In my experience, a huge number of people spend the most they can on housing. So the local price level is set by the local income distribution. Their observation lines up perfectly with my experiences.
This also suggests two solutions that are bound to be unpopular:
* To make housing prices more reasonable, give everyone a pay cut.
* Trying to set a "living wage" is futile since boosting income will feed right through to the price of housing.
Why doesn't it feed through to the price of food? Of vehicles? Of energy?
It only feeds through to the price of certain classes of goods: housing, healthcare, education.
Those are also "markets" that are artificially supply-constrained, through zoning, the AMA, and accreditation.
To be clear, I'm not saying that we should get rid of zoning, the AMA, and accreditation—but we should be much more careful to avoid use of those tools to curb supply.
Kidding aside, most people looking for housing aren’t buying land, they’re buying housing — which absolutely does not have elastic supply by policy, not by natural law.
Well, they are buying land because housing exists on land. As discussed elsewhere in the thread, if you make the housing upon that land more elastic (e.g. by loosening zoning restrictions), that elasticity pretty much immediately gets baked into the price of land itself.
This is so significant an effect that there is a highly lucrative business in simply buying low-density zoned land and going through the entitlements to turn it into a high-density zone. This does not just generate a free lunch for a developer to build more units on the same plot of land at the same price, it makes the land instantly more expensive.
> there is a highly lucrative business in simply buying low-density zoned land and going through the entitlements to turn it into a high-density zone
Sure, but this is only a lucrative business because despite the land getting more expensive, the housing units are less expensive—otherwise who in their right mind would pay as much for one unit in a duplex/triplex/etc. as they'd have paid for a single-family home in the same location?
The $/sqft of housing tends to go up as density increases... for the same reason as the article is suggesting: incomes are higher, so people can eat higher prices.
> The $/sqft of housing tends to go up as density increases
This is only true generally, not within a specific neighborhood, and it's because of correlations between demand and density.
If you look at a neighborhood with mixed SFH and condos, the condo $/sqft is lower than the SFH $/sqft. (To be clear: that's $/sqft of housing space not of land).
Having a diversity of density enables home pricing at different points. Looking only at SFH (as this article does) is missing the forest for the trees, IMO.
This also suggests two solutions that are bound to be unpopular:
* To make housing prices more reasonable, give everyone a pay cut. * Trying to set a "living wage" is futile since boosting income will feed right through to the price of housing.