There is an overplayed, but true enough, answer to this: there isn’t enough of it. That certainly passes the common sense test in some way. However, it’s hard to reconcile with the perception, available to anyone living anywhere you might call “urban”, that new condo builds have been going like gangbusters for decades. How could there still not be enough?
Part of the answer to that is in what types of units are being built. If you look at it from the developer’s perspective, you want to have as many units per build as possible, because the price of a 2- or 3-bedroom unit is lower per square foot than a 1-bedroom or studio. Put another way, 2- and 3-bedroom units is a more financially efficent way for people to live, but that means they are less efficient for the developer trying to make money. The developer’s efficiency is optimized by building only 1-bedroom and studio units, plus a minimum number of 2+ bedroom units to satisfy regulations (which always lag behind).
So supply is part of the answer, but simply building more doesn’t help unless you’re building the right thing. What’s the rest of the answer?
In a way, it’s even more common sense: when wealth is concentrated, more of it will go toward anything that looks like a good investment. Put that together with wealth inequality, and IMO the case is pretty much closed. The amount of “cash in search of a job” in the Western world skyrocketed in the years following 2008 due to the US’s perverse “solution” to the mortgage default crisis (print more money and lend it to the banks for free, the absolute triumph of the trickle-down delusion), and again in 2020 as part of economic stimulus plans by governments in response to the COVID-19 pandemic.
Cash injected into regular people’s pockets will either get spent immediately on things they need or want (real economic stimulus) or saved for retirement (creating stability and dignity). Cash injected into banks, corporate coffers, or the pockets of the already-rich will simply go in search of commodities to invest in. And once real commodities, like tech companies, have been saturated with investment, other things that are not true commodities, but whose price is expected to increase, will be commodified anyway — like housing.
The ways in which this actually plays out are so complex that I can’t pretend to understand half of them — for example even the supply issue is partly about financialization. The reason there aren’t enough 2+ bedroom units is not only about efficiency of profit for developers, but the fact that developers are primarily selling to investors rather than directly to residents, so it’s actually investors’ speculation determining what’s “in demand”, rather than the actual market of people who want to live somewhere.
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