> It’s a magical policy under that makes better off both the owner of a small house who needs a bigger house and the owner of a large house who needs a smaller house.

Because the person who needs a smaller house sells the bigger house immediately, the developer turns it into ten bigger houses (or condos), and that increases the supply of bigger units for the person who needs a bigger unit.

> If the owner of the large house would be better off by the presence of bids by developers, wouldn’t that tend (strongly) to work against the interests of the owner of the small house seeking a larger house?

The developer doesn't care about the size of the existing structure because they're going to knock it down and build a taller one, so then the smaller house increases in value by as much as the bigger one because a developer would pay that much more for that one too since what they really want is the land. In which case what happens is that the developer buys the smaller house and then that person has the extra money to outbid some other developer for the bigger house and they both win.

> It might work to help the owner of a small house who wants to move into a larger apartment or condominium.

It works even if they prefer a bigger house, because there are others who have no preference and only want a bigger space, and then some of the demand for larger units gets satisfied by the new condos and frees up houses to the people who specifically want a house.

Notice that if you're turning one house into 10 or 20 condos, the supply of houses is only going down by 1 but the unsatisfied demand for the remaining stock is going down by 10 or 20.

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sokoloff an hour ago | parent | next [-]

> It works even if they prefer a bigger house, because there are others who have no preference and only want a bigger space

People looking to open a new office might fall into this category, but I have serious doubts that enough people fall into the category you describe to leave the owner of the smaller house better off because how larger houses are too-low priced.

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AnthonyMouse 39 minutes ago | parent [-]

Housing in higher-density areas currently has a higher cost per square foot than it does in the suburbs, implying that unmet demand for it is currently higher than demand for suburban real estate. You'd have to build enough to make that not the case before anyone who doesn't want to live in a condo would have any reason to choose it over a similarly-sized house. And if you actually managed that then it would be from building enough condos to make them more affordable, which would start attracting some people with only a weak preference for a house and still make them better off because they'd get lower housing costs. Meanwhile the people with a strong preference for a house would just pay the extra money for a house, which in the long term would still be less than they're paying now because there wouldn't be so much housing scarcity.

	▲	sokoloff 28 minutes ago \| parent [-]
		> less than they're paying now because there wouldn't be so much housing scarcity And now we’ve circled back to where the owner of a big house looking to downside isn’t made better off. Housing policy is complex and tied up in economics and emotions. Arguing (as you seem to be) that all users of housing are made better off by a policy change that’s so simple and obvious that no one has tried it is going to leave many people more skeptical of your idea, not less. Arguing “these users are made better off at the expense of these other users is probably more accurate and more persuasive”; if you can’t find anyone made worse off, it’s possible you’ve cracked a problem facing society for well over a century, but it’s more likely that you just have thought/looked hard enough.

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amluto 42 minutes ago | parent | prev [-]

This effect is quite broken in many US markets. Developers are, for various reasons, building higher-density developments consisting almost exclusively of studios and 1-bedroom units.

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AnthonyMouse 36 minutes ago | parent [-]

Developers build what's profitable, i.e. what's in demand. And they don't have to build the thing you want to make more of it available to you. You want a big house, someone who currently has a big house just wants a place to live, so if someone builds them a 1-bedroom then they take your money, pay a fraction of that for the 1-bedroom and pocket the difference. They get the new unit and a pile of money and you get the existing bigger house.

That continues until demand for bigger units starts to outstrip demand for smaller units, at which point developers start building something else.

	▲	amluto 8 minutes ago \| parent [-]
		> Developers build what's profitable, i.e. what's in demand. This is only true to the extent that regulations don’t constrain the developers. As I understand it, in much of the US, regulations make it very difficult to build high density family housing.