All else equal, it seems reasonable to think an increase in demand would tend to cause an increase rather than decrease in prices. Unless you have a deep-seated ideological urge to believe otherwise.
I think it’s very instructive to look at a cost breakdown on new build housing. When I built in my small town in the exurbs it looked something like:
Labor and materials: 40% (I don’t remember but let’s say it was half labor and half materials)
Land: 25%
Taxes, impact fees, sales cost, etc: 35%
So the labor cost of the house was only 20%. This is why when people say “what will the cost of housing be if you don’t have all those immigrant construction workers” doesn’t make much sense to me. If I think the immigrants are driving up things like land, taxes, and fees then even if that 20% labor gets a boost I’m losing on the rest of it.
Id add too that property taxes are a cost of housing. Over thirty years they will add up to 30% in a low tax area and 60%+ in high tax areas.
Yes. And those "impact fees" are in part driven by this. If a locality needs to build new schools, roads, etc to accommodate more population that is where those fees go to (theoretically). For instance there was a "utility hookup" fee simply for building within the town limits amongst others, which the town claimed offset things like the water treatment facility, etc.
Personally, I think that there is a price potential buyers are willing and able to pay and local government just keeps increasing its taxes and fees until it hits that point, capturing all the consumer surplus.
All else equal, it seems reasonable to think an increase in demand would tend to cause an increase rather than decrease in prices. Unless you have a deep-seated ideological urge to believe otherwise.
Indeed
I think it’s very instructive to look at a cost breakdown on new build housing. When I built in my small town in the exurbs it looked something like:
Labor and materials: 40% (I don’t remember but let’s say it was half labor and half materials)
Land: 25%
Taxes, impact fees, sales cost, etc: 35%
So the labor cost of the house was only 20%. This is why when people say “what will the cost of housing be if you don’t have all those immigrant construction workers” doesn’t make much sense to me. If I think the immigrants are driving up things like land, taxes, and fees then even if that 20% labor gets a boost I’m losing on the rest of it.
Id add too that property taxes are a cost of housing. Over thirty years they will add up to 30% in a low tax area and 60%+ in high tax areas.
Yes. And those "impact fees" are in part driven by this. If a locality needs to build new schools, roads, etc to accommodate more population that is where those fees go to (theoretically). For instance there was a "utility hookup" fee simply for building within the town limits amongst others, which the town claimed offset things like the water treatment facility, etc.
Personally, I think that there is a price potential buyers are willing and able to pay and local government just keeps increasing its taxes and fees until it hits that point, capturing all the consumer surplus.
I've heard that Denmark is pervasively rent-controlled, is that accounted for at all, and are those effects analyzed?