The lack of basic financial literacy in this discussion really should eliminate many commentators from the debate but unfortunately their "influencer" status leaves us with many commentators that are ill equipped to help the situation. Thanks for your coherent discussion.
Also in defense of blanket upzoning ... if they were a relatively stable production rate, then upzoning might (accidentally) increase production (assuming that rate) for the few sites in which 1.) owners chose to re-develop and 2.) were previously zoning constrained.
Yes it is artless. Shooting a squirrel with a shotgun. And its likely that any accidental uptick in production would be lost in the noise of real the variability of the production rate. It also defeats the entire concept of zoning which suggests placing density in those locations where it makes sense to do so because of infrastructure support etc.
A good example is the SB9-like rezonings that allow duplexes and quadplexes in large tracts of single family homes. These have resulted in very little new production. In part because these densities don't maximize price in the few opportunities that exist where single-family owners are willing to trade their land.
But you have to understand, regulatory-only government is stuck pretending to solve a problem largely out of its control. In many US locales, the only tool it has is a regulatory tool, and the only real option is to de-regulate not increase regulation. So government officials pretend to do something by creating a myth -- supply (production rate) is zoning constrained-- and by taking a government action -- deregulation-- to increase supply (production rate.) And, once we say it properly we see through it immediately.
Unfortunately too many officials and housing advocates believe the myth.
Good comment. I think people also see removing zoning as a "free" policy. But of course, economically, the cost is exactly what is given up. And in a world where charging a price for extra property value from zoning changes is possible, it costs the budget dollar for dollar the exact amount that it increases property values by.
"Property owners don’t choose a density to maximise... you can adjust the number of projects to meet a rate of production that overall maximises returns."
A bit unclear. Can you clarify?
Property owners individually seek profit-maximizing site densities and collectively undermine them with profit-minimizing production rates? (i.e. they don't collectively choose to flood markets)?
Maybe to use your words, what I mean is that "Property owners individually seek profit-maximizing site densities and also individually choose profit-maximising production rates amongst their own portfolios of potential projects"
The sum of individual profit-maximising rates is also the collective profit-maximising production rate.
>Supply "is not a quantity of existing homes nor a rate of production of new homes"
Supply is a curve, not a quantity. We have other words for those quantities. We call them and "inventory" and "production."
This not just for homes and not just supply. When ppl say "demand increased," they usually just mean that…spending increased, not that the demand curve moved or changed slope. How would they even know if it had?
Ha! Yep. The training in economics perpetuates this loose thinking/writing. If we were more strict about units of measurement, like engineers, we would have a lot more success I think.
The lack of basic financial literacy in this discussion really should eliminate many commentators from the debate but unfortunately their "influencer" status leaves us with many commentators that are ill equipped to help the situation. Thanks for your coherent discussion.
Also in defense of blanket upzoning ... if they were a relatively stable production rate, then upzoning might (accidentally) increase production (assuming that rate) for the few sites in which 1.) owners chose to re-develop and 2.) were previously zoning constrained.
Yes it is artless. Shooting a squirrel with a shotgun. And its likely that any accidental uptick in production would be lost in the noise of real the variability of the production rate. It also defeats the entire concept of zoning which suggests placing density in those locations where it makes sense to do so because of infrastructure support etc.
A good example is the SB9-like rezonings that allow duplexes and quadplexes in large tracts of single family homes. These have resulted in very little new production. In part because these densities don't maximize price in the few opportunities that exist where single-family owners are willing to trade their land.
But you have to understand, regulatory-only government is stuck pretending to solve a problem largely out of its control. In many US locales, the only tool it has is a regulatory tool, and the only real option is to de-regulate not increase regulation. So government officials pretend to do something by creating a myth -- supply (production rate) is zoning constrained-- and by taking a government action -- deregulation-- to increase supply (production rate.) And, once we say it properly we see through it immediately.
Unfortunately too many officials and housing advocates believe the myth.
It's largely another act in political theater, that creates opportunities for unintended consequences. Here is one of them. 400' towers in a single family neighborhood in a small town, Menlo Park, in the Bay Area: https://www.almanacnews.com/menlo-park/2024/06/22/menlo-park-deems-builders-remedy-application-for-controversial-sunset-magazine-campus-development-incomplete/
Good comment. I think people also see removing zoning as a "free" policy. But of course, economically, the cost is exactly what is given up. And in a world where charging a price for extra property value from zoning changes is possible, it costs the budget dollar for dollar the exact amount that it increases property values by.
"Property owners don’t choose a density to maximise... you can adjust the number of projects to meet a rate of production that overall maximises returns."
A bit unclear. Can you clarify?
Property owners individually seek profit-maximizing site densities and collectively undermine them with profit-minimizing production rates? (i.e. they don't collectively choose to flood markets)?
I'm not 100% clear what you are missing.
Maybe to use your words, what I mean is that "Property owners individually seek profit-maximizing site densities and also individually choose profit-maximising production rates amongst their own portfolios of potential projects"
The sum of individual profit-maximising rates is also the collective profit-maximising production rate.
The last line nails it. Property owners manipulate both. Site densities and production rates.
Exactly:
>Supply "is not a quantity of existing homes nor a rate of production of new homes"
Supply is a curve, not a quantity. We have other words for those quantities. We call them and "inventory" and "production."
This not just for homes and not just supply. When ppl say "demand increased," they usually just mean that…spending increased, not that the demand curve moved or changed slope. How would they even know if it had?
You're right. There should be a different word for each different concept or dimension here. A huge problem in economics generally, as you know!
Blame Keynes as much as anyone. As far as I can tell, “effective demand” just means…spending.
Ha! Yep. The training in economics perpetuates this loose thinking/writing. If we were more strict about units of measurement, like engineers, we would have a lot more success I think.