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"Supply and Demand" is a law of nature.
If you build infinite luxury apartments, in the limit their value is zero.
Build more luxury housing and the inventory increases. If you've met the city's housing demands (which you probably won't since nearly every city is behind on meeting demand), then it follows that typically less desirable inventory experiences less demand and will subsequently experience a price drop.
The problem is nobody is building enough. The equations of taxes, property value, and developer profit all balance each other out and control the rate of building. Regulations slow this equilibrium even more.
A few policies that can help:
- Remove stupid regulations against building dense housing. Keep the fire safety regulations, but nix the multifamily zoning regulations, the building height regulations, curb space and parking space minimums, etc. There are so many NIMBY and outdated 1950's era regulations that make it costly and time consuming to break ground.
- Tax unproductive land use, eg. storage units and parking garages. This will convert those plots into housing and businesses.
- Heavily tax unused and dilapidated land that is not currently occupied by businesses or residents. Burned out houses have no place in the city. Tax these properties to the point that they fall into foreclosure and give cities the power to take over the land and sell it at a profit to developers. Give owners the chance to cure the issue, but make quick work of clearing these useless plots.
- More controversially, tax single family housing more than multi-family housing. Tax it proportional to how many people could live on the plot if it were occupied by a 10-story development. Or if you don't want to raise taxes, lower taxes on multi-family housing. This will encourage density.
- Give tax breaks to developers, apartment and condo complexes, and businesses that help underwrite development.
Note that these policies only make sense in dense metropolitan cities. Suburbs and rural areas don't need to operate in this way.
Replies
> "Supply and Demand" is a law of nature
It's a law of human nature. Value is inherently subjective, which makes deriving it from natural laws conditional upon a physical explanation for humanity.
> Tax unproductive land use, eg. storage units and parking garages.
Good luck doing that before you've fixed transit, which will take forever even with a miracle of political will.
And housing is a substitutable good.
The people moving into the new luxury units are moving out of older less desirable units, which (with enough of this movement) see their prices decline