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> If a developer is given free reign as to what they can build, they will naturally build the most profitable thing they can on the land they have available. I doubt anyone would dispute that?

There is no such thing as luxury housing[1], and developers in the US are given nothing like free reign, so this doesn't happen - they don't build special gold-plated apartments for rich people. The most profitable building for the landowner would typically have more units, because that means more people will buy/rent units from them.

And of course, the developer is not necessarily the landowner, and so they might be paid a flat rate anyway.

[1] What actually happens is developers call their buildings "luxury" because it sounds good, but they're lying.

I never said anything about luxury housing?

Housing doesn't have to be "luxury" to be unaffordable.

The most profitable thing to build on land is usually also the most affordable thing, because it has the most units.

Unaffordability happens when zoning makes them build single-family housing, or when the land is so expensive anything would be unaffordable while it's new.

Single family zoning is not just unaffordable for the people living there, it's also unaffordable for the government. It also causes car dependence and energy inefficiency. Overall it is a net loss for everyone involved.

I don't understand this? Sure there are cheap developers who use trendy finishes with cheap materials and markets as fancy.

But luxury exists. googled definition of luxury includes 'extravagant living.' To me that includes

Doorman, butler services, room service and daily housekeeping (e.g. condos at the Ritz), valet, huge amounts of in building amenities. Super high end custom finishings, fixtures, decor which doesn't serve a purpose in terms of extra comfort or use, just aesthetic/signaling.

And the epitome of the logo whore luxury condos celebrity architect firm placing giant $10mm Koons or Kaws lobby sculptures (which funny enough there's an ever more high brow snobby art joke that once you're in the lobby you're done lol).

Those $10 million condos are wealth traps. Nobody lives in them so nobody gets displaced if a billionaire parks his money in the real estate market of your city. If that billionaire had to buy 10 apartments to park his money the displacement would be very high. This type of "luxury housing" is guarding the rest of the city from foreign demand.

More generally, a tower doesn't cause displacement because it's built up in the sky. Displacement is caused by taking up land, which single-family houses do the most of because they fit the least people on the most land.

The thing is affordable housing is like rearranging deck chairs on the Titanic.

If a city creates a million new jobs, they need a proportional amount of new housing to avoid a housing shortage.

But what happens is the NIMBYs clamp the amount of new housing to a fraction of what's needed. Obviously developers, if limited to building a fraction of what's needed, will go for the more profitable segment first. But that's not the underlying problem! The problem is that the total new units are too restricted. If we build a tiny, restricted amount of subsidized housing, there will still be hundreds of thousands of workers lacking housing, because the overall amount is too small.

What we need to do is first focus on the overall shortage and commit to building a huge amount of housing. Then it won't matter as much whether or not it's subsidized, because with an excess of housing, some will end up priced for every segment.

The end state of that logic is that 8 billion people are crammed into a single city. The rest of the world is a wasteland with no jobs.

An alternative is that jobs could go elsewhere, for example in Arkansas or Mississippi.

It's fine for a city to limit jobs to fit housing, if they don't want to build housing.

What's not fine is encouraging jobs while discouraging housing, which is common in California because Proposition 13 makes residents a net expense - cities have to get most of their revenue from businesses.

Pretty obvious how that leads to a never-ending housing shortage.

Proposition 13 doesn't mean that cities have to get most of their revenue from businesses. They could trim the budget. I think that was the intent of Proposition 13.

Obviously, a direct prohibition on city budget increases would have worked better.

With residents not feeling the sting of increased costs, they will of course vote for local politicians who spend money without hesitation.

Did you even read the article? The author addresses this concern.

If there’s demand for a hundred fancy houses and two hundred plain houses, but the government only permits twenty houses to be built, all twenty are going to be fancy. There’s profit to support building every variety of house, but we need to stop making it illegal.

> If there’s demand for a hundred fancy houses and two hundred plain houses, but the government only permits twenty houses to be built, all twenty are going to be fancy.

On top of that, it's not even obvious that this is true.

If you build a multi-story building with 30,000 square feet of housing, you can either make it ten 3000 square foot units or thirty 1000 square foot units. Which is more profitable? It depends on the local market but it's not inherently the smaller number of larger units.

Unfortunately in the face of property taxes both are the same or maybe it is worse.

30 small apartments that cost $200k (to build) or 15 big apartments that cost $400k both can end up paying the same amount of property tax. Replacing property tax with land value tax would push the profit calculation 100% in favor of lots of smaller units because you would only pay a fixed tax for the land. If the LVT is $360k/y the landlord would pay $1k tax per month in the small apartments. In the larger apartments he would pay $2k. The tax is a pure loss for the landlord so he wants to pay as little as possible by building more units.

>If a developer is given free reign as to what they can build, they will naturally build the most profitable thing they can on the land they have available. I doubt anyone would dispute that?

Nobody disputes this, it's obvious. However, you're missing the benefits of this approach though. For a lot of industries you have very high upfront costs. You want to pay those off as soon as possible. Once they are paid for you can often drop your price substantially. The company has to pay for the training of the construction workers, lease machines and pay for the currently very expensive housing because that is where the construction workers live.

>The idea here is that the most profitable thing tends to be more upmarket than the locals can typically afford. The area gets gentrified and rents go up.

Well, this is where things go wrong. You are mixing up cause and effect. Demand (gentrification) leads supply (house construction). If you fail to construct new housing you get displacement. That demand is driven by people getting a well paying job and they have to live somewhere. If you don't build housing for them they will have to displace locals because that's the only place where they can live. From this perspective the new comers don't want to take your home. You can keep it. They just want a place for themselves.

>A socialist would say that if the market fails to provide solutions for core needs of people (health, housing, etc) it is up to the government to provide those. Some things are simply either unprofitable or not suited for a profit driven approach (e.g. private prisons where the companies running them are actively incentivised to see repeat offenders).

That's not a failure of the market but a failure of policy. The primary reason why public housing works is because it forces the government to acknowledge bad policies and replace them. The bigger failure of for profit housing is that it is slow. A housing shortage that took a decade to create also takes a decade to solve. The government has the benefit of being excellent in the short term but in the long term it is only "good enough", which is why you need both.