Comment by ragle | Hacker News Reader

Comment by ragle | Hacker News Reader

Whether or not we are in a bubble is increasingly the wrong question to be asking in an age where failure for sufficiently-large institutions is no longer permitted.

The question used to be pretty simple: "has a sufficient portion of the market been priced out to the extent that demand collapses"?

As we've seen in equities / derivatives (and increasingly, commodity) markets - the answer to that question is now perpetually "lol, number go up" because large investment banks have essentially infinite access to free money and will be bailed out if they get in trouble.

On a long enough timeline the end result of this is that more and more Americans write their rent checks to institutional investors. [1]

Sure, many Americans own their homes now (or have a nice cushion of equity). But what happens as wage growth continues to stay relatively flat while cost of living rises dramatically and folks need money for medical bills or their kid's college tuition (or w/e)? They sell and become renters.

There's a pretty bleak future for American housing absent regulation in this space.

[1] - https://www.theatlantic.com/technology/archive/2019/02/singl...

> more and more Americans write their rent checks to institutional investors

Homes as a wealth vehicle has been the standing wisdom for a while. That being less and less true (by virtue of requiring a higher and higher degree of wealth to even play) is scary in that there isn't an immediately obvious alternative with nearly the same odds. Also scary in that a lot (a lot a lot) of rules have been written and enshrined with the assumption of that fading wisdom.

At what point does it cross a type of pandemic level where fighting it isn't the best strategy but mitigating it and finding alternatives is the only route forward?

I mean, regulation is why the housing market is so bad (SFZ environmental review etc), so really what we need is forced deregulation.

Edit: Some people might have misunderstood what I said so here's what I mean: What we really want is states to force localities to reduce zoning restrictions on new construction

Because deregulation did wonders for telecoms, energy companies in texas, boeing, subprime mortages, etc...

Deregulation hand in hand with allowing things to fail is the answer. The issue here is the constant bailouts. We live in a fake economy.

The economy wouldn't crater if these massive institutions failed? I find that hard to believe.

I mean, there are specific regulations we can point to that are making houses and housing more expensive, I don't see how "allowing people to build more houses" could destabilizing living?

Deregulation in this case wouldn't lead to "allowing people to build more houses" but "allowing people to build more *unsafe* houses."

Regulations are written in blood.

Oh come on. Obviously people aren't clamoring for bringing back asbestos or dumping sewage into the street.

Regulations are written for a wide range of reasons- legitimate safety issues, quality of life concerns, propping up values, funneling money to groups favored by the politicians or bureaucrats crafting the rules, political grandstanding against imaginary problems, particular rules favored by coordinated special interest groups, etc.

I once lived in an area where several suburbs all met, you could drive a few blocks and cross imaginary lines separating different legal cities. They had different regulations for minimum lot size, how close structures could be to the property lines, how trees on the property needed to be handled, whether you could put two separate structures on one property, etc. Obviously none of these things impacted safety, but did impact density, home prices, etc.

I disagree. Why can't you relax zoning restrictions without relaxing safety requirements?

Less safe does not mean unsafe. Marginal gains in safety after a certain threshold may not be worth it. People wear helmets on bicycles, but no one wears a helmet just walking around.

Several years ago I read a German interview with a construction engineer who complained about the industrial lobby that pushes more and more regulations that, incidentally (/sarc), increase a (forced) demand for their products.

He gave several examples, of which I remember one. It is now law in Germany that new homes with French windows must have extra strong glass in them. The reason? What if a toddler on a tricycle ran into the glass and suffered serious injuries or death?

Now, said the engineer, there are no cases in Germany of this actually ever happening, or at least we do not have any records of them. But this what-if theoretical scenario increases construction costs of new German homes by a thousand euro or so. (And increases a basically guaranteed demand for products of a few certified safety glass vendors A LOT!) Take forty or fifty such extra requirements together and their cumulative effect on price of the finished home starts being significant.

But no one wants to be known as a potential child killer, so it is not worth opposing such measures.

The level of safety gained by such measures is nevertheless dubious. People didn't die in homes built to the less stringent standards of 1990 like flies.

> People wear helmets on bicycles, but no one wears a helmet just walking around.

When you start off with a false equivalence...

Yeah, just to be clear, I was specifically talking about land-use regulations. I don't know anything about how stringent material requirements are for building houses, but i'd wager we have some dumb ones on the books in the US.

In this case it means "allow people to build multi-family housing" and "allow mixing small retail and residential."

get rid of the requirement for large lot sizes, and single-family residential-only zoning.

Why do you think entrenched power needs to be entrenched further? Our current situation can be traced back to deregulation:

https://en.wikipedia.org/wiki/Financialization#Deregulation_...

>The securities that were so instrumental in triggering the financial crisis of 2007-2008, asset-backed securities, including collateralized debt obligations (CDOs) were practically non-existent in 1978. By 2007, they comprised $4.5 trillion in assets, equivalent to 32% of U.S. GDP.

This is a total nosequitor, building more apartment buildings would make apartments cheaper, being allowed to build two houses on your one house lot would make houses cheaper etc. Like do you have a reasonable path from "people have more latitude to build on their own property" to putting families or individuals in a dangerous financial situation.

Ding ding ding ding!

I find it suspect that environmental regulations are the driver of housing market issues.

That's a claim you should be substantiating and not making a blanket statement about.

Fair enough, let me find you a good article on the subject

See here for example:

Basically anyone can just maliciously sue if they don't like a development and force a length environmental review process.

https://www.theatlantic.com/ideas/archive/2021/03/signature-...

Also just as an aside, I'm in favor of large, expensive intervention for both climate change and the environment in general but Environmental review at least in California is basically worth nothing compare to investing a billion dollars in solar cell research or building a nuclear power plant.

Maybe not environmental review, specifically (which differs quite a bit state to state), but zoning and onerous building regulations more generally are a significant factor. At this point the burden is really on detractors to explain why artificially limiting supply for decades didn't affect prices.

In NYC, people call for multi-year environmental reviews to stall putting in something as good for the environment a new bike lane. Not sure where you live, but if you just look up where SEQR is referenced NYS lawsuits or sit in any local CB meetings on buildings and zoning, you'll see it often come up around both buildings and bike lanes as a way to kill momentum on a project for years.

Based on your subsequent comments, it seems like what you specifically mean is "reduce (probably zoning-based) restrictions on the construction of new residential buildings".

Phrasing this as "forced deregulation" is...not going to get people to recognize what you actually mean, because 95% of the time, when people say they want "deregulation," what they mean is they want big businesses to be allowed to exploit the middle and lower classes however the hell they want with no consequences.

If you do, in fact, mean specifically "reduce zoning restrictions on new construction", I suggest using phrasing like that, because it'll communicate your intention much more clearly. (If you don't, then I have misunderstood you, and apologize for the confusion.)

thanks!

What exactly are you proposing be regulated?

Ownership of single-family residential properties by large financial institutions should be limited to their traditional role - i.e. custodial ownership of a home for the duration of a mortgage.

How about we just let people build more and let the market be liquid and efficient?

We certainly need to build more, but that's no panacea. If you want the market to be efficient we first need to account for the systemic inefficiencies.

There exist good arguments for the existence of rentals in some capacity. However, the rentier class have abused their power enough to distort the market in their favor without adequately maintaining their properties. Once property has decayed too much to provide an adequate return the owners are left with a few options: massive capital investment that they won't make back for ages and in many cities won't justify a rate hike, insurance fraud, go bankrupt and walk away clean leaving a toxic eyesore to rot while keeping the all the illgotten profits. Holding corporate stakeholders personally liable for their properties externalities, and management failures, would help chill the burgeoning rentier class buying up everything they can rent, flip, or airbnb without a thought about how their actions effect everyone else. Sure, people will take a bath on their misguided 'investments', but that's what happens in efficient markets. 90% of Americans shouldn't suffer so a small class of people can make gains out of inefficient distorted and government reinforced markets.

Development companies aren't innocent here either, the crap they get away with doing and not doing is insane and dangerous. I don't think regulation is the answer to developer fraud, instead I believing strengthening the rights of owners/tenants and funding actions against bad developers to chill the industry against taking shortcuts is a better solution. If a developer knows that their own house can get taken for cutting corners they're going to be very invested in doing things right, and having the paperwork to prove they did it right, the first time. Sure massive companies building cardboard boxes might go bust, but that's what we want in an efficient market right?

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