When the zoning/permitting process limits the building of new houses, builders are going to build what gives them the biggest return: large, luxuriously finished houses.
> builders are going to build what gives them the biggest return: large, luxuriously finished houses
In a lot you could build one largish luxurious home and sell it for 1.5 to 2.0M
Or do 8 tiny townhouse units and sell each for 800K for a total of 6.4M
I don't see how the single home will ever be more profitable if a builder is doing it.
We're seeing a lot of these 8 townhomes per lot (4 on each side with small driveway in between) popping up everywhere, precisely because it maximizes profit per lot for the builder.
Exactly that: you've got a limited number of lots and a limited number of units that can be on those lots, so max the value of those units. With the lot supply and zoning, that equals replacing whatever might already be there with a giant McMansion. This drives up housing prices while also deleting the middle out of the market.
> that equals replacing whatever might already be there with a giant McMansion
That's the opposite of what we see around here. Developers buy houses from the 1940 to 60's (big houses on big lots), tear them down and build an 8-pack or 6-pack (depending on lot size) of tiny townhomes.
The only people building large houses are wealthy individuals building for themselves (as opposed to a development company building to sell) because they can afford to take the potential-profit hit and just build what they want.
