Who Lives with Their Parents?

In which city (or country, if city is too specific) did you go to university?

I believe Mr. Kemendo is being facecious.

> 1/3 of the female students at my university did sex work to pay the rent

I find it hard to believe there's enough customers to make this viable, let alone that it actually happens. Do you have some source to back this claim up?

> 1/3 of the female students at my university did sex work to pay the rent.

What did all the male students do to solve the same problem? Just regular jobs?

If the girls were doing sex work just because it's easier/more-pleasant than spending 25hours per week waiting tables or stocking shelves then this doesn't seem to make much of a point.

On the other hand, if sex work is generally an act of desperation then I'm genuinely curious about what an equally desperate boy in similar circumstances tends to do.

I think the light rail thing is so that they get a higher development cost.

The simulator mentioned in the article says it costs $9 million to construct 50 units. That's $180,000 per unit, which seems like it must have some regional peculiarity to it (you can buy a new 3 bedroom house for less than that in many areas). Hopefully they are at least pretty nice apartments.

Houses get bigger and use more expensive materials and fitout that increase the comfort of the inhabitants. Building a house now to the standard of say 50 years ago is either impossible because of building code, or doesn't pose a sufficiently attractive value proposition to convince buyers.

In other words, a house and a house are two different things.

> But then, the price of raw unimproved land basically tracks inflation, indicating a competitive market.

This is true looking at all land, as recent articles by Robert Shiller indicate[0], but especially valuable land has outstripped inflation by many, many times-- in the Bay Area, for instance, land value has increased by a factor of 10X in recent decades (or significantly more, depending upon neighborhood). The only thing that keeps land in check is the ability for land to sprawl out into previously marginal land, and our ability to commute from where we are sprawling to is reaching a breaking point. (I know people commuting from Tracy to SF, which is hell.)

[0] http://www.nytimes.com/2016/07/17/upshot/why-land-may-not-be...

Some of the better returns, in my limited experience, are reaped by land and under-improved property speculators/developers (development, I this case, referring to lot subdivision or other methods of locking in construction approvals above and beyond existing by-right approvals).

Another large proportion of potential profits are destroyed by the regulatory process because by-right approvals are often extremely limited and easily challenged by third parties. I'm a huge fan of communities being able to shape their built environment, but making most development approvals into a lengthy, expensive series of challenge/response hurdles rarely leads to progressive outcomes.

Lastly, project delivery timelines can de-sync with economic cycles due to long developent periods and the timeline of construction itself. Since construction starts typically lag economic booms, people take losses due to this off-cycle behavior more often than they realize unusual gains.

I work in a small construction market though, so my experiences may not carry well to the more populous parts of the USA.

> I'd thought that real-estate developers were that scarcity in the housing value chain, but this article suggests that they struggle to break even. Who is it?

The real-estate developers are still the scarcity in the chain. They make the money -- and lots of it.

They just don't make that money on affordable housing for the poorest of people without government subsidy. Which is why that stuff almost never gets built.

But they make a good chunk of cash on government subsidized housing (anything with Brownfield credits, for instance) and they make a lot of cash on luxury units. I'm in a small city in the Midwest, and condos here are selling for $300k - $600k despite way-below-average land and labor costs. There's 20-40% profit margins in those units, no one is loosing any money there.

The asset inflation that a good chunk of that profit derives from (because so much of real estate vitally depends upon transaction churn) is in the dirt, not the structures on top. Verify this for yourself by looking at fire insurance: it hasn't nearly increased coverage amounts by the same growth as real estate in general.

Any taxpayer-based bond issuance for infrastructure of water, wastewater, roads, electrical, data, and emergency services is a giant externality that developers pay only a tiny fraction of by comparison, and the developers capture a big bite of the profit up-front on the initial sale. Taxpayers end up footing the risk cost of anticipating the network effects of the build out will pay off the projects. This is compounded by the car-centric American culture imposing infrastructure costs that go up as the square of the expansion, but by and large cost recovery and operational costs are comparatively linearly composed because American suburban and exurban developers tend to sell low-density in the first pass greenfield development (large lots, fewer people per acre) to sell their book and cash out fast. NIMBY politics then gridlock densification later, so you get all this infrastructure that is now spread among fewer taxpayers than you need to effectively not only pay it back, but properly maintain it as well.

The real estate industry enjoys enormous subsidies that really distort the market, and if you aren't in the industry this basically translates as monotonically increasing land prices (which most people interpret as constantly-increasing housing prices). Much of the dysfunction is likely to entrench and get much worse in the future, and won't stop until a really ugly, sharp dislocation happens.

I used to work in the real estate development industry. The best returns are almost always made on increases in land value. Who exactly captures that profit can vary a lot. Sometimes it's land speculators who buy land cheaply on the outskirts of growing cities. Other times it's developers who buy a large parcel cheaply and then develop it slowly until by the end it's a much more desirable place for a lot of people and they can sell sell product at premium prices but with a very low land basis cost. More often than not it's property owners - typically REITs for multifamily and office buildings - who benefit from price increases. And they can profit enormously from speculating and trading properties.

In a lot of ways the US real estate market is similar to luxury consumer goods markets. People are willing to pay a big percent of their income to live in SF or NYC because those cities have a strong brand. There's a perception of value that goes above and beyond quantifiable quality of life measures. It's not radically different from how people will pay a premium for an iPhone over an arguably equal or better Android phone. Landowners and homeowners can benefit from owning property in a location that commands a brand premium not unlike shareholders in a company.

> It's a manufacturing industry where we have relatively advanced machinery to build the houses themselves; you'd think that the cost of housing would have dropped the way, say, cars or silicon has.

I'm not sure why you think that.

Unlike manufacturing cars or silicon, housing has very poor economies of scale. Building 10 houses isn't a whole lot cheaper than building 5.

It's also a lot harder to make more efficient. Housing isn't manufactured in large factories where you can optimize every step of the process—instead, it's done by lots and lots of local firms. This leads to vast differences in the level of efficiency.

There's also the problem that there is still a social stigma against "generic" housing. Having the same phone as everyone else isn't looked down upon, but mass-produced homes carry a definite negative connotation. People look down on cookie-cutter condos or manufactured homes.

> But then, the price of raw unimproved land basically tracks inflation, indicating a competitive market.

Where on earth are you getting that from? Raw land in the middle of nowhere might track inflation, but land near any jobs center certainly doesn't. That's also the explanation of where most of the profits go: to owners of appreciating land in desirable areas, which is a mix of professional speculators/investors and existing homeowners.

Source: Spent Thanksgiving hearing about the frustrations my architect relatives have dealing with different contractors around the country.

People don't expect to get a return on investment with cars and silicon. Really if you think of it, there's wide spread market manipulation being performed by the public, local, and federal government.

There is some good work on this subject being done by good (not all) Low Income Housing Credit developers, but it is difficult. Like many tax credit programs, application, syndication, and compliance is a real expense both in time and focus.

Also, many communities have zoning codes, many fifty years old, that make it difficult to build low-income projects by restricting unit sizes, mandating minimum lot sizes, etc.

There are cases of communities being sued over discriminatory zoning, but the typical impact is that the communities add flexibility for less expensive single family homes, but the dense housing and multi-use neighborhoods that work well for low-income communities are not incentivized. I know Massachusetts allows zoning to be overruled if a community lacks affordable housing (40B?), but it is still a fight.

Lastly, between two developers, one building high end and the other building low-end, who is going to pay the land owner the most money if there is the same amount of units allowed by-right? If the low-end developer pays high-end land prices, where does the extra money come from?

> Are we designing low income housing wrong?

I'd argue yes. We should be building housing for working class / middle-class residents (sometimes called "missing-middle" housing, although developers often abuse that term to include luxury units) That's where demand is greatest while still having reasonable budgets and modest-but-workable profit margins for developers involved.

> Is anything getting in the way?

Yes, developers. (Occasionally zoning/historical associations/local laws in places like San Francisco or NYC. But primarily, it's developers)

Instead of building where demand is greatest, developers build only where profit is greatest -- almost every developer focuses solely on ultra-luxury housing (with ultra high profit margins) or low-income housing (where margins are reasonably good due to government subsidy).

If there was new working-class housing construction, their old units would filter down to low income households, because there's enough middle-class people for that impact to be felt in a market. But the margins there are lowest, so no company chooses to do that.

Instead, property developers focus soly on high end. Technically, those filter down eventually too, but by definition, there will never be enough high-income people for those properties to filter down to middle class folks in amount meaningful enough to help the market (so in turn, their properties can't filter down to low income households)

This breaks the entire market. High-end construction costs soars (because they want it and can afford anything). Middle-class properties become psuedo-high-end (for no other reason than lack of middle-class product) which creates this weird distinction between rich middle-class people who bought before the bubble, and poor middle-class people who have healthy wages, but burn 50+% of their income on rents (and so are effectively poor, even though they are on-paper upper-middle-class), and now you have an ever-growing group of "low-income" people who can't afford anything.

If we prioritized middle-class working-class housing, we could get units going without major government subsidy, and the old housing could become affordable to low-income folks (also without subsidy). But that would require companies to not prioritize profit over everything else, so it won't happen.

> Are we designing low income housing wrong?

We're designing it for people with no money. Hard to make a consistent profit that way.

Check out the Tiny House movement wallae!

http://tinyhousetalk.com/category/tiny-houses/

In this respect it is we Euros who should be getting off our butts.

Depends on your perspective, and what you consider problems.

If it's about not housing enough people in the major cities, then yes, it can probably solve that. Providing some quality level of housing for every pricing point ... well sure. That can be done by deregulating. We all know we will NOT like quite a few of those quality levels though, and some will be bad enough to make actual victims. For health reasons, for preventable accidents reasons, for crime safety reasons ...

If you're talking about doing that while maintaining current standards of housing and standards of traffic, crowdedness of the streets, etc - of course not. Can't be done, of course.

Housing everyone at a decent standard, lower than now, but decent ... well regulation (ie. shifting regulation from local to federal) can do that.

I think that that is by far the best option. Shifting permitting from local level to at least state, better yet, federal level.

The best option would be to provide distributed jobs again, of course. But that can't happen because, well it's complicated [1].

[1] https://www.youtube.com/watch?v=lYJI0cokQ5k

That sounds wonderful. Just as soon as you pry the car culture and suburbs from the hands of the folks who live in say Kansas and enjoy the status quo...

> There is no reason there can't be more Portlands or Minneapolises in the Midwest, for example.

In theory, sure. But in practice, there are a lot of reasons why there aren't (or won't) be more of those types of places.

The Midwest is strongly anti-city. In terms of culture, lifestyle, economics, politics, etc. Even self-described "urbanists" in the midwest are typically strongly anti-city (their goal is usually to reproduce the problems of existing cities, not to attempt any solutions).

It's not like there is a shortage of small cities in the Midwest. There's a reason no one is excited to move to Toledo, or Lansing, or South Bend.

The same reasons that make a midsize city more attractive than a cornfield also make a large city more attractive than a midsize city.

As a rule, larger population center enables more and better cultural options, more and better education options, more and better industries and choice of jobs - There's a zillion of things that aren't feasible in a 100k city simply due to lack of scale.

That's true for young and single. Default thing to do when getting married is to move out.

You don't like your own independence? Living with other people your own age?

Exactly, what's a degree from the "Univesity of Nowhere" worth? Same with jobs.

It's good that now at least, remote work is possible.

You seem to have strongly internalized the notion that only 'losers' live with their parents, and hence it's inherently wrong to do so. I would question that assumption.

It's the US that's the outlier here -- in most countries, living with parents at least for some points in time is the normal thing to do, for the simple reason that it's more economical.

What would living on a dollar a day entail in the US ?

Is such a long commute necessary? Are you in the bay area and can't afford to live closer?

Good quality noise cancelling headphones can change your life - with no music but just for the sound of silence. The bose qc ones are the ones that did it for me :)