What happens if we ban “luxury” housing?

Some people think that the answer to more affordable housing is to simply stop building any more luxury housing, reasoning that if developers are forced to stop creating it, they’ll build more housing that people can afford.

There’s a big flaw with that theory though: people move to Bend because they want to live in Bend, not because of the availability of luxury housing.

Say someone wealthy can spend a million dollars on a house.  They’ll go buy something in Tetherow or on Awbrey Butte and all’s well.  But say they no longer have that option, and still want to move to  Bend.  At that point, they may well decide to simply buy that 500K home somewhere else.  If this happens enough, the price of what were formerly 500K homes starts to rise as competition for them increases, and so on down the ladder.

Restricting the supply of housing of any type is not really the answer to Bend’s housing woes.

This is explained in further detail in Professor Sanford Ikeda’s How the Housing Market Works.

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