Those high-priced condos will be great for families with children
There’s a common perception that the condo boom is making central Austin less family-friendly. Some people argue that because the new condos won’t attract many families with children, they are turning central Austin into a playground for rich singles and couples. Council member Kim has even taken up the cause, suggesting we need more four-bedroom condos downtown.
It is true the new condos are aimed at affluent singles and couples. But this does not mean they are bad for families with children. Just the opposite. Building lots of expensive condos is one of the best strategies for getting more families with children into central Austin.
Here’s why: The supply of single-family houses in central Austin is essentially fixed. Families with children must compete with singles and couples for these houses. There are lots of affluent singles and couples to compete with. This competition has pushed up prices, and will continue to do so for the foreseeable future. If we want more families with children, we have to give them an edge in the bidding.
One way to do this is to stack the market with homes that appeal more to families with children. This means replacing small homes with large homes. Large households generally want large homes more badly than small households do. The typical family with three kids is willing to spend more for, say, the 2,400th square foot of living space than the typical single. All else being equal, a family with children is likely to outbid a single or couple for a large home. Whenever a small home is replaced by a large home, the odds go up that a large household will win the bidding on another home. (On the other hand, artificially restricting the supply of large homes is a good strategy for driving families with children away.)
There is another way to give families with children a better shot: Add lots of homes that singles and couples will view as close substitutes for single-family homes. Giving singles and couples a good alternative makes them less likely to bid up the price of the existing stock. Why pay a steep price when there’s an equally attractive option just around the corner?
The expensive condos sprouting up around downtown will attract affluent singles and couples who are willing to pay a premium to live in central Austin. In other words, they will attract exactly the class of buyers most likely to compete with families with children for scarce single-family housing. And unlike single-family homes, there is a huge potential supply of new condos. This steady supply of new homes will give small households other choices, cutting what they are willing to pay for detached single-family homes. Over the long run, families with children will see less competition and pay less for housing than they otherwise would.
So there are really two ways to get more families with children into central Austin. One is to build large houses. The other is to build a lot of small, expensive condos.
