Oakland shows how to expand housing supply: tell developers they can build homes | Hacker News Reader

Oakland shows how to expand housing supply: tell developers they can build homes

city-journal.org

264 pointsRickJWagner317 comments

The whole topic of conversation around housing affordability is backwards. Specifically, housing affordability is 100%, entirely, a problem of artificial constraints on supply by city councils.

(1) Americans consider housing to be an investment. An investment is only an investment if you expect a positive return over time. We generally want that investment to match or exceed inflation.

(2) That's antithetical to the idea of affordable housing. It's either affordable or an expensive, appreciating asset. It literally cannot be both at the same time. The only reason it's worked thus far is the broad-based expansion of the US economy and of specific population centers like SF has masked the problem for many, many years. Especially in conjunction with 30-year mortgages requiring 2% down. That's some serious leverage.

We don't talk about the lack of affordable AAPL shares do we? That's insane, it's an investment, we want it to go up. The less affordable, the better!

(3) Renters tend to be younger, transient and not vote. Owners tend to be older, wealthier, have deep roots in the community, and vote their asses off. They also aren't huge fans of change. They vote their interests: whatever keeps their, on average, largest investment performing well.

If you want cheap housing forget rent control. Allow developers to build up as high as the infrastructure can sustain. Allow smaller units, too, micro-apartments like whatever that place is on Mission, Panoramic. It's time to re-think the idea of housing as an "investment." We need to re-focus the narrative to make housing much more utilitarian.

This is reflected in major housing markets around the world, like Tokyo. They don't consider housing an investment, and they have some of the most affordable housing in any major metro in the world. [1]

[1] https://www.vox.com/2016/8/8/12390048/san-francisco-housing-...

Two thoughts

1) Isn't a developer also making an investment when they build these high as hell micro-apartment apartment buildings?

2) How do you avoid a race to the bottom in terms of housing quality when you allow said micro-apartments? Do we want a culture where the poor are living in barely livable wage slave pods while the rich are living in abundant villas?

I'm all for affordable housing but it seems too nuanced to allow market forces to take care of it. I think the correct solution revolves around government subsidized/funded housing but that's a whole other can of beans.

1) Isn't a developer also making an investment when they build these high as hell micro-apartment apartment buildings?

They are but they build and then sell off, developers develop, they tend not to own those units long-term. I believe this to be true regardless of market direction. Generally in the case of condos for sale, developers manage the complexes for a couple of years until enough units are sold off and the HOA takes them over.

If someone wants to run the whole building for rental, they can certainly still do that. You would just factor in that your rent would grow with inflation instead of geometrically when you're planning your building.

Indeed, that is a risk, however the current solution of not providing these folks a place to live is a punt.

Re: government operation model, I actually agree with you wholeheartedly. Singapore's model where something like 80% of housing is built and managed by the HDB and 20% if totally free-market has worked very well there. I didn't want to bring that into the already-long-enough post as I felt it might distract from my point shrug. [1]

[1] https://en.wikipedia.org/wiki/Public_housing_in_Singapore

> You would just factor in that your rent would grow with inflation instead of geometrically when you're planning your building.

Compounded growth at inflation is geometric growth.

Yeah, I bit my thumb as I wrote that haha, better-than-linear in constant-dollars instead of geometric in constant-dollars :P

FWIW there are developers who build and hold long term, but it depends on their strategy and hoe their capital structure is set up.

Currently the poor are homeless or enduring multi-hour mega-commutes or stuffing a bunch of people into a single studio apartment. Well-located "barely livable wage slave pods" would be a huge improvement for a lot of people. I agree that the race to the bottom effect is a problem, but I think even the worst-case scenario would still be better than our existing housing situation.

Indeed, it is only a problem in the sense that it is not a perfect solution.

Correct. A fire in a nice, completely unremarkable neighborhood about 40 miles east of San Francisco destroyed 4 units and made 35 people homeless. Almost 9 people to a home. And this is a solid 3-hour roundtrip commute from San Francisco or Mountain View. "Dickensian" is the word for it. Not literally, perhaps, because the housing situation in Dickens's time was even worse, but there is human misery on a broad scale.

https://www.independentnews.com/news/chestnut-street-fire-in...

> Do we want a culture where the poor are living in barely livable wage slave pods

At least the poor would have the choice between the barely livable pod in downtown, or a house 2 hours commute away. Currently they can only choose the latter.

You don't really save all that much money by building a barely livable pod vs an actual apartment. The big cost items are kitchens and bathrooms. Those are mostly fixed costs, i.e. it costs the same to plumb a toilet, shower, and sink in a 50 sq foot bathroom as a 100 sq foot one. Only when you get to stupid high real estate cost does a ~300 sq foot pod start making sense over ~600 ft 1 bed or ~1000 sq ft 2 beds.

It's a bit counter intuitive, but the best way to lower the cost of housing for the poor is to build more housing for the upper middle class and up. They will trade up houses which will increase the supply of used houses driving down their price. It's essentially impossible to build something new that will be cost competitive with something that already exists.

>It's a bit counter intuitive, but the best way to lower the cost of housing for the poor is to build more housing for the upper middle class and up. They will trade up houses which will increase the supply of used houses driving down their price

The problem is that housing in any location is not a closed system with fixed demand. It is an open system in which increased supply can generate increased demand.

When you build that housing for upper middle class and up, they vacate their homes, the price of their old homes goes down, then upper middle class and up people who previously decided to live in a cheaper area over paying the extreme rent costs move in, the population grows, and the price break never fully flows down market to the poor people in the city. This is why the market approach to building more housing isn't going to solve the whole problem. You need to build new homes at every pricing level and the market generally doesn't do that without the government incentivizing them.

If you keep building, eventually you will meet the pent up demand. Your scenario might match the first batch of new housing, but it can't continue indefinitely. Eventually you have more houses than people.

There is a ton of pent-up demand in the bay area, because this has been going on for a long time. People who own houses there are going to fight you the whole way.

You are of course right in theory. There is some point in which things will stablize and demand is fully satisfied. However that is where your second paragraph comes into play too. It isn't just people who own the homes that are disincentivized from allowing that to happen, real estate developers also don't want housing to get to that point either. And who is the one deciding what gets built with a market approach to the problem? Developers. In a market approach, developers inherently want built up demand and therefore they will never build to a point in which demand is saturated. Once again, you need government intervention.

AFAIK developers have not formed a cabal that is trying to manipulate local real estate pricing.

Developers will build as long as it seems profitable to do so. Presumably this means that when the prices do go down, a few projects will end up in the red when they're done.

>upper middle class and up people who previously decided to live further away over paying the extreme rent costs move in, the population grows, and the price break never trickles down to the poor people in the city

It does because the poor people move into the housing that the upper middle class vacated. Population growth is an independent confounding factor. In other words, housing cost can still go up due to population growth but they would go up less if the new luxury housing is built.

> You need to build new homes at every pricing level

But you can't. You have high fixed costs like land, hook ups to the city utilities, architect work, plumbing, electrical, permits, and HVAC. These are pretty much the same regardless of how big of a house you build. The stuff that varies directly with size like dry wall, paint, framing, flooring, etc. doesn't cost that much. And even then the more you do at one time the cheaper it gets. In other words, hanging the last section of drywall costs a lot less than hanging the first one because you incur all of the over head to hang that first sheet.

The end result is that you can't build a new house that a poor person can afford. They probably can't even afford the fixed costs. Even if you could, it wouldn't be economically viable. You're way better off spending the ~10% more to get a upper middle class house that you can sell for 50-100% more. It's still good for affordability because you've increase supply. Everybody takes one step up the ladder and the benefit will trickle down to the poor.

>It does because the poor people move into the housing that the upper middle class vacated

That only works if the system is closed. If housing in the bay area goes down in price, you get people moving in from New York, LA, Boston, Austin, etc who previously avoided the area due to costs. Do you just ship off those poor people to those vacated homes hundred or thousands of miles away?

>Population growth is an independent confounding factor. In other words, housing cost can still go up due to population growth but they would go up less if the new luxury housing is built.

This is of course true. The question is just will building new luxury housing increase population growth to an extent that swallows the whole price break before it ever flows down to the bottom of the market?

>But you can't. You have high fixed costs like land, hook ups to the city utilities, architect work, plumbing, electrical, permits, and HVAC.

The reason housing in the bay area is so high has nothing to do with fixed material costs or else housing everywhere would be that astronomical. The reason housing is so high is because demand is high and the supply of land is limited. Land is the primary costs. You fight that by building vertically. The higher the building, the lower the marginal cost of land for each unit and therefore things become more affordable. But like I said in my first post, this doesn't happen if everything is left up to the market because it isn't the way to be most profitable, so the government would need to be involved to incentivize this.

>That only works if the system is closed. If housing in the bay area goes down in price, you get people moving in from New York, LA, Boston, Austin

If that were true the bay area would have been empty long ago because of the ridiculous housing cost. Fact is most people won't change cities for lower housing cost.

>The reason housing in the bay area is so high has nothing to do with fixed material costs or else housing everywhere would be that astronomical. The reason housing is so high is because demand is high and the supply of land is limited. Land is the primary costs. You fight that by building vertically. The higher the building, the lower the marginal cost of land for each unit and therefore things become more affordable. But like I said in my first post, this doesn't happen if everything is left up to the market because it isn't the way to be most profitable, so the government would need to be involved to incentivize this.

Developers are putting 5 on 1 buildings every where they possibly can because it's the most economically efficient use of the land. They can't in the bay area because of zoning restrictions. Remove the zoning restrictions and you'd see skyrocketing density.

>If that were true the bay area would have been empty long ago because of the ridiculous housing cost. Fact is most people won't change cities for lower housing cost.

Do you genuinely think that housing costs don't factor into which cities people choose to live? I'm not sure this conversation can go anywhere beneficial if we can't agree on that fundamental and in my opinion obvious fact.

> If housing in the bay area goes down in price, you get people moving in from New York, LA, Boston, Austin

Yes, and the other direction too, if NYC dropped hugely in price probably a lot of people would move from SF. If a city manages to solve its housing problem in some enormous way some of the benefit would go to other cities.

The reverse is true too, SF building nowhere near enough will cause people to move away and drive up housing prices in other places like Austin. This sounds more like the reality today.

It's a real effect, but it seems like the best action for people who need housing is still to build more.

The main thing is does luxury housing act like a totally separate market. For example, if no affordable luxury 2bd apartments are available, will a software engineer move to Boston from SF instead of settling for an ordinary 2bd apartment. I'd expect the majority of the time high-income people who can't afford luxury apartments simply displace middle-income people in ordinary apartments rather than move cities, but I don't have hard data on it.

In most urban areas the cost of an apartment has more to do with the value of the land under it than the cost of actually building and furnishing the place.

A lot of older apartments don‘t have full kitchens, but that isn‘t a bad thing. Some people just don‘t need full kitchens, and you can get by with a hot plate and a rice cooker.

A full appliance package can be bought for under 2 grand retail. You can save a little bit of labor/material by eliminating the need for a couple circuits, but not that much. Not much extra work to pull additional wires if you already have to do one. So the savings just aren't there to meaningfully impact the housing cost.

You're talking out of both sides of your mouth here. You say that kitchens and bathrooms are the "big cost items" yet here you say that omitting or scaling them back doesn't save much. How can both things be true?

Appliances are cheap-ish. The structure and space for extra bathrooms or a full kitchen are much more expensive than a full appliance package.

So you can save money - but not much - by not having full appliances. You can save a lot more by not building a full kitchen and a second bathroom.

> The big cost items are kitchens and bathrooms

Why does a pod need a kitchen and bathroom? If it had those it'd be called a studio apartment. A pod is essentially anything from a dorm room styled apartment to a half-height room big enough to have a bed to sleep in and a shelf for a few items (like the Japanese have). In any of those cases you'd have communal kitchens and bathrooms. This would actually also be good socially because as we become more digitally immersed it provides a public area to meet new people, just like how it was in college.

Doesn't this already exist in communal living places like Ollie in NYC?

Not quite. Ollie provides kitchens, along with other luxury amenities, which makes their price point still pretty high with the cheapest apartment being ~$2800/month.

Years ago, they had what were called "SRO" (Single-Room Occupancy) apartments. These often had shared baths or showers on each floor.

These all went away by the late 60s in New York. They wouldn't be legal now. For one thing, buildings, or floors, were restricted to either men or women. And they didn't allow children, or more than one person/room. But they allowed people just getting started--working clearing tables, or washing dishes, etc--to be able to live near where they worked.

https://en.wikipedia.org/wiki/Single_room_occupancy

> "Neighborhood groups in Seattle have criticized new micro apartment SRO units, arguing that they "harmed community character and provided ... inhumane living conditions; due to these concerns, the city passed regulations that outlawed micro apartment/SRO construction."

Annoying. I lived in a SRO (I just called it a studio apartment with a shared bathroom) for 3.5 years that was run by a co-op apartment building. This was in Seattle. Having a shared bathroom was an annoyance (shared between 4 men - never more than a sentence said to two of them) but I was more than happy to put up with it versus having to deal with roommates. It was also cheaper than having roommates in a variety of houses that I looked at. I had more space than all those rooms for rent I looked at. I often wish I could've kept that kind of housing when I moved to the bay area because everything here is so outlandishly expensive just to get your own bit of space and that housing was so cheap for me.

These still exist in San Francisco. In fact one of my junior co-workers lives in one.

I lived in two of these in Madison, WI. I'm not sure if was legal, but my landlord rented each bedroom in half a house individually. Four men, one bathroom, beer cans in the shower (Why?), but the bedrooms all locked individually and we weren't mutually responsible for each others' rent.

Second one was a former HoJo parked while awaiting condo conversion. Imagine a hotel room stripped of all furniture, with a single kitchen per floor. Had to wash my dishes in the bathtub, but otherwise it worked for me.

Dorms are essentially that. Not sure why that is illegal and dorms are fine.

EDIT: just looked it up, xenophobia of course. New Yorkers didn't like immigrants living in Manhattan in 1955.

They still exist in many parts of the US, and many of them don't have the kinds of restrictions you mention.

> Why does a pod need a kitchen and bathroom?

Basic human dignity? Being forced to share an intimate thing such as a bathroom with strangers or depending on strangers not eating your food/trashing your stuff or not being able to feed yourself because another person is cooking a 5-rounds-meal is not something that should be acceptable in a developed nation.

As someone who has actually spent a few years in this type of living arrangement, having a communal bathroom when it is clean and there is no line was just fine for my dignity, and vastly preferable to having no house or spending 3+ hours and several dollars a day to commute.

I also have spent time in such an arrangement and let's keep it at "you're fucked when two or more people have diarrhea".

I mean, it's affordable living, obviously there's going to be trade-offs just like there's trade-offs when you opt for a 1 bathroom home or apartment vs a 2 bathroom, a place with dedicated parking vs no dedicated parking, or personal laundry in-house vs external laundry facility.

I lived in a college dorm for four years and I don’t consider my human rights to have been violated in the process.

Yeah, I think it’s silly when people complain about developers not building affordable housing.

Nobody expects car manufacturers to build new run-down clunkers they sell for $200... they build new cars and people who can’t afford them generally buy cheap used ones!

People complain about the lack of cheap new cars too. They also ignore the fact that a nicer used vehicle is a better value than a new cheap one.

Houses are the same way. A nice house built in the 80s is going to be way better than a cheap house built today. Outdated looking quality construction > modern looking cheap crap.

I think that maybe a lot of little, it doesn't cost much to add things ends up costing a lot.

Think about bathrooms; my childhood home and my grandparent's home both only had 1 bathroom. My grandparent's was on the second floor with enough room for a sink with a toilet on one side and bathtub on the other. Mine was toilet, sink and single standing shower.

Newer homes started having a guest toilet. Then guest/second bath and master bath. Now newer constructions seem to have 1 bathroom per bedroom as well a guest. All while increasing the size of the bathroom. And increasing the size of the bedroom. And the size of the closets. And so on.

I bought a 3 br 2 ba ranch. Currently my 2 sons are 1 and 6, I don't need the second bathroom. It's nice when we have guests but when we don't it just sits there.

I see many new constructions but not any that are even close in size or price to what I have. I also see the older lots being bought and redeveloped.

>> At least the poor would have the choice between the barely livable pod in downtown, or a house 2 hours commute away.

> You don't really save all that much money by building a barely livable pod vs an actual apartment.

Okay, so build normal size apartments then. Even if it's the same price as a house 2-3 hours away, you're removing 3-6 hours of commute time.

The important part is splitting land costs over tens of units instead of just one or two, not exactly how many tens.

a pod would be more like 50-75 sq ft, just enough for a bed and maybe a side table (with communal bathrooms; shared kitchen optional).

300 sq ft is a quite livable studio apartment, with enough room for a bathroom and (compact) kitchen.

with that said, yes, any additional housing is better than none.

You forgot the third choice:

Fit the whole extended family into the 1br unit.

I've seen a craigslist ad in LA for barracks style bunk beds for rent near downtown in a shitty looking room, 500/mo.

> Do we want a culture where the poor are living in barely livable wage slave pods while the rich are living in abundant villas?

The poor can always move away if space becomes a real problem. Plenty of "SF-poor" people outside CA who are actually living in "abundant villas" in their preferred locations.

Moving isn't free. Most people you would assume to be not poor couldn't afford a move. Neither could they finance a move because of how leveraged they already are.

If you are an adult, and you have a car, you can move. If you have so many items that you can't "afford" to move, you sell some of those items and suddenly you not only have money for relocation, but less things to move as well. There will never be a country, society or civilization where the entire population can afford to live in the most expensive areas - and that's okay.

You're making it sound like it's easy to hock a bunch of stuff. Ever try to sell a bed? If you can't take it with you and can't sell it then you're paying disposal and transportation fees only to buy the same junk again. It kind of seems like you're arguing from a place of privilege not experienced with the consequences of moving a family without help, without savings, without adequate work.

In Oakland? You just pull the bed to the side of the road and it's gone within a day, tops. Same with most metro areas.

Also a lot of non-trash-strict places will take a mattress in the trash pickup if you just put it near the trash can and make it known it's trash. Also, for the same reason it's hard to sell a mattress, it's easy to buy one used in a new city. If you can afford to heat treat it, you can be sure theres no bed bugs, or if you have a job, buy a $200-$300 mattress from amazon - theyre surprisingly good these days.

I moved 10 times in the first 3 years I was on my own, and have done huge moves up/down since (up to a three bedroom, then decided I hated owning so much and downsized to a studio.) - no family, no savings, just a lot of manual labor/smart packing.

I think ops comment stands, unless you are used to some crazy nice cost of living (which is a different privilege).

>...pull the bed to the side of the road and it's gone within a day

That's littering. In most places this carries a substantial fine. Sure, you, might not get caught. I've known several tenants that got large disposal fee bills from their landlords for doing this. This happened whether they left their trash on the sidewalk, or by/in the bins.

>it's easy to buy one used in a new city. If you can afford to heat treat it, you can be sure theres no bed bugs, or if you have a job, buy a $200-$300 mattress from amazon - theyre surprisingly good these days.

Easy != free. Every expense adds up.

Deposit up front before getting back whatever's left after the previous landlord takes their scammy fees.

Lost wages. Costs of moving itself, and disposing of stuff that needs to be repurchased . Buying new stuff, even replacing a modest set of furnishings for a studio from second hand stores can pass $1k easily.

>no family, no savings, just a lot of manual labor/smart packing.

That has a price tag. You're not calculating it accurately. Just because you think you made all those moves cheaply doesn't mean you did.

Did you rent vehicles? Rebuy furniture? Stay at hotels? Mooch off friends or family? Did you eat out or sleep in your car?

These costs grow with a family. It might cost me $500 to move in a hurry. But it could cost a family $10k or more.

Did they stay long enough to build significant equity or make repairs? They might've lost money compared to renting. Some people do everything right and suffer bad luck forcing a move in bad conditions.

Do they need to rent or stay at hotels in between the move out and move in? It's not always possible to avoid this.

Even moving/re buying a minimal amount of furnishings for a family can cost thousands. Moving it is often cheaper. That adds time and labor either way. Or cost to avoid this. Some people also aren't physically capable of moving themselves.

It feels so easy and simple because you make these decisions for you and you alone.

Please don't sour the discourse by providing a false choice.

There are a lot of options (opportunities) between residential zoned single family dwellings with huge setbacks and love hotels.

Simply progressively incrementally upzoning areas, on a fixed 30 year schedule, is The Correct Answer. So that (for instance) Seattle would go from 75% zoned residential today to 70% in 2050.

That kind of long term planning makes the market predictable and protects current owner's investment and plans. eg Maybe someone wants to stay in their house until their kids go off to college, or stay in their house during their golden years, and it'd be nice to know they can afford to stay.

The idea that "allowing multifamily housing" is somehow different from "zoned residential" shows an interesting cognitive bias here.

Plenty of people would love to live in a micro-apartment. Just because it would make you feel poor to do so doesn’t mean it should be illegal!

Your suggestion is not in opposition to repealing zoning restrictions. You can do both, but one should happen first.

Zoning laws restrict what builders can build. Subsidies take funding. I find it unpalatable to have a portion of my income taken to solve a problem caused by rules which can be repealed for free.

An extreme example would be subsidizing gold plated homes. Gold plating adds no practical value and makes the house needlessly expensive. Tax dollars should not fund gold plated houses.

Replace the concept of gold platting with suburban zoning.

Micro apartments are a straw man. The zoning codes all over California prohibit duplexes and triplexes, including over 85% of the area of the supposedly dense city of San Francisco. We don’t need weird innovative forms. We need the old forms.

I agree. This is a false dichotomy between the status quo and Judge Dreddesque super towers. I think changing zoning at the edge of the current sense areas could help a lot too. You'd likely need an increased investment in public transit to make that work.

We've already spent the money on the transportation and forgot the upzoning that should have accompanied it. For example we poured billions into BART to serve dispersed areas full of detached single-family homes. All areas within half a mile of a BART station should permit 5-story multi-family dwellings without mandatory parking. This was the point of SB50.

I don't live in SF so I've only been on the BART in downtown. I didn't realize it ran out to so many suburban areas. Definitely seems like a no brainier to up-zone in at least a mile radius around every one of those stations.

My city (Waterloo region Ontario) pretty much did exactly what you described. Approval to build light rail was tightly tied to automatic upzoning within a given radius of stations. The light rail itself took years to build and has been open less than 6 months, but the zoning fixes are already apparent. Density around many of the stations has shot up and the skyline would be almost unrecognizable to someone who lived here even 10 years ago.

Unfortunately, like the bay area we are very popular for tech and the all the new dense buildings going up hasn't been able to outpace demand from newcomers. Prices have been skyrocketing and it's really starting to squeeze the most vulnerable. Even more zoning restrictions need to be slashed and timelines for building permits approvals need to tumble.

In terms of part two, legislating middle class comfort standards as a requirement mostly makes new housing only affordable to the middle class and up.

American localities have significantly larger minimum space requirements than peer cities around the world. A Parisian studio can be from 9-35 square meters, and that basically wouldn‘t be allowed as new construction in the vast majority of the country today.

> How do you avoid a race to the bottom in terms of housing quality when you allow said micro-apartments? Do we want a culture where the poor are living in barely livable wage slave pods while the rich are living in abundant villas?

I don't see how this is worse than what we have right now. SF housing is already dystopian.

the fad of tiny homes shows what can be done with a limit amount of space and we must always be aware of one fact.

our bias as to what we would accept is not what others would accept. let alone what qualifies as a micro apartment, is the size the same world wide or even nation wide?

We already have a market that is effectively subsidized/funded by government and that is why we have the problem we do have. Government does not have to serve the market, it only has to serve the particular housing program put in place and no more.

1) developers can make what’s called “development margin” on the improvement of the site (fixing a house, building a multi family on top of a vacant lot, etc.). The margin is the (sale price - acquisition cost - building cost - planning cost) / (total cost).

This is separate from the YoY post property tax equity appreciation of a housing unit by simply buying and holding.

> 2) How do you avoid a race to the bottom in terms of housing quality when you allow said micro-apartments? Do we want a culture where the poor are living in barely livable wage slave pods while the rich are living in abundant villas?

Right now we've got a scenario where the rich live in fifty-year-old units that really ought to be reasonably priced and the poorest live in alleyways. Having the poor in up-to-code micro-apartments would be a major step up. It would also help if the rich could also live in modern up-to-code units of luxurious size. That would free some of the stock of existing units for everyone else instead of them being pinched between the rich and the most vulnerable.

> I'm all for affordable housing but it seems too nuanced to allow market forces to take care of it. I think the correct solution revolves around government subsidized/funded housing but that's a whole other can of beans.

The US has a poor record of being capable of funding and running public housing, even after you get past the effects of concentrating poverty. The first major problem is often that permanently BMR units cost in excess of $800k each to construct in places like SF - and the city has to be able to afford a lot of those. Then you have the problem of funding ongoing costs, which has often been the problem in the US.

With this in mind, it's perhaps worth reconsidering why some might favor approachs that center on inclusing subsidized units into mixed-income properties.

> Do we want a culture where the poor are living in barely livable wage slave pods while the rich are living in abundant villas?

Given the abundance of "working homeless" (homeless people with jobs); I think we're already there. At least with cheap housing they can be insulated from the cold and such (unlike tents).

> 1) Isn't a developer also making an investment when they build these high as hell micro-apartment apartment buildings?

The difference is that it's a value-creating investment rather than a purely speculative one. If you buy a piece of property for $500K and then build a dozen $300K condos on it, you come out with a sizeable profit, but each of the new residents gets the opportunity to live somewhere for $300K when they would have previously had to compete to pay $500K.

You can't make someone's options worse by adding more of them. If you'd rather keep your existing two hour commute in exchange for a larger living space, that option continues to exist. But if people choose the closer, smaller apartment when given the choice, what does that tell you about whether having that option leaves them better off?

The “race to the bottom” is called the market price and quality. One of the big progressive mistakes was instituting all sorts of bans on cheap, low quality housing. Bans on week-by-week rentals, etc., made it hard for poor people to live near where jobs are. The alternative has become fighting for a tiny supply of subsidized housing, or going to locations where there are few jobs.

The problem with government subsidized housing is: where will you build it? At least the market creates an incentive to put the housing near where the jobs are. Political control of where housing gets built and how much results in poor people being segregated away from jobs, opportunity, etc.

This wasn't a progressive mistake. In California it's been consistently shown in opinion polls that Republicans (wealthy suburban Republican homeowners) are more strongly in favor of exclusionary zoning than Democrats are. It's just that the problem is most acute in big cities, which trend Democratic.

Right. The Republicans, who are in control of both California's state legislature and city governments, are blocking Democrats from passing any policies. The Democrats push hard to pass laws for more inclusive zoning, but since California is such a red stronghold, there's absolutely nothing they can do.

I’m not talking about zoning. I’m talking about regulations on housing quality. Tenement style housing wasn’t pleasant, but it was better than having no housing or only having housing far away from jobs.

The problem is not 100% supply. Supply is just sub-component. In this case Oakland had been zoned for many of those buildings for decades now (Jerry Brown had a 10,000 homes plan). I'm moving in to a building that was entitled in 2007 but didn't open until a few months back... Locally developers couldn't get projects to pencil out. After SF hiked a bunch of rates Oakland suddenly became financially viable for them.

There are also the issues of tenant protections (most of the unsheltered people in Oakland lived here better living on the streets, and they still have jobs here) and making sure low-income affordable housing is built.

Yeah, for one thing we have a chicken or egg problem with construction labor being expensive due to the high cost of housing.

I agree with what you’re saying, but that’s overly simplistic.

Infrastructure costs increase as you increase density. Charging an appropriate fee for new housing rather than limiting the growth is an efficient solution, but current methods allow for local corruption.

That’s just one of the hidden reasons for our current system. Another, is most people want to live as far as possible from poor people.

> Infrastructure costs increase as you increase density.

They increase much slower than the efficiency gains from having a higher density and the rate of per capita costs decrease from having much more people pay for those costs.

When a city passes ~20,000 people per square mile the per person cost of infrastructure increases as roads stop being efficient. You start needing tunnels for roads and or subway systems. You also need deeper pipes for water etc, it’s not a deal breaker, but it is a real issue.

Having existing residents subsidize new residents is a common approach, but understandably unpopular.

Where does this 20,000 number come from?

Infrastucture costs are higher for decreased density. This is well known. You have to lay a lot more pavement and pipe when people live farther apart. Your typical suburban subdivision doesn't even pay enough in property taxes to maintain their infrastructure, and is subsidized by the denser areas. The folks at StrongTowns have done tons of work in this area.

If the comparison where to empty fields or low density suburbs I would agree per person, but we are talking about existing cities which act as an inflection point. Further, expanding infrastructure is an additional capital cost where much existing infrastructure has already been built and paid for.

There are important things to regulate to make housing affordable, and as others said rent control is not really one of them. What needs to be controlled is where information asymmetry exists.

Eg. quality control, you can't post-inspect a house easily, much less a high-rise. Also usually with new real estate development there's always some fraud-ish scheming going on. Not just with the safety, but regular consumer protection shouldn't be left to the courts, because that leads to a lot of wasted energy. (So anything from the hardcore crimes of developers taking the money and disappearing to developers missing the completion date and not compensating the buyers, because "sue me", and the obvious after handover warranty.)

Rent control is almost completely orthogonal to the whole problem. If lending becomes impossible people will just become owners and they will pay to banks. The problem is that it costs sooo much to build new units. (Because idiotic density limits.)

"We don't talk about the lack of affordable AAPL shares do we? That's insane, it's an investment, we want it to go up. The less affordable, the better!"

I've always found our obsession with stock price amusing. It's the dividend that technically matters (and, with risk and growth potential, what ultimately should be setting the stock price).

When you sell your stock at a gain it just means that, while you owned it, the expectations of future dividends has done up. You're just bowing out of the future returns to enjoy them today.

So, seeing how people need retirement funds as well, expensive [0] AAPL means people can't afford to fund their retirement.

[0] What does "expensive" mean when shares are, individually, kinda cheap? First the fees to play are very high, unaffordable to low-income people. Second, it means that returns, interest rates, are low (price = return / interest rate as a quick rule of thumb).

So yea, we should be complaining that, not AAPL but financial instruments, are expensive!

At least four major discount brokerages have zero commissions on stock trades.

Many major mutual fund companies have had commission free trading of mutual funds for over a decade (probably more like 3+ decades.)

I’m not sure which fees are “very high” in this context.

> So yea, we should be complaining that, not AAPL but financial instruments, are expensive!

And to the point of this topic I think this contributes to housing woes, atleast in major markets where there's a very low rental yields.

I can afford to rent in my area, but I can't afford to buy because (with an identical unit in the same neighborhood) my monthly costs would go up by $1000 or $1500 or so, even with 20% down. I think low returns on financial instruments contribute to this (because on the contrary, if you could buy bonds yielding 5% why would you hold rental properties that yield less before maintenance?)

All financial markets are connected, and across the board we have capital appreciation with low yield. It seems like we're headed to some kind of reckoning, but I have no idea what or when. Last year I thought it would come with rising interest rates, but that's off the table for who knows how long.

>(because on the contrary, if you could buy bonds yielding 5% why would you hold rental properties that yield less before maintenance?)

Because you're able to get a mortgage for lower interest than that?

Not if federal bonds are yielding 5% you're not

Sorry, I see what you mean. Yes, price to rent ratios tend to be inversely proportional to bond yields.

> if you could buy bonds yielding 5% why would you hold rental properties that yield less before maintenance?

There is leverage available for real property that is much greater than that typically available for other investments. (There are also depreciation tax incentives that further help cash flow.)

An investor who is seeking cash-on-cash returns can invest $200K to control $1MM of property or invest $200K to control $200K of bonds. If the bonds yield 5%, that's $10K per year. (With bonds yielding ~2% now, that's $4K per year on $200K invested.)

If the property appreciates at 3% per year, that's $30K per year in appreciation. Add rental income, subtract insurance/taxes/interest on the mortgage (but not principal), and you can often find that real estate is a "better" investment than bonds, particularly if you discount the fact that you're working it as a second job, the labor of which is not taxed as labor but returned to you as capital gains later.

The law of supply and demand notwithstanding, are there any cases where increased housing supply has been the proximate cause of a decline in housing values?

By "proximate", I don't mean "my home's value dropped more after the bubble popped than I think it should have because [points to new housing]". I mean the housing built as a consequence of relaxed laws directly caused the decline.

Houston seems like a good case study as it lacks zoning and vast swaths don't have deed restrictions, either.

This. Thank you. The goal of housing should be price stability at a point everyone can afford, not appreciation.

Agreeing with you:

I have friends who work on housing (and related) policies. The stereotype of "Liberal Seattle" simply isn't true. One of our biggest intraparty food fights is the upzoners vs the nimbys. The tortured logic and hypocrisy of the nimbys is maddening. Yes, homelessness and affordability are acute problems, govt should do something, but increasing supply couldn't possibly work.

I can't prove it, but I know it's true: Ok Boomer. All the nimbys I know (active in policy, politics) are my age and older.

I live in a 75% democrat area (in austin) built in the 60s/70s and the NIMBYs are boomers and are bad.

The city council wants to reduce the lot size,parking, and setbacks required for duplexes and triplexes all over the city. They want to increase density for about 100 units along a transit corridor from single family to 4 units, up to 6 with affordable housing.

The nimbys are going crazy, talking about lawsuits, protests etc. Many posts talk about flooded schools, huge traffic increases, and gigantic duplexes on every lot. The reality is people can already build duplexes and they dont at a huge frequency. People have even posted articles written by NIMBYs in other cities how housing pricing doesnt follow supply and demand.

It is all about "neighborhood character". Im a hardcore conservative and believe upzoning is the best way to solve the affordability problem.

> Im a hardcore conservative and believe upzoning is the best way to solve the affordability problem.

Removing zoning restrictions is arguing for the free market, and for reducing government intervention and in this case, as a liberal, I couldn't agree more. This is an example of government being used as a cudgel of the wealthy to beat back the poor. That's not what I want the role of government to be.

I actually disagree with you about shares of companies. They should accurately reflect the value of the underlying company. Wanting everything to "go up" all the time is part of the problem that we face throughout the economy, not just in housing. Just as city councils have conspired to rig the process for housing, forces like central banks have rigged the process for all types of investment assets (including housing!). This will become a problem as a generation of savers/investors is unable to generate positive returns on investments to fund their lifestyles and retirements.

One issue you don't mention is the urban growth boundary laws, which basically mean there is no competition for housing outside of areas that already have housing.

Prior to these laws, cities absolutely could not get away with such nonsense restrictions on growth because people would move just outside of the city limits, establishing new communities not within the city's taxing region, so cities would try to accommodate to keep the taxes in the city.

Now, the cities all know that people cannot move outside of cities, so they can behave as oligarchs.

> (1) Americans consider housing to be an investment.

Apparently I'm the lone dissenter on this, but I think for many people this is a side benefit that they may hope for, but the primary objective is simply to own a home that they can live in and raise a family.

I don't know your age, but from my experience this is a generational thing. During the great suburban expansion, houses were parroted as your greatest asset and your biggest investment.

In the modern era, if you don't own a home already you probably couldn't care less about the investment quality of a home. You just want a home to live in and call yours without an 80 minute commute.

> During the great suburban expansion, houses were parroted as your greatest asset and your biggest investment.

The "investment" should not be "I can sell this in 20 years for a boatload of profit" but rather "I don't have to pay rent when retired, only property taxes + maintenance + energy".

Heck, for all I know maybe that was originally the idea. Buying a place that you'll live for 30-50 years is absolutely an investment in your future, regardless of the paper value of your property.

But when property values are wielded as arguments to beat down proposals for growth, for transit, etc, it's clear that this isn't the meaning in use.

A boatload of tax-free profit, the first $250K is tax exempt for individuals and 500K for couples.

That is mouse nuts compared to how much people get paid in stock around here

You pay taxes on the funds used to maintain the property. So unless you're in a market with obscene growth rates, you still lose money even if you earned capital gains on the transaction.

I just put together a spreadsheet assuming 1% maintenance, 1% tax rate, and 3.5% mortgage rate on a 250k house. You still would need a 5% annual rate of return to make money. After 15 years you would have hit your $250k capital gains limit, but you'd only have $70k in profit after taxes, interest and maintenance. At 3%, you lose money until well after the house is paid off.

I believe with proper documentation remediation is tax deductible in that you can raise your cost basis when you sell.

Further, your mortgage interest up to $750K is also tax deductible, and you have to index the whole thing to inflation. Once you do all that the costs are either nominal or negative on a 3.5% 30 year fixed deducted from a Bay Area income. Until Donny took us for a ride property taxes were deductible too.

This is what it looks like when owners vote.

Also "I can recover sooner if my housing costs when I want to move."

Exactly, you know your earnings are going to go down dramatically at retirement; slowly paying off a mortgage over 30 years was the accepted way to make your costs go down dramatically as well in the end.

Unless you end up getting a reverse mortgage, in which case I guess you were renting all along.

In many places of the U.S. house prices don't really jump up that much to call it anything more than a temporary holding vessel for money, much less an investment. The suburbs of Cleveland are an example, where you can still buy houses for 50k within 20mins of downtown. Demand has been low so prices have been constant.

In California, demand is high, and prices have been inflated by constraining supply due to a lack of upzoning. It also doesn't help that CA has proposition 13, which locks you into your purchase price tax rate in perpetuity. You should see wilshire country club's property tax bill, it's like a couple buttons and pocket lint.

But it also decreases turnover. Say its 1970, you buy a house in LA for 50k, have your kids, they move out, you are old and want a smaller place, it's 2019, and your house is worth 1m but your taxed as if it was worth 50k. You can cash out, but if you want to continue to live in LA in another 1m property, you pay taxes on that 1m.

It's like rent control for homeowners only you can also give your house and that sweet sweet 1970 tax burden to your kids, perpetuating the landed aristocracy at the cost of the working class.

No, OP is painting with an extremely broad brush. There are a lot of reasons to own a home that have nothing to do with its investment potential. I don’t care how much my home is worth because I don’t plan to sell it until I retire.

The problem is that even if it is a minority contingent, it is a loud, high-turnout contingent, and local politicians generally do not want to get turfed out.

It results in farcical scenarios, like homeowners opposing workforce housing for the local school district because the people teaching their kids are too low-income to fit in. https://www.citylab.com/equity/2018/10/san-jose-trying-build...

I'm with you. Granted, I do consider it an investment in the sense that every month I pay off part of the principal and thus I can get some money back when I sell it whereas I'd get nothing if I was renting but I don't expect greater than inflation appreciation on the house.

However, this could just be because I grew up in Chicago where there is endless farmland that can be developed and thus expecting greater than inflation appreciation on your house is foolish as someone else can just develop some farmland and sell it for the cost of building the house thus forever increasing the supply at the marginal cost of building a house.

I assume that people are willing to pay more to have a better commute or live in a better town? I know that I am.

> better commute

Wasn't a big issue for us at least as we have double decker commutator trains. The one that ran through my town has 3 tracks even so the train only has to stop at a few stations and then it hops onto the middle track and drives the rest of the way downtown. Only took 30 minutes to go 20 miles downtown and going out further doesn't add much time as your just adding distance traveled at top speed.

> better town

Not sure what metric you are interested in that regard but if it is school wise, I went to one of the highest rated public schools and you could still find smaller more affordable homes in the school district. While there were plenty of wealthy people, I had some friends whose parents were firefighters and USPS delivery men.

> but I don't expect greater than inflation appreciation on the house.

Even expecting the house to hold its value is rather strange. You would naturally expect the value of a home to decrease by some amount each year. Most of us would prefer a modern home to an older home. The only reason it does not is because supply of new homes is restricted.

In well functioning markets like Tokyo, that's exactly what we see: homes tend to lose value each year until around 25-30 years most are simply torn down and re-built.

So in Tokyo, not only is the average rent sharply lower than a city like San Francisco, the housing is also more modern. The average age of a home in Tokyo is 20 years. More than half of Tokyo's housing stock has been built since the year 2000.

In San Francisco, more than half of the housing stock was built before 1940.

"You would naturally expect the value of a home to decrease by some amount each year."

If you deduct maintenance from your home value, it more-or-less does. I don't see why a maintained home "should" decrease in value, though. A lot of the value of a home is in the structure, which tends to wear much more gracefully than, say, a car's body.

There is little that maintenance can do to prevent a 100 year old foundation from 'settling' in a pretty precarious way. Or finding out one day that the water pipe is a 100 year old wooden pipe that is now rotted through. As a house gets older, maintenance ($) turns into renovation ($$) then critical overhaul ($$$), even in the houses with good bones.

I'd expect the value of a properly built and maintained house to decrease very slowly (e.g. the building I live in is ~110 years old and not that much worse than when it was built), and while that's still a negative, on the other hand the value of the land would appreciate even (and especially if) there's active building of new homes, so the total value of house+land can be quite stable even if supply is not restricted. It won't skyrocket, though.

Housing in Tokyo is also built to have a useful lifespan of 30 years, so framing it as them being “new” lacks background information.

10 years is the norm. They build it..raze it down and rebuild it.

A 40 year old house in tokyo is probably half mold by weight at that point. No wonder.

I always like to say that everyone is short a house, and your first property is just covering that short position. It's only properties after that first one that are investments.

This doesn't cover many many people for various reasons. Ie I own 2 properties and I live in neither (house that I bought for my parents 1500km away, investment apartment in the mountains). I rent, because a) it doesn't make much sense to buy a property in traditional sense here where I live, too costly; b) we're not yet stabilized on location with first kid coming, and pinning us down to specific place before this is clear might be a huge mistake on many levels and massive stressor for our lives and relationship. We might end up not buying anything else till rest of our lives, dunno now.

Others might have other reasons for similar state.

I think jdmichal’s point was that if you don’t own a property, you’ll lose money (in the form of increased rent) if the real estate market goes up. In effect, you are born with a short position on the market just by needing a place to live, and owning your primary residence gets you to neutral.

I mean, I guess I could refine it to say "primary residence" instead of "first property"? Otherwise, yea it's an analogy and it will break down at some point.

This is more meant to attack the idea of a primary residence being an "investment". If people insist on calling it an investment, then it's fair for me to insist that it's only covering a short position, because you need somewhere to live.

That's quite catchy. But nonetheless, people can "cover" by renting or buying. And in particular, to the degree that mortgage payments are greater than the equivalent rent, one is indeed investing in the real estate market. This is often good, but it can actually turn out much worse than (say) simply parking the money in an index fund.

I think, if anything, this position is actually supportive of making an educated rent vs buy comparison, by discarding any kind of "investment" potential on the buy side.

Another way I say it is that buying a house is a hedge against homelessness.

TBH I stole that from an article I read a while ago that I can't seem to Google now...

Except you need cash flow or savings to afford a house, even a paid off one. If you don't pay your mortgage or tax bill, then someone is going to evict you.

I don't understand the criticism, because the cash-flow aspect certainly doesn't get better with options beyond a wholly owned house...

Houses aren't great protection against homelessness because they don't address the root cause of being homeless: having no money or income. They can provide a buffer because it's harder to foreclose on a person than it is to evict them. While this additional time may certainly make a difference, in all likelihood the outcome of losing a job and not being able to find another one is probably the same.

You can't liquidate any built up equity either, since you probably need income or assets to get a rental or equity loan. So it's completely possible that you lose any built up equity in the event of a foreclosure too.

At worst, you'll break even, at best, you'll make a profit, and if you don't, it's an automatic loss.

There are dozens of us!

I think most of this comes down to the fact that Americans generally had little savings outside of their home equity. This only became relevant in the 90-00s when home equity loans/LoCs took off and were widely available to almost anyone. Suddenly, it mattered how much equity you had in your home because you could spend it.

There's another group of people that look at their parents' home and realize that it has doubled in value since the early 90s. But these people usually don't account for interest, tax, and maintenance payments over those 20 years.

Simple inflation too, the value of a dollar in 1990 was twice as much as now. But for most owners, inflation works in your favor since it negates some of the mortgage interest.

Or interest tax deductions, property tax deductions and the fact any renovations you do can be used to raise your cost basis to offset some of those gains. Also your mortgage inflates away over time too.

Right there with you. I'm guessing we're both over 40. Thinking your home is an investment is some "flip that house" 1990's reality TV show bullshit.

There is no home in LA county that didn't see price rise in an arbitrary 10 year period. Flip that house is a real thing in the rat race real estate markets in the U.S.

> the primary objective is simply to own a home that they can live in and raise a family.

And owning that home, as opposed to renting it, is an investment.

There's a pretty solid argument to be made that as property values rise, their usefulness as investments decreases. If you sink $1M into a home, you're likely tying up a huge percentage of your net worth in something that will appreciate pretty slowly compared to equities. Homes are only really valuable investments if you are an otherwise undisciplined investor who can't hold on to liquid assets.

Housing is actually a depreciating asset in Tokyo, with a regular cycle of tearing down and rebuilding units every few decades.

But the poor youth don't need to vote, they can just simmer on things long enough until they break out in riots. I mean hey massive social upheaval and unrest nearly got the FAP passed under Nixon.

Let the kids burn down a few small suburbs and the government will figure out something.

I often say people underestimate the value they get from paying taxes into welfare programs. The class conflict they prevent is invaluable especially if you're a person who owns property in or near a major city.

Agreed

What was the FAP? I've never heard of that legislation, and it's obviously ungoogleable.

basic income with extra steps and an unfortunate name (Family Assistance Plan)

https://www.amazon.com/Failed-Welfare-Revolution-Americas-Gu...

Took the words out of my mouth. Zoning laws need to be completely overhauled and changed to be planned by the state, not local government.

When you let local town hall meetings give their input on every single development, it heavily hinders the ability of housing supply to keep up with demand. States need to create universal zoning laws that adapt to different situations and if a building meets it, it's automatically approved, full stop.

Holding up development by town hall meeting should be for exceptional cases where there's a gray area in meeting the zoning law, not the norm.

Can you imagine what NYC would look like today if they let local homeowners block every single building until their every desire was satisfied? It would be a shell of the metropolis it is today.

Homeowners need to get out of their head this idea that when you buy a home, you're entitled to a neighborhood that stays frozen in time to how you liked it. The only thing they have a say on is their own property, and thats it.

Many people who own houses don't want the value/price of their homes to go up, because that means property taxes will go up.

Not in California, thanks to Prop 13. Homeowners can have their cake and eat it too.

I live in California. I don't like the fact that house prices have risen so much faster than wages.

   We don't talk about the lack of affordable AAPL shares do we? That's insane, it's an investment, we want it to go up. The less affordable, the better!

Isn't that pretty much what stock splits are for?

"Micro apartments", short term rentals, lower than hotel level of service. this is what we need. These housing restrictions raise the minimum affordable rent causing people to live with their parents or find roommates which is risky. And it's funny, because times have certainly changed and got stricter in regards to minimum livability. My mom's apartment in manhatten as a child had the bathtub in the kitchen, it's still no unheard of there.

Do i need a huge fridge, sink, 4 burner stove with oven and all? Not really.

I don't need a window in my bedroom.

I don't _need_ a private bathroom.

I don't _need_ a private kitchen.

> I don't need a window in my bedroom.

Until there's a fire. Some regulations actually make sense.

> Specifically, housing affordability is 100%, entirely, a problem of artificial constraints on supply by city councils.

Not just city councils. Residents, environmental groups, and special interest groups controlled by residents have a huge influence on limiting housing through legislation as well. Often places where housing is approved by the city are stalled in courts for years. City councils can control some of the lawsuits by reforming local laws but there is a huge number of individual residents who are willing to spend absurd amounts of money preventing people from building a new 6 unit apartment at the end of the block.

It's worth noting that some of the groups you mention are motivated by a general opposition to rent seeking developers, and would be perfectly amenable to a 6 unit resident-owned coop in the same location.

Are those residents going to build that 6-unit themselves?

Yes actually.

Nobody ever says "I just don't want a new housing unit there". Every single one of those groups has some kind of justification for why they don't want new housing near where they are. Some say it's to prevent "Rent Seeking Developers", some say it's to improve the quality of local parks, sometimes it's because the unit they are replacing adds some "special character" to their block. In the end though they all have the exact same goal and same effect. It's all NIMBY bullshit, everyone is for affordable/ new housing unless it impacts them in the tiniest way, then suddenly they are against it.

A big one is they don't want additional underground parking in their neighbourhood which means more cars. Of course cars are evil and they should not exist or be in someone else neighbourhood, parked along side-streets next to bike lanes.

Better yet keep those cars in the suburbs! But also suburbs are lame and we make fun of them (I would never be caught living there!). But yeah back to why I dont want more housing downtown... /s

> Americans consider housing to be an investment.

Not just an investment, but for many, it's the investment. For most of the 99% property ownership is seen as the only reliable motive for social mobility. It's the only way to sustained and reliable long-term financial wealth.

I'm not saying you're wrong, I'm just saying asking people to give up their only solid method of upward social and financial mobility for the sake of fairness is a little callous, especially since all the other methods were discounted and are heavily tilted in favor of the 1% so they can cling to their mountains of gold just a little harder.

Has anyone actually stopped to think maybe city councils (and the people who vote them in) don't want you to live there and that's why they constraint the supply?

Multi-family buildings and commercial real estate are investments. Primary residences are not, and I think it’s actually quite rare for owners of a single family residence to view it as an investment the same way they view a 401k as an investment. They’re often been seen as a store of value and are definitely seen as a place to grow old in.

I think you have a false choice in there somewhere. Yes we want housing to grow more than 2%. No we don’t need housing to grow by 500%.

That's not a false choice. If you grow faster than inflation than it's only a matter of time before your grow by 500% in total. If you e.g. grow by 4% annually then you will have quadrupled in 36 years.

If housing grows by more than wages, it gets progressively more unaffordable. There is no number at which it is both a good investment and remains affordable because those two things are, by definition, opposite.

Even in the best growing markets, like San Francisco, housing is still not a very good investment. It's only gone up about 8% per year over the last decade. That significantly underperformed the s&p 500.

The real reason people want to use it as an investment is that you can get it at a very low interest loan, whereas you cannot with the s&p. this has the unfortunate effect of making well-off people more well-off, at the expense of making poor people poorer.

This is a very urban viewpoint. There are millions of people in rural areas who can't afford to buy a home as well. Cheap mortgages are a huge factor,I agree with that.

I think city policies are a problem but nowhere near 100%. Banks and cheap risk free lending massively dwarf the impact of city policy.

That'd be a big no friend, since 80% of America's population lives in urban centers.

It's a strictly factual viewpoint that you want to distort to fit your lens which is quite clearly in favor of your (likely) minority (rural) freeloading* living situation.

America has by far and away the cheapest/easiest country to buy a home in general.

* Most people who live in rural areas are subsidized in huge amounts by the government for things like telephone access, electricity, and roads. They says they "only rely on themselves" but it's bullshit.

You're both incorrect and out of line.

(1) does not have to be true. You can "lose" money, or break even selling a home and still come out ahead compared to renting. An example of this is "low income" homes that have strict price controls, and are in high demand with waiting lists or lotteries to buy.

This is so correct!

I wish we could sticky this post at the top of every housing discussion.

Progress means things become more affordable and cheaper. For instance the price of lighting up a room has come down my many orders of magnitude. It used to cost a significant portion of one's earning to buy a candle and light up a room for an hour, now it costs mere pennies. I hope some day humanity can have that kind of progress in housing as well.

The way to get there is to start opening up innovation. Start letting builders build it the way they want, and allow startups to create new ways to make buildings. We can deregulate certain parts of the towns/cities or start new ones. We need to open things up and reduce barriers to entry. That's why there was an explosion of innovation on the internet: no barriers to entry and no regulations to get in the way. Let's do the same for housing and see what progress we can make.

> It's time to re-think the idea of housing as an "investment."

Shameless policy plug: part of the reason that property tends to be a good investment is that a significant portion of its value derives not from improvements, but from "location, location, location": proximity to businesses and community services. Some economists (Henry George, Milton Friedman) have advocated shifting property tax to be based on the unimproved value of land, rather than its total/improved value, thus offsetting the (arguably unearned) benefits of sitting on a lot while the surrounding community accrues value.

https://en.wikipedia.org/wiki/Land_value_tax

https://en.wikipedia.org/wiki/Georgism

Land Value Tax is one of my favorite overalls to the tax system proposed. Normal property taxes are one of those things that sounds great on paper but the actual implementation has shown us it just encourages horrible rent seeking behavior.

I like the idea of a land value tax more than a property tax, but I feel like I'm missing something. If I sit on an empty lot while the city builds up around me, doesn't the unimproved value of my land still go up?

Yes, exactly. A land value tax is not actually a tax on the land but rather a tax on improvements people have made in the area around the land. Literally unimproved land has no value to tax.

Then I feel like I really must be dense. Doesn't this mean that there's still an incentive to hoard land while nearby land is improved, so that you can sell at a profit? And if that's the case, for the purpose of dissuading land hoarding and encouraging building housing how is a land value tax functionally different from a property tax? In both cases if you have an empty lot in an area that gets built up, you make a big unearned profit, right?

It depends on the tax rates of the land-value tax. If it's equal to 100% of the excess rents, then that removes the drive to speculate on land. Any appreciation in natural rents has a one-to-one increase in your tax bill.

Granted, any LVT won't approach the 100%-of-rents rate, so it's a proportional thing.

>for the purpose of encouraging building housing how is a land value tax functionally different from a property tax?

A land-value tax is indifferent towards a single-family home and a thirty-story apartment building on identical plots of land. Property taxes aren't, they add an additional penalty on the highly-developed land.

Let's say your neighbors build great restaurants, bowling alleys, and office parks, making your location more desirable and increasing the market value. As a result of a (high) Land Value Tax, your tax bill just went up significantly, but your earnings have not. So you are incentivized to put your property to productive use.

Of course, you could alternately just sell your now-valuable land. However, the higher the ongoing tax bill (due to the LVT) the less people will want to pay for your land. The LVT captures some or much of the value currently accruing to landlords (depending on how high it is).

High property taxes can serve a similar function. Taxing the unimproved value of the land removes a disincentive to improve the land, though. If you knock down your house and build a much better one on the same land, your property taxes would go up while LVT would not.

LVT vs property tax is not the main point, though, in my opinion. The real issue is moving from heavy reliance on income tax to heavy reliance on property tax or LVT.

I understand now; thank you for explaining this to me

It's a tax on the (arguably undeserved) gains in the market value of your land that come from other people's efforts as opposed to your own.

LVT makes no distinction between value resulting from your own efforts outside the property itself and value resulting from others' efforts. In any case, recognizing the potential in a piece of land and investing resources to secure it and hold it in reserve until that potential can best be realized (i.e. "speculation") is also effort worthy of reward.

Yes, this is why I called it "arguably" undeserved. It's not totally black and white.

The best argument against LVT that I came across was from Bryan Caplan concerning prospecting for oil; once a person finds oil and builds a well, LVT would not charge her for the well, but it would charge her for the oil. She didn't make the oil, but finding it does take effort and you don't want to disincentive that.

I still like LVT conceptually but I don't know what the best solution is for this kind of case.

Isn't that how it goes? If I buy a house today for 1m dollars in CA, I pay taxes on 1m of property, regardless of the fact that the house sitting on that dirt is a bungalow probably only worth 50k itself. I thought most of a properties taxed value was from the land already.

In the case you describe, that's mostly correct; however, you would end up paying on a $2mil valuation if you built a $1mil home on the property. Under a Land Value Tax, you'd only pay taxes on the property ("ground rent"), regardless of what's built on top of it. This incentivizes productive use, rather than idle speculation. (In urban settings, where the location value of property is at a premium, the most profitable use is often a parking lot rather than residences or businesses: not because it's the greatest return, but because the improvement cost and therefore the tax increase are near-zero.)

The whole topic of conversation around housing affordability is backwards. Specifically, housing affordability is 100%, entirely, a problem of artificial constraints on supply by city councils

This is literally economics 101. Supply and demand curves.

Anything that decreases supply, increases price. Anything that makes some of that supply available cheaply, increases price for the rest. Anything that increases development risk or reduces the profit available to landlords, decreases supply and therefore increases price.

In short, drives for affordable housing mandates help cause the very problem that they intend to solve.

If you want to actually improve affordable housing, build a shit ton of housing. And built it close to where people work. This will reduce prices, reduce congestion, and reduce commutes. Everyone winds up better off.

And yes, the solution needs to be built in YOUR backyard. If you whine about that and whine about the problem, you're either willfully blind to facts, or a hypocrite. Get over it.

> Americans consider housing to be an investment.

Correction: Americans who own their homes consider housing to be an investment. But that in no way prevents housing from being "affordable" for renters.

Tokyo has a declining population. When Tokyo’s population was still increasing, housing prices there were ridiculous (there was the 80s factoid about the Imperial Palace grounds being worth more than the entire state of California).

If you look at many other major cities in Asia (especially China) you will see a combination of wall-to-wall skyscrapers as desired by yimby (usually really yiseby) types, plus insanely high property prices.

I don't believe this is correct. All the sources I've read say that Tokyo has a growing population.

https://www.japantimes.co.jp/news/2018/07/12/national/japan-...

Specifically, housing affordability is 100%, entirely, a problem of artificial constraints on supply by city councils.

If this were true then cities with comparatively less zoning (e.g Houston) would comparatively speaking -- be meccas of affordability.

But in reality this is of course anything but the case.

I saw this tweet recently, by patio11: https://twitter.com/patio11/status/1199366332468224000

"Tokyo has positive population growth of about 100,000 people a year, and rents and home prices are roughly stable for last decade.

How? Outconstructing NYC. And LA. And SF. And Boston. And Houston.

Combined.

Every year."

Does anyone know how much of such construction is re-construction, and how much new stock?

I have heard (but am not sure) that the pattern is more to buy some land, knock down the previous guy's house, and build your own. On a time-scale of 20-30 years, closer to how Americans regard cars (e.g. having to buy used cars is undesirable) than how they regard houses (once built they stay in use forever, although renovated).

A fair chunk of that rebuilding is due to more relaxed zoning which is additive instead of single-purpose.

In the US, zones tend to be "single family home", "apartments", "town homes", "commercial", "retail". No overlap and the housing variants don't allow increased density without re-zoning, which is expensive.

In Japan, zones are more like a maximum usage. "homes", "homes+retail", "home+retail+commercial", etc. The housing zones are less restrictive - typically single family, duplex, and low-rise apartments are all allowed in the basic residential zone. High-rise would be in a different zone, along with retail, commercial, etc.

Thanks, yes I'd heard it was more mixed. If you had to guess the proportion of construction which was new floor area (not just building 3 stories, but replacing a 1-story thing, etc.) would this be 10%, 50%, 90%?

(I would blindly guess 90% for the US.)

Without disputing the main point, I wonder if he meant net new construction. He was asked about this in the replies and didn’t give a real answer.

Houses in Japan have tended to be torn down and rebuilt every twenty to thirty years. It’s an unusual situation, owing to various factors, including code updates for earthquake resistance.

An article on this topic: https://www.theguardian.com/cities/2017/nov/16/japan-reusabl...

Tokyo also has mixed-rate zoning and the culture is not built around using a developed proprty to build equity but rather continual reproduction of a living space.

Tokyo is an 845 mi² megacity. Is population growth of 100k/yr something a city should aspire to? At a certain point I feel like some kind of family planning makes sense at larger levels of society just like it does with the family unit. I don't look forward to the day when there are 1000 mi² of concrete and 20M people crammed together where San Diego used to be

If people want to come live there you can either build homes for them or they will outbid existing inhabitants, housing prices will shoot up and less wealthy people will have to move out.

Those are the options. You can decide which one you look forward to more.

Japan overall is in a long-term _negative_ population growth trend, so the Tokyo population growth seems to reflect an in-country geographic shift, rather than a problem with too-permissive family planning.

See also: Friday's “Don’t Blame Tech Bros for the Housing Crisis” column:

https://www.nytimes.com/2019/11/30/opinion/sunday/housing-cr...

If they spent that $4.5B on lobbying for upzoining and densification the problem would likely sort itself out. Probably for a fraction of the cost.

If we divided that 4.5B by the number of tech workers, where would we be at? If there are 100,000 tech workers in the Bay Area, that'd be around $45,000 per person of lobbying for affordable housing. If those tech workers saved $500 per month, they would earn back what their companies spent on them in 90 months, or 7.5 years.

Assumption, I don't know how many tech workers there truly are.

>100,000 tech workers in Bay Area

Seems pretty low of an estimate tbh. Just for scale, Google has around 45k employees in Bay Area alone. I realize that not every single one of them is an engineer. But even if just 30k of them are (completely ballpark guessing here), it seems pretty implausible that every 3rd engineer in bay area is a googler.

Just did some googling, and according to this source[0], there are about 624k software developers in CA. I realize that it includes not only Bay Area, obviously, but I am willing to reasonably bet that a heavy majority of the developers are there, with a notable chunk in LA as well, something on the order of 116k.

To be more specific about how I arrived to that estimate, I checked StackOverflow Jobs portal, to see how many job openings there are in LA vs Bay Area, assuming that the number of job openings proportionally correlates (positively) with actual people working in said jobs. LA had 118 openings [1], while Bay area had 518 [2]. 624,000/(518+118)*118 ~= 116,000. Yes, it is napkin level of statistics, but that's the best estimate I could think of.

0. https://www.daxx.com/blog/development-trends/number-software... 1. https://stackoverflow.com/jobs?l=Los+Angeles%2C+CA%2C+USA&d=... 2. https://stackoverflow.com/jobs?l=bay+area&d=20&u=Miles

The number I heard was that tech was somewhat less than 10% of the employment of the Bay Area. This includes non-programmers and non-engineers working in tech companies, too, and is a broadly constructed number.

Real galaxy brain take there. “Housing prices have always fluctuated, therefore these fluctuations are unrelated to this other highly correlated factor”.

Not that I disagree much with the substance of pointing out Prop 13, etc, but you should also definitely blame tech for loading an entire industry into a metro area.

Sounds like the rhetoric against anthropogenic climate change.

Traditionally, metro areas would have not just one, but many industries (e.g., NYC with banking, fashion, journalism, law, or Tokyo which is the capital of most of Japan's industries, and the national capital too), but they would also allow housing to be built, and that did indeed avoid the kinds of housing crisis we're seeing in cities today that are practicing exclusionary zoning.

> definitely blame tech for loading an entire industry into a metro area

Supply and demand gonna supply and demand. It's weird to "blame tech" for existing and injecting a massive amount of jobs into our economy; there's no metro region that could have handled that growth without the same effect on price, and there is no singular entity responsible for concentrating tech into a single city instead of distributed more evenly.

Maybe Houston could have come close to handling it without massive price increases, but I'm guessing Houston is too spread out to enjoy strong network effects, and probably would have become gridlocked with traffic to boot.

New York could have "handled" it, from a raw housing & transit perspective, but the region is already pricy and all of Manhattan (which has the best access to jobs and transit across the metropolitan region) has long since gentrified, so I don't know if that really counts.

(Of course, part of the reason no region could have handled it is precisely because of how Americans approach zoning and growth. Like our politics, our cities and neighborhoods seem to be static until there's an absolutely overwhelming force against the status quo, and even then sometimes that's not enough to change anything)

New York is significantly more affordable than the Bay Area though. Transit into manhattan from affordable places in NYC and New Jersey is quite quick, in contrast to the Bay Area where any place within reasonable commute time of SF or SV is just as expensive.

I'm biased since I grew up in Chicago, but I think Chicago could have handled it fine with the endless farmland to develop with housing especially if the companies put their offices in high rises downtown as Chicago has double decker trains that go from the suburbs to downtown [0]. We also love high rise architecture so there are plenty of high rises to live in downtown if you want to.

[0]: https://en.wikipedia.org/wiki/Metra#/media/File:Metra-System...

Growth only happens upwards or outwards. Your post seems to suggest that Chicago still has both available, which is (pleasantly) surprising to me as I was under the impression that every major american city had hit the limit on outward growth (usually because the roads are clogged by traffic and there's no political will to build more trains, so nobody wants more farmland developed).

Log-adjusted, rents were growing faster in the 80s than anytime after dot-com: https://fred.stlouisfed.org/series/CUURA422SEHA

> blame tech

It confuses the issue to anthropomorphize an industry category.

I don't think it's fair to blame rank-and-file tech workers. In today's scary economy, you can't blame anyone for entering a growth industry and taking a good job that's offered. Who wouldn't want a great salary, good benefits, a safe comfortable workplace, and a stable work-life balance?

The more interesting question is why are there so many tech jobs and why do they pay so well? Facebook had 35,587 full-time employees in 2018. What the hell are all of those people doing that Facebook can pay them so much?

My hunch is that this is a consequence of perilously low corporate taxes. Giant companies simply have more money than they know what to do with, so they are throwing it any place that seems reasonable. In particular, they're trying to build bigger and bigger moats to outcompete the other tech giants. The biggest moat of all is skilled humans since it takes so long to increas the supply of them. So they're throwing money at tech workers mostly to keep other companies from scooping them up.

Being essentially on retainer is great for the people who luck into that field, but it seriously screws up the economies of the few cities where it happens. Other job categories that aren't dominated by huge companies competing for each other's skilled workers don't end up driving up wages to the same degree so everyone else gets priced out.

I think the real answer is to start taxing these companies appropriately. You can look at their current behavior as wealth distribution that only trickles down to tech employees. If the wealth is going to be distributed, I'd rather some of it go to teachers, nurses, sanitation workers, and waiters too.

If a company is spending some revenue as wages, they aren’t paying taxes on that revenue at all.

Only on wages for employees classified as R&D.

That money is taxed as income on the employee's side and they still pay payroll taxes.

All through human history up until the last couple of decades, housing has followed the jobs. When they built the great pyramids they build an entire city for the workers. You build an office building in manhattan in 1860, and what do you know an apartment building of similar size is going up in the next lot. You build a factory then you build the town; that's how it's always been done.

What we are seeing is cities eager for job growth and commercial business to call their city home, but the other half of the equation is given no thought. Upzoning residential areas to match commercial growth is not being done. Even when tech companies promise to build some housing with their new office space, it's never 1:1, so it too is a net strain.

When looking at the problem in those simple terms, it really seems like insidious profiteering on the local government's part, considering LA councilmen all own at least 1 property and therefore all stand to benefit from housing price surges.

> the city passed a series of neighborhood plans in and around downtown that relaxed zoning and removed parking requirements, making it easier and cheaper to build.

Wait, you mean deregulation isn’t just a republican talking point? And restrictive city (and state) governments were the problem this whole time???

Except its just as regulated, just differently. Its certainly not "the private sector policing itself." Efficient regulation that conforms to need is not the same as deregulation.

Removing parking requirements = fewer requirements = less regulation = deregulation.

Deregulation does not equal zero regulation.

I don't think anybody is pro or con "regulation" in the abstract. People disagree over whether specific regulations are good or bad.

Example: I live in DC and there's been recent controversy with the Historic Preservation Review Board essentially thinking solar panels are ugly. It's legit to have regulations regarding the appearance of homes if those neighborhoods want them, but at the same time is short-sighted to block solar panels. I'm sure you're for some regulations and not others, no reason to make this ideological.

I mean in this case it's hard to find any expert that doesn't agree the problem is self created from over regulation. That doesn't mean we don't need any zoning laws though.

The reason midwestern cities hardly have housing bubbles like the coastal areas do is because old housing is cheap and competes with renting. Landlords can't afford to not be lenient. Although the only change I wish to see is that tenants could more easily enforce their rights and Landlords had to follow the law.

Most midwestern state governments are very laissez faire about the whole thing which is incredibly annoying. Apartment cleaning is illegal to make tenants pay for or withold a security deposit, yet they still do it anyway cause landlords know tenants aren't taking them to small claims for it. As a tenant, you need housing references. So taking your landlord to court over $100 is a surefire way to making you ineligible for further tenancy basically.

Landlords don't like tenants that know and enforce their rights.

> The reason midwestern cities hardly have housing bubbles like the coastal areas do is because old housing is cheap and competes with renting.

Sure, but isn't the reason that housing is cheaper because those cities don't have anywhere near the level of demand that coastal cities have.

Yes and I'm not denying that. Also the midwest hasn't seen radical overvaluation of property that the coastal areas do. Since demand is so high there, the value of the property is not determined upon is "worth," but on someones ability to pay. You can see how that becomes a major issue when things crash. Suddenly many people lose out on the value of the place they paid for.

> Since demand is so high there, the value of the property is not determined upon is "worth," but on someones ability to pay.

The monetary value of the something is by definition what the highest bidder is willing to pay for it. How would you determine it otherwise?

Chicago has the 3rd largest metro population in the entire US [0]. Granted, I wouldn't argue that old housing is what keeps housing relatively cheap there but instead that there is endless farmland to build new housing and thus the price will pretty much always equal the marginal cost of building a new house as anyone trying to charge more can just buy some cheap farmland and build a house themselves.

[0]: https://en.wikipedia.org/wiki/List_of_metropolitan_statistic...

Oakland has built less housing per capita than SF over the last 5 years, as mentioned in the article. Appears like a few big projects finished construction and 2019 was an outlier year. The article implies this bounty will continue by citing “15,000 units in development” but doesn’t mention that SF has 4x as many “in development” and many projects linger in that category for a decade and many never get built.

For large projects it takes 3- 5 years to get through municipal approval.

How to increase the housing supply: get the government out.

Places in California requires things like requiring all homes to have a high amperage outlet in the garage for charging electric cars. Do you really think people that are struggling to keep a roof over their head are driving a Tesla?

Yes, let's get the government out, of deciding how tall houses can be.

Removing the requirement for a high-amperage outlet (a tiny incremental cost during building) is like an umbrella in a hurricane. Nice to have, but totally doesn't solve the real problem.

I think that was an example, not the entire point.

Lost on both of them. You should look up other useless stuff, like how many outlets are required in kitchens.

My argument is many of these represent small incremental costs and even if all of them were eliminated then affordability wouldn’t change in any appreciable degree.

On the other hand increasing supply (even if somewhat more expensive in a per unit basis due to regulations that neither of us can really say are good, bad or cost effective) will.

It’s the easy win.

> Do you really think people that are struggling to keep a roof over their head are driving a Tesla?

I mean - adding an outlet for electric cars is probably $100-200 in labor+parts when constructing a new home. It's trivial to add when everything is already exposed.

And, if you're in CA and buying a new home -> you can afford a Tesla or some other electric car. Alternatively - you have a 40-amp outlet. Run a washer/dryer there instead or maybe a table saw or something? The outlet will still be useful for things beyond a car.

The new ruling on requiring solar on new homes is actually more problematic in terms of cost. https://fortune.com/2018/12/06/california-solar-panels-new-h...

I'm not sure what Oakland is doing is actually a major change. It's like something just triggered the money to flow to finish a bunch of projects in the east bay. But the spigot could just turn off again.

There's something broken in city planning that seems to be the largest hurdle to addressing affordability. Cities seem to want to have a box with a label on a map that doesn't change much. Then, if something changes within that box, there needs to be this big massive process. The "real fix" might be figuring out how cities can work on a smaller scale, not with these massive projects.

Just look at the report for the Oakland plan: https://cao-94612.s3.amazonaws.com/documents/FINAL_DOSP-Publ...

I'm struck by how much it must have cost to even generate that plan. And, there's a ton of goals, but no feedback loop. As the plans are implemented over the next decade or two, how do they know what's going well and what isn't?

Not surprising. San Francisco seems to vote more owner friendly vs Oakland which votes more renter friendly. For SF I thought the recent proposition E was encouraging. It reduced zoning requirements on public zoned land for affordable housing. It was first proposition I’ve seen that reduces zoning requirements, it seems like a “toe in the water” for reducing complexity for addressing housing. Of course one might argue fuck toes in water we are in crisis, but given my first statement, I saw it as a trial balloon. Hopefully we see more aggressive measures in next few elections

Lacking from the article are the statistics for how affordable those homes are and actual occupancy. Developers overwhelmingly love upselling to "luxury homes" that are kept as investment deeds in someones closet. NYC for example is building new apartments like bloody crazy, none of them are affordable to anyone other than investors.

The price of housing is determined by supply and demand, not the developer.

Building new housing lowers prices for all preexisting housing.

> Building new housing lowers prices for all preexisting housing

This is not true in the US. Housing in the US is valued solely by the value of the housing around it (called 'comps' or 'comparables'). Building new luxury housing raises the price for all preexisting nearby housing, because your comparables will now be based on whatever the luxury housing prices are (even if your own house is very modest, even if your own house could never fetch a similar price, even if you never try to sell your house)

This is one of the big reasons you see pushback by rational, logical, well-informed residents in the US. Luxury housing usually raises all non-luxury housing costs nearby, simply by proximity. Is is effectively a form of financial pollution. Some people's wealth is so obscene, that the mere fact it exists in a physical location, punishes everyone else in proximity to that location.

This is what Gentrification looks like in non-California, non-coastal cities. Wealthy people artificially inflate the value of property in an area (which they can do, because there's never any limits or restrictions on construction of any kind, so they always build the highest-cost highest-margin property possible). And regular residents are now forced to bear that cost, forever.

It is possible to continue this bubble, irregardless of any actual demand for the housing, long after all real humans have checked out of the system. (See 2008 Financial Crisis). This process was not primarily driven by real people's housing needs, but by private capital's desire to store or grow their wealth, so real people have little control over it.

And, in non-Californian states like mine where property taxes are not locked in, but are recalculated constantly based on "market comparables", the bill for this financial pollution will hit you instantly on your next property tax invoice. Luxury condos go up on your block? Congrats, the tax bill for your old modest home is now doubled next year. Don't like it? Your only other option is to rent the unaffordable shitty luxury crap they just built.

Any reference on this as it doesn't make sense intuitively. How does increasing supply increase price? I could see how this could have hyper local effects in UHCOL locations, where you attract foreign investment by virtue of showing a trend of increasing rent prices. This also probably happens only in locations where demand has far exceeded supply for a long time.

Gentrification is perfectly possible without new construction. Boston found apparently that luxury condos had a containing effect on gentrification overall - they reduced demand for other areas. Also wouldn't it be authentic inflation of value?

The tax bill objection also strikes me as odd given that it is synonymous with a windfall to owners - the renters it makes perfect sense for.

> synonymous with a windfall to owners

It's not. It's just inflation. If I double your salary, but jack the price of everything up 50%, you "got a windfall", but have in real-world dollars earned nothing.

If you own a house worth $100k, but a luxury condo goes up next door full of $600k/each units, and your old house is now "worth" $300k, have you really gotten a windfall?

You still need somewhere to live, the windfall doesn't cover even half the new cost of housing. You could sell it, but there's no where safe for you to land nearby without doubling your mortgage (since your house went up, all nearby ones did too), and paying the extra on your mortgage just to remain housed is a destruction of wealth, not a windfall. You could get a home equity loan out of the new equity, but you'd just have to pay that all back with interest.

It's technically a "windfall" on paper, but it's mostly fake wealth. You are now liable for this "windfall" and owe taxes on it anyway, despite it the fact that it's never physically existed in the real world, and is mostly unusable (except for a few specific scenarios, like cashing out your home to Gentrify some other poorer people out of their homes, in some other different place)

You don't pay extra on your mortgage. A mortgage is a loan to buy the house with the title to the bank as collateral plus some bundling like insurance. Otherwise people wouldn't walk away from "underwater" mortgages.

It may come with inconveniences of linked job changes and relocation but that is a real gain of wealth. The locational value has gone up - which is why they can even afford to "displace".

Assuming that buying a home elsewhere will automatically have comparable price or displacing is also a bad assumption. Despite the rhetoric a single person with a collegd degree in a neighborhood won't cause appreciable rises in real estate value.

New luxury housing is not used as comps for older housing, at least in California. There is always a massive price premium for newer housing over older housing, contrary to your claims.

> Building new luxury housing raises the price for all preexisting nearby housing

If this was true, you could create infinite wealth by just building more and more "luxury" housing.

You will not find any economist agreeing with this "folk wisdom".

> If this was true, you could create infinite wealth by just building more and more "luxury" housing.

I mean, it works until the bubble bursts. But the last time that happened, the federal government bailed out everyone participating in it -- they carefully re-assembled the bubble, like nothing had ever happened.

So, uh, until federal policy changes, this sort of does just create infinite wealth (on paper, at least).

Then the government should just do that and replace a lot of taxes with this income source!

> Building new luxury housing raises the price for all preexisting nearby housing

Based on this logic we should ban all new housing construction and ignore basic things like population growth.

Hint: It's only "luxury" because the market can bear it.

The quality of construction of new homes in Oakland is run of the mill new apartments. The same buildings in style and quality rent for $1,500/mo in Riverside, CA.

i have a plan small homes starting at 500sqft suitable for the x military also our elderly most will have small 1 room apartments to help with living costs. for every 2000 houses a collage will be built.max tuition will be $1500per semester and every 4 years tuition will go down 25% until it is free. 1st phase 150,000 homes priced approximtly 50,000 per home nothing fancy built to last all solar power stage 2 300,000 homes stage 3 electric glide monorail train coast to coast 2hr traveling speed of 2000 kmph change it starts now we the people are not asking we are demanding

How much do you think it will affect housing prices? Is there a model that can predict the effect?

I'll be surprised if it helps a lot. Demand seems infinite.

> Is there a model that can predict the effect?

Yes, the model is called supply and demand. When you increase the quantity supplied, the only way the extra quantity can be sold, is if the price drops. If you increase the quantity supplied without reducing the price, the extra units will never be sold. Why would they... anyone who was willing to pay the previous price, would have already done so and will already have a home in SF/Oakland. The only way to fill the new units is to entice new residents who aren't willing to pay the previous price point.

Obviously. But, are you expecting a 10% decrease in prices, or 0.5%?

Why so defensive? I’m asking Because if it works, I’d like to sell the idea to skeptics. We all lean scientific here, right?

It's not him/her being defensive, it's basic economics that shouldn't have to be explained...

Sometimes one has to understand intermediate economics ....

For instance, in cases of inelastic demand and low liquidity (like housing), if prices are pegged at a maximum that buyers can pay, the actual equilibrium price could be much higher. In that case, a small amount of extra supply will not lower prices.

How can we think of housing without considering resource constraints. It’s not just space to build vertically that determines how many homes can be built..it’s traffic, infrastructure, roads, water, power, schools, essential services, public services, public spaces, community amenities..the list goes on.

Urban density cannot keep on increasing. You cannot ‘keep on adding homes’. We are already having very high costs of living and this also contributes to unaffordability of Bay Area cities.

The only winner is the state which can get more property tax dollars in Bay Area and other urban centers than elsewhere in California. Essentially a handful of high tech dollar fueled California cities are subsidizing the entire state.

This state will implode with this ‘high density is sustainable’ and ‘build and they will come’ mantra. We are already having power outages, crumbling infrastructure, increasing water rates, more and more tolls, high rents, overcrowded schools and unending traffic jams. And the rent is nothing to sneeze at..

The high density lobby is going to incinerate my state. Having already witnessed the devastation this kind of building has caused in my home country, this breaks my heart and frankly I am terrified for the future.

High density living is potentially more efficient than low density living (look European or some Asian cities, etc). Indeed, the US model of the low-density mega-city is the thing that has become unsustainable - commuting from city to suburb or suburb-to-suburb involves a huge amount of infrastructure that is simple to build but expensive to maintain.

The problem of the US in particular is that low-density has had the upper hand for so long that efforts to produce sane high density get sabotaged in a variety of ways (look the difference in cost per mile of public transit in the US versus Europe).

You can also think China and eastern bloc. What people want is not high density housing but high density luxury living. Every home is no less than 1200 sq ft and two cars and 2 kids if it’s a family..and a million dollar. This is not sustainable high density. It’s a scam.

You can’t compare Asian and European (i have lived in both places)high density building to what is touted in the Bay Area.

There's little evidence that "people" all want 1200 sq ft houses in the US. They are a zoning standard but a lot of zoning is a scam to push low density, extensive development.

I think there has been a very successful diversion of derision towards ‘Americans who own homes’ and ignoring the vast majority of foreigners who own properties(both rent seeking and farmland) in the Bay Area as speculative/investment properties that they have purchased sight unseen.

Deriding pensioners on fixed income whose taxes actually built the infrastructure and schools and roads of the Bay Area is shameful..Whose final home is not ‘speculative property’, but their retirement nest egg. Not everyone has a pension from a public sector job.

Look into pension funds, foreign investors,insurance companies, university investment funds ..and yes, Wall Street..who are literally raiding California from the other side of our state to see how this inequality and unaffordablility is caused. And the Govt in the state of California seated in Sacramento is complicit in this.

On a broader scale, they are also stealing our water(example: family farms in Paso Robles can’t grow their crops like alfafa and corn because of a water moratorium because Harvard investment funds have bought acres and acres to grow grapes in vineyards..and drilling wells at the fence line which makes it legal but essentially taps into aquifers and water tables meant for the entire region. 1500 ft when water was found at 300 ft.)

This is causing a divide between rural and urban causing the former to become unliveable and increasing population pressures on highly dense urban hubs.

What is the cause/effect here? You seem to be laying the blame at foreigners, wall street, etc for causing the housing shortage, but the cause/effect of voters/local governments prohibiting building housing -> housing shortage is pretty straightforward, I don't see why pointing it out should be "shameful".

I don't think homeowners are a unified block on this issue, but specifically the local organizations that put a lot of effort into preventing housing during a serious shortage seem to reasonably deserve some criticism. In the bay area even small proposals (like allowing 1 story of apartments over shops, or some mid-density near transit) often get killed by groups that uniformly oppose all housing.

Is it a housing shortage or an excess of population in urban centers?

What are you going to do living like sardines in a can where high density housing has been approved if there is a high cost to scarce water/power/infrastructure and support services.

Infrastructure is far cheaper to provide per person at high densities. You need less of it, and things like electricity have less loss over shorter distances.

The population hasn't increased tremendously, it's the price that has gone up. So it doesn't seem like excess population is probably the problem.

You could lay the blame at demand for housing in cities (instead of supply). It seems less possible to make housing affordable by reducing demand though.

I don't think it's wrong to dislike cities and to want to live in the suburbs or countryside. But people will need to commute longer and longer and pay more and more to landlords unless more housing is built.

I think what makes sense is for the cities to expand to accommodate the demand, then be surrounded by suburbs. If the people who want to live in cities can live there, that should make the suburbs more affordable. And there is no way to have an affordable suburb right in the city anyway.

They forget the human cost. Increasing density decreases quality of life. The people are the product of the cities in the commercial sense. The well being of the people is lost in the drive for infinite growth.

Not being able to afford a house decreases quality of life infinitely more than some increased density.

If you can't afford a house there maybe you should consider moving somewhere more affordable.

Different strokes for different folks. Some people like living in dense cities. No reason not to build for them if they apparently enjoy it.

Which also has a human cost if you have social connections with the other humans around you.

This may not have occurred to you, but a lot of people simply can't afford to move and leave the safety net of friends and family. They may also lack skills that would help them secure employment elsewhere. There people are especially vulnerable.

With respect to quality of life, there are far denser cities with much higher quality of life.

Building more homes for the middle income families and individuals absolutely helps everyone, except landlords.

Right but there's no reason for that if you just allow developers to build up. You can live a few blocks from work, next to some nice allocated park land, and if you want to visit nature, take a train.

That's far more humane than demanding your fellow citizens commute hours from the outskirts every day so your real estate investment performs better. If you want to live somewhere greener perhaps consider the commute for yourself?

Having to move away from your family, friends, job and the life you know also decreases quality of life. A lot.

If you don't like the density, maybe consider moving somewhere with lower density?

Already did. I never realized how bad I had it.

Often times the density hawks are the newcomers, asking to be accommodated. This is true in the bay are and Seattle, for example. So I don’t think it’s fair to ask the incumbents who make up a community to leave.

If you don't like the increasing density then maybe you should consider moving somewhere less dense.

Neither of you are incorrect as it's about preferences, but the real problem is one of balance.

A city needs all kinds of people. Affordability and density needs to be moderated so that there's enough diversity in families and employment to function well. Also some of the most affordable areas in the USA are also the most sparse.

> A city needs all kinds of people to function and affordability and density needs to be moderated so that there's enough diversity in families and employment to function well.

I don't necessarily see how one follows the other. So long as there's diversity in, for instance, bedroom count on units, what difference does it make if the units are stacked horizontally as they are today or vertically? To be clear, I'd love your thoughts, I'm not sure myself.

> Also some of the most affordable areas in the USA are also the most sparse.

Indeed because building up is expensive, so it requires demand. There's no demand in the middle of Idaho even comparable to what SF has.

Further, I'm proposing scrapping constraints on new development, not taking peoples 2 story Sunset units via eminent domain and throwing up SoMa style 50 story skyscrapers.

I think it's not an unreasonable place to start by doubling all height restrictions across all of SF. No more of this prime real estate on 17th and Brannan (the SFMTA bus lot redevelopment) getting wanged by a 4 story cap. That should be 20+ no question.

> What difference does it make if the units are stacked horizontally as they are today or vertically?

One difference is how far things end up to be after. If they are spaced vertically, everything ends up far from everything.

Not enough people living in the geographic area means that stores wont be there, playgrounds will be empty, school will be far away. Visiting friends means longer drives, commute to work means longer drive.

4 - 5 floor is the sweet spot for balancing cost and price, if you go up from there the cost per sq meter increases. The places where economically is worth to go higher than that, is where the land is very expensive and you have to recover that cost having more units.

From what I have read, it's probably more like 4-8 floors. With 8 still being totally possible with with a podium floor or two and wood framing above that. (DC does this now)

Stacked vs horizontal makes differences for some uses and not others. If we are vertical I care is you start a kitchen fire as I have to evacuate just in case, Horizontal makes that need much less likely. There are a lot of hobbies that include large objects that are easier to have in horizontal development (any collector of large objects, a grand piano).

Though the number of people who do that is small in the scheme of things. Grand pianos are often moved via crane - if you only do it once in a lifetime the cost isn't much but if you move regularly it is expensive.

You actually can have both: dedicate some parts of the city for single-family homes for upper-middle class,other parts for high rise buildings. That's how many cities in Europe look like: high density central districts, then some suburbs. The choice is then: do you prefer short commute and living in apartment, or a bit longer commute, but your own big house.

Wouldn't the world simply increase population where this is still the case even if we build more housing though?

Tends to go the other way. Fertility is strongly negatively correlated with development, of which housing is a component. America's birth rate is already well below replacement (1.8 births per woman), and relies heavily on immigration to maintain a steady population. There's a stark graph of page "4074" (page 4, figure 1-E in the PDF) of fertility rate vs HDI. [1] I bet if you build more housing you'd have fewer kids still. It's in a way counterintuitive, but very pronounced and well-studied.

[1] http://ijp.mums.ac.ir/article_7680_7828694c3909aa70d156fb9c8...

> Fertility is strongly negatively correlated with development, of which housing is a component. America's birth rate is already well below replacement

Wouldn't this imply america already has affordable housing ? Why are there endless articles in news that this isn't the case.

HDI is a composite score of which housing is an element. It includes all sorts of things like access to water, access to health care, etc, etc. I'm suggesting that continuing to develop the US through the addition of housing units would likely not lead to an increase in population but rather a decrease as tends to happen with development more broadly. I'm unaware of any studies which correlate specifically housing with fertility in isolation.

Maybe I confused you with two definitions of "development" in the same context -- developing houses, and human development / HDI of which housing is diffuse factor. See [1] for more info if you're curious.

[1] http://hdr.undp.org/en/content/human-development-index-hdi

> develop the US through the addition of housing units would likely not lead to an increase in population but rather a decrease as tends to happen with development more broadly.

That doesn't logically compute though.

Decrease in population is correlated with housing shortage in US.

Only conclusions we can draw from this is,

1. Housing is irrelevant to population growth

2. Decreasing housing will lead to further population shrinking.

3. Housing has unknown effects on population growth. In which case it can go either way.

I don't see how you it can lead to your conclusion.

Because most journalist jobs and thus journalists are in over demanded hip cities, instead of random rural flyover country, and thus write what they know.

> Wouldn't this imply america already has affordable housing ?

America has plenty of affordable housing, but it's in places that are not experiencing significant economic and population growth.

The affordable housing crisis, as defined by a high price to income ratio, is specifically occurring in areas with growing economies and populations [1]. There are many reasons for this, but the biggest is simply the recent large scale internal migration to the booming metros.

1. https://www.jchs.harvard.edu/blog/price-to-income-ratios-are...

I don't think I've ever been linked to a site in Iran before. Odd.

Yea I don’t understand how urban activists can claim “induced demand” when discussing road supply but joy housing supply. There’s no obligation for any town or city to keep growing and accommodate continued population increases. That doesn’t serve the incumbent population, which is why those populations have chosen to enact zoning laws in the first place.

So your argument is to build less housing and force people to be homeless so they don't have kids?

You’re tone deaf. CA is in the midst of their worst homeless crisis ever. Density is a long ways behind my concerns for the middle-class homeless whom have been priced out of any meaningful housing options.

Is “middle-class homeless[ness]” a significant/common occurrence, absent mental illness or drug addiction as complicating factors (excluding those as changing housing supply/demand point is likely not the solution there)? That would indeed be depressing but also fairly surprising to me.

What would “middle class” mean if it didn’t include secure housing as a significant part of the definition?

In San Francisco what the rest of the US considers middle class incomes are not enough to afford a place to live.

Don’t many people love cities specifically because of density and the diversity of opportunities that usually follows?

There's a trade-off though, if it comes at the cost of smaller and worse living accomodation for themselves. And you have to be careful that the transport and other infrastructure can keep up. Transport in particular always seems to get ignored.

Right but lets focus on one problem at a time. With more people in the city, you have a bigger tax base, meaning more tax revenue, meaning you can spend more to improve infrastructure like public transit.

The population of SF has only increased by 111K (14%) in the last 20 years. Imagine what we could do with twice as many people contributing tax revenue?

It isn't just tax base. If you have a lot of people taking transit you can recover the costs of the system just from riders paying their fare, and the riders are saving money over the cost for insuring a car for a year. Less dense areas cannot do this, both because people need to go farther (less dense means you have to go farther to get there), and because there are less riders.

Dense areas need less taxes in general: the cost difference of a big pipe vs a small one isn't nearly as much as the amount the big pipe can carry. However this is more than made up by the fact that the more people to spread it out with means many services that were not affordable are now cheap and those cheap things add up (you don't need a library, and at farm density you can't afford one - but at city density it is cheap per person so you pay a little more), you need to ask if those extras you can have are worth it.

I am not so sure that dense areas need fewer taxes. Some of the most heavily taxes areas are dense cities.

They NEED less taxes for the same amount of infrastructure. They have more anyway because things less dense areas cannot afford at any price are affordable. That is they are getting more for their money, but also spending more.

I'm making two assumptions above: corruption, and higher cost of living forcing higher wagers are both not significant issues. Both are factors, but I'm going to contend they are not significant - you get to decide if you believe me (different answers for different cities are likely!)

I think if you don't take transit into account before hand (public and road infrastructure) you're likely to end up with more people, more traffic and more of what parts of California is already famous for... hours-long tailbacks!

What do you mean? Transport, considered to be the time it takes to get to your relevant destinations, has been objectively worse in pretty much every suburb I've lived in.

A 15-minute drive at maximum speed still takes longer than a 5 minute walk to the supermarket. Most suburbs end up experiencing traffic jams, with no option of foot traffic, subways, or other alternatives.

I mean that if you blindly shove more housing capacity into an area without considering upgrading your transport links, you'll end up with more traffic and more chaos.

I think the argument is that we’re better off decentralizing opportunity than increasing density, considering long term sustainability (ie, we have a lot of room to decentralize) and human well-being (ie, mega-cities aren’t great — and get worse the higher density).

Yes many people love big dense cities like NY, which is why they live there.

The problem is when people love low density cities and make it a great place to live. Then new people want to change it into denser cities with everyone living in apartments. Who should win out?

This is exactly the problem. Lots of people love low or medium density cities because they make great places to live. And then other people who want the same thing start moving there, not asking what made it great in the first place. When lots of people do that, the prices go up and then the newcomers demand that they be accommodated at whatever price they want.

Also the hate against rent control here is myopic. Rent control is meant to protect those incumbents who were a part of the community prior to rapid growth / increase in prices. It allows low supply (protection of quality of life) to work without displacing incumbents when faced with rapid growth. Now we can argue about how effective specific implementations if rent control are, but a lot of folks misconstrue the underlying goals.

"The problem is when people love low density cities and make it a great place to live. Then new people want to change it into denser cities with everyone living in apartments. Who should win out?"

How related is this question to the gentrification of poor neighbourhoods and cities? If we go historically, the newcomers with new money always win out via (often violent) eviction. See: The People's History Podcast regarding Boston's government-supported gentrification of its public housing.

I feel that if we would take the stand to be against sparse neighbourhoods being changed into dense cities due to increased population, we should also protect and support low-income neighbourhoods and public housing from gentrifying construction projects and income-related displacement. But broadly the latter is often viewed as a sad but inevitable phenomenon, and therefore I don't know why that same logic shouldn't apply to increasingly dense cities.

You opinion on density is just that, your opinion, not everyone agrees.

Density means a larger selection of jobs, increased variety in entertainment (ie: more likely to find something you personally love), increased selection of medical professionals, increased variety in food, ability to avoid driving commutes, kids who can self-manage without being driven everywhere, etc. To some people that's worth more cramped living, to others it's not. Quality of life is taken as a whole and not based on part of the whole.

> You opinion on density is just that, your opinion, not everyone agrees.

Sure but curious why that comment is downvoted and yours is not?

Disagreeement != downvote.

It's not stated as opinion, and has some ridiculous statements like this in it:

> The well being of the people is lost in the drive for infinite growth.

There is no drive for infinite growth, that I have found. People are just trying to have enough housing for everyone, yet this "infinite growth might happen therefore we are going to impose housing austerity" is the attitude that has been prevalent in older suburban homeowners, and that's exactly how we got into this mess of a housing crisis.

Categorically dismissing the large number of people that choose to live in cities because they prefer them is ridiculous. If it really were worse, prices would be lower in the cities than outside them. More people want what cities have to offer than are allowed to access them.

> There is no drive for infinite growth, that I have found.

What about Carbon emission projections. Isn't that proof of 'drive for infinite growth' ?

no, thats just growth

That doesn't make sense, unless your definition of infinite growth is not infinite.

Rather, I suspect "infinite growth" is a hyperbole to stand in for "everybody has it as good as I do."

And carbon emissions are a particularly bad example of that because carbon emissions are falling per person without a decrease in the standard of living for people, or for the amount of useful energy they use in their lives.

> Disagreeement != downvote

The founder of the site disagrees: https://news.ycombinator.com/item?id=117171

In addition to what umanwizard posted, there is this: https://news.ycombinator.com/item?id=16131314

However, density taken to the extreme eventually leads to bedspace apartments, which seem like a pretty dystopic outcome.

I don't necessarily mind density and I'm not trying to invoke a slippery slope, but sometimes reading the pro-density folks it sounds like there is no recognition that there could be such a thing as too dense.

Please remember saying this and reflect on how you feel the quality of life has changed when the city you live in doubles in population. Portland is going to be a great case study for this. They just outlawed single family residences. I will be highly surprised if in 30 years people think the place is better than now.

You can always get to "decreased density" simply by moving away from the urban core. The jobs might not be as good, but that just goes to show that increased density does not necessarily involve a human cost.

Similarly the people who complain of unaffordable housing can simply move to places where they are affordable. Same logic

there is no drive for "infinite growth". However so far the population keeps increasing at about .7% per year. Housing has to keep up to keep prices stable. If not, where do you suggest the people live?

.7% growth is an exponential rate. Cities are corporations and the ones that push density are looking for money.

Higher density construction makes more room for low density everywhere else.

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