As much as it sounds strikingly similar to the plagued 'trickle down economics' theory there is some merit to it.

Cities across the world have more occupants than ever and this shift will only continue. The only option is to build more period. Yes there are only so many rich people to afford the newest luxury condo so theoretically the oldest ones would shift down to the middle and so on.

The problem with only tackling from the top though, is it takes 30 odd years for the middle to get access to the decent older building meanwhile the poor remains either homeless or in crumbling unsanitary conditions. This is prolonged as owners will wait months even years for a vacant unit to be rented/purchased rather than lower the asking price for fear of driving down perceived value etc. More people are moving to cities than housing is being added. This is exacerbated in cities which already lacked affordable housing then didn't build for years.

So the question is do the poor and middle class only deserve leftovers? Or is it possible to allocate some tax revenue or resource toward, at the very least, repairing their delapitated residences? The latter seems to be the strategy in NYC - of course met with some backlash - but it's sort of the only option given the current regulations.

The problem not mentioned in the article is the steep rise in building costs - both labor and materials since the baby boomer building booms of the 60-70s. It would seem attention should be paid to preserving and restoring existing housing stock just as much as building new, in order to maximize the number of available units.

Another oddball scenario that could take off on a bigger scale is the reuse/adaption of commercially defunct real estate.

I keep seeing parallels to 'trickle down.' I don't think this is like trickle down economics, but I'm having trouble explaining why.

we're in an affordability crisis in many cities because we've spent decades building primarily single family and have reached the limit of where it's possible to build "lower density" where most people can still have reasonable commutes to good jobs.

I think the resistance comes from the fact that if you start building denser, you need a lot of people to shift toward higher capacity transportation modes. US Cities aren't moving fast enough on transit and bike infra, so people get all worked up over potential traffic and parking, which is usually the main complaint. 

3 words, location,location,location.

In effect, we need a certain amount of urban decay to make older areas less desirable, so that the affluent will move away and leave them to the less affluent.  The rich guy's house becomes home to the middle class guy, and the middle class guy's former home goes to the poorer guy, and so on.  I'm not advocating this, just making an observation.

Another way to make for more affordable units is for the Fed and policy makers to create more periodic real estate bubbles and panics.  Lots of units get built, and then sold off at great loss when the market corrects.  Supply goes up, prices come down.

Tongue firmly in cheek.  LOL

archinine beat me to it (trickle down).

But a more accurate description might be proletarian drift.

As to affordability, private development aims for maximum profit.

The problem with that theory that immediately comes to mind: where is the luxury housing from 50 years ago that's affordable today, in let's say NYC?

Also, if you own a housing development that's depreciated over time to the point where the rents are affordable, at some point it will make more financial sense to redevelop the property and raise the rent.  There are some problems the market alone can't solve.

There's also the matter of deferred maintenance and owners managing their properties into the ground, but keep rents/sales at a point that is still higher than what wage increases allow for rent or purchase. That's when you run into the slumification part. 

++ jla schoon and marc

The other thing not mentioned here is the vast expanses of affordable rentals and condos that were added to city housing stock, again during the 50-70s but not since. At least not at that scale. As an example of other posters' points regarding valuation and maintenance it's a tale of two divided cities. Many middle class condos - Mitchell Llama in NYC - were subsidized and built on then undesirable land. Values skyrocketed over the years and many co-op boards opted to go private selling out what were once entry level homes for multi million price tags. On the flip side low income/section 8 buildings, often adjacent and with nearly the same floor plans and general infrastructure, weren't maintained and are currently in severe disrepair. The city claims it can't keep up with the costs, yet the subsidized co-opers cashed in, essentially for free with a simple internal vote.

And yes there are countless million $ co-ops in manhattan that are decades old. In fact these are some of the highest cost properties in the city.

Almost the same story could be told of San Francisco, Chicago and other major hubs.

The point is the trickle down theory has never been seen to actually work, with housing or anything else. The only time urban housing shortage was alleviated in a marked way was in an era of wealth/white flight to suburbs immediately following massive public investment.

This makes sense as developers are unlikely to build if a surplus of buyers aren't present. And if buyers are present, developers are never going to target middle-low income brackets without government intervention. There have consistently been more people seeking housing than available in major metros with the exception of maybe 1970s-1990s. Adding unoccupied luxury condos for foreign billionaires to park their money hardly translates to upward movement within the market.

There's a rather fantastic book about this, 'Affordable Housing in New York' by Bloom and Lasner. Ironically it's somewhat expensive but a worthy investment to anyone interested in the topic.

In my case, it's the exact opposite. I live in my own luxury apartment (according to my personal architect standards and skills) dead centre and next to parks (multiple!) and all facilities I can think of, in what used to be subsidised social housing. The social housing associations have been privatised over here and need to make a profit now, so they build less and less social housing (because you can't make a living from that unfortunately) and build for a competitive market with a bare minimum of social housing units, the amount only what the law requires them to build. And they even put (former) social housing units up for sale or rent at market value (making it unaffordable for people relying on social housing) and force people that rely on social housing to move further and further away from the city centre or even leaving the city all together to some boring suburb that still has plenty of social housing blocks because nobody in their right mind would want to live there. So to me it's funny that there is a sort of trickle down housing strategy in the States, or at least that's what the developers want you to believe perhaps while they make huge profits now, while here in good ol' Amsterdam social housing units are trickled up into expensive real-estate.

All depends on what city you live in.  Housing prices could go either way with time depending.

"How Luxury Housing Becomes Affordable"

By earning more money!

House prices only tend to go up. I dont see how this would work at all.

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I don't disagree with the article; That is how it worked (past tense).  But if you look at demographics, what is happening is people are flocking to 15 cities in the US (I think I heard that this morning about some study on the election and electoral).  So, smaller cities aren't facing this affordable housing crisis as much due to low housing stock, but more of a lack of jobs that pay enough.  Those 15 lack housing stock and are also facing gentrification issues with older neighborhoods that would have otherwise been affordable (that gentrification increases rent).  

Blame it on whatever; Good marketing by the 15 so people and businesses want to be there... or the internet killing smaller communities since you can shop out of region for both services and consumer goods... maybe big business consolidation where they gobble up smaller companies and have huge offices in those cities... and the list goes on.

I don't know a reasonable solution to this very large complex problem.  But this migration is also messing with government representation since those smaller cities and towns have more power per person than these huge cities which generate the most GDP for the nation, taxes, and jobs.

right now as a whole, the US has a very low vacancy rate on rental units.  if more housing is built this number will go up hopefully.  i think this new idea of getting the leftovers is sad. 

think of all the housing that was intentionally built for middle income people post ww2.  levittown and the san fernando valley for example, was not built out to provide luxury housing.  it was built out for middle income earners. 

i'm not sure if we can do that now, some would argue we can't.  i think we haven't tried hard enough or tried the right combination of incentives and legislation.  

hi geezer, I'm not nostalgic for it.  My point is only that it was housing built at a price point intended for middle and low income people.  There's nothing like that happening today.  

"After re-reading OPs opening quote, I still find it incredibly shitty that the purported solution to generating affordable units is 'depreciated' leftovers."

Which get bought by new money and torn down / renovated out of "affordable" territory.

The whole premise is not true. In New York City the "pre-war" apartments still command top dollar. In my little burg in central Virginia the old historical section of town is the most expensive. Priced homes in the Charleston Battery lately?

True.  The "trickle down system" only sort of works in "normal" smaller cities with lots of buildable land.  Mega cities like NYC, SF, LA and the like have land costs that are too high.  Commuting distances and geographical barriers (like oceans) keep land at a premium, and as soon as the existing older units become obsolete, they quickly get torn down for the land and thus don't become available for lower income people.  Super large urban areas are the enemy of people who don't have enough money to compete in the bidding war for desirable locations.  I don't have a solution that is economically and politically practical.

Today’s new homes are 1,000 square feet larger than in 1973, and the living space per person has doubled over last 40 years

In other words, what were once "luxury" units are now bottom-of-the-market. "Affordable" is highly questionable when average rents consume 1/3 of personal income.

Still the only viable solution is government intervention to spur development and densification of existing lots as the noted 15 or so cities will continue to attract the most residents.

^ The taxpayers should support Google and other tech employees who want to live in San Francisco and Silicon Valley? When places become unaffordable they are unaffordable and the corporations move to where their employees can live more than a third-world lifestyle.

Affordable housing subsidies generally have caps around the 50-60 AMI to avoid exactly that. I'm talking about supporting the people who are displaced by the Silicon Valley transplants. These are the same people who clean up after, chauffeur and feed the software engineers and their ilk. Further the tech workers are some of the few who can afford these luxury private developments so they're the last ones who ought to be scooping up tax dollars. They and their employers are providing the tax revenue.

And on the note of google, I believe it was on this forum someone had mentioned how google is now testing out housing it's own employees. But that seems more about coercing them to work as many hours as possible as opposed to mitigating unaffordable housing.

Cities are not for the poor. Move to a smaller community. Our 1920's bungalow would cost a fortune in a desirable location. However, living in Bumwad, Louisiana it is surpringly affordable. And you, young hipster doofus, can still have a man bun and make handcrafted artisanal lard in a small town just as easy as Portland, Brooklyn or San Francisco.

Lol if only vado had any idea how idea how deeply I despise man buns and all those other things described.

affordability - we don't work hard enough nor are we whooores...