Developers not recouping their investment will discourage less housing in Austin in the future and it will become expensive again. A lot of our current housing shortages are from the build up in 2008 and an implosion of the entire industry (so that crafts people did not really exist for the next need for housing).
Last time I did the back-of-the-envelope math, financing permitting delays in San Francisco added 10% to the cost of new housing [1]. (Note: not the cost of permitting. Just the cost of financing the delay.)
This is deadweight loss that everyone in the transaction wins from eliminating. One could absolutely see lower prices and higher developer margins if this waste were cut.
I thought about that. But a bank would rather lend in lots of high-confidence, low-duration deals than a small number of high-margin deals. The only people who lose when housing is built are incoment landowners. Because prices go down.
They can recoup the investment with volume (especially apartments) I would think? Sell 10 houses at 2 million each or 30 at 1 million each or however it breaks down.
Their land, labor, and material costs aren’t trivial. If thy were pulling a 10-20% margin before, how will increasing volume (which increases costs) make it up?
Seems like a free market issue, any profit resulting from development is a free market issue. Your profit margins mean worse quality housing for people, and we can see what actual public housing programs look like with Singapore and Vienna where rents can typically cost less than 20% of median salaries:
As renown corporate welfare recipient Bezos would say: "your margin is [our] opportunity."
If the only thing stopping development is that rich developers want to make more money, then maybe we should get rid of the rich developers and let the public decide what to build. It couldn't be worse and it'd be 20-60% cheaper too.
> actual public housing programs look like with Singapore and Vienna where rents can typically cost less than 20% of median salaries
It could work, but both Singapore and Austria have less than 10 million people amd have a residency system where you just can't come in from the outside and get your subsidized housing in Vienna or Singapore. Singapore doesn't extend subsidized housing to its foreign residents, even permanent residents, and they make up 40% of the population!
Vienna is a bit better, as it applies it to all EU citizens who are resident in Austria, but you have to have lived at the same address there for 2 years, you just can't come in and claim one.
Did Austin really have any constraints holding it back? It’s still Texas. People still look at Houston as the canonical example of a city with no artificial constraints.
Public housing projects were and sort of still are a thing. Glass Amendment limits the number of units that can be produced but most areas are well below those limits and the larger issue is that there's no budget or political willpower for social housing projects right now.
Most blue metros in the US have a bad combination of high labor costs/low labor availability, high regulatory burden, wealthy conservative inhabitants who oppose construction, and working class people who are convinced that construction is gentrification.
I've been racking my brain trying ti figure out what it looks like for US cities to pull out of the housing crisis, and I think it's either going to take about a generation, or there will be some catastrophic event (Great Depression II, WWIII) that changes the political landscape so drastically that nobody can really oppose housing anymore.
It's a balancing act. Build too much and developers make less money. Build too little and poverty and homelessness shoot up. Which side do you want to err on?
