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Old 08-27-2015, 09:20 AM
Status: "pissed at violence" (set 16 hours ago)
 
Location: Texas
1,480 posts, read 1,518,449 times
Reputation: 2132

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Why are all these luxury condos and apartments being built when we need regular apartments?

Who is behind this? I think of it as a giant, pre-planned rich person's get rich quick scheme that moves across the country at rapid rates and yes it will go somewhere else.

Surely other people in other cities who experienced this have advice? I think of Hawaii and Santa Fe as 2 places I know this happened years before.

Thanks.

 
Old 08-27-2015, 09:32 AM
 
Location: Holly Neighborhood, Austin, Texas
3,981 posts, read 6,751,120 times
Reputation: 2882
WSJ had a good article on this:

Rents Rise Faster for Midtier Apartments Than Luxury Ones - WSJ

"The difference in costs between installing granite countertops and stainless-steel appliances is so slight compared to buying land and installing elevators that economists say developing a luxury apartment and a midtier one comes out roughly the same. Historically, developers could save some money by building low-rise buildings in suburban locations, but even those are becoming increasingly difficult to build as even suburban officials push developers to develop midrise buildings in central locations and reduce sprawl."

Please keep in mind, though, that the more luxury units that hit the market the less pressure there will be to remodel older, cheaper apartments to the luxury category. An analogy (imperfect as they all are) is the more people that buy new cars the more previously owned vehicles there will be on the market at lower prices.
 
Old 08-27-2015, 09:35 AM
 
Location: Denver
4,716 posts, read 8,593,521 times
Reputation: 5957
Supply and demand, supply and demand. It's no conspiracy; just shortsightedness and selfishness. Very little land in the core is zoned for high density (low supply), and 100-150 people a day are moving here, of whom many want to live central (high demand). This means very high prices.

That said, it's no secret that the 99% of all new wealth generated since the 80s has gone to the top 1% while middle class wages have stagnated since the late 90s.
 
Old 08-27-2015, 09:57 AM
Status: "pissed at violence" (set 16 hours ago)
 
Location: Texas
1,480 posts, read 1,518,449 times
Reputation: 2132
Supply and demand? No, the demand is for middle priced places. Don't be naive. They are building those luxury places-so they will come.

So back to the original question.

Why is the city allowing the luxury places to be built when we need other housing? Why are starter homes not being built? Why not make flipping illegal until we can fix the housing issues and go back down to average from crisis mode.
 
Old 08-27-2015, 09:59 AM
 
7,736 posts, read 5,006,653 times
Reputation: 7965
they are trying to drive off middle class and make way for the 6 figure folks.. I'm just glad i found a house when i did
 
Old 08-27-2015, 10:12 AM
 
2,602 posts, read 2,988,096 times
Reputation: 997
Quote:
Originally Posted by creepy View Post
Supply and demand? No, the demand is for middle priced places. Don't be naive. They are building those luxury places-so they will come.

So back to the original question.

Why is the city allowing the luxury places to be built when we need other housing? Why are starter homes not being built? Why not make flipping illegal until we can fix the housing issues and go back down to average from crisis mode.
Starter homes are being built. In Leander and Manor. Even in Austin proper in the east (Harris branch area, etc.)

You can't build a "starter" home in the middle of Austin when the _lot_ costs you 300k. More if there's a house on it already and you need to scrape it.
 
Old 08-27-2015, 12:30 PM
 
Location: Denver
4,716 posts, read 8,593,521 times
Reputation: 5957
Quote:
Originally Posted by creepy View Post
Supply and demand? No, the demand is for middle priced places. Don't be naive. They are building those luxury places-so they will come.

So back to the original question.

Why is the city allowing the luxury places to be built when we need other housing? Why are starter homes not being built? Why not make flipping illegal until we can fix the housing issues and go back down to average from crisis mode.
Naïve is not understanding basic economics. Land and housing in central Austin are expensive because a ton of people are competing for them. That's how a market works.
 
Old 08-27-2015, 12:33 PM
 
Location: central Austin
7,228 posts, read 16,133,417 times
Reputation: 3915
Quote:
Originally Posted by creepy View Post
Supply and demand? No, the demand is for middle priced places. Don't be naive. They are building those luxury places-so they will come.

So back to the original question.

Why is the city allowing the luxury places to be built when we need other housing? Why are starter homes not being built? Why not make flipping illegal until we can fix the housing issues and go back down to average from crisis mode.
What in the world are you thinking?! We don't have a command economy. The city does not determine how private property is sold and developed as long it conforms to zoning and safety regulations. You remind me of someone in my neighborhood complaining about the new low-rise hotel on S. Congress -- the South Congress Hotel -- "how could the city allow them to use such ugly white brick?" The city does not determine the brick color or landscaping of properties!! The City does not make developers put in granite and stainless steel or determine the rent they charge, market forces do!

 
Old 08-27-2015, 12:33 PM
 
Location: Austin, TX
1,825 posts, read 2,834,030 times
Reputation: 1627
Quote:
Originally Posted by creepy View Post
Supply and demand? No, the demand is for middle priced places. Don't be naive. They are building those luxury places-so they will come.

Why is the city allowing the luxury places to be built when we need other housing? Why are starter homes not being built? Why not make flipping illegal until we can fix the housing issues and go back down to average from crisis mode.
Your distinction between demand now and hypothetical demand (if you build it, they will come) is largely meaningless: if a developer is going to build an apartment complex, they want it filled ASAP. Price it too high and you won't get the leases you need. Whether or not they could fill it today if it were finished today, or whether they think the demand will be there 1-2 years out is just a question for their business team, but I've never heard of developers arbitrarily deciding to anoint someplace as a luxury market that didn't already have most of the components going for it. Residential developers don't create demand: they answer demand.

As land values go up, the barriers to building anything at all go up. Think about it this way: you have some money that you want to invest in building an apartment complex. If the land had no cost and your whole pile of money could go toward construction, you could build whatever you liked that you thought would rent, mid-market or upmarket. If, on the other hand, you need to drop a million dollars on land values, environmental reviews, permits, traffic analysis and green space development before you've even poured a square foot of foundation, that makes it harder for you to raise the money to proceed: just like I need a better job if I want a mortgage of $500,000 instead of $100,000, your developer needs more or higher quality investors to front two million instead of one million, and the only way those people get paid is if the return from the market rate justifies that kind of output.

A few rich people can't create demand. It takes thousands and thousands of people to do that. If you want to blame anybody, blame the states of New York (where the state and the NYC metro area just earned 8/10 places on the Top 10 Most Expensive Places to Raise a Family list) and California - without people cashing out of their homes on the coasts and moving here, that demand would be quite a lot less.
 
Old 08-27-2015, 12:42 PM
 
1,044 posts, read 2,380,471 times
Reputation: 719
Here is the way I see it:

1. Supply and Demand. Yes, there is a huge demand to live in the City of Austin, and be close to all the interesting amenities. This has caused land prices top skyrocket. So, in order for a developer to hit their required ROI on the project, they have to pack as many units on that plot of land as possible. In most cases, this precludes them from building suburban-style, car-oriented apartment complexes. It also requires they they build these apartments in a way that appeals to higher-end buyers (upgraded finishes), so that they can justify a higher price point per square foot. All of this means building mid-rise or high-rise style buildings.

2. However, at the same time, building a high rise gets very costly; oftentimes, the project cost goes up exponentially for every floor that is added. This means that the landlord has to increase price per square foot even more.

Ultimately, the answer is to build more housing, across the board, and across the city, to increase supply to all market segments. The best model for this, is to build dense mid-rise apartments (with street level retail on the first floor) along public transit corridors that serve the the lower income and middle income renter market, and then develop "streetcar subdivisions" a la Mueller., for actual housing that people can buy. Small footprint yards, rear alley access. You can build subdivisons like this, one after another, to the north and east, mile after mile, and build public trans along with it. This will increase the supply of housing to the lower and middle classes while decreasing dependency on autos.

Last edited by SmartGXL; 08-27-2015 at 12:57 PM..
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