When new housing is expensive, older housing is expensive
Older rentals in the Broadway Plan area are still expensive
There’s a lot of older low-rise, wood-frame, purpose-built rental buildings in the Broadway Plan area, built back in the 1950s and 1960s. It’s natural to assume that rents there will be much lower than in a new concrete high-rise.
In fact if you look at vacant apartments in the Broadway Plan area, asking rents are quite high. I didn’t clue in until someone on Reddit mentioned that they were renting in an older building in the Broadway corridor, and it was pretty expensive. They had moved in about a year ago.
When new housing is expensive, older housing is also going to be expensive. It’s like during Covid, when there was a shortage of new cars (because car companies had trouble producing new cars). People who couldn’t buy a new car ended up buying a used car, and so used cars were also scarce and expensive.
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Protecting renters in the Broadway Plan area. For the many renters in the area who have affordable rents, it’s primarily because there’s rent control and they’ve been there a long time, not because asking rents in older buildings are that much lower. (My understanding is that they’re roughly 25% less per square foot.)
Conversely: Class C apartments get cheaper when there's a lot of new "luxury" Class A apartments.
Housing is a ladder - it’s all connected.
$500M for non-profits to acquire older, cheaper rentals. Once you realize that older rentals aren’t that much cheaper than newer ones, does this strategy still make sense?
Russil- I appreciate that you’ve tied the economics of housing with the economics of cars—two seemingly separate industries that are now becoming co-dependent of one another.
I feel like this implies causality that’s not necessarily true? There’s two ways to interpret the data here:
1. Expensive new housing results in expensive old housing, so it’s most important that new housing is affordable in order to bring housing prices down
2. Housing overall is expensive because the overall supply is too low, so it’s most important to build as much new housing as possible to bring housing prices down across the board
The policy question here then is in questions such as, does it make sense to require affordable housing for new developments, if that means fewer new developments? Or should increasing density and # of units be the sole guiding star instead?