There's definitely lessons their for the rest of Europe.
Or build entire new cities. This is what the UK did after WW2 [0], building dozens of new cities of 100k to 250k people, most notably Milton Keynes, Peterborough and Northampton.
[0] https://en.wikipedia.org/wiki/New_towns_in_the_United_Kingdo...
What it means is that 65% of homes are occupied by their owners. It doesn't mean that 65% of people live in their own homes, but I suspect it is not too far off the share of people living in their own home or in a home owned by a family member or partner.
I guess the difference is people renting a room in a house occupied by its owner. Did I forget anyone?
It may not be the same at all in big cities though. I know that homeownership rates in London have collapsed far below 50% in recent years.
https://fred.stlouisfed.org/series/RHORUSQ156N
https://tradingeconomics.com/united-kingdom/home-ownership-r...
https://www.ethnicity-facts-figures.service.gov.uk/housing/o...
Theres also the question of what it means to own ones house. A lot of people have a mortgage for their house, but the relationship between this and benefitting from the value appreciating is different for different people.
"Households in London were fairly evenly distributed across the tenures, with half in owner occupation and half in the rented sectors."
Section 1.10 in https://www.gov.uk/government/statistics/english-housing-sur...
To get the number of voters you could weight by average occupancies but I don't know what those numbers are.
Or enact laws that don't have a negative effect on most voters - e.g. block non-resident ownership like in NZ and give owner-occupiers the same tax breaks as landlords.
I would gladly see the value of my house drop by 60%, if it meant that all the bigger/nicer houses in the area also dropped by 60%.
For most homeowners, the absolute value of their house is broadly irrelevant. What matters most is the difference between their current house and the next one they want to move to.
People looking to stay put for the foreseeable future are unaffected by changes in house prices.
Empty nest downshifters benefit from prices remaining high and rising, as do flippers, landlords, and those with a very high LTV who wish to move.
People looking to move to a bigger/better house would benefit (e.g. renters saving up to buy, a young family currently outgrowing the house that was perfect when the parents were just a couple).
Thank you!! Exactly this
Say I own 50% of the equity in a home valued at $1M today, and I want to move into a new home valued at $1.5M.
I sell my current home, and I realize enough cash ($0.5M) to cover a 33% down-payment on the new home. Assuming I have the cash flow to satisfy the lender I can pay the mortgage, I can make the move.
But assume all property decreases in value by half. Now when I come to sell my home I only get back enough to repay the mortgage and I have nothing to fund a down-payment on the new home.
Even though the difference in price between the homes halved, I can no longer afford the move.
If you were trying to move from a 150K place to a 200K place, you are now moving from a 60K place to an 80K place.
You never had that 90K that you just "lost". Your net worth didn't really drop from 150K+savings to 60K+savings, it was always 1house+savings.
If you limit yourself solely to the utility value of the home (i.e. you can live in it), you could perhaps convince yourself of that, but for most people their home is the largest investment they'll ever make.
I know a lot of people (including myself) have "sell home, move to a lower cost-of-living area, roll excess cash into retirement funds" as part of their retirement plan.
Which is why almost any talk of trying to actually make systemic, long-term fixes to the housing market--to move it back towards something that provides housing for actual people instead of an investment vehicle for those (shrinking few) who are lucky enough to get on the property ladder--feels doomed to failure. That this situation sustains means that people who have spent many years in a place that is a high cost-of-living area will not be able to retire there unless, again, they got lucky on the property ladder.
On a macro level, people will say that they want fixes and that people should be able to find housing near jobs and all of that. But, at the individual level, rising housing prices that stay high over the long term are beneficial to so many people in a way that, were it to change, would fundamentally crash their post-work prospects. So everyone who owns property is scared to death of that being undermined, to the point that it is, intentional or not, an "I got mine don't touch it" situation.
I know that's a bluntly unfair way to put it because people are simply playing the game as it exists, but that it's unfair doesn't mean it's not also true.
It isn't about limiting yourself solely to the utility value, but about the difficulty in separating the utility from the investment.
You can sell your shares for market value at any time, and use the proceeds for whatever you want.
If you sell your only home, you usually then need to spend money on replacing it, whether in the form of rent, mortgage, or using the proceeds to buy outright.
Say I owe $400K on a $1M home, and I want a $1.5M home. I sell my home to make a 600K downpayment and have to borrow 900K in order to buy that new place.
Let's say all property decreases by half. My home is now 500K, the one I want is now 750K.
I sell up and have a 100K (13%) downpayment and have to borrow 650K to cover the rest.
My LTV has risen considerably, and if the market continues to fall, I might be stuck with negative equity, but I still owe less than I would at the higher prices.
Lenders might be less likely to lend in that scenario, but there will be a sweet spot somewhere where the price drop corresponds to something sufficiently below the majority of movers' LTVs to be beneficial for homebuyers in general.
Maybe you mean to say that what matters is the difference between the price of the desired future home and the amount of salable equity that they have in their current home?
Someone who took out a 100% LTV mortgage ten years ago and only paid the interest would now own about 30% of the equity.
Housing cannot be both 1) "a good investment" in that it grows more than the economy 2) and affordable.
Ideally, prices would be fairly stable, so that people can swap out of different housing depending on their needs at different stages of life without stressing too much about 'the market'.
Real estate is a backstop on equity.
Leveraged real estate is (as with homeowners) a tremendous risk to financing firms.
They will (and have) fought tooth and nail to resist any depreciation of assets.
This is one of the resistances to technological innovations that Bernhard J. Stern wrote of in 1937. The commonality with the other examples he gives is striking.
https://archive.org/details/technologicaltre1937unitrich/pag...
Retyped Markdown: https://pastebin.com/raw/Bapu75is
Prices are driven by supply and demand. Highly desirable locations with limited scope to increase supply have always been expensive, and will always be expensive.
Oulu is a small place almost literally in the middle of nowhere and extremely North, hardly a property hotspot.
I guess the question is "let people build condos" ... where? What if there's a natural park? Or what if something is private property and the owner doesn't want you to build there?
Zoning laws basically prevent construction of condos even by the owners of the property in like 90% of the Bay Area, if not more...
You know it's possible to regulate prices with laws, do you? The thing you said is not a law of nature, just something we agreed on. And we can change our mind.
Price controls do not work and are actually damaging because instead of trying to balance supply and demand they make the imbalance even worse. They do not remove the pressure of supply and demand, which continues to be at play.
I'm not trying to be coy, I simply haven't seen a viable alternative with details. And since most of the world converged on using money to decide allocation of resources, I'm wondering if the alternatives have significant drawbacks.
I understand that wealth begetting wealth, especially for generations seems unfair. But the solution to that doesn't have to be lottery or waiting list of housing. If the goal is to spread the wealth around more evenly, then that can be accomplished with higher taxes.
You can't legislate what people value, but you can change things so they value them more or less. I think the most promising thing would be to convince companies to create jobs in places where the cost of housing is lower.
There has to be some selection. With free market, the selection is about how much you can or are willing to pay. Cap the rents and other criteria will be used. In many cases, more or less legal froms of bribery will make up for the gap in value.
Another common thing that happens when rents are capped is that landlords are going to make sure that they are only renting to the rich, because the rich are less likely to default. How are they going to know that you are rich? Obvious ones are to look at your bank account (privacy?), but unfair criteria like race can also be used.
You can also become communist, have the state take all housing and redistribute them "fairly". I think it is an area where communism actually works, but it probably won't be well received in the US...
You know they did just that in Venezuela, with noble intentions, do you?
Interest rates and mortgage policies have a huge effect on housing prices.
Bizarre tax policies like the ability for Americans to write off interest on mortgages also certainly don't help.
There are governments that intervene directly to keep their housing market cool in order to maintain affordable housing stock for their workers. My understanding is the German state tries to do this, for example, in order to maintain its ability to be a relevant industrial exporter.
https://qz.com/167887/germany-has-one-of-the-worlds-lowest-h...
Prices are driven up because people compete to buy a limited stock.
Restrictions on mortgages and higher rates to not necessarily make desirable areas more affordable. The absolute prices might be lower, indeed, but fewer people will also be able to afford the mortgages.
For effective and sustainable affordability there is no alternative to balancing supply and demand.
So it should be no surprise that in countries where the state effectively encourages private home ownership through favourable loans that the demand for private homes is high enough to drive prices high.
Obviously there is the supply side to this. I think in some regions, especially the badly planned sprawl that is Silicon Valley, restrictions on density and supply are really a big part of the problem. But it doesn't explain it everywhere. There are regions where construction and density are not similarly restricted that still have high, unaffordable home prices, because demand for single family homes is effectively stimulated by economic policy.
The demand for private homes is driven by people wanting to live in a specific location. Prices are then set according to how that aligns with supply.
It is unrealistic to expect every locations to be affordable to everyone.
Apart from increasing supply, a remedy is to spread demand. Prices in e.g. London or Silicon Valley are high in part because these are very attractive locations and there are so in part because jobs are concentrated there.
There are macroeconomic policies that underwrite and encourage private ownership of single family homes.
The two are not equivalent in the real world.
Not quite unique: this kind of loan is available for college tuition too!
Perhaps unsurprisingly, that’s another disaster zone...
I support building up (with ample green space) to bring down the cost. But that doesn't have to be the only solution. The attitude that everyone has to work from an office every day of every week is ridiculous to me. A week or two per quarter of travel and then a strong culture around remote work will distribute the prosperity as well. The future economy is knowledge based and we better prepare for it.
one of those is not like the other. Berlin has recently passed a law capping rent at below 9 Euro per square meter (much less in many regions) all over the city.
It's the first time such a law was passed anywhere in Germany. [1]
[1] https://www.spiegel.de/wirtschaft/soziales/eckpunkte-fuer-mi...
What if it's the reverse?
The supply of land is fixed. Its intensity of usage is not.
By imposing a per unit rent cap, what's effectively happening is that a rule is being established that no more rent than that cap can be extracted per unit. But there's no inherent restriction (zoning, construction laws, etc., being of course the exceptions) to more intensive development. Increasing the unit count.
A rent cap plus zoning restrictions is one form of death: there's no new housing supplied, and if the issue is rent control (limited rates of increase over tenancy), then the result is similar to what happens in San Francisco.
But with sane zoning and construction standards and a cap, you're inducing more intensive development -- an increase in housing supply -- by imposing an arbitrary per-unit revenue cap. And without nominally raising taxes, the bugbear of the land value tax approach.
I'm not aware this argument has ever been proposed, though I am fairly confident it has been.
Your hypothesis assumes that increasing the potential revenue by square meter has no effect attracting Urban development projects.
It seems obvious that if it's possible to increase intensity then being able to generate more income per m² only helps put together a valid business plan that increases supply.
There are two ways to increase revenue per m^2. One is to intensify the construction. The other is to limit supply.
For numerous reasons, the latter approach ... seems to predominate. Rather than constructing denser residential, commercial, and (where appropriate) industrial space, the tendency is both to sprawl out, and to simply refuse to allow new construction. San Francisco is the pathalogical case, but hardly the only, and numerous other US growth areas (LA, Seattle, Austin) and elsewhere (Sydney, Vancouver, London) are to large degrees similar. There's new construction ... of large McMansions. But not of denser forms of housing.
By imposing an arbitrary constraint in one dimension (rent extraction per unit) but allowing intensification on another (density or height of construction), this should be addressable.
Keep in mind that most of SF is at best 2 storey construction. You don't have to airdrop Salesforce Towers all over the city, only allow construction to 4-5 storeys, to more than double effective density. Apply this more broadly over the SF Bay Area, and what's become a region-threatening blockage to housing availability (and incidental issues such as traffic congestion, hours-long commutes, access to schools and services, etc., etc.) would be lifted.
The fact that landlords (or banks, through mortgages) can extract arbitrarily high amounts of rent from a given area regardless of intensity of development, is the problem. The land value tax is one approach, and is probably a better one. I'm considering what the implications of a rents cap might be.
A usual objection to rent controls (increases on existing units) is that landlords are not incentivised to maintain or improve the quality of units. Whether that might also apply to a cap is a possible objection.
you know why Oulu has inexpensive housing? Because not many people want to live there. I probably wouldn't live there even if they paid me to live there.
You want to make SF affordable? No problem, make it bad enough so that no one will want to live there
[1]: Looked it up, they're certainly getting praise for it: https://www.businessinsider.com/how-finland-beats-america-on...
finland: 5.5 million
usa: 327.1 million
USA: $60k Finland: $45k
So there's no reason Americans shouldn't have the same level of comfort.
It's not, however, useful as the sole metric for evaluating the economic condition of a society.
for me it's just a fact that in a high population, high wage, highly regulated society it's much harder to overhaul things radically than in a similar tiny nation. without some sort of a disaster (think WW2), it would be very hard to force everyone to switch from an entrenched system to a different one.
how would it be easier to force 300 million people vs 5 million?
It is fine to suggest that this system is better but there is a reason it only exists in some countries and not others. If you have a high level of business creation/destruction, it is a huge risk (Denmark is an example of a country with this system but very low regulations on business/labour, 2008 nearly killed this system). If you have a very mobile population, it doesn't work either. If you have a heterogeneous population, it doesn't work.
The simpler solution is to take the parts that will work i.e. investment in retraining.
To be totally clear: I have studied this topic (I studied econ/policy at PG level) and no research I have ever read has suggested this. Google comparative social policy research.
I understand that if you get your knowledge from misinformed politicians who haven't studied the issue but believe it will solve all their country's problems...yes, that distinction is not clear. If you actually read books though, it is quite wrong.
There are big differences between the US and EU though, not disputing that. But maybe there's a way of describing this difference that makes the distinction clearer?
Because you seem to not understand some part of this: in Europe, if you make $100k/year and you lose your job the state will pay you a percentage of your previous income for a fixed period of time (and you then get nothing or put onto a long-term unemployed program). For example, 75% so you will get pro rata $75k/year. In the UK/US, if you lose your job you will get $x/year, regardless of your previous job and what you contributed to the system (i.e. it is redistributive...some people pay a lot into the system and get nothing, people who pay nothing in get the most...insurance doesn't work this way).
The history isn't worth going into but the European welfare state was invented by Conservatives. The US/UK welfare state was invented by Socialists. Practically, what most people think about the European system is almost 100% wrong: the US/UK welfare system is intended to intervene in the market, the European welfare system is not (and the Nordic countries are usually most strident about not interfering in the market, particularly Denmark which has very high rates of job creation/destruction).
Just to be totally clear: what most Americans are being sold by Democrats is a total fiction. There is no alternative to the market. Every country that has had politicians that tried to outsmart the market has failed (the Nordic countries did this in the 80s, they were bankrupt by the early 90s). The US already has the most heavily redistributive social policy anywhere. If it isn't working, that doesn't mean you need to go further.
And yes, that is why I suggested you read about it yourself. This is seminal - https://en.wikipedia.org/wiki/The_Three_Worlds_of_Welfare_Ca... - but social policy is perhaps one of the biggest areas in comparative politics (because the importance of context/history is so evident).
Social programs take care of you based on needs, regardless what you payed in. Healthcare (the public program) gives the same service to everyone while having you to pay a % of income. You won't get neither more housing nor child benefit by having payed in more.
Yes, unemployment is a bit of a special case since its goal is to minimize disruption on peoples live in case of sudden job loss. Not just being a basic safety net... those are available to everyone.
Great, you have a "real problem"...no-one cares.
Why I have to tell you this is unclear? Just look on the internet. Too much like hard work, amirite comrade? Also, you are not only reasoning from your sample size of "people I know" but that is limited to one country...at least try to be serious.
> The only way to obtain money without performing work is to be disabled. That is it.
Right, but getting a diagnosis from a psychologist that you are depressed or similar and can't work is not very hard. I've also received this kind of aid before I got a job so I know.
Though it is true the higher taxes are also the source of benefits they provide other benefits even if you're employed.
Very true! Many colleagues I met here were ex-nokians. It seems that the market was able to absorb at least a bunch of them over time.
It's difficult or even impossible to translate that into different country, but I'd argue each bit has an effect over long period of time. US has become so antagonistic over the years it's hard to see it ever growing out of it. And in smaller scale of course, US must have similar kind of environments. But the cultural norms are such that it's not really a joint goal of the people to have it for everyone. It's a behavioural dilemma since in order to create such culture it has to reciprocated and seen as the "better way", but that takes generations to happen. By believing it can't be done it's kind of a self-fulfilling prophecy. Our egos are too fixated on our own habits that learning to look life at different perspective is made impossible. And when happiness can be directly measured in how many dollars you have, who could convince people otherwise.
This is not possible for either countries with low income or large cultural or racial diversity because there is big difference of opinion on what is good for society