No. It’s a given that people without the incomes to afford housing won’t enter that locality, but many could remain from before it was a popular place to live.
Gentrification actually only affects a very small percentage of people who end up refusing to sell and holding out until they cannot afford anymore.
But the point remains that a 90 year old living on Social Security could potentially own a million dollar home.
> Gentrification actually only affects a very small percentage of people who end up refusing to sell and holding out until they cannot afford anymore.
In California, gentrification almost never affects long time homeowners. Once you pay off your mortgage, your only housing costs are maintenance and property taxes which are highly subsidized thanks to Proposition 13.
However, renters who make up 44% of all California households very often do experience increasing housing price pressures which drives them to move to lower cost (and lower opportunity) areas. Some municipalities have tight rent controls, but most do not. There's a state law which prevents rent increases in older units above 5% plus inflation but that is still an allowable rate which quickly outpaces income growth.
I happen to like some rent controls but I'm not saying that universal rent controls are a solution here. There just has to be some explanation for why housing construction costs seem to grow just as fast as housing prices in general. If housing prices are growing faster than wages and the producer price index for materials then it cant just be construction labor and materials!
What I am alluding to is that there is simply a lack of locations which are able to be developed into new housing. Sometimes that's onerous land use constraints, very long project entitlement and permitting timelines which increases financing costs, local taxes/fees or exactions on development, or some combination of all of these!
A new construction unit is always going to be priced higher than a similar sized and located unit that is older. This should not be surprising.
The claim that housing supply advocates make about affordability is not that new units will be most affordable than but that older comparable units will become more affordable due to the increased competition. The people who’ve been bidding up the prices on older rental and resale homes will choose the newer housing instead because they are able and more willing to. The older stock becomes more affordable. Time goes on and even newer buildings cause what was once new to become a more affordable option. It should eventually get to a point where nobody would ever choose the older (again, similarly sized and located) units with poor amenities because it’s not worth it compared to newer options that are a better value. And those get replaced with new construction. That’s how a housing market should function.
But instead we have housing that is over 100 years old going for ever increasing prices even without modern renovations. Thats a broken market.
That's not broken. That's location, location, location.
Also, your average 100 year-old house is a much higher quality structure than your average new house. And 100 years old is about the pinnacle of craftsmanship.
Higher location values are supposed to lead to more intensive land use (more dwelling units per acre) but we don’t tax land enough for this to work properly. I’d still consider a housing market without land value tax to be fundamentally broken. Adding on arbitrary constraints on building (eg, beyond health and safety regulations) makes it si much worse.
As for 100 year old houses being considered high quality… there’s definitely going to be a survivorship bias for such buildings that didn’t get replaced while they could (prior to mass downzoning on the 1970s) but they literally didn’t have building codes back then. Lots of money needs to be spent to retrofit old buildings for modern seismic and energy standards.
Also — not saying you’re guilty of this — there is a lot of racial prejudice when folks criticize the “poor craftsman” of modern construction workers compared to those of past generations, as they more often tend to be Latino workers these days.
> "there is a lot of racial prejudice when folks criticize the “poor craftsman” of modern construction workers compared to those of past generations, as they more often tend to be Latino workers these days."
This is nonsense. The reason people say nearly all modern construction and manufacturing sucks is because the primary focus is on reducing costs and increasing production efficiency/speed. Something that needs to be replaced sooner is also seen as a benefit rather than a problem - planned obsolescence.
“Modern craftsmanship is shit” mainly comes from using things like OSB and laminated beams. Anyone who actually studies modern building techniques realizes that modern houses are significantly better than old ones in many many ways - perhaps the only one they’re not being that they’re not using old growth lumber.
Where I live there is a separate tax on land and structure. But my understanding is we're unusual that way.
Land tax reform is debated amongst economist. It is a form of wealth taxation, and in America we generally don't tax wealth. And even if we did, unlike having $1 million in the bank - which is a known amount of wealth - the value of land is rather hard to quantify. You could arbitrarily say that all land in the city is taxed at $10 a square foot per year. Clearly that would be inequitable by some land is worth considerably more.
Land, unless it's farmland, generates no income and our tax policy is generally based upon income income tax.
Your average surviving 100 year old house, maybe. I’ve seen enough of them to realize that though they may be build out of wood that is old and hard and thick, they’ve tons of issues that just pile up over time.
Perhaps it is different in temperate climates, but old houses can be an absolute hassle.
Wood isn’t used because it will last forever - brick and stone are better for those purposes. Wood is excellent, just not the best. It’s much more efficient though.
That’s probably a big part of it, but of course making anything stand the test of time is extremely difficult.
Maybe you live in a tropical climate but wood can last 100s of years as long as the roof is maintained. Unless it is a timber house the outer walls will need replacement every 100 years though.
>But that would require builders to build affordable homes, which is the same effort and lower profit than building luxury.
This is only true because they can't build homes in significant volume in most localities due to land use and zoning regulations. It took 3 years in my former neighborhood to build 20 houses, because of the review and public comment period. This is the same story I've read about across the country: any locality that is desirable to live in has had increasingly strict regulations and processes that artificially constrain the building of housing inventory of any type.
Given this, if you can only build 20 units instead of 2000, you'll end up building in the luxury category, as its the only way to maximize any value of the build without other incentives.
If instead they could 2000 or 20000 homes that meet building code, builders could not only compete in earnest but you could do things like selling units at lower prices per unit but its made up in volume, or each housing unit could be denser (like town houses, condos etc).
You can't overlook these aspects. Real estate is not a functional marketplace and should be seen as the definition of government regulation overreach in many respects, but home owners tend to vote in blocs, so politicians won't touch it
Even in places where there’s infinite land literally you can buy 50 acres and develop it tomorrow and people are building it. They’re only building high-end luxury homes. Even the cheapest smallest townhomes are definitely into the low luxury area.
If they wanted to, they could build them much more affordable and save 30% off the total price, but nobody does it. Why not? It takes the same amount of time and you might as well build the more expensive one because someone will buy it and you get a percentage of the sale price.
Builders are building and the houses are selling; in suburbs all over the country. I presume the people buying them desire them, they're spending close to half a million for them.
The builders get approval from the county if outside a city, or the city if inside one, or build a new city.
This doesn’t answer my question. Where is it both highly desirable to live and lots of land to build on? And what are there zoning and building regulations?
“All over the country” isn’t a specific answer to the question at hand
Good catch - I definitely should’ve pointed out that I was referring to owners only. In that sense, it’s somewhat of a transfer of wealth from the rich to the poor.
For renters though, you’re absolutely right that they suffer much more directly.
> Gentrification actually only affects a very small percentage of people who end up refusing to sell and holding out until they cannot afford anymore.
Not quite just those who refuse to sell — because housing costs impact the cost of every other local service, maintenance in a gentrified area often becomes unaffordable for those who hold out, and then they can’t afford it. Roof replacement is the classic example. Another example (though not as relevant to the 90 year old on social security) is childcare costs.
Correlation != causation. The lack of factoring these locality inputs means they lose the broader context of their conclusion and that’s what makes it incomplete to me
No no, you're misunderstanding. The study did factor locality-specific inputs like the ones you're describing. In fact they included all of them by measuring the actual realized supply production for each locale.
They do matter a lot. I disagree with their conclusion that they don’t matter.
There is plenty of available evidence that when zoning laws are less restrictive and buildings get faster approval the overall cost of housing comes down over time in significant ways.
The way income factors into this tends to be driven by the fact that the weather the neighborhood the more time that is spent at city hall by residents lobbying for regulations to preserve their market values in their neighborhoods in order to achieve artificial local scarcity which drives the home values up.
One is in regards to the lasting effects of Houston's 1998 zoning reforms[0]
Another looks more broadly at patterns of regulations and how they affect the market[1]
Bloomberg also did some nice reporting in this space[2] as well which goes over many cases of attempted land use / zoning reform and various outcomes, most notably that trying to only single out 1-2 regulations is at best token reforms and more meaningful comprehensive reforms are needed to zoning and land use laws.
This is simply what I have easy access to at the moment, but there is more out there that studies housing as an ecosystem and they all seem to be converging on similar conclusions: the real estate market (housing in particular) is functionally broken around the country
