The Pittsburgh Downtown Partnership sees a thing it wants-people living Downtown-and wants to create a program in order to get more of it. To promote Downtown living, the Partnership launched a $3.5 million revolving loan program designed to assist property owners and developers who are looking to convert vacant or underused upper floors of Downtown buildings into apartments or condominiums.
Citing pent-up demand for units on their way to being built, the loans are supposed to help developers make the projects viable, with one official noting "these projects are hard to finance in the conventional sense. This is that extra help, the extra support, that will help to get the projects done". Of course, the underlying intention of the program is to try and lower the costs for developers so that the rental price ends up being lower and more affordable.
Basic economics tells us that price is the mechanism that determines resource allocation and how to produce, what to produce, how much to produce, and for whom to produce it. Consider that a newspaper article cites two apartment buildings with 106 available units and 425 people on waiting lists. Under normal market conditions the price of these units would rise until supply and demand equaled, and the shortage of units would dwindle and former applicants would look for other housing options. Other Downtown owners, seeing the demand, could then decide to take the risk of developing their property into apartments to take advantage of the strong demand and rising prices.
Perversely, the loan program and the desire for moderately priced housing will likely create a bigger shortage of apartments as the number of people wanting moderately priced apartments will exceed the supply of units to a degree greater than currently exists.
Ten years ago the City went to great lengths to subsidize retail; now they seem to be doing the same with residential development. There’s a reason why the cost of most housing in Downtown falls in the $300k to $1 million range, but officials don’t see it and don’t want to see it.
