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A housing absorption rate and upzoning thought experiment
Leave your answer to my question in the comments
A city has 100 active new housing projects.
Each project is owned by a different developer who is staging their project in batches of 20 new dwellings. Some of the stages are individual apartment buildings, some are new townhouses, and some are lot subdivisions for detached homes.
Each project has been designed to be carried out in 20 stages. There are 400 dwellings in each project across all stages. These are all approved by the planning system.
So that’s 100 projects that each have 400 new dwellings approved or 40,000 total possible dwellings in the pool of already approved housing projects.
Dwellings are only built after they are sold, and each project is selling 1 new dwelling per month from its currently released stage. So that’s a rate of new housing supply of 100 dwellings a month, or 1,200 per year.
The market appears competitive, as any market with 100 alternative suppliers does.
The city council has been listening to concerns about the price of housing and is convinced that the rate of new housing development is too low.
To accelerate new housing development they upzone the remaining 19 stages of each of the 100 projects, so that now each developer can build 800 new dwellings instead of 400, increasing the pool of zoned and approved dwellings from 40,000 to 80,000.
What happens to the rate of new housing supply per month when the stock of potential new homes instantly doubles?
Answers in the comments please.
Also, you can find my academic paper on the absorption rate concept via this post.
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