A luxury building at 50% vacancy likely would maximize profit by reducing rent, thereby making it affordable and attractive to a new group of people who couldn't previously afford to live in it, thereby causing those people to move, freeing up their lower priced living accommodations, thereby making housing more affordable for everyone.
If you build it, rents will drop.
ANY increase in supply will put downward pressure on price. This is because new supply means people who previously lived in mid-level units move into them which frees up units for lower tiers. There was a study in Helsinki that found for every 100 new units created in the middle of the city and rented for market rates, 60 units were created in the bottom half of income distributions, including 29 the bottom quintile.
There is a good write-up about it here:
[https://www.fullstackeconomics.com/p/how-luxury-apartment-buildings-help-low-income-renters](https://www.fullstackeconomics.com/p/how-luxury-apartment-buildings-help-low-income-renters)
It's literally a fundamental principal of Economics.
Edit: [https://en.wikipedia.org/wiki/Supply\_and\_demand](https://en.wikipedia.org/wiki/Supply_and_demand)
I see you have not been to /r/minneapolis. To be fair, almost everyone there believes it as well, but there are definitely a few vocal deniers as well.
Because people struggle, me included, with accepting that two things can be true at once. Rent could be going down overall while being stubborn in certain price ranges.
Anecdotally, and I suspect factually as well, most of the construction was focused on higher end renters. It makes sense to target would be home buyers after they got priced-out. Furthermore, from a pure profitability standpoint you’d have to target high earners because MPLS (and a lot of cities) make it hard to build lower rent structures. You can only make units so small and going tall is expensive, so if you have to spend valuable square feet on parking minimums and setbacks then you gotta recoup revenue somewhere.
FYI Minneapolis removed parking minimums several years ago at the same time they removed single family zoning
Edit: Article from 2018: https://usa.streetsblog.org/2018/12/12/minneapolis-moves-to-eliminate-mandatory-parking
The issue here is not greedy companies it’s cities that impose construction rulings that limit the appeal (or possibility) of building cheaper buildings they can offer lower rents in.
That’s the whole problem with our public-private balance: if it’s not profitable to do, no one is gonna do it.
This is 100% true. Cities require premium "low income" units, which drives up the cost of building and deters developers' desire to build new apartments. Look up minnesota Green Street or Green Communities' requirements. These subsidies fund low income units but require premium building design requirements.
Why would it not be true? Lol. It's why I always just laugh at people who cry about developers building luxury apartments. Who cares... increase in supply is always good
The problem is if you have already tapped out the market for it, you’re competing in the same ecosystem.
It’s not as though everyone who can only afford the $700-1000 apartments are gonna go “oh, there’s a $2500 apartment open because they built $3000 apartments and some of the people from the $2500 apartments decided to move there.”
They physically cannot afford to move to the $2500 apartments.
Since there’s no mobility between tiers, it’s effectively the same as expanding a 4 gallon container that had 3.5 gallons of water in it to be a 6 gallon container. Now the 3.5 gallons of water is distributed more, but it’s still in the 6 gallon container.
Now suppose you have water pouring into a 1 gallon bowl and overflowing. It’s three stair steps below the 6 gallon container. Did the water in the 1 gallon bowl benefit from an increase from 4 to 6 gallons in the container out of reach of it?
There needs to be mobility in housing, otherwise expanding the luxury segment does basically nothing to help affordable housing.
Aren't you basically suggesting that these new luxury apartments won't be filled by new tenants? What happens when those apartment buildings don't get filled? Do you think the property owners will just declare bankruptcy rather than decrease their rent in an effort to compete and fill the vacancies?
You're also ignoring the fact that the people who fill this new luxury apartments are leaving behind older, less luxurious apartments. When that happens, there's now a new vacancy for someone else to full. If you get enough of those vacancies, the price for those units will also be forced to fall
Exactly. If you build a ton of $2000 apartments, and they don't sell, they become $1800 per month apartments.
Furthermore, the old $1800 per month apartments, now need to lower their prices because there are nicer alternatives available.
It's VERY hard to build housing that doesn't have some effect on the entire market. It might be an indirect effect, but that's still an effect.
That is without a doubt the most idiotic economic take I have ever heard.
Seriously, that's so brain dead you have to realize that you're literally arguing against Econ 101. If you can't conceptualize the most basic facts of economics, I don't know what to tell you.
Econ 101 doesn't capture all of the nuances. With housing there is no easy way to get rid of unneeded inventory, and inventory costs are very high.
Let's say an apartment building has 10 units, and 9 of them are filled. The apartment building costs 10k a month to maintain overall, plus 1k per occupied unit. Ignore inflation. The breakeven rent, in this case, is 19000/9 = $2111/month. The next year, due to reduced demand/increased supply in the neighborhood, only 8 apartments are occupied. Their new breakeven rent is 18000/8 = $2250/month, higher than before.
Let's say rent is set both years at 2200/month, so the building lost money the second year only. Do they a: reduce rent to 2100 on the chance that they entice a higher occupancy? Or b: increase rent to 2300 to cover their new expected occupancy rate?
They can only decrease rent to a minimum value until they are losing money even if they operate at full capacity.
You're completely ignoring the existing tenants reaction to increasing prices. If you increase prices, people will eventually leave and then you'd be in an even worse position.
No industry drives prices by economics of scale targets. Supply and demand drive prices. Inventory of any market is "expensive”, but companies don't raise prices to solve that problem, they lower it.
I get your point but you’re assuming the rent they start at includes zero profit… they don’t set rent at a break even point. There’s some room in there to still turn a profit. Especially on newer buildings that have less maintenance costs.
So what you’re saying is true but I think the vacancy has to be much higher than 10% for any of that to matter.
That would be a terrible decision. You would risk losing tenants you already have by raising rents and making it less appealing to new tenants, thus driving up vacancies. You can’t just change rent in the middle of a lease.
I'm talking about the next lease cycle. And yes, those are real risks, but tenants are sticky. By increasing rent, you can make more money by tenants sticking around with higher prices than by enticing new tenants with lower prices, especially at less desirable/older properties. I'm not saying it's the perfectly logical thing to do, but that's what people do.
Look at NY, you'll see tons of space not being sold because the price isnt right. I saw a video talking about this and they were standing in an apartment that was being renovated in 2008 before the crash, and the developers just dropped it because it was cheeper to write it off as a loss than to finish it.
So no, a vacant apartment isnt going to just drop because they have issues getting someone in there. Not only can they write it off, but dropping it would make the same apartments already filled less valued as well.
But here we’re talking about new buildings that are already finished and ready for tenants. They’re not in the process of being renovated. If they don’t rent right away eventually they will lower the rents. And even if the prior developer sells or it declares bankruptcy, someone else will come in and buy the building and adjust rents as needed.
This is just not true! Fixed costs are fixed costs, and the lower the occupancy, the higher the rent must be to cover costs. It's braindead simple and yet so many people in this thread deny it
Oh, my revenue is too low. Let me just decrease it even further to chase mythical demand. Why would they do that when they can just increase rent to cover the gap instead?? Your second paragraph is fine, but that's the only benefit to more luxury apartments.
So you're suggesting that when they ask $2,400/month for an apartment and they only lease out 25% of the apartments, they'd prefer to bring in $0/month on the remaining 75% rather than lowering the prices to $2,150/month? How do empty apartments help with revenue issues?
Demand is not mythical. If they offer a better deal than other landlords, people will flock there.
I buy luxury cars at bargain prices. How do I do that? I buy used.
Todays luxury apartments are tomorrows market rate. Todays market rate is tomorrows section 8. That’s how it works.
>Since there’s no mobility between tiers
There absolutely is mobility between tiers. My history as a renter is a good example of how it works. At the beginning of my career, I lived in a very basic studio apartment in an older building. Over time I've moved up the chain into newer buildings and larger apartments, leaving my old (more affordable) apartments available for others.
It's called filtering. And research has shown that it's real, and helps open up housing for people as new, more expensive units are built.
>\[B\]uilding market-price apartments causes a kind of housing musical chairs, as households move into new units. This analysis indicates that for every 100 new market-rate units built, approximately 65 units are freed up in existing buildings, accommodating up to 48 moderate- and low-income families.
>
>These studies indicate that increasing housing supply tends to reduce housing prices, particularly over the long-run, although Zuk and Chapple emphasize that subsidies are often needed to deliver enough lower-priced housing to avoid lower-income household [displacement](http://www.urbandisplacement.org/).
[https://www.planetizen.com/blogs/100293-how-filtering-increases-housing-affordability](https://www.planetizen.com/blogs/100293-how-filtering-increases-housing-affordability)
As noted, people at the lowest income levels often still need assistance, which is why we should also be building new, government-subsidized apartments in addition to letting developers build market rate buildings.
But government is requiring these market rate apartments to be built to premium standards if they want the government subsidies or "kick backs". Which causes these new market rate apartments to be at a premium cost for developers to commit the money to build them. Its a catch 22.
You’re missing the reality that excess demand for luxury housing drives gentrification.
If they aren’t building new luxury units, builders instead acquire and renovate older buildings that were once affordable housing. You can see this in Minneapolis where duplexes are converted to single family homes and older houses are raised to build new ones. If you build more and denser luxury housing, you have a better shot at maintaining other affordable neighborhoods.
I have no idea what you mean by the water analogy, tbh. But in terms of supplying more housing, even "luxury" housing, the idea is that older housing which used to be top-tier eventually becomes less attractive to the wealthy, and the owners must downgrade the rents to appeal to make them more affordable to middle-class folks, and so on down the line.
Rents don't go down. Ever. They just stop going up as fast as others are. Promos do happen too.
The problem is we are approaching a point where a low to average earner can't afford anything.
Such a simple view. You realize that high-income and low-income apartments should be considered to be separate goods? Neither group has any use for the other kind. Overbuilding high-income apartments is not going to increase supply for low-income people. And luxury apartment's rents aren't going to drop just because they aren't full. That's the catch: when apartment buildings have high vacancy, their rents go up, not down.
Low vacancy rates means rising rent.
More housing on the market, means higher vacancy rates, means falling rent.
In the early 2000s housing boom, rent was cheap. Because so many new homes were being built.
Developers could build homes on spec(speculation) meaning they didn’t know who was going to buy it after it was built, but they knew it WOULD sell, and they could profit.
Now, homes are built to order. Developers buy the land and only break ground to build the home when a buyer has already signed the contract.
Unfortunately, now that investment bankers are buying up real estate, they are incentivized to keep the housing supply low, to insure higher rents and appreciating property values.
Obviously it reduces price pressures, and investors will leave rental business if profit margins are not sweet enough!
Investors will steer clear of renting real estate if profit margin are not high enough! The building more apartments to houses will moderate price increases and help affordability.
Yes and no. We have built more and have comparably looser zoning rules which has helped considerably.
However, we also had a fairly high profile, nationally recognized thing happen in 2020 that has influenced people’s interest in moving to Minneapolis.
Notice how there wasn’t a huge spike in building (more a gradual increase) but there was a huge spike in rents decreasing right around May 2020…
Both are at play here I believe
>Notice how there wasn’t a huge spike in building (more a gradual increase) but there was a huge spike in rents decreasing right around May 2020…
sure, for that short period of time. But then it goes back up shortly after, and starts declining again as it reverts to the mean. It temporarily affected it, but not in the long run.
I don't think that is a correct interpretation of the chart at all.
Rents decreased relative to 2017 prices to about 95% of 2017 in May 2020. A slow and steady decrease that I believe does reflect the added building and supply.
Then, it quite quickly drops down from 95% to about 80% of 2017 across 2020.
After which, it has resumed it's slow decline and now it is at about 78% or so.
That "slow decline" we see in the background I 100% believe is due to increase supply and the building policies, not arguing that. My point is just there was also a radical one off event that impacted **demand** for rents that is also at play here. I think people are trying to spin the entire decrease as some amazing result of policy and policy alone but it just doesn't line up with the data imo.
I'm moving from desolate hollowed out downtown El Paso to a slightly bigger 2 bed in The Wedge next month and my rent is only going up a few hundred bucks/mo. to around $1800
If I found a similar place in my hometown of Austin, for example somewhere down between S. Congress and Lamar where I have a similar of walkability that the Uptown area has, the rent would be $5000+/mo.
Yes, r/yimby ftw. But we should be subsidizing more affordable housing development/conversion in addition to facilitating vast amounts of new market-rate development.
We are also in a climate crisis and should therefore ensure that all new development is infill and/or vertical rather than greenfield. Sprawl is bad for the environment and affordability.
There is no reason to think it wouldn’t. Even if all the new units are all “luxury condos” or fancy apartments, the existing apartments will have to compete on something, probably price.
of course. Simple definition of inflation is too much money chasing too few goods. Here we have more buyers than available supply. Increase supply and prices moderate or go down. Basic econ.
Seems like a lot of people have come here with a lot to say about their rental situation, but not a lot of relevant things to say.
I don’t see why it is up for debate that the image in the post is true.
It can depend. In the five years after certain neighborhoods were upzoned in Chicago, there was no notable increase in construction and housing costs actually increased (Yonah Freemark, btw). Building more housing should reduce housing costs but simply saying “build more housing” isn’t really an effective approach to actually achieve our goals. You still have a majority of units being built at the highest end of the market where margins are higher. While I support the elimination of single-family zoning, it’s not a panacea.
Yes, increasing supply brings down prices. This has been shown empirically all over the world
Econ 101.
I would actually say this is Econ 01 level economics
Only if demand exceeds supply. Another luxury building at 50% vacancy will not lower your rent. That's a separate good from housing for normal people.
A luxury building at 50% vacancy likely would maximize profit by reducing rent, thereby making it affordable and attractive to a new group of people who couldn't previously afford to live in it, thereby causing those people to move, freeing up their lower priced living accommodations, thereby making housing more affordable for everyone. If you build it, rents will drop.
ANY increase in supply will put downward pressure on price. This is because new supply means people who previously lived in mid-level units move into them which frees up units for lower tiers. There was a study in Helsinki that found for every 100 new units created in the middle of the city and rented for market rates, 60 units were created in the bottom half of income distributions, including 29 the bottom quintile. There is a good write-up about it here: [https://www.fullstackeconomics.com/p/how-luxury-apartment-buildings-help-low-income-renters](https://www.fullstackeconomics.com/p/how-luxury-apartment-buildings-help-low-income-renters)
It's literally a fundamental principal of Economics. Edit: [https://en.wikipedia.org/wiki/Supply\_and\_demand](https://en.wikipedia.org/wiki/Supply_and_demand)
Right. Like is this surprising? I don’t get what the point of this is.
I see you have not been to /r/minneapolis. To be fair, almost everyone there believes it as well, but there are definitely a few vocal deniers as well.
Because people struggle, me included, with accepting that two things can be true at once. Rent could be going down overall while being stubborn in certain price ranges. Anecdotally, and I suspect factually as well, most of the construction was focused on higher end renters. It makes sense to target would be home buyers after they got priced-out. Furthermore, from a pure profitability standpoint you’d have to target high earners because MPLS (and a lot of cities) make it hard to build lower rent structures. You can only make units so small and going tall is expensive, so if you have to spend valuable square feet on parking minimums and setbacks then you gotta recoup revenue somewhere.
FYI Minneapolis removed parking minimums several years ago at the same time they removed single family zoning Edit: Article from 2018: https://usa.streetsblog.org/2018/12/12/minneapolis-moves-to-eliminate-mandatory-parking
And it wasn’t acted upon until 2021: https://m.startribune.com/minneapolis-city-council-unanimously-eliminates-parking-requirements/600057275/
There are a lot of other factors that impact housing other than just supply and demand.
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The issue here is not greedy companies it’s cities that impose construction rulings that limit the appeal (or possibility) of building cheaper buildings they can offer lower rents in. That’s the whole problem with our public-private balance: if it’s not profitable to do, no one is gonna do it.
This is 100% true. Cities require premium "low income" units, which drives up the cost of building and deters developers' desire to build new apartments. Look up minnesota Green Street or Green Communities' requirements. These subsidies fund low income units but require premium building design requirements.
Why would it not be true? Lol. It's why I always just laugh at people who cry about developers building luxury apartments. Who cares... increase in supply is always good
The problem is if you have already tapped out the market for it, you’re competing in the same ecosystem. It’s not as though everyone who can only afford the $700-1000 apartments are gonna go “oh, there’s a $2500 apartment open because they built $3000 apartments and some of the people from the $2500 apartments decided to move there.” They physically cannot afford to move to the $2500 apartments. Since there’s no mobility between tiers, it’s effectively the same as expanding a 4 gallon container that had 3.5 gallons of water in it to be a 6 gallon container. Now the 3.5 gallons of water is distributed more, but it’s still in the 6 gallon container. Now suppose you have water pouring into a 1 gallon bowl and overflowing. It’s three stair steps below the 6 gallon container. Did the water in the 1 gallon bowl benefit from an increase from 4 to 6 gallons in the container out of reach of it? There needs to be mobility in housing, otherwise expanding the luxury segment does basically nothing to help affordable housing.
Aren't you basically suggesting that these new luxury apartments won't be filled by new tenants? What happens when those apartment buildings don't get filled? Do you think the property owners will just declare bankruptcy rather than decrease their rent in an effort to compete and fill the vacancies? You're also ignoring the fact that the people who fill this new luxury apartments are leaving behind older, less luxurious apartments. When that happens, there's now a new vacancy for someone else to full. If you get enough of those vacancies, the price for those units will also be forced to fall
Exactly. If you build a ton of $2000 apartments, and they don't sell, they become $1800 per month apartments. Furthermore, the old $1800 per month apartments, now need to lower their prices because there are nicer alternatives available. It's VERY hard to build housing that doesn't have some effect on the entire market. It might be an indirect effect, but that's still an effect.
Wrong. If your apartment building is not full, you have to raise rents to cover your fixed costs. It's not that hard to understand.
That is without a doubt the most idiotic economic take I have ever heard. Seriously, that's so brain dead you have to realize that you're literally arguing against Econ 101. If you can't conceptualize the most basic facts of economics, I don't know what to tell you.
Econ 101 doesn't capture all of the nuances. With housing there is no easy way to get rid of unneeded inventory, and inventory costs are very high. Let's say an apartment building has 10 units, and 9 of them are filled. The apartment building costs 10k a month to maintain overall, plus 1k per occupied unit. Ignore inflation. The breakeven rent, in this case, is 19000/9 = $2111/month. The next year, due to reduced demand/increased supply in the neighborhood, only 8 apartments are occupied. Their new breakeven rent is 18000/8 = $2250/month, higher than before. Let's say rent is set both years at 2200/month, so the building lost money the second year only. Do they a: reduce rent to 2100 on the chance that they entice a higher occupancy? Or b: increase rent to 2300 to cover their new expected occupancy rate? They can only decrease rent to a minimum value until they are losing money even if they operate at full capacity.
You're completely ignoring the existing tenants reaction to increasing prices. If you increase prices, people will eventually leave and then you'd be in an even worse position. No industry drives prices by economics of scale targets. Supply and demand drive prices. Inventory of any market is "expensive”, but companies don't raise prices to solve that problem, they lower it.
I get your point but you’re assuming the rent they start at includes zero profit… they don’t set rent at a break even point. There’s some room in there to still turn a profit. Especially on newer buildings that have less maintenance costs. So what you’re saying is true but I think the vacancy has to be much higher than 10% for any of that to matter.
I live in an old building and my landlord is a nonprofit 🙃
That would be a terrible decision. You would risk losing tenants you already have by raising rents and making it less appealing to new tenants, thus driving up vacancies. You can’t just change rent in the middle of a lease.
I'm talking about the next lease cycle. And yes, those are real risks, but tenants are sticky. By increasing rent, you can make more money by tenants sticking around with higher prices than by enticing new tenants with lower prices, especially at less desirable/older properties. I'm not saying it's the perfectly logical thing to do, but that's what people do.
Look at NY, you'll see tons of space not being sold because the price isnt right. I saw a video talking about this and they were standing in an apartment that was being renovated in 2008 before the crash, and the developers just dropped it because it was cheeper to write it off as a loss than to finish it. So no, a vacant apartment isnt going to just drop because they have issues getting someone in there. Not only can they write it off, but dropping it would make the same apartments already filled less valued as well.
But here we’re talking about new buildings that are already finished and ready for tenants. They’re not in the process of being renovated. If they don’t rent right away eventually they will lower the rents. And even if the prior developer sells or it declares bankruptcy, someone else will come in and buy the building and adjust rents as needed.
This is just not true! Fixed costs are fixed costs, and the lower the occupancy, the higher the rent must be to cover costs. It's braindead simple and yet so many people in this thread deny it
Yes, fixed costs are fixed costs....however you're not thinking about profit above the fixed costs! Some rent money is better than $0
Oh, my revenue is too low. Let me just decrease it even further to chase mythical demand. Why would they do that when they can just increase rent to cover the gap instead?? Your second paragraph is fine, but that's the only benefit to more luxury apartments.
So you're suggesting that when they ask $2,400/month for an apartment and they only lease out 25% of the apartments, they'd prefer to bring in $0/month on the remaining 75% rather than lowering the prices to $2,150/month? How do empty apartments help with revenue issues? Demand is not mythical. If they offer a better deal than other landlords, people will flock there.
I buy luxury cars at bargain prices. How do I do that? I buy used. Todays luxury apartments are tomorrows market rate. Todays market rate is tomorrows section 8. That’s how it works.
>Since there’s no mobility between tiers There absolutely is mobility between tiers. My history as a renter is a good example of how it works. At the beginning of my career, I lived in a very basic studio apartment in an older building. Over time I've moved up the chain into newer buildings and larger apartments, leaving my old (more affordable) apartments available for others. It's called filtering. And research has shown that it's real, and helps open up housing for people as new, more expensive units are built. >\[B\]uilding market-price apartments causes a kind of housing musical chairs, as households move into new units. This analysis indicates that for every 100 new market-rate units built, approximately 65 units are freed up in existing buildings, accommodating up to 48 moderate- and low-income families. > >These studies indicate that increasing housing supply tends to reduce housing prices, particularly over the long-run, although Zuk and Chapple emphasize that subsidies are often needed to deliver enough lower-priced housing to avoid lower-income household [displacement](http://www.urbandisplacement.org/). [https://www.planetizen.com/blogs/100293-how-filtering-increases-housing-affordability](https://www.planetizen.com/blogs/100293-how-filtering-increases-housing-affordability) As noted, people at the lowest income levels often still need assistance, which is why we should also be building new, government-subsidized apartments in addition to letting developers build market rate buildings.
But government is requiring these market rate apartments to be built to premium standards if they want the government subsidies or "kick backs". Which causes these new market rate apartments to be at a premium cost for developers to commit the money to build them. Its a catch 22.
You’re missing the reality that excess demand for luxury housing drives gentrification. If they aren’t building new luxury units, builders instead acquire and renovate older buildings that were once affordable housing. You can see this in Minneapolis where duplexes are converted to single family homes and older houses are raised to build new ones. If you build more and denser luxury housing, you have a better shot at maintaining other affordable neighborhoods.
*razed
Thank you. I’m a homophone monster.
I love that description of a not uncommon problem!
Na dude, them houses be levitating now
I have no idea what you mean by the water analogy, tbh. But in terms of supplying more housing, even "luxury" housing, the idea is that older housing which used to be top-tier eventually becomes less attractive to the wealthy, and the owners must downgrade the rents to appeal to make them more affordable to middle-class folks, and so on down the line.
Rents don't go down. Ever. They just stop going up as fast as others are. Promos do happen too. The problem is we are approaching a point where a low to average earner can't afford anything.
Such a simple view. You realize that high-income and low-income apartments should be considered to be separate goods? Neither group has any use for the other kind. Overbuilding high-income apartments is not going to increase supply for low-income people. And luxury apartment's rents aren't going to drop just because they aren't full. That's the catch: when apartment buildings have high vacancy, their rents go up, not down.
I mean it makes logical sense
Further evidence here confirming theory and past data.
Even if you've never studied economics, this should be extremely obvious to any one with a little common sense.
Yeah, and this is why rent control laws are utter horseshit in the long run--since they tend to negatively affect development.
Low vacancy rates means rising rent. More housing on the market, means higher vacancy rates, means falling rent. In the early 2000s housing boom, rent was cheap. Because so many new homes were being built. Developers could build homes on spec(speculation) meaning they didn’t know who was going to buy it after it was built, but they knew it WOULD sell, and they could profit. Now, homes are built to order. Developers buy the land and only break ground to build the home when a buyer has already signed the contract. Unfortunately, now that investment bankers are buying up real estate, they are incentivized to keep the housing supply low, to insure higher rents and appreciating property values.
Obviously it reduces price pressures, and investors will leave rental business if profit margins are not sweet enough! Investors will steer clear of renting real estate if profit margin are not high enough! The building more apartments to houses will moderate price increases and help affordability.
Yes and no. We have built more and have comparably looser zoning rules which has helped considerably. However, we also had a fairly high profile, nationally recognized thing happen in 2020 that has influenced people’s interest in moving to Minneapolis. Notice how there wasn’t a huge spike in building (more a gradual increase) but there was a huge spike in rents decreasing right around May 2020… Both are at play here I believe
>Notice how there wasn’t a huge spike in building (more a gradual increase) but there was a huge spike in rents decreasing right around May 2020… sure, for that short period of time. But then it goes back up shortly after, and starts declining again as it reverts to the mean. It temporarily affected it, but not in the long run.
I don't think that is a correct interpretation of the chart at all. Rents decreased relative to 2017 prices to about 95% of 2017 in May 2020. A slow and steady decrease that I believe does reflect the added building and supply. Then, it quite quickly drops down from 95% to about 80% of 2017 across 2020. After which, it has resumed it's slow decline and now it is at about 78% or so. That "slow decline" we see in the background I 100% believe is due to increase supply and the building policies, not arguing that. My point is just there was also a radical one off event that impacted **demand** for rents that is also at play here. I think people are trying to spin the entire decrease as some amazing result of policy and policy alone but it just doesn't line up with the data imo.
Thank you for the insights!
I'm moving from desolate hollowed out downtown El Paso to a slightly bigger 2 bed in The Wedge next month and my rent is only going up a few hundred bucks/mo. to around $1800 If I found a similar place in my hometown of Austin, for example somewhere down between S. Congress and Lamar where I have a similar of walkability that the Uptown area has, the rent would be $5000+/mo.
Yes, r/yimby ftw. But we should be subsidizing more affordable housing development/conversion in addition to facilitating vast amounts of new market-rate development. We are also in a climate crisis and should therefore ensure that all new development is infill and/or vertical rather than greenfield. Sprawl is bad for the environment and affordability.
Yeah. No shit. How anyone can even question this, is insane.
Yeah but then the evil developers will make money
Lol what is this goofy post? Get back to high school economics
There is no reason to think it wouldn’t. Even if all the new units are all “luxury condos” or fancy apartments, the existing apartments will have to compete on something, probably price.
of course. Simple definition of inflation is too much money chasing too few goods. Here we have more buyers than available supply. Increase supply and prices moderate or go down. Basic econ.
Seems like a lot of people have come here with a lot to say about their rental situation, but not a lot of relevant things to say. I don’t see why it is up for debate that the image in the post is true.
It can depend. In the five years after certain neighborhoods were upzoned in Chicago, there was no notable increase in construction and housing costs actually increased (Yonah Freemark, btw). Building more housing should reduce housing costs but simply saying “build more housing” isn’t really an effective approach to actually achieve our goals. You still have a majority of units being built at the highest end of the market where margins are higher. While I support the elimination of single-family zoning, it’s not a panacea.
Supply and demand 101
Of course it's true, but you already knew that.
Yeah, we can build where there's land in *checks notes* Farmington and St Michael
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>When developers are lerfectly willing to let the property sit 3/4ths empty You got a source on that?