The bigger problem, at least in my neck of the woods, is they're not building affordable housing. By-and-large they are building luxury apartments and luxury homes. We've torn down half the city to build luxury apartments that sit at 20-30% occupancy.
Building luxury housing won't help the housing crisis until the sellers are on the brink of bankruptcy and forced to sell their properties at a reasonable price.
Affordable housing is NIMBY whitewashing of reducing supply through rationining. (Note the supporters of affordable housing programmes count the largest landowning families in San Francisco and New York among their ranks.)
There is an article on the front page, right now, about Denver moderating its rents through construction [1]. We've also seen this in Montana [2].
[1] https://denverite.com/2025/07/25/denver-rent-prices-drop-q2/
[2] https://montanafreepress.org/2024/09/09/can-bozeman-find-rel...
100%
"Supply and Demand" is a law of nature.
If you build infinite luxury apartments, in the limit their value is zero.
Build more luxury housing and the inventory increases. If you've met the city's housing demands (which you probably won't since nearly every city is behind on meeting demand), then it follows that typically less desirable inventory experiences less demand and will subsequently experience a price drop.
The problem is nobody is building enough. The equations of taxes, property value, and developer profit all balance each other out and control the rate of building. Regulations slow this equilibrium even more.
A few policies that can help:
- Remove stupid regulations against building dense housing. Keep the fire safety regulations, but nix the multifamily zoning regulations, the building height regulations, curb space and parking space minimums, etc. There are so many NIMBY and outdated 1950's era regulations that make it costly and time consuming to break ground.
- Tax unproductive land use, eg. storage units and parking garages. This will convert those plots into housing and businesses.
- Heavily tax unused and dilapidated land that is not currently occupied by businesses or residents. Burned out houses have no place in the city. Tax these properties to the point that they fall into foreclosure and give cities the power to take over the land and sell it at a profit to developers. Give owners the chance to cure the issue, but make quick work of clearing these useless plots.
- More controversially, tax single family housing more than multi-family housing. Tax it proportional to how many people could live on the plot if it were occupied by a 10-story development. Or if you don't want to raise taxes, lower taxes on multi-family housing. This will encourage density.
- Give tax breaks to developers, apartment and condo complexes, and businesses that help underwrite development.
Note that these policies only make sense in dense metropolitan cities. Suburbs and rural areas don't need to operate in this way.
And housing is a substitutable good.
The people moving into the new luxury units are moving out of older less desirable units, which (with enough of this movement) see their prices decline
> "Supply and Demand" is a law of nature
It's a law of human nature. Value is inherently subjective, which makes deriving it from natural laws conditional upon a physical explanation for humanity.
Ecologists have been studying how groups of animals deal with famines, natural disasters, loss of habitat, climate change, etc for many years. These conditions change supply and demand on resources that are out of those animal populations control. Studying cooperation in bacteria colonies from a similar lens was pretty hot in academia in the late 2010s from what I remember.
Each animal defines value differently (heck, different groups of different people define value differently). A half-eaten sandwich thrown on the street is trash to you, but a jackpot for your local crow. The crow has no interest in the housing market though.
Value is partly subjective but all value eventually can tied to the reversal of entropy. And the reversal of entropy costs energy.
It is naive to think the topic is wholly subjective. Subjectivity is one aspect of value but not only does the subjectivity coincidentally correlate with entropy reversal… but entropy reversal is also intrinsic to all value as even a human being alive and assigning value to something carries an energy cost. This cost is non trivial as it takes a lot for you to live and a lot more to have the luxury to think in terms of value.
A lot of other models closely resemble economics:
- Computational systems, distributed systems, and operating system theory model resources and demand. They often attribute a cost to units of space, time, or compute based on availability.
- Ecological systems very closely model economics with respect to predator-prey dynamics.
- There are so many systems in biology that resemble economics. Evolutionary systems often increase gene dosage over generations in order to meet demand for gene products: polyploidity in plants, gene duplication, promoter amplification, etc. There are then also suppressive measures taken when deleterious effects arise. The balance of telomerase, etc. Within a living organism, there are the dynamics of apoptosis and proliferation pathways to follow the developmental program, to avoid disease states, etc. And then there are the biochemical flux of metabolites, etc.
> Tax unproductive land use, eg. storage units and parking garages.
Good luck doing that before you've fixed transit, which will take forever even with a miracle of political will.
There's that, but also it's more difficult to get mixed-density builds than detached homes developed, or the type of builds the left associate with "affordable housing".
While being able to build detached homes faster is nice and all for those on the market, for an effective YIMBY approach allowing density is preferable.
Plus, trying to sprawl out into perpetuity is putting cities in the hole. The suburbs are money pits that are subsidized by the city cores.
If US car sales were capped at 10 million cars per year manufacturers would immediately focus on their luxury brands and leave their regular brands out of stock. When you keep strict zoning, give NIMBYs veto power, let environmental review be weaponized as a delay tactic, you are capping new construction.
They did exactly this when supply chain disruptions limited the amount of cars they could produce.
Asking why they don't build affordable housing is like asking why don't they build used cars
This is a perfectly succinct way to put it.
New housing is simply more expensive; so it's marketed as "luxury", and it's sold at a premium to the higher end of the housing market. This reduces demand for the older, more affordable existing housing stock, and with depreciation and wear and tear, the new housing will become more affordable as time goes on.
If you're in a market with a shortage of housing, those with more money will simply outbid those with less, even for older, less desirable housing. I've seen it, where when I moved out of my last apartment before I bought a house, my landlady raised rent considerably when looking for a new tenant, and even then she got a tenant who wanted to pay her over the rate that she was asking for to ensure that they were able to get the apartment over all of the other applicants. Wealthy empty-nesters who were downsizing, and willing to pay a premium for an older apartment in a desirable neighborhood, forcing out anyone who might have otherwise been able to afford it.
So yes, while it does help for there to be some push to build more affordable housing, if taken to an extreme building only luxury housing will leave an unbalanced market, in a lot of cases building luxury housing is exactly what you want to do to reduce the competition for the existing, more affordable housing stock.
> New housing is simply more expensive
There is no natural reason for this to be the case. If anything, learning curves and economies of scale should result in new units costing less, not more, than ones built by artisans.
You would think, but constructions seems amazingly resistant to this. construction-physics.com writes extensively and convincinly on this.
https://www.construction-physics.com/p/sketch-of-a-theory-of...
Baumol’s Cost Disease means construction labor cost rises faster than productivity. We’re allergic to prefab construction - banks and insurance companies block it. A lot of construction workers left the industry after 2007. Baby Boomers are retiring and told their kids to not get a blue collar job. New housing has to be ADA compliant. People expect to give each kid their own bedroom and have two car garage instead of one car or no garage at all. Recent immigration crackdowns and trade wars are the icing on the cake.
> Baumol’s Cost Disease means construction labor cost rises faster than productivity
Baumol’s applies to jobs that “experienced little or no increase in labor productivity.” I’m arguing there may be extraneous causes for construction’s productivity stasis.
there are! Land use code. And permitting. Municipal processes for permitting housing have stifled any really serious innovation in construction.
you know why we don't have modular, factory built apartment buildings? Not at scale? Because the municipalities won't permit them. and the real reason they won't permit them is because it would put all their inspectors out of business if you didn't have to do any walls open inspections because it was all built in a factory...
> This is a perfectly succinct way to put it.
I think the entire analogy falls apart the minute you realize houses almost always appreciate while cars do the opposite.
Land appreciates. Houses depreciate.
Houses depreciate if there's an adequate supply of newer housing keeping up with the housing demand of the area. If there isn't then the general GDP growth of the area in which the house is located dictates that the house's value grows as well.
Houses appreciate too. The materials and labor cost required to build my house have outpaced inflation by far.
This is most clear in insurance data where replacement cost is isolated from land value.
Cars would appreciate the same way if we only let you build half as many as there are demand for. And kept doing that for 50 years.
With cars you can build a high margin luxury and a low margin affordable model if there are two buyers and collect profit from both.
With an apartment if there's one plot available, you build the high margin apartment.
Land constraints matter.
A 100% land value tax would help solve this problem and would make buying apartments more like buying a car.
When you build the high-margin apartment, people vacate other housing units to move into it, reducing demand on the older units, which reduces prices in the area. This is just the law of supply and demand, but you don't have to derive it axiomatically: it's empirically what happens when we increase supply at market rates.
I'd like a land value tax too, but it's not going to happen, and an LVT would guarantee market-rate development.
Your argument here is simply "rich people dont take second homes".
I think it's rather obvious that they do.
The number of rich people buying random unoccupied apartments in new multifamily developments has measure zero in the greater scheme of North American housing policy. Meanwhile: the construction of still more housing works against the interests of anyone who would buy a random apartment and hold it vacant as an investment interest, so this is a doubly facile point.
The project to build
https://www.libraryplaceithaca.com/
was almost a decade late, like a nuclear reactor, and they realized only after it was built that there is no market in our town for "luxury senior housing" because seniors with money go to Florida or Arizona. If they could fill the places you might say that it's better business to build expensive rather than cheap apartments but when these places are vacant you start to wonder if they are farming tax writeoffs or something
https://www.youtube.com/watch?v=9wfblqh9icQ
What you expect first is they are going to tell the local town they can't pay the property taxes, in a few years they'll tell the bank they can't afford the loans they took out to build it.
Other "luxury apartment" projects outside of Collegetown usually have some segment of subsidized "affordable" units, one of these has at least two police calls to it a day and in the last few weeks these have included murder and arson.
How are they still able to live in subsidized affordable housing after they are convicted of murder or arson? Don't we have jails for this kind of criminals?
Exactly -- all new housing is going to be marketed as "luxury".
Who is going to build a brand-new apartment and say "well, this is janky low-quality housing, you might want to live here if you're poor or something"?
I go outside and look at my neighborhood of bungalows largely built immediately after the war, they were not sold as luxury. They were sold as affordable housing.
Exactly
Plus housing you are mostly paying for the land. The land is expensive because it is finite and because zoning constrains how much housing you can build on it.
In many places the land is 2/3 the cost of the housing. The cost difference in building what left nimbys deride luxury and what would be considered affordable is really marginal. It’s like $100k in finishes in a $1.5M condo type difference.
Because most people are out here driving used Ferraris and Koenigseggs and living in old mansions?
Your argument falls apart when you realize they manufacture and sell explicitly affordable cars. It's nearly half the market.
Except that outside of Japan, it is unusual for detached homes to depreciate in value. Apartments though you do have a point. Unless the location adds the value they will depreciate over time.
It's not unusual at all. Here's a bunch in America just over the past 12 months and during a huge economic expansion with low unemployment.
https://www.realtor.com/news/trends/zip-codes-cities-home-pr...
Detached houses almost always depreciate in value everywhere and require constant maintenance expenses just to keep from falling apart. It's the land under the house that appreciates in value. People often mix those two numbers up.
Not my experience. Cost to rebuild and cost/sqft seem to outpace inflation.
r/cars swears up and down that they'd buy a brown manual wagon pre-used from the factory!
Why don't they build $10,000 Ford Rangers anymore?
The same reason housing isn't being built, it was regulated out of existence.
This is the real answer, not the pat “no one builds new used cars” nonsense. It is entirely possible to build new, no-frills apartments that are 100% habitable and to code. But because of all the regulatory boxes one needs to check — namely all the fees spent, and time spent waiting for seemingly endless approvals — it is simply not possible to rent out bottom-dollar builds at a low market rate. The same logic applies for single family homes sold for purchase. The startup costs are just too damn high.
It's simplistic to say that the US car market is "regulated out of existence".
Consider how huge trucks that mow down children because they can't even be seen over the hood are unregulated, even incentivised. (1)
Wrong regulation, maybe. But not merely "too much regulation".
1)
https://news.ycombinator.com/item?id=36480122
https://www.nbcnews.com/news/us-news/americas-cars-trucks-ar...
https://www.vox.com/future-perfect/24139147/suvs-trucks-popu...
You are right of course. I was being flip. There are multiple reasons it is no longer profitable for car companies to make small trucks. CAFE regs are part of that.
> Why don't they build $10,000 Ford Rangers anymore?
Fleet economy standards.
The problem is that you don't generally destroy the used car in order to build a new one. So increasing the new cars on the road eventually also increases the number of used cars on the road.
> you don't generally destroy the used car in order to build a new one
There is very little de-densification construction happening in hot housing markets.
De-densification isn't required; a one-for-one knocking down and rebuilding of a single family residence suffices.
> De-densification isn't required; a one-for-one knocking down and rebuilding of a single family residence suffices
Sure. The only reason developers do that is because land-use restrictions prevent the construction of denser, more-profitable and more-efficient housing.
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No… it’s like asking why they don’t build cheap cars. Which they do.
Do they? Are there any production cars under 20k? Plenty of used ones for that.
This is a fair point, but the analogies to vehicles don't really work anyway: they're a depreciating asset, houses are not. Even a tiny rundown place can cost millions owing to location.
But all things held equal, if you have a new house that's big and a new house that's small, the smaller one is cheaper. And further, mixed density builds will be cheaper than single detached homes. Beyond that there's nothing caked-in to the walls that makes a house cheaper or expensive. Shitty houses are just unmaintained, dilapidated. Flooding the market with houses will drop prices.
Building "luxury" apartments dropped rents in Bozeman, Montana, which is one of those cities that "everyone wants to move to"
https://montanafreepress.org/2025/06/23/has-bozemans-rental-...
When housing is scarce, all housing, even 100 year old dumps, will sell or rent at luxury prices.
No one is building apartments made of solid gold or concrete mixed with diamonds. They are building thoroughly ordinary buildings of concrete, wood and drywall. They fetch "luxury" prices & rents because for each one that exists, there are 40 ppl trying to live where, so they raise the price or rent to capture the riches of the 40, despite there being nothing particularly special or expensive about the physical structure.
You can do this with non-profit/govt/social/public housing too - if there isn't enough of it, every unit will require a "luxury" of time to wait for it to become available, even if the nominal price or rent is affordable.
Building only affordable housing is how you get cities into a downward spiral. The people who want luxury housing are the well-to-do. They probably contribute 10x the sales tax per capita than the people who live in affordable housing. And almost by definition luxury housing causes more property tax to be paid to cities than affordable housing. Both sales tax and property tax revenues shrink. And the city gets into a fiscal crisis. The city reduces services. People leave. Housing becomes more affordable but also more undesirable.
Luxury is just a realestate buzzword that means newly built and has stone countertops. Nothing that actually meaningfully impacts the pricing.
The vast majority of "luxury" properties are just regular property that spend a marginal amount on nicer appliances and finishing.
No matter, it comes down to what people will pay for. At the very least they're selling/renting to people with more wealth.
Yes, new builds are targeting wealthier people. Those wealthy people then move out of their previous housing and that becomes the affordable housing. Like another commenter pointed out, you can't get affordable used cars without producing new cars.
Today's affordable housing are the "luxury" units from 30 years ago. If you want to decrease the cost of housing you need to build more of whatever people will buy.
Presumably, if they're sitting at 20-30% occupancy, somebody (like the developer) is going to be having trouble paying their bank loans. You understand what happens next? (hint: prices plummet). If that isn't happening then your diagnosis of the problem is very likely wrong.
Toronto's housing market has a similar problem, except they also mostly built one bedroom shoeboxes for investors. Will be interesting to see how this unwinds[1].
[1] https://financialpost.com/news/toronto-condo-market-falls-of...
Where is this city with 20% occupancy?
Agree. I am not seeing starter homes being built in Omaha. They keep moving further out west, north and south — there's nothing there but fields and fields. I'm not sure that they're in anyone's "back yard".
And yet, they build expensive homes because (I assume) that is where the bigger profits are.