Housing costs

[plam]

Even safety rules can go too far. Imagine changing the electrical safety rules in a way that doubles the cost of everything electrical from where it is, which eliminates half of the remaining deaths from electrical issues. It would take a detailed study to really figure this out, but I’m guessing the increased morbidity from people being homeless due to being unable to afford the more expensive housing would outweigh the numerically tiny reduction in deaths (since our electrical systems are already very safe). I’ve actually heard of an affordable housing project that was planned as a walkup. Code required an elevator. Result: no project built. Better overall? I doubt it; those people continued to live under bridges or wherever.

Electrical is a bit far-fetched but earthquakes are a reasonable example of something that is legit expensive to provide but worth it when the earthquake happens.

Certainly you can go too low, but I don't think we're anywhere near that...I don't even think the margins are occupied...the margins would only be occupied with housing that is already being built as cheaply as possible that would now be sold for less because they would now be equal or greater than the price of more expensive housing...because if housing wasn't sold for as much, they can also build it for less by building cheaper housing...i.e., no granite counters...

Basically if there are cheaper houses being built for only the barest minimum that housing actually costs to be constructed, those prices don't have to fall as much or at all than more expensive housing...more expensive housing can now be less profitable or built more cheaply depending on the demands of the market.  But I don't even believe that there is any housing being sold at or near minimum cost.

Fundamentally I think the problem with the housing market is not the actual cost of constructing housing, but the profit that is being generated from doing so and the regulations which limit who can build and where.

I think it's actually simpler than that: while construction costs have been going up, the real driver is the cost of the land. And the increases in the cost of the land have been driven by scarcity of (desirable) land for development. And that, in turn relates very closely to zoning restrictions.

I think that both of these perspectives are valid to some extent. Certainly people convince each other that a detached house is worth $1M, then the "new money" that then goes into housing (which could be profitably used for things that are not housing) also pays for granite countertops, which really aren't mandatory.

I guess it works like this: the market brings the expected cost of a new house to $3X instead of $X, which is financed by the bank. Then the developer now has $3X to play with, and can buy granite countertops with that money, which wouldn't have been possible at $X. (By the way granite isn't that great. I prefer quartzite.)

I don't think it really is the cost of the land. I read something once about estimating the land value. It's kind of made up, even more than the cost of the granite countertops (which is tethered to reality in some sense). (The keyword here seems to be "residual land value")

But we don't really know how these numbers work. Here's a link: https://www.biggerpockets.com/blog/2009-...and-profit

Options For Homes developed the first condo I had in Waterloo. They're a non-profit land developer. They don't seem to be active in Waterloo anymore but they are still occasionally building stuff in Toronto.