On Tuesday, July 31, 2018 at 2:49:04 PM UTC-7, Joerg wrote:
On 2018-07-31 13:07, jbeattie wrote:
On Tuesday, July 31, 2018 at 10:51:21 AM UTC-7, Joerg wrote:

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An apartment building is not a commodity item like a house. The
sale price of a building is determined based on its net cash flow
which is related to building quality only to the extent that it
increases rents and decreases expense, e.g. new building doesn't
need a new roof, immediate maintenance, etc.

Whether a building gets built depends on what net cash it will
produce, ...


Bingo! And that depends on the cost of construction. If it goes up
for all developers, and with this mandate it does, then the market
move up in price.

That's where you go wrong.


Nope. The housing shortage is getting worse here and all those mandates,
permit fees, et cetera is what developers say is driving that.


So, lets say construction costs are the
same in Tulsa and Folsom. Why would you build a $5M 50 unit low-rise
complex in Tulsa when you could build a $5M 50 unit in Folsom and get
triple the rent. Even if the complex cost $6M in Folsom because of
the solar hit, you're still earning more than you would in Tulsa --
land of cheap construction.


That investor would neither got to Tulsa nor to Folsom. He'd go to
Rochester, NY or Memphis, TN where rental returns are currently best.


The difference in construction cost is far outweighed by the market
rents, potential for appreciation and the natural increase in rates
with a rising local economy. Gentrification is a gold mine. Smart
money goes to Folsom even though construction costs are higher.

Rental rates are based on supply and demand and not cost of
construction -- until those costs get so high that market rental
rates don't produce an acceptable ROI.


That is what I am saying all the time. Not enough ROI - no new
construction. Until rents consequently rise, then there wil be new
construction.

What I think is more worthy of complaint in California are development fees, which dwarf the cost of solar, particularly for an individual home in Fleamont!

"Of the cities studied, Fremont proved the most expensive on a per-unit basis: 'Development fees for multifamily housing range from a low of $12,000 per unit in Los Angeles to $75,000 per unit in Fremont. Fees for single family housing range from $21 ,000 per home in Sacramento to $157,000 per home in Fremont, over five times as much.'”

https://sf.curbed.com/2018/3/22/1715...ees-oakland-sf

Again, those fees are not recouped over time like solar. OTOH, there are costs associated with development that should be recouped by cities and counties who have to build schools, roads, etc. to serve new citizens. But I would think that $157K a pop for a home in Fremont would cover those costs and then some. I could see that shutting down new home construction along with high labor and materials cost.

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Where we live not it's nice though. This week I'll be riding he

https://www.youtube.com/watch?v=jvI1W7kmc4o


I'm trying to get my son interested in a Bridge of the Gods ride on Saturday. https://www.youtube.com/watch?v=kr_cSccFePg The far side of the bridge is Washington. One of my favorite spots on the Washington side: https://www.youtube.com/watch?v=IjvEsJvQe5w You go east on the Washington side because it has a great shoulder on the eastbound lane and then west on the Oregon side. Some hipsters did a vlog: https://www.youtube.com/watch?v=kkouuwDDpaQ&t=167s West side starts at 3:10. The road was still closed at the falls a couple of weeks ago because of the fire, and I have to see if that has opened -- otherwise I have to ride a stretch of HWY 84, which sucks.. Good shoulder, just noisy.

-- Jay Beattie.