There are 1.5 million housing units under construction, which is an all-time record. It'll be interesting to see how quickly that get absorbed in a market with rising interest rates and questionable valuations. There appears to be lots of demand but what I'm seeing in my corner of the world is most of the demand is at the lower end of the market, which I'm guessing isn't what is primarily being developed. People moving up does free up properties at lower ends of the market, so in effect, a trickledown effect, but that takes a while to happen. Maybe we're going to see more and more house sharing and renting of individual rooms (legal or not).
Around these parts, these new housing units are insanely expensive. They are building a lot of them, but there's no altruism involved. Not even one tiny bit. They are building these gigantic highrises, that are destined to be packed with yuppies. There are cranes everywhere in NYC.
Brooklyn and Queens; formerly "affordable" places to live in New York, are now getting $4,000 (or more)/mo for 1-bedroom cribs. I've seen it with my own eyes, in Manhattan. Areas like Alphabet City, that used to be considered "dangerous," are now primo real estate, and well-dressed young couples walk their toy poodles around these neighborhoods.
It's only a matter of time, before NYC becomes an East Coast San Francisco. Manhattan is pretty much there.
I am not personally familiar with the way France is structured, but I have been told that the cities are where the wealthy live, and the suburbs are where the not-wealthy live.
From what I have seen, Seattle is becoming that way. I was pretty surprised, when I visited some friends, down in the suburbs south of Seattle, and saw that it was actually a rather scruffy area. I had gotten used to Bellevue and Redmond.
> They are building these gigantic highrises, that are destined to be packed with yuppies.
Unless there have been major changes in the last few years, many of those buildings will not, in fact, be filled with yuppies. They'll sit vacant, parking the money of the world's ultrarich in a low-tax investment.
Think of apartments the way you think about cars. New ones cost more, and many lower income people think of a new car as a luxury that they can't reasonably afford. But you need people to buy new cars in order for them to become used cars later. And like we saw during the pandemic, when the car factories shut down many of the people who wanted a new car jumped into the used car market instead, and prices for used cars went through the roof.
If you don't build new housing, then the people who can afford it will just end up driving up the price of older homes. Alphabet City is expensive now because they didn't build enough apartments in the East Village to meet the demand from people who want to live in that area.
>Around these parts, these new housing units are insanely expensive.
So long as the total number of units increases, it really doesn't matter how much they cost, so long as they get filled. Increased supply will bring down rents at the less expensive end of the market.
I lived in exactly that in Liberty Village in Toronto for a period. "Lulu's and Shitzu's" it was often called. How right they were.
New rental-only builds were even going up in the area, not just condos. But they were more expensive to rent than the bloody condos, and about 3/4 the size.
Areas like Alphabet City, that used to be considered "dangerous," are now primo real estate, and well-dressed young couples walk their toy poodles around these neighborhoods.
How awful. The government should do something about this kind of degradation.
and thats the problem. if you watch any of Louis Rossmans videos on NYC real estate he explains the Issue.
Buisness dump invested money into expensive building. If no one rents then it stays vacant.
Why vacant, isnt the landlord going to lose money? well yes but if he rents a lower amount then his valuation goes down and he is suddenly upside down on his loan. So he is compelled to not rent versus renting it.
Add to this governments make more tax yearly if its valued hire and now there is no incentive to fix this.
>I am not personally familiar with the way France is structured, but I have been told that the cities are where the wealthy live, and the suburbs are where the not-wealthy live.
1.5 million housing units != 1.5 million housing units for affordable rent
London literally has tens of thousands of dwellings sitting empty. Many are investment properties and will be sold multiple times without ever being lived in.
It's easy to make money at the high end from rising property values without the hassle of dealing with tenants.
It's easy to make money at the low end by packing as many tenants as possible into small properties and spending as little as possible on maintenance. There's occasionally some legal hassle with evictions, but generally for landlords it's a seller's market, with minimal regulation and enforcement.
There is, indeed, tens of thousands of empty homes in London. In a city with millions of homes. Current statistics show a vacancy rate of 2.2% [1], which is an incredibly low rate, which implies a pathologically supply-constrained market. Additionally, there is no evidence to support that even a statistically relevant proportion of those empty homes are empty for investment purposes; vacancies can happen for a number of reasons, including being between tenants, non-primary homes, etc.
I think a lot of the supply at the low end is irreplaceable, because building codes and regulations have changed significantly over the years. It's effectively illegal to build some of the more affordable buildings in certain jurisdictions.
This is true. I'd estimate at least 70% of all rental unit currently under construction will not be "affordable" for two people working full time for minimum wage. In northern New England it's easily 100% of units.
That said all rental projects that I know of in Maine and New Hampshire are all rented before they even finish construction.
EDIT: I'd also like to make a point about current regulation and zoning. It's not unusual for a developer to pay around $500,000 or more in state fees, environmental review, and layer time to get a new apartment complex approved. This requires insider connections and specialized knowledge of the municipality if you want it completed in a reasonable time frame. Partially this is because national building codes are more complicated then ever but more often building anything at all requires a zoning exception or amendment.
If you pull of the zoning maps for your town or city you'll likely find it riddled with parcels that have been cut out or otherwise exempted from the rest of the zone. This process can be expensive and take years to complete.
"not unusual for a developer to pay around $500,000 or more in state fees, environmental review, and layer time to get a new apartment complex approved"
If a complex had 500 units, thats a negligible cost
That's a nice fiction. This is a bit old (1999) [1], but California's own housing policy administration at one point sifted through the data and found it averaged something like $15k/unit for apartments, and worse for other forms of housing. I'm not sure there's any evidence it's gotten an order of magnitude better since then.
I can't possibly understand how you can be debating in good faith when someone shows your optimism is likely off by a factor of 10x and you try to spin that into some sort of "doesn't explain it away" non-issue. When you set the bar at $1000 a unit and it is $15k+ (in 1999 dollars) per unit, that's kind of a big deal which you disingenuously brush away because it was fantasy. Development fees are just one piece of the regulatory barrier, these expenses add up, and they absolutely help explain the problem.
A house is made up of individual pieces of wood, drywall, bricks that are "under 10% of the cost" individually by the single piece but when stacked up they absolutely help explain the (much greater) cost of the house. It's going to be difficult to point to a single smoking gun; with housing it's death by a thousand cuts (in California development fees are one of the bigger ones).
According to architects who know, it’s the price of mandatory parking, especially in MDUs, that drives up the cost of housing much more than the additional cost of adhering to more stringent building codes.
How many of them are starter homes? Majority of the home constructions I came across is always above 3.5k sqft homes, some are McManison. It is great about 1.5 million housing units, we need starter houses than 4k sqft homes.
Few new starter homes in my (non-trendy) city. However, once builders started working again around '12, they started putting up both McMansions and spectacularly ugly apartment buildings (partially fills the role of the starter home, I guess, in that at least it's a place to live, if not a stepping stone to financial stability, so should take pressure off the market) at a crazy-fast pace. Construction everywhere, constantly. Downtown? New several new or converted high-rise apartment buildings. Just off downtown? Tons of new ugly-ass mid-rise apartment buildings in that new style everyone's using. 'Burbs? New and developing McMansion-filled neighborhoods everywhere, and a ton more of those same ugly apartment buildings.
Doesn't seem to have done much to keep housing prices under control, and houses still sell so fast that you blink and a new listing will be gone. We can't possibly be a major location for internal migration—not like cities in California or Texas or anything of that sort—so IDK what's up with that. My 20ish year old McMansion has increased in value about 30% over the last two years, and was already way up from just a few years earlier. WTF.
The ugly apartment buildings you are seeing are probably one-plus-five buildings (one concrete + five wood floors) that are actually optimized for balancing zoning+codes+affordability for single-family apartments. At least theoretically, they should offer cheaper rent due to their much lower construction costs.
I think of the ugliness of the facades as a bonus that would drive wealthier people to other buildings once options open up a bit.
Yeah, it's those, I just couldn't recall the term for it. Much of the ugliness seems to be a choice, though—lots of weird, haphazard nooks and crannies and bump-outs, and bizarre color schemes that seem designed to dazzle you into not noticing how ugly the unevenly-bumpy exterior is. If they just flattened out the exterior walls a little and cooled it a bit with the crayon-box color scheme, they'd look much better.
In many cases, the superfluous nooks and crannies on 5-over-1's are mandated by local zoning rules that call for "façade articulation" on buildings occupying larger amounts of street frontage (I suppose to conceal the unthinkable horror of a big building existing in a city).
At least in the upstate of SC, I see lots of starter homes, some would say too many. Of course, the average price in the state has risen above $300K and I don't know where people are getting this money from. The starter homes/condos seem to have a sqft of between 1200->2000 (best guess unresearched).
You and me both. Though, the older housing inventory often is 900-1200 sqft, which is a very suitable size for a starter home, but smaller than the modern homes...
I'm in the upper midwest, from what I've seen when traveling in my state it's few and far between. New construction is all MDUs and custom homes in the 5k sqft range.
Fed/State government can issues credits/tax relief for "investors" who build MDUs but somehow starter homes are off the table?
It's not all doom and gloom, Habitat For Humanity appears to be the only outfit that's building affordable houses/starter homes, helps when you get a nice influx of money going into that program (thanks MacKenzie Scott).
Moving McRichPeople out of normal housing and into McMansions can open up housing availability downstream though. The homes they are moving out of are an upgrade for those in starter homes and then those starter homes become available.
That is the case from what I have seen. We've put so much playdo money in the hands of young McRich who worked at a FAANG and there are so many of them. Also Chinese investors are buying up properties and locking them up for a few years to resell. We may get to a point where we have to actually change the law to fight homelessness and rising housing costs.
> There are 1.5 million housing units under construction, which is an all-time record.
No, it isn't. Back in the early 1970s, the US was averaging about 2.4 million housing units started per year [0]. And at the time US population was only about 210 million, compared to 330 million today...
How many of these will be snatched up by scalpers looking to rent them out? It doesn't matter if they build 1.5 million houses if they all end up as rentals anyway.
Housing bought by landlords looking to rent is the most relevent, as it increases competition among landlords putting pressure on them to be less selective.
> An estimated 870,000 Mexican migrants came to the U.S. between 2013 and 2018, while an estimated 710,000 left the U.S. for Mexico during that period. That translates to net migration of about 160,000 people from Mexico to the U.S., according to government data from both countries.
