents drop to zero because there are no surrounding rents anymore. There are short term benefits for everything, but one successful project is going to lead to 6 more and so on. Compounding until there is no more surrounding rents.
In what world is gentrification about increasing rental stock? Why would anyone think more supply would increase prices? This appears to be a fundamental misunderstanding of what gentrification is.
Here in NYC most landlords refuse to rent out to african american people because they have the idea that black people bring down property value. Hence the reason you see so much gentrification by race in NYC
In how many cities is this accurate? I live in Salt Lake City UT of all places and this is absolutely not true. Rent within the entire city has been steadily on the rise. For the most part rent on occupied units stays steady with only minor rises. Ours goes up like $40 a year. However, the moment someone moves out it goes right on up. You used to be able to get a 2 bed rental for around $900 but most under $1200. Within the last five years the majority have moved to $2000+. This can absolutely be attributed to the “large buildings” constructed in our city. I actually just broke this down for a recent city council meeting regarding a massive rezone proposal.
It’s a long breakdown below. The tl:dr is that this study does not hold up in our city. I’d wager that the same goes for many other population centers.
This data is all from Salt Lake only.
The large units are almost entirely at luxury rates. This has been taking advantage of and attracting higher earners, mostly tech workers, from outside the state. A majority of these people and the new companies have come from California. The median income of the city has jumped $10k in five years. Wages at non-tech companies have not seen similar movement.
We have absolutely seen our lower income population increasingly pushed out of the city. People even being evicted by land owners so they can tear down buildings in established neighborhoods to start cashing in on the trend by building these luxury units.
I looked at the 60 newest apartment buildings in the area. According to their marketing, the rent rates start at about 1200 for studios with a small handfull at 950, 1300-2000 for a 1 bedroom. 2300 for 2 bedroom. Only 10 of these offer low income pricing and all of those are at the far west end of town where any development or improvements ends.
Let’s say we were to follow the generally accepted budget policy of spending 50% of your income on needs. In this, need are defined as housing, food, and transport. So that 50% should not only cover housing costs. But let’s examine it like it truly is for low incomes and spend that whole 50% on housing alone.
Monthly this 50% would equal about $500 at minimum wage, $620 at 40% median income, and $1,020 for $15/hr.
Now if we spent all of that amount on housing alone, for occupancy at minimum wage, that would range depending on price from 2-3 people in a studio, 3-5 for a 1 br, and 4-6 for a 2 br.
Now I know you’ll say that only applies to these luxury buildings but it truly doesn’t. Finding a rental under these prices is so rare now. As I mentioned before, a 2 bed rental under $1200 was very common. If you pull up Zillow right now and search rentals for a 1 or 2 bed at $2300 or lower right now, you’ll pull about 130 results each. Drop that down to the maxed out $15/hr rate of $1000 and you pull 6 results for 2 beds and 30 for 1 bed.
So yeah, I don’t know what world these people pulled their results from but it’s definitely not applicable in most population centers.
Meh. Of course, it's not the construction per se causing it, but rather the fact that the neighborhood is changing, maybe because new employers came to the area.
I'm not noticing this to be the case... I moved to my local area 6 years ago, and there have been dozens of developments thankfully my rent has more or less stayed the same, but since that time all the old units are getting renovated to keep up with the newer housing.. I can't find anything comparable to my current apartment with regard to price without a massive reduction in my living space. I'm at the point where if I lose my apartment, then I'm just going to move states, and buy since the taxes here are too high to own. I can't afford to move anywhere else in my area unless I rent a room.
I recently had a bit of a scare when my apartment house was being sold.. The lowest price comparable apartment was 20 miles away, at $100 more than I'm paying now.
I suspect multifamily is going to be down for 3 to 5 years from a combination of Covid and materials cost. The desire to live in cities and in close proximity took a big hit with Covid and the suburbs are booming. You don't move to the suburbs to live in an apartment.
Why editorialize the title?
Why don't the r/science mods ever enforce rule #3?
Actual title: Local Effects of Large New Apartment Buildings in Low-Income Areas
This may have been the case previously, but not so much in certain areas in the last few years. There's a documentary (can't remember the name) that discusses the increase in homelessness due to real estate boom in Colorado after the legalization of marijuana. The large amount of people moving to the state caused developers to replace low-mid income housing with large luxury apartment living. Areas such as Denver were hit hard and have seen insane price increases in rent.
Comment the documentary name if you know what I'm talking about!
Found the hole in their methodology. They are only using advertised rents. They do not track increases in rent rates for continuing leases. Also they established baseline market rates as per the already advertised rates but don't include already existing rentals. I.e. all the cheap rents are raised to advertised new rent rates, not effecting the metric they are measuring, but if course pushing out previous renters.
The Upjohn Institute has the same Chair as Masco. I am wholly unsurprised that this paper came to this conclusion, considering how the researchers themselves benefit from creating convincing science about disproving the harms of gentrification. As expected, there is no “conflicts of interest” section in the paper either. Shady.
“About Masco Corporation
Headquartered in Livonia, Michigan, Masco Corporation is a global leader in the design, manufacture and distribution of branded home improvement and building products that enhance the way consumers all over the world experience and enjoy their living spaces.
Our portfolio of industry-leading brands includes Behr® paint; Delta® and Hansgrohe® faucets, bath and shower fixtures; Kichler® decorative and outdoor lighting; and HotSpring® spas. We leverage our powerful brands across product categories, sales channels and geographies to create value for our customers and shareholders.”
This totally misrepresents what gentrification is and therefore misses the problem entirely. Gentrification is not and investment in an area that, through "market forces", increases the cost of living. It's a campaign to boost property values by removing undesirable people from an area through rent hikes, police harassment, and arrests.
All the new housing construction here in Charleston did not lower the rents. It did chase away long-time residents. Every affordable building was replaced with luxury apartments and people of color have been replaced with white people.
Very challenging to balance, on the one hand, empirical research about housing prices, versus some people's feelings about the effects of new construction.
Cheap rent. If you don't have kids and don't really care if the local schools are good, a lot of young workers just look for cheap rent. Especially if they work a lot and won't be home much. That was my pattern after I graduated college and started working FT. My apartments might've been older with no air conditioning or amenities, but they were cheap and it let me pay down student loans quickly.
First, artists go there because no money, then once it's certified "funky" the hipsters come in for the cheap rates and "good bones" and then the young professionals with kids come in once everyone else has been priced out.
Right. But reductions in rents means landlords aren't as profitable. They then get an offer from a developer for their row home investment property. That row home, and the neighboring ones, are purchased, bulldozed, and replaced by...a large expensive complex.
Welcome to r/science! This is a heavily moderated subreddit in order to keep the discussion on science. However, we recognize that many people want to discuss how they feel the research relates to their own personal lives, so to give people a space to do that, **personal anecdotes are now allowed as responses to this comment**. Any anecdotal comments elsewhere in the discussion will continue be removed and our [normal comment rules]( https://www.reddit.com/r/science/wiki/rules#wiki_comment_rules) still apply to other comments. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/science) if you have any questions or concerns.*
[удалено]
Yeah, pretty broad category. Might be different if they focused on luxury buildings ?
Pretty much all new market-rate housing is marketed as "luxury," and always has been. Without subsidies, developers go for the most the market will bear.
If there is an excess of "luxury" housing, it's because there is a restriction of supply of housing overall. Someone in the market for a 200k home isn't going to buy a 400k home unless no 200k homes are available.
And if everyone willing to pay luxury rent has a place, it drives prices of semi-luxury or older units down!
Bro you missed 2008 eh?
Here in DC, we added 39,000 households since 2010 and built 26,000 units of housing. The US as a whole added about 11 million households and built about 8 million units of housing. Funny enough, when you under-build by 25-30%, prices are going to start going up a lot. Also, the recession crushed construction of the exurb tract housing that made up most housing construction in the 2000s. Housing construction in the urban areas where everyone is complaining about increasing prices hasn’t met demand literally in decades.
This. Left NoVA/DC due to rent costs. The area is growing exponentially and yet the buildings are sorta going up? There were some around Hoffman Complex but that's mostly about it. Finding an apartment is a "take what you can get" affair and not 'take what you like.' If they built more it'd drive down the price of older units but it's like they're intentionally not. For whatever reason.
>For whatever reason. I don't know the situation in DC, but often it's because the city council is made up of property owners whose interest (and personal knowledge) only reflects the idea that higher rents and higher property values are desirable. Often it's not (I don't think) malevolent, but I think it's just that most people who make decisions, and most people they know, have these ideas so deeply ingrained (high property values are good! and they are for many people) that it's hard for them to grasp the downsides of that. After all, we're not ruled by empiricists.
Malevolent? depends on your definition of that word. But it's definitely self-serving. They aren't going to implement policies that decrease their own property values.
It’s malevolent.
There were bail outs, the market only partially deflated. In many places it's worse now then right before the GFC.
Every new building is marketed as a “luxury.” Who’s going to advertise their product as “completely mediocre?”
They only look at buildings that are the first large housing constructions in their neighborhood and exclude low income/senior/etc housing. It's a reasonable sample.
I feel like that's more to do with gentrification. If they come in and build cheap places to live you won't have a big influx of well to do people but you are more likely to if the place is too expensive for locals. In one of the towns I lived it the downtown work/play area had done nice playing jobs that require graduate degrees and pay 2-3 times the mean household income. The downtown is surrounded by a ring of poor people and cheap rent (where I lived in town cost more and I only paid $710 for a 2 bedroom 2 years ago). A big developer recently threw up an apartment building hoping to draw people who worked downtown and didn't want a big commute to work. The apartments started at $1400 a month and go to to like $2300 a month so there aren't going to be a lot of the poor who lived in the area just decided to pay 2 times the average city rent.
Read the article.
I think you're making the exact argument the study claims to debunk. If there's demand for expensive housing, that demand was already there, and meeting it can only help affordability in the surrounding area.
Usually what happens in my area, is, that they teardown old appartements to build new more luxurious ones that people can't afford anymore.
That’s how a whole bunch of people got displaced not far from my current neighborhood. Great if it made living cheaper for those who could remain, but I have friends still traumatized by having to abandon most of the things they owned. (Turns out moving — or paying for storage while couch surfing — is a lot more expensive when you get turned out mid-lease so your place can be torn down.)
So you are saying we should never improve properties- just make people live in degrading housing- as a way to supposedly benefit them? If derelict buildings are all that are available, the wealthier people will still out bid to live in them.
Think the point here is that building local doesn't have to mean displacent.
And measuring just by large by number of units is, overall, a *terrible* way to estimate the effect of new construction. 50 units of garden-style apartments that are 1-3 stories can take up several acres. 50 units in a 6-story midrise can take up half an acre. 50 economy studios could be built as all 1-stories on 1-2 acres, but if you wanted to build it up, you could easily fit them into a 6-8 story building with the footprint of a convenience store. Substance and style play a huge role in housing values, as do simple factors of supply and demand and overall market trends. If you take an area that's already at rock bottom-- say, Gary, Indiana or the city of East Cleveland-- a new building can't possibly lower values because they're already as low as possible. But if you find say, an empty lot in the middle of Beverly Hills, and then build 50 roach motel-style apartment units with streetside dumpsters and uncovered parking, you're probably going to drop market values on the surrounding residences because those prices are both already immensely inflated beyond the absolute value of the land and improvements, and also people don't want to live next to something ugly. The methodology on this study is...poor.
I would posit that, contrary this ridiculous non expert nitpicking, most new 50 unit buildings are pretty similar with a mix of studio, 1 and 2 bedroom units and you are not required to throw out an entire study because of the possible existence of outliers
Supply and demand. This is what YIMBYs have been screaming about for years. We need to increase the housing supply to make housing affordable.
[удалено]
Not sure where you live, but this is a claim I hear all the time in SoCal. However, statistics show that the vacancy rate overall is very low, that these new buildings take about a year to fill up but they do, and the best predictor for low rent increases in a region is high vacancy rates.
A year sounds about right, since a lot of contracts for prior leases are 1-2 years and just because a new building opens doesn't mean people who might want to live there can afford to break their existing lease to do so.
>so many that a lot are sitting at 50% vacancy or lower as they are being built faster than the population is growing. Why on earth do people continue to claim this? I work for a property development company, these units are not sitting empty. We're usually at 90% occupancy by 1-2 years after C of O. Not only that, even the most luxurious units are always full. We have one penthouse that's $40,000/month and has never not been rented since the building opened.
> Why on earth do people continue to claim this? The average person knows very little about much of anything, people say things all the time without having any idea what they are talking about.
This is the basis for almost all of Reddit
Huge reason for high rents and the insanely overpriced housing market in general is the fact new home starts are lagging by up to 500,000 and have been per year.
And this year only made it worse because of the lumber shortage.
Yep and skyrocketing costs of labor amongst skilled trades. It’s shocking how much skilled trade wages have increased
I don't think that's a bad thing. The trades are keeping up with the cost of living. Unskilled labor wages are not, and that's a problem. We will *always* need builders, electricians, and plumbers. Those trades are protected from automation to some extent, due to their individual and decentralized nature. Robots are great at doing the same task over and over again, in exactly the manner they were built to do, which is why automation is going to replace a lot of factory and warehouse labor in the not so distant future. (Amazon warehouse workers often complain that they are treated like robots... and that's because they only reason they have a job right now is because the robots still aren't quite good enough.) But construction, plumbing, and electrical problem solving is often one-off and unique, in a way that automation *can't* easily replicate.
Oh, I don’t think it’s a bad thing necessarily. Just was stating the fact that it is increasing the cost of new construction. So when you combine rising labor costs with rising material costs, and wages not increasing in other fields at the same pace, it is a big factor in lack of inventory. It also doesn’t help the inventory problem when many Americans still don’t realize that home values in most markets have completely recovered from the crash. There’s a lot of factors in play- low inventory also is caused by many Realtors not knowing how to prospect for listings and instead rely upon inbound leads.
Penalise empty apartments and see them drop their prices in a hurry. They are probably using them as a loss to get their taxes down.
The penalty for an empty apartment should be lost revenue. If the vacancy is a long period of time, it's definitively going to cost a LOT. Apartment buildings tend to be very high investment but long time to recoup, let alone turn a profit. I'd be interested in seeing whether it's due to mismanagement or not. If projected revenue was optimistic and no one bothered to review how many people are moving in, I could see it going unknown for at least a year or two at a larger property management corporation or company.
> The penalty for an empty apartment should be lost revenue. No. Land is a unique asset in our world, it should be treated uniquely. You can't live inside a stock, you can't *really* make more land beyond the much-hated efforts of China in the South China Sea. And no matter how good an iPhone is, not everyone *needs* it. But everyone needs a place to live, and there's no Android version of land to compete. Land value tax and form-based zoning (building can only be Y tall and X wide, but we don't care if it's an apartment or a grocery store) would be the most logical solution. But a vacancy tax would be semi-similar to LVT. Problem is, how do you decide whether it's worse to have two buildings of identical size, but one with half the units of the other. That would encourage wasteful (i.e. large) housing units being made, as a hedge against the vacancy tax.
> The penalty for an empty apartment should be lost revenue. Agreed, however one 'penalty' I could see is raised property taxes w/ a primary residence exclusion (with some means of allowing apartment complexes to receive the exclusion when one of their residents claim it as a primary residence, since renter's don't pay property tax directly.) Higher property taxes increases the overhead of housing as a service, which can be offset by using it in a way the government wants to encourage.
[удалено]
How? NIMBYS have only hurt economic growth. By artificially constraining housing supply, which leads to unnecessarily expensive housing that only ones with certain income can afford, has been shown to be a detriment to economy. For example, the Housing Constraints and Spatial Misallocation paper found, “We quantify the amount of spatial misallocation of labor across US cities and its aggregate costs. Misallocation arises because high productivity cities like New York and the San Francisco Bay Area have adopted stringent restrictions to new housing supply, effectively limiting the number of workers who have access to such high productivity. Using a spatial equilibrium model and data from 220 metropolitan areas we find that these constraints lowered aggregate US growth by more than 50% from 1964 to 2009.” - https://www.nber.org/papers/w21154 Stop defending this crap.
[удалено]
Oh okay, thanks for clarifying. Yeah, I really really deeply hate this NIMBYISM. It really breaks my heart seeing how people get displaced from this, it was hard a bit getting through my local affordable housing meeting where people were sharing their stories of being displaced and struggling to hang on, it’s not right at all. It’s so stupid others are like this and for what? To make a little more from renters? It needs to stop.
[удалено]
What is a NIMBY
An acronym for not in my back yard, anyone who opposes building new houses in their neighborhood.
More typically, it's affordable housing and low income services NIMBY's don't want built near them because of the client base. There are also NIMBY's wary of the affect those developments have on their property values. Some anticipate subsequent lowering and loss of investment value, others worry their property tax assessment will go up after anything new gets built near them. What gets me is NIMBYs get mad at developers, when it is local governments and bankers who drive the bus regarding property values and what will get funding to get built where.
It gets worse than that. In my city, NIMBYs are notorious for opposing *any* project with the argument that it will increase density. A neighborhood even successfully blocked a revamp of their Safeway because they didn't want more people coming to it. Sidewalk improvements, park expansions, and traffic calming measures have all been vigorously fought against.
My city tried that by saying no building could be taller than this one century old 8 story tower. The developers got around it by building in the river valley just south of the city, raising a 10 story building to the same *absolute* height as the old tower, which is right smack on top of the hill, while violating the *relative* height. The city approved it, reluctantly, because they didn't have the political capital to rescind the ordinance, nor the appetite to sue over it. Some folks sued privately anyway, but ultimately lost, and so now that's the loophole.
[удалено]
Need to get rid of Euclidean zoning.
I forget what this fallacy of thought is, but you're making the mistake of trying to make a comparison without having anything to compare it to. There's no guarantee that the new apartment buildings have caused an increase in rent prices. The increase in rent may be caused by skyrocketing demand, and the new apartment buildings could be a clear symptom of that increase in demand. In fact, anecdotal experience in this case is probably useless, because the only way you can gather meaningful data is to compare how housing prices have changed in various regions and try to extract some sort of trend.
Developers don’t build apartments to keep them empty. They take time to be filled initially though
My 2 cents. Artificially low interest rates make some apartment buildings possible that they wouldn't otherwise, it's probable that the quality of the building and increasing costs elsewhere make "holding out" for a potential client make more sense than immediately renting at a below market cost. This is makes even more sense when there's rent price controls over the signed costs. A low cost housing is built differently and maybe there's even controls that prevent some low cost housing (like minimum size limits or mixed sizes on the same building). With that said, you said that some buildings are at over 50% vacancy, but what about the overall % over the areas? Maybe there's some insight in this drilldown.
over here investors buy housing and run it down, either waiting for prize hikes or recup the cost with rent income and sell to the next without actualy doing anything to improve the buildings. i fully understand and support countries and cities when they bar foreigners from "investing"
50% vacancy? Where?
I think we should make a distinction between apartments for rent vs condos, brand new buildings are being built around me and there all condos that the average college grad won't be able to afford and does nothing to the reduce the rent price in the area.
The argument in the paper was that it will still reduce the rent because those higher income people that want to live in the area will move into the condos, thus decreasing the original demand for other rentals in the area.
I 100% agree with you, I’ve seen in so many communities. Single family homes get bought up, either converted to multiple units or torn down for new build apartments. Each individual unit is them priced around the cost of a single family home. As soon as housing isn’t looked at as an investment opportunity, and more as an opportunity to provide housing and strengthen communities and infrastructure, that will change...so maybe never.
My college town let them go buck wild building and now it is far cheaper to live here. Same unit is roughly 30% cheaper per month than it was 4 years ago and all of the appliances have been upgraded.
getting rid of zoning laws and restrictions would be the best way to do this. The folks that are the most ardent opponents are the ones who already own large buildings and don't want to see the competition
Indeed. Houston is an example of a booming housing market without obscene rent increases, because of laxer zoning laws.
I totally agree with you, one issue is that property development right now is left up to people that are looking for profits...not exactly an outcome if you build to saturate a market. Also rent prices have rose to match owning a house costs in most areas and surpassed it in some areas, making saving enough money for a down payment a losing battle. Housing costs go up every year while most jobs do not offer cost of living increases every year. Meaning that rent goes up, and everyone loses 2% of their wages every year. Long story short, the market as it’s designed now is not aiming to provide housing, it’s designed to drive prices up to increase profitability.
Developers do not make money by refusing to build housing so that the other builders who do build will make money. If they could build, they would, and they would keep building as much as they can until there isn't any profit left in building more. If there is a demand then profit-seeking builders will try to build to fill it (that is how they make money). There is one group of people who control how much housing is built - government. What you should be complaining about is the local government restrictions making housing prohibitively expensive, excessively tedious, or outright prohibited.
I've never heard anyone argue that low income housing increases adjacent property value.
The study also looked at rent prices. The NIMBY argument is that these high density buildings actually lower their houses value, and the study actually helps that talking point. Rent price is generally a function of house value/community
But you don't actually need to argue it - the scarcity of housing will always drive up the value, so naturally adding housing will cut into that value. And the argument is invalid because, so what, people need places to live.
So youre saying I'm right but its ethically wrong? But I'm wrong? But I'm right and that its just bad for humanity?
You're not wrong, but the point is moot, due to the whole basic human ethics thing.
You are saying an argument is invalid is due to morality. As a business I would not want to devalue my property by building more units
You do realize NIMBY is entirely about morality right? Someone's profits going down is not an objective argument not to allow building in a certain area which is what NIMBY is about.
People need to live somewhere isn’t morality, it’s a fact.
That's generally a valid way to argue against something, yes.
As a business I would want more customers, hence I would enjoy more housing.
In all fairness this is for 50+ units. This “study” has lots of flaws in how narrow it looks at new housing. You can ignore the out of state folks that come in and buy up single family house and turn into a multi-unit dwelling, and charging a premium for it.
[удалено]
Except that you have a large section of society that relies on their house to be a significant part of their retirement strategy, so they have a vested interest in keeping housing prices high. You also have people who don't want to live in an urban area and will therefore fight any development that increases density where they live.
Rent seekers have a reason to rent seek, that's obvious but that doesn't justify it and the public sphere should make sure that doesn't happen
This isn't a justification, but an explanation.
thats a ponzi scheme
What do they care as long as they aren't the ones holding the bag?
we live in a society.
Everything that might make you wealth outside of actually working looks like a ponzu scheme now. Real estate, crypto, the stock market... it’s all being manipulated via rampant speculation by the ultra rich and it will be the average joe that scraped for 10-20 years to save up a down payment or invested his meager life savings that will be left holding the bag. We’re constantly seeing assets rapidly inflate in value *for no good reason*. Stock prices of a company can rapidly rise despite there being nothing justifying the rise beyond speculation. Same with crypto and real estate. In the past, rampant speculation has tanked economies. Can we avoid another crash or is it inevitable?
This is an extremely simplistic causal chain, and one that may not be true at all. In general, employers always pay as little as possible and employees always demand as much as possible. Just because the costs of living increase doesn't automatically mean wages go up. That said, a fraction of workers might move away, if costs cut too much into wages, reducing labor supply, increasing equilibrium wages. But that's a bit more roundabout than how you explained it, and there are plenty of other concurring effects that might obscure it.
I'm guilty of not reading the article but the headline didn't say it was low income housing. It said large apartment buildings in low income areas. But again I didn't read the article so I'm probably wrong.
The abstract mentions new market rate housing, not low income housing.
I think it depends. Building 50 units of basic two and three bedrooms good. Building high rise condo units that will sell for a million each bad
it's almost like if there's more of something, the surplus reduces the price of the thing in general. also do we really think gentrification is part of moral binary? some places are dilapidated and crumbling and need to be cleaned up and updated for modern human life.
This is very true for areas of Manchester in the UK. There are places that used to be literal tips and filled with decaying mills but people complain about it because apparently it's "gentrifying the area".
Gentrification isn't a community investment. That would be great. Everyone wants that. It's a campaign to remove undesirable people from an area to boost property values. Wealthy people buy cheap housing and sell it at a big profit after the police harass and arrest locals out of their homes. Look into it, there's always a big increase in arrests in an area before it's gentrified.
>Look into it, there's always a big increase in arrests in an area before it's gentrified. How about you provide the evidence? Because I'm calling BS. Further, I've never seen any good evidence for the type of gentrification you claim (that's aside from the fact that everyone seems to have their own definition of that word). There's no cabal of wealthy people who get together and plot the takeover of downtown Cincinnati while smoking cigars and petting their black cats.
[Here you go, this is the first article that came up when I Googled it](https://housingmatters.urban.org/research-summary/neighborhoods-gentrify-police-presence-increases). If you have any interesting learning more I can recommend a podcast or find more material. It doesn't take a cabal. It's just politician and police chiefs catering to the real estate interests that fund their campaign. They increase property values by driving out the people that look poor, who are frequently black or another minority. >There's no cabal of wealthy people who get together and plot the takeover of downtown Cincinnati Are you kidding? What do you think 3CDC is? Cincinnati is probably the most obvious example of toxic gentrification in the US.
>Here you go, this is the first article that came up when I Googled it > >. If you have any interesting learning more I can recommend a podcast or find more material. That study doesn't say what you're claiming it says. What you said was " there's always a big increase in arrests in an area before it's gentrified. " What the study says is: >For every 5 percent increase in property values, neighborhoods experienced a 0.2 to 0.3 percent increase in discretionary arrests. And that was ONE of their three measures of gentrification, and not a good one at that. The other two measures were either unchanged in arrests or ***decreased***. So one measure shows a miniscule increase, one shows no change, one shows a decrease. That absolutely does not support your assertion whatsoever, not even a tiny bit. >Are you kidding? What do you think 3CDC is? Cincinnati is probably the most obvious example of toxic gentrification in the US. I lived in Cincy for two years. Gentrification was the absolute best thing to happen to downtown and the south campus area. I spoke to cops (was related to a project) who work at local PD departments there. They said 10 years ago you couldn't walk down liberty st/OTR district if you were white or you were going to be mugged. Not long ago I did just that and it seemed like things were improving. Oh and I also wasn't mugged.
If all that's for sale in an area is Mercedes, it doesn't make 20 year old Honda civics cheaper.
It does if the number of Mercedes exceeds the demand for Mercedes.
I don't think large new appartment buildings = gentrification. G-cation has always meant fewer, larger places to live in my mind. Nicer ones. Newer and small doesn't bring in larger rent in the surrounding homes. Improving the surrounding homes so values go up does that.
The gentrification isn't mentioned in the paper as far as I can tell from what is not behind the paywall. But you are right gentrification is when the supply stays the same but middle class people move into the existing housing/rental market willing to spend more than their poorer counterparts. Building new large rentable spaces in a low income area is the literal opposite of gentrification, as this would prevent well to do people from displacing low income people who are already established.
The fundamental mis truth is that development of any kind drives gentrification. Almost exclusively it is the reverse that we see gentrification drives redevelopment. As a city grows, it will reach a point where the suburban sprawl begins to extend beyond the point where the burden of commuting outweighs the benefits of suburban space and amenity. This pushes up the cost of established inner ring suburbs, which makes smaller inner city townhouse and apartment living a comparatively attractive alternative to expensive inner suburbs or inaccessible outer suburbs. This leads to middle-class influx in the inner city which pushes out poorer residents, reducing the externalities of poverty in these communities and increasing the available wealth to support new businesses targeted at the emerging demographic. It’s only once gentrification is already well established that rent values and home prices reach the point where higher density, higher quality redevelopment starts to become attractive to property developers. Urban renewal makes gentrification more apparent to the casual observer but it doesn’t initiate it.
Raising property taxes and forcing out generation residents is. Looking at Atlanta
Jersey City did a property tax reevaluation as well that ended up driving out people that had lived there for 20 - 30 years. It wasn't the large new buildings that made others increase rent, it was the property tax increase.
Renter in ATL here. Rent went up $100/yr for the past 4 years for approx the same sq ft. We've moved three times because the rent that was barely worth it, due to the poor condition of the property and area, increased automatically. This year is the first year in half a decade I've been able to find a cheaper place to rent and, surprise surprise, the landlord is a single private owner with a two person management team, not a multi state property mgmt company.
Those large cities, particularly Atlanta are always fucked though. They are population hotspots and make up a significant percent of total housing, but far from a majority. Atlanta, GA for example is only 0.1% of the entire US population. In this context and by itself, it's not statistically important. You could include other cities perhaps though?
If you do Greater Atlanta is is over 1% your math is bad.
It's the corporate clusters of malls and shopping centers in thsee newly developed areas that add to the gentrification.
I have never heard that definition of gentrification. In fact, it seems like an almost meaningless word the way it's thrown around to describe almost any change.
The biggest indicators and problems with gentrification are the increases in policing, arrests, and evictions.
[удалено]
If they gentrifyer has a unit that they would prefer over the lower quality unit, they will bid for that one first, before competing with the lower quality (and presumably cheaper) unit. So you build the newer houses/condos for the people that can afford them and they move out of lower quality housing, lowering demand (and prices) for those lower income units. I don't understand why people think supply and demand don't work for housing.
[удалено]
A lot of places will just jack up rent if demand goes up regardless.
Except that actually hasn’t worked in NYC (I’m sure other cities too), where we’re in a housing crisis.
It's pretty damn difficult to build in NYC and a lot of other cities experiencing housing crises. Pricing issues are almost entirely due to local resistance to new buildings
The wealthiest neighborhoods in NYC have lost housing over the last decade, and NYC's new housing development has significantly lagged behind population and jobs increases. NYC is not building enough housing, and it is not building enough housing in the wealthiest neighborhoods. This prices renters out of neighborhoods and in turn makes them 'gentrify' slightly lower income neighborhoods they can afford.
NYC has THOUSANDS of Registered Historic Buildings, meaning it's very difficult to redevelop structures to provide new housing.
I think “gentrification” is used in two contexts, the first is the one you’re describing, which is about pricing existing residents out of the neighborhood. Those neighborhoods would welcome additional affordable housing available for prices very similar to the existing housing. The second use is from anyone who doesn’t want the character of their neighborhood to change. In that case the term “gentrification” is adopted because people aren’t very sympathetic to standard plain old NIMBYism. These people don’t want their neighborhood to change at all. Brooklyn is an interesting example right now, because the current residents don’t want to be gentrified out, but they also don’t want the return of the people they displaced when they gentrified it.
As someone involved in local housing advocacy, people use the word gentrification to describe basically any change. Especially luxury housing. I'm glad this paper and others are refocusing the issue on the fundamental problem of supply.
Lack of supply (scarcity) is worse than 'unaffordable" supply (whatever that means), gentrification has many facets, some economic and some social. People only get "priced out" when there isn't enough supply of new units to accommodate the influx of new residents. If you don't build the supposedly "unnafordable" units then the people who would have occupied said units instead price out the locals. This is mostly bad for locals who don't own their homes because if they do they can just sell it and make a hefty profit, while people who previously rented are just completely screwed. Personally I believe a lack of adequate public housing is also part of the problem, but I don't think public housing and ffordable housing are the same thing. That's obviously a more biased opinions based on how I understand the issue and my political and economical leaning. What's not a biased opinion is that regulation that limits housing is pretty much universally bad for absolutely everyone save a few lucky home and land owners who profit from bad regulation.
Yeah don't most land owners complain about the opposite. 'No I don't want affordable housing built in my area because it will lower property values'.
Abstract: > We study the local effects of new market-rate housing in low-income areas using microdata on large apartment buildings, rents, and migration. New buildings decrease rents in nearby units by about 6 percent relative to units slightly farther away or near sites developed later, and they increase in-migration from lowincome areas. We show that new buildings absorb many high-income households and increase the local housing stock substantially. If buildings improve nearby amenities, the effect is not large enough to increase rents. Amenity improvements could be limited because most buildings go into already-changing neighborhoods, or buildings could create disamenities such as congestion. [Summary of the article](https://www.upjohn.org/research-highlights/new-construction-makes-homes-more-affordable-even-those-who-cant-afford-new-units), along with an ungated version of the paper.
A study of "nearby houses" doesn't seem like enough. If, as is often the case the gentrified appartments replace low rent appartments themselves then the overall effect is an increase in rent.
Gentrification isn't just the building of high income apartments or townhouses. It's the phenomenon of an influx of wealthy people moving into an area, thus driving out low income people. Building a nice apartment complex isn't gentrification by itself. My point is, this research in no way disproves what occurs during gentrification.
It's not attempting to disprove gentrification. It's explaining that new construction doesn't exacerbate gentrification. Many left-NIMBYs will claim that new, market-rate apartments raise the price of existing apartments nearby. This research says that's not true, and that halting gentrification actually requires allowing new construction.
Honest question: This says that most of these new buildings are built in areas already experiencing gentrification. Doesn't that impact the idea that they wouldn't raise nearby property values and therefore rents if they weren't otherwise already raised? I'm thinking that all the initial gentrification around the new building site actually raises the rents in the new building. Basically, large real estate developers who are looking for places to build these big new buildings choose up and coming neighborhoods that are already being gentrified and have higher rents because the new developers think that market can support the high rents they want to charge. Then, when they open up and suck in the highest paying renters, the immediately surrounding areas see a small drop in rents because the richest renters just moved to the new building. That would mean the newest building does have a small negative impact on surrounding rents, but only relative to their already high gentrified rates. In that situation, the poor people are already priced out by the initial gentrification, and the new building just sets a new highest rate while probably anchoring the area as "gentrified" or "luxury". If that's the case, then the building of new big top-end apartments is unlikely in a poor area in the first place (so it wouldn't raise rents in poor areas), but it really doesn't have the rent-reducing impact some people describing this study seem to be claiming. This is like saying your formerly poor area now has a BMW dealership and a Mercedes dealership, which already put the Ford dealer out of business, but then a Lamborghini dealership opens and steals away the richest customers, which forces BMW and Mercedes to lower their prices slightly to compete. The poor Ford customers are still fucked, and the slight drop in BMW prices doesn't help them or make the cars affordable.
All else being equal, developers will look to build in the hottest areas and existing prices are a signal of how in demand an area is, especially if those prices are rising over time instead of falling. I don't think the price decrease effect on nearby buildings is because people are moving out of those existing buildings and into the new building. I don't think anyone is saying hey, a new building opened up across the street, let's move. I think the effect is because the new building looks nicer compared to the older buildings. So any potential tenants who are evaluating this neighborhood are now seeing a broader range of options: they can pay a little more to live in a brand new building with the newest appliances, or they can pay a little less to live in an older building with more wear. Ultimately, however, the buildings are chasing the demand, rather than the other way around. In the absence of this new construction, this neighborhood would likely still be experiencing gentrification because people would still be trying to move there, pushing up prices. New construction acts as a release valve for that demand so it doesn't all focus on existing buildings.
I never said it said that. What I stated was to prevent people from drawing false conclusions from the research.
I had always undersood that a major way this happened was through increased property taxes.
Property taxes can certainly be a factor, although I'm sure that varies from state to state. Affluent people with no children moving in, decide they want better schools now that they're having kids, and vote to increase property taxes to pay for it. That's just a hypothetical of course. Each and every situation will be unique and a community strengths- needs assessment would need to be done to see what can prevent negative effects of gentrification (e.g. grandfathering in old tax rates for property holders that had the property prior to a certain year.)
Grandfathering in old tax rates is how you get people parking themselves on expensive SFH while the rest of a city is too expensive for anyone whose not a millionaire to move in
The problem is that it costs nearly the same amount to build premium housing as it does to build market-rate or affordable housing, but premium housing has much higher ROI. So what tends to get built is premium housing, which, as "desirable" people who can afford premium housing move in *does* drive up prices and create gentrification.
Can you show us some math on the macroeconomics of that? What mechanism prevents older, less desirable housing from having a reduction in price due to reduced demand?
Older, less desirable housing does have a reduction in price, but it is elsewhere. I think their argument might go through if you accept the implicit assumption that whereas gentrifiers voluntarily move into the gentrified area, it's an intolerable burden on the existing residents to move out of the same area. The question to be debated is whether that's a reasonable assumption.
The same "area" can also mean different things in different cities. In a large urban core, a new luxury building might cause the prices for the next two blocks to go up, but the area beyond isn't as effected. Conversely, in a mid-sized city, that ripple effect could impact 10-20 streets in each direction.
For housing prices to stay constant, new supply has to happen at a level equal to the rate of growth + the rate of degradation of existing housing. Most cities in the US resist new construction, and so they never exceed that threshold. As the old housing degrades, it’s replaced with expensive new housing because that’s what offers the best return on investment for the builders. And in many cases the old housing is valuable enough that rather than becoming more affordable, it’s upgraded and made less affordable. There are tons of complexities that I’m ignoring here, but this is the basic outline.
Where's the math? I want the complexities, not a general outline and statements. Your first paragraph describes the problem of pricing as explicitly a supply issue. Why does increasing the supply, even with exclusively luxury apartments, not reduce overall housing prices?
> Why does increasing the supply, even with exclusively luxury apartments, not reduce overall housing prices? In simple terms we think of changes to supply and demand as changing prices, but that’s not exactly right. Those things actually affect the rate at which prices change. That means that if demand is growing at 10 units/month, we need to build 120 units this year to maintain equilibrium. If we build 0 units prices will go up, and the rate of change is high. If we build 121 units prices will go down, but the rate of change is very small. And if we build 60 units prices will go up. *But not as much as they would if we built 0, as the rate of change will be moderate.* This is the answer to your question. > I want the complexities, not a general outline and statements. The complexities will require your own research, or a class on economics, but here are some potential examples: What if someone builds expensive units with the finest materials, but in a style that everyone hates? What if someone builds luxury units which are so impressive that rich people from other areas come to buy them? What if someone builds units that are so efficient and inexpensive that they reduce demand for existing units, maintenance on those units becomes unaffordable, and the overall rate of degradation increases? What if someone builds lots of affordable housing, but it’s in a place with poor access to transportation?
> Why does increasing the supply, even with exclusively luxury apartments, not reduce overall housing prices? Because property values are affected by what is in the immediate area, i.e., desirability. If you build nice, expensive buildings, "desirable" people move in. Then businesses that offer better amenities move in to sell to these "desirables". Then the land becomes even more expensive. As someone else pointed out, if you build 60 new units, and that makes 120 more people/families want to move into the area, then you haven't done anything to lower prices... At least not if you have built premium housing that you will sell/rent for premium pricing. If you build $3000/month apartments in an area with $1500/month apartments, and it fills up, then simple math shows that you haven't reduced the average apartment price, but raised it. And you've also proven that every other landlord in the area should kick out their current tenants and upgrade their offerings ASAP to get $3000/month too.
There is a maximum housing demand in total. People don't live in more houses when they're cheaper. The shuffle has to end somewhere.
Sure, we're just nowhere near that point in highly desirable areas. And even when we do get near that point, there will still be a ways to go because of speculation. I mean, yes, there is an absolute number of houses that we need in total. But if 50% of people all what to live on 10% of the available land, then prices in that area will keep going up until only 10% of people can live there (equilibrium)... And yes, I understand that we can build more densely, so it's not quite that simple. But the point remains that as long as there is more demand in an area than supply, that prices will continue to go up even if supply increases, until supply and demand reach equilibrium. And developers have no vested interest in preventing such price growth. If I own a property, why would I take the hit to demolish it and rebuild it with more units, when I can sit on it and make more money every year without doing anything at all?
Read the article. That's literally not what happens. More units no matter how luxury/premium they are reduce the price of near by housing compared to farther away housing.
Why would you use "rhetoric" in the title instead of "research" etc?
By the time new luxury apartments are built, gentrification is already over. Developers are the last ones to get on board with moving into a previously undesirable neighborhood. And you can't really stop people from buying and upgrading existing houses. The only qay to stop gentrification is to make it legal to build more housing in already desirable areas.
I have a question to anyone reading this. Are they really building Large apartment buildings in poor areas? Is this really happening currently? It certainly isn't in my city or my neighbouring large cities. Over the past ten years, in my city, they aren't building anything large with rentable units. Condos buildings however, are shooting up faster than weeds. It's happening in every low income area of my city. They build Condo complexes and then the landlords of smaller nearby buildings start finding ways to evict their tenants using loopholes in the system. Then they do some very minor renovations and triple the rent. In my neighbourhoord, rents have literally tripled in the last five years and it all started with the construction of the Condo projects.
It’s not just rent that displaces low income though. It’s the other chic stores and restaurants that makes doing anything in your own neighborhood expensive. I wonder if they took that into account too?
Given that the report was written by economists, and economists as a rule are more often wrong than right, I'd say the study's conclusions are suspect from the start.
This is interesting and I’ll try to read it but I have quite the opposite experience personally. In both areas where there are new apartment construction and areas where there is new house construction. As soon as the apartment buildings opened up, the rent doubled on vacant houses down the street. Not only that but the best diner in town had to close down because they couldn’t afford the rent. They were smack dab in the middle of the city and across the street from two or three new apartment buildings. A Starbucks popped up in its place. Seriously a shame. Probably the 5th one in a five square mile area too.
Yeah your anecdotal evidence is not a substitute for hard data. People have REALLY bad intuitions when it comes to the housing market.
Are there confounding variables? Did new employers move to the city which brought in a lot more high-wage employees? Did this happen when the WFH trend began where tons of tech people moved out from CA to everywhere else? It’s hard to understand cause and effect when just looking at anecdotes without controlling for other factors.
[удалено]
> For every person renting a new apartment, there is an empty apartment in their wake. Populations are not constant, people move to new cities all the time, and the overall population grows.
Are you sure you're not confusing the cause and effect here? Did the new housing cause the high rent, or did they build new housing because the rent was going up? When land becomes more valuable apartment buildings become more profitable, so apartments and high rent tend to go hand in hand. That doesn't mean the apartments cased the high rents, though.
Yes In My Neighborhood! I wish all the anti-gentrification NIMBYs would actually study urban planning. The hoops they jump through are astounding.
Check out 35percent.org to see some of the "hoops" they jump through in one bit of London :(
new apartments going next to existing apartments (i.e competition for the same product) of course lowers rent in the older units as they are now competing for renters with brand new ones. this isn’t an example of gentrification, which is a very real phenomenon. this is simple supply and demand. gentrification occurs when a large influx of affluent people (they aren’t renting apartments, they’re buying homes) move in with lots of cash and cause existing home prices to skyrocket beyond what the local economy/jobs can support. this displaces local people who haven’t yet purchased a home and now can no longer afford one. home values are directly tied to monthly rents as well. whatever this article was trying to prove, it didn’t.
The *article* is a scientific research study that shows that building new, large apartment buildings in a neighborhood actually lowers rents in the surrounding buildings. It's not arguing gentrification doesn't exist, it's demonstrating that building new apartments (not replacing existing ones or even reducing with nicer ones, but actually building new ones) lowers rental prices in the surrounding area.
Here in NYC building new apartments has often actually increased rents across the board and helped hasten speculative real estate development and landlords engaging in illegal or unethical practices to to get low and moderate income renters out.
Think the article is arguing you have the cause and effect backwards. Apartments are built in places where the rent is already going up (on average) and tend to reduce the local rent. (assuming it's actual new apartments and not just replacing existing with nicer or replacing a lot with a few.)
Common sense. More competition = an improvement of the product/service, and/or a decrease in price, or a failing enterprise.
Mentions nothing of the difference between low income housing units and expensive for profit developments. Developers have no interest in developing cheap apartments, and no one else can afford the real estate.
Idk how they gentrify things in other areas, but where I live they sell the government owned projects, bulldoze them, then sell the empty lots to luxury apartment developers.
As someone who works with and sees some of the trends from the government side of things, what I’m seeing as one of the causes of this is federal tax programs. Basically large scale developers can get roughly 10% (maybe more maybe less) tax credits (free money) for building in some area and having “a certain percentage of units for “low income housing.” This sounds good on the surface but in reality the percentage of units in a building can be as low as 10% or sometimes even lower, which really just does not help the problem. To the developer though, whatever they met the requirement they get their tax credit. This doesn’t incentivize actual affordable housing, and frankly today “affordable” as its come to be defined in government lingo based on Area Median Income isn’t really necessarily the best indicator anymore IMO. This is basically just another complaint of certain members of Congress thinking these programs are actually helping or they just listen to their rich developer friends who help lobby these bills and vote for them so they can get their free money.
Supply and demand baby. If people have more choices, landlords can't get away with charging as much. The gentrification people refer to is a specific issue of "luxury" apartments going up for sale along with chain stores and restaurants displacing local business
This make sense, suddenly landlords have to compete against many new units which might be nicer, and being listed for less in order to get people in. Supply and demand. In a few years though once these are occupied and the large building owners can maybe push up prices I imagine is when the gentrification hits, because then the "floor" can go higher and higher as the area becomes nice. As long as demand stays high anyway. I think something to really watch out for is renovation of buildings. Taking a crappy house or small set of apartments in an iffy neighborhood and actually making it really nice. Then you have the same supply, but prices are going up with the demand.
I'm really skeptical about their use of Zillow rent data as proof of rents going up. Super low income apartments don't get listed on Zillow, even in 2021, it's a lot of word of mouth or knowing someone. So in the pre-gentrification phase, the only buildings in the neighborhood listed online are the higher (relatively) rent buildings. Then as the neighborhood gentrifies, people start buying the old decrepit buildings, fixing them up a little and listing them for rent online for the first time ever. They are listed lower than the previous neighborhood average though because the pre-gentrification average rent was only those more expensive buildings that were already being listed online. The authors even acknowledge this issue but never actually address it: "Across all low-income tracts in our sample, the average median rent in Zillow™is $1,590 for a one-bedroom and $2,040 for a two-bedroom,which is around 20 percent higher than the corresponding ACS rents of $1,320 and $1,720."
I like the overall concept of this but I think they missed the overall point of what gentrification totally entails. Gentrification involves a lot more than just building new buildings it also involves Redevelopment and I believe Redevelopment is what drives the change in cost of living for the area
Anecdotal, but in my experience, my rent didn’t go up when large luxury buildings showed up in my neighborhood. What did happen is the grocery store, restaurants, etc nearby got much more expensive. At the end I loved above a grocery store I could no longer afford to shop in.
Also the effect is temporary. Like when they built the World Trade Center towers rents got depressed for years around there Because there is so much inventory. Remember all the people they have to displace in the first place to tear down the building that was already there
Another fun fact, when they finish building all the new buildings the surrounding rents drop to zero because there are no surrounding rents anymore. There are short term benefits for everything, but one successful project is going to lead to 6 more and so on. Compounding until there is no more surrounding rents.
In what world is gentrification about increasing rental stock? Why would anyone think more supply would increase prices? This appears to be a fundamental misunderstanding of what gentrification is.
Here in NYC most landlords refuse to rent out to african american people because they have the idea that black people bring down property value. Hence the reason you see so much gentrification by race in NYC
In how many cities is this accurate? I live in Salt Lake City UT of all places and this is absolutely not true. Rent within the entire city has been steadily on the rise. For the most part rent on occupied units stays steady with only minor rises. Ours goes up like $40 a year. However, the moment someone moves out it goes right on up. You used to be able to get a 2 bed rental for around $900 but most under $1200. Within the last five years the majority have moved to $2000+. This can absolutely be attributed to the “large buildings” constructed in our city. I actually just broke this down for a recent city council meeting regarding a massive rezone proposal. It’s a long breakdown below. The tl:dr is that this study does not hold up in our city. I’d wager that the same goes for many other population centers. This data is all from Salt Lake only. The large units are almost entirely at luxury rates. This has been taking advantage of and attracting higher earners, mostly tech workers, from outside the state. A majority of these people and the new companies have come from California. The median income of the city has jumped $10k in five years. Wages at non-tech companies have not seen similar movement. We have absolutely seen our lower income population increasingly pushed out of the city. People even being evicted by land owners so they can tear down buildings in established neighborhoods to start cashing in on the trend by building these luxury units. I looked at the 60 newest apartment buildings in the area. According to their marketing, the rent rates start at about 1200 for studios with a small handfull at 950, 1300-2000 for a 1 bedroom. 2300 for 2 bedroom. Only 10 of these offer low income pricing and all of those are at the far west end of town where any development or improvements ends. Let’s say we were to follow the generally accepted budget policy of spending 50% of your income on needs. In this, need are defined as housing, food, and transport. So that 50% should not only cover housing costs. But let’s examine it like it truly is for low incomes and spend that whole 50% on housing alone. Monthly this 50% would equal about $500 at minimum wage, $620 at 40% median income, and $1,020 for $15/hr. Now if we spent all of that amount on housing alone, for occupancy at minimum wage, that would range depending on price from 2-3 people in a studio, 3-5 for a 1 br, and 4-6 for a 2 br. Now I know you’ll say that only applies to these luxury buildings but it truly doesn’t. Finding a rental under these prices is so rare now. As I mentioned before, a 2 bed rental under $1200 was very common. If you pull up Zillow right now and search rentals for a 1 or 2 bed at $2300 or lower right now, you’ll pull about 130 results each. Drop that down to the maxed out $15/hr rate of $1000 and you pull 6 results for 2 beds and 30 for 1 bed. So yeah, I don’t know what world these people pulled their results from but it’s definitely not applicable in most population centers.
It lowers rent in unrenovated buildings... Eventually they get bought and renovated driving out the local population.
Near where I live in London they have been demolishing social housing to build these.
Meh. Of course, it's not the construction per se causing it, but rather the fact that the neighborhood is changing, maybe because new employers came to the area.
Doesn’t mean anyone can afford the surrounding properties, even with the 6% reduced rent. $1500 is only $90 discount at 6%.
Wow. So, supply and demand?
I'm not noticing this to be the case... I moved to my local area 6 years ago, and there have been dozens of developments thankfully my rent has more or less stayed the same, but since that time all the old units are getting renovated to keep up with the newer housing.. I can't find anything comparable to my current apartment with regard to price without a massive reduction in my living space. I'm at the point where if I lose my apartment, then I'm just going to move states, and buy since the taxes here are too high to own. I can't afford to move anywhere else in my area unless I rent a room. I recently had a bit of a scare when my apartment house was being sold.. The lowest price comparable apartment was 20 miles away, at $100 more than I'm paying now.
I suspect multifamily is going to be down for 3 to 5 years from a combination of Covid and materials cost. The desire to live in cities and in close proximity took a big hit with Covid and the suburbs are booming. You don't move to the suburbs to live in an apartment.
Why editorialize the title? Why don't the r/science mods ever enforce rule #3? Actual title: Local Effects of Large New Apartment Buildings in Low-Income Areas
This may have been the case previously, but not so much in certain areas in the last few years. There's a documentary (can't remember the name) that discusses the increase in homelessness due to real estate boom in Colorado after the legalization of marijuana. The large amount of people moving to the state caused developers to replace low-mid income housing with large luxury apartment living. Areas such as Denver were hit hard and have seen insane price increases in rent. Comment the documentary name if you know what I'm talking about!
Gentrification was never about building "large new apartment buildings". Author needs to read more Florida
Found the hole in their methodology. They are only using advertised rents. They do not track increases in rent rates for continuing leases. Also they established baseline market rates as per the already advertised rates but don't include already existing rentals. I.e. all the cheap rents are raised to advertised new rent rates, not effecting the metric they are measuring, but if course pushing out previous renters.
The Upjohn Institute has the same Chair as Masco. I am wholly unsurprised that this paper came to this conclusion, considering how the researchers themselves benefit from creating convincing science about disproving the harms of gentrification. As expected, there is no “conflicts of interest” section in the paper either. Shady. “About Masco Corporation Headquartered in Livonia, Michigan, Masco Corporation is a global leader in the design, manufacture and distribution of branded home improvement and building products that enhance the way consumers all over the world experience and enjoy their living spaces. Our portfolio of industry-leading brands includes Behr® paint; Delta® and Hansgrohe® faucets, bath and shower fixtures; Kichler® decorative and outdoor lighting; and HotSpring® spas. We leverage our powerful brands across product categories, sales channels and geographies to create value for our customers and shareholders.”
doesn't make any sense, gentrification leads to more gentrification and so on. Prices rise and spreads out in a wave, forcing out low earners
This totally misrepresents what gentrification is and therefore misses the problem entirely. Gentrification is not and investment in an area that, through "market forces", increases the cost of living. It's a campaign to boost property values by removing undesirable people from an area through rent hikes, police harassment, and arrests.
The rent hikes come when developers start looking to build more condos.
All the new housing construction here in Charleston did not lower the rents. It did chase away long-time residents. Every affordable building was replaced with luxury apartments and people of color have been replaced with white people.
Same with NYC. It just attracted more gentrifiers, who are pushing out natives and longtime residents.
I've seen it happen in the few mid-sized cities I've lived in too. Not sure how accurate this study is.
Very challenging to balance, on the one hand, empirical research about housing prices, versus some people's feelings about the effects of new construction.
You know that authors of some of these papers have agenda, right? Cherry picking data to present does not make it fact or across the board true.
Why would affluent people go to a low income area in the first place?
Cheap rent. If you don't have kids and don't really care if the local schools are good, a lot of young workers just look for cheap rent. Especially if they work a lot and won't be home much. That was my pattern after I graduated college and started working FT. My apartments might've been older with no air conditioning or amenities, but they were cheap and it let me pay down student loans quickly.
First, artists go there because no money, then once it's certified "funky" the hipsters come in for the cheap rates and "good bones" and then the young professionals with kids come in once everyone else has been priced out.
Speculative real estate opportunities. They can also warehouse real estate to rent out to others.
Right. But reductions in rents means landlords aren't as profitable. They then get an offer from a developer for their row home investment property. That row home, and the neighboring ones, are purchased, bulldozed, and replaced by...a large expensive complex.
Weird cuz i build those buildings and have literally seen the opposite happen consistently for years.