> 1. Americans view property as an investment while also wanting it to be affordable. These are mutually exclusive. If you want something to be a good investment you want it to become less affordable over time.
This comes up a lot, but is false. It's easy to have every single home become more expensive over time while the average unit remains affordable. Let me paint a picture of how it would work in a city where you can actually build new housing at higher density.
Family buys single family home in year A for $100k. Lives there for a while, then sells in year B for $200k. The buyer is a developer, who then constructs a larger building on that same lot consisting of 4 apartments that now each sell for $100k again. Original family gains in wealth, developer makes tidy profit, new families can still buy a place to live for $100k. All numbers inflation-adjusted, you pick A and B to make whatever return you think is reasonable.
This is how density increases happened almost everywhere, until zoning laws became the new way to keep racial minorities out of white neighborhoods, roughly mid-century, after restrictive racial covenants (i.e., "when you buy this house you agree not to sell it to anyone non-white") became illegal.
Note what you don’t get out of this arrangement: a neighborhood that doesn’t change for 40 years; the ability to live in the same type of house your parents did, in the same neighborhood, for the same price. But you could have the same amount of (indoor) space they did, and outdoor space through public parks and the like.
What’s not sustainable is everyone having a suburban style detached single family home without increasing density in perpetuity. That is what leads to this contradiction.
The non-density alternative is sprawl, where prices rise in long-established neighborhoods, and outlying new developments are where you can buy new houses for less—which is what you observe all over California.
I see what you're saying, that densification and building up vertically means each unit represents a smaller proportion of the footprint of the building. This in turn means that the ground under the building becomes progressively more valuable as the average density of construction increases. This can happen either by permitting smaller units or by building taller, or both.
This feels transient to an extent no? At some point your building is tall enough and your unit as small as people are willing to accept.
But does this not apply primarily to the land underneath the building? Once you reach a certain plateau a 700sqft apartment on the 10th floor of a 50 story building isn't worth any more than an apartment on the 10th floor of a 70 story building is it?
> This feels transient to an extent no? At some point your building is tall enough and your unit as small as people are willing to accept.
Yes, there is an endgame here -- and also, truth be told, construction costs per unit start to go up once you pass 4 or 5 stories, so there's other economics at play.
But that endgame is Tokyo or midtown Manhattan, and we're not close to those levels of density basically anywhere on Earth -- and certainly not in the USA, where you can count with one finger the number of cities that might not be able to increase density because the buildings are so tall it's hard to imagine building more-attractive taller ones.
> But does this not apply primarily to the land underneath the building? Once you reach a certain plateau a 700sqft apartment on the 10th floor of a 50 story building isn't worth any more than an apartment on the 10th floor of a 70 story building is it?
This is an interesting question -- in my example, you might think it's pretty clear that a single condo in a 4-plex would be less valuable than the same land area with a single family home (even if all 4 units together are worth more). But it's not clear why a single condo in a 25-story doorman building is inherently more valuable than a similar condo in a 50-story doorman building, which is basically the only density increase that's realistic -- and in fact, maybe the larger building supports more amenities, making the individual units more expensive as density increases? Also, this level of density supports rapid transit that allows for more effective geographical distribution than the "freeways choked with traffic" sprawl we're seeing today.
That said, this is not the situation that SF (or really, any market in the USA outside of Manhattan) finds itself in. In all these cities, developers could build a larger number of less-expensive units to replace more-expensive lower-density units on a given land area (and still profit! And increase housing supply!), if they were allowed to by zoning and other (typically local) policy.
This comes up a lot, but is false. It's easy to have every single home become more expensive over time while the average unit remains affordable. Let me paint a picture of how it would work in a city where you can actually build new housing at higher density.
Family buys single family home in year A for $100k. Lives there for a while, then sells in year B for $200k. The buyer is a developer, who then constructs a larger building on that same lot consisting of 4 apartments that now each sell for $100k again. Original family gains in wealth, developer makes tidy profit, new families can still buy a place to live for $100k. All numbers inflation-adjusted, you pick A and B to make whatever return you think is reasonable.
This is how density increases happened almost everywhere, until zoning laws became the new way to keep racial minorities out of white neighborhoods, roughly mid-century, after restrictive racial covenants (i.e., "when you buy this house you agree not to sell it to anyone non-white") became illegal.
Note what you don’t get out of this arrangement: a neighborhood that doesn’t change for 40 years; the ability to live in the same type of house your parents did, in the same neighborhood, for the same price. But you could have the same amount of (indoor) space they did, and outdoor space through public parks and the like.
What’s not sustainable is everyone having a suburban style detached single family home without increasing density in perpetuity. That is what leads to this contradiction.
The non-density alternative is sprawl, where prices rise in long-established neighborhoods, and outlying new developments are where you can buy new houses for less—which is what you observe all over California.