Spectre film san francisco5/26/2023 So, San Francisco is a nice place to live. That’s right, rent, in the economic sense of the word:Įconomic rent is the cost of non-produced inputs or advantages the result of natural or contrived exclusivity. There are cheaper or more expensive ways to build homes, but in the cities facing these crises construction costs constitute a relatively small portion of the expense of housing. The trouble comes in trying to understand why those constraints are there and how to alleviate them. Yes, supply constraints are the cause of the affordability crisis. Prices are therefore soaring and neighbourhoods are changing, touching off some occasionally nasty social conflicts.īut the author of the TechCrunch piece, Kim-Mai Cutler, puts her finger on the real problem. The economy of the Bay Area is booming, but the region is one of the most difficult places to build in the country. The point is that if demand for high-end housing is not satisfied with new construction, that demand will flow to existing supply, putting upward pressure on prices right across the housing stock.Ī new piece in TechCrunch makes this point nicely in a very good explainer of the housing crisis in San Francisco. You see this in London, for instance, where literally every house in the city is now being rehabilitated, including those that were rehabilitated last year…. When new construction of luxury units lags, the very rich buy up older housing stock at exorbitant prices and pay to have them redone. The former point misses the fundamental fungibility of housing. The latter point gets causation the wrong way around given an unexpected decline in demand due to financial crisis or other shocks prices fall and interest in new construction dries up until existing inventories are cleared. Others love to say that price declines have historically gone hand in hand with falling construction. Housing affordability activists like to point out that most new construction is for luxury housing, meaning that supply of non-luxury units is not growing by very much. The piece nods to the idea that rising rents-or housing costs generally, in America and elsewhere-are about more than supply and demand.
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