Inflation and the housing question
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Landlords and owners will be able to command high fractions of average incomes as long as there is no slack in the housing market. If you nationalize housing and hold prices low, then there will be supply shortages where some folks will not be able to get housing who would happily pay your price. (This is a fact, not conjecture, and is easily observed in any affordable housing lottery in the United States.)
The only way to have low prices and also to satisfy the demand for housing (i.e. have each person who is willing to pay be allocated a unit) is to have slack in the market. No other solution will do it.
What's the ratio like?
> Even if the bids are rejected it still has a large effect on pricing
If they put in a bunch of bids that end up being rejected, doesn't that work in the opposite direction? If you're selling something on craigslist and you get spammed with a bunch of lowball offers, you're not going to think your widget is more valuable. If anything it's going to make you have second thoughts about your original price and make you want to lower it.
>I'm not aware of anyone who claims that the housing market is uncompetitive in the economic sense.
You guys aren't even talking about the same thing. The parent post is claiming that "there's no such thing as price gouging", period.
If you nationalize housing, wouldn't you also subsidize supply?
Hence the wait-lists even where it exists; people want to live where they can be near what they need (be that work, medical, family, etc), not literally anywhere. The "literally anywhere" tradeoff may be worse than homelessness, or at least perceived to be.
The short answer is: No, in a command economy, what happens is whatever the politicos demand.
Generally home owners are pro regulation to avoid building larger stuff in their neighborhoods though. Zoning and Nimbyism are home owner driven.
Toronto.
[1] only half serious
PS: I am sure that's not what you intended, but I'd appreciate it if you avoided that condescending tone. My argument doesn't rely on your sympathy, and reframing an argument as narrative doesn't help either. It puts into doubt all good faith you may have in a discussion.
Also, my tone was not intended to be condescending. I wanted to be let know if I was wrong, genuinely. I am eager to update if there are other places where the renters are identifiably and largely YIMBY, because that would break some of my personal beliefs about the housing market. Any my lack of sympathy is for the narrative -- which I've heard many times before -- not you personally. I'm positive that you are great.
Whether it's because increased density would spoil their views, or make parking harder to find, or the social housing would bring in "undesirable elements" or lower their property value, the incumbents have a lot of reasons to oppose housing changes that would benefit society as a whole.
Allow me to introduce you to the acronym NIMBY[0]. Often found in newspapers with their arms crossed looking stern in front of a building site. And you'd be amazed at what they can oppose - kindergartens, schools, even playgrounds (as they increase noise, and there's a risk of balls coming over the fence!)
And planning laws that require authorities to consider submissions from residents are one of their best weapons - after all, it's typically the wealthier who can afford to own property, and so it's often the wealthier who can form groups that hire top tier lawyers to fight developments they're opposed to.
There's even a snappy quote: "Democracy must be something more than two wolves and a sheep voting on what to have for dinner." James Bovard
But it is not, as my example shows. There's a lot more to it. That's the entire point.
> that there isn't some shadowy system for how landlords can control zoning
I don't think anyone is arguing it is in any way shadowy, it's done very openly. There is sufficient discussion in the media about the practice of voting in the US, so I will not repeat that.
Also, take the Bay Area as an example - how large would you guess is the fraction of immigrants working in Tech? And mind you, even a green card does not allow you to vote. All of these people are excluded from the process.
Ironic, if you think about how this whole country started on 'no taxation without representation'.
I'm sure it's ultimately the Kochs' fault, or whoever. But at some point I really feel like there should be an element of personal responsibility to educate yourself about the forces that affect your economic wellbeing, and of those whose interests you nominally have at heart. If such a large share of renters can't do that . . . well, ideally we should still build more housing, but it's tough as a homeowner to feel too bad about it.
Singapore solved this (and other issues) by creating a department that basically functions as the nation's largest property developer.
https://en.wikipedia.org/wiki/Housing_and_Development_Board
Net result is about 80% of residents living in public housing.
https://en.wikipedia.org/wiki/Public_housing_in_Singapore
This is pretty much the exact opposite of the nationalize-all-the-things public housing concept, which presumably is why it's not devolved into the usual electoral capture/tragedy of the commons sh show
For example, my Googling seems to suggest that you could buy a 4BR in a new neighbourhood for under 350k. A new estate in Melbourne would be double that, with no public transport or other amenities.
It's worth noting that Singapore's average household income is around 1/5th that of Australia.
A quick Google shows an average household income of $116k AUD for Aussies, and $114k SGD for (resident) Singaporeans. Current exchange rates peg 1 SGD to 0.997 AUD.
If you're not married, you can't get public housing until you're 35.
If you do qualify, you have to enter a lottery for the opportunity to choose a unit. The chances of winning the first time are low.
Then once you've won, the wait time is 4-5 years before you actually get the place. But people do it because you can buy the unit subsidized, then after ~5 years, you can sell it at market rates. It's basically a free hand out by the governement.
https://www.bbc.co.uk/news/business-47028342
Furthermore, most policies of this nature are stupid because they assume that everything except the target of the policy (in this case rent) stays the same, and this is obviously not true. A lot of policies meant to help tenants involve moving additional costs onto the landlord... Who then increases the rent to cover them, and yet remains competitive because every landlord has the same costs imposed on them, and so makes the same decision.
The article does point out some problems (like the high cost of moving as a renter causing an imbalance) and then instead of directly addressing those issues, leaps to a completely unrelated "solution". From personal experience with agents, there's a hell of a lot that could be done to make that process smoother and cheaper...
Historically in 18th century rents were 1/3 of farm product in England, 1/2 of product in Milan, up to 3/4 product in China. Citizens in countries with low rents developed wealth quicker and in countries with high rents were quite poor.
It makes no financial sense to sell a property locked into such a low interest rate while rates are moving up.
Combine this situation with fairly stringent housing code requirements that make new housing difficult and expensive to build, and you have a recipe for low supply. Housing prices are exploding, and will continue to do so until one of the above situations change.
At the current rate, we will have an entire generation of renters unless they inherit property.
This is already the case in some European countries like Germany, Austria and Switzerland. Buying without inheritance is nearly unaffordable already for most people.
I went, for shits and giggles, to a house viewing hosted by a realtor, to see who can afford so many 600k - 1MM houses when the average national income is around 1800 Euros/month NET. I expected it would be full of people who cashed out on crypto at the right time, but it was all 20 somethings with mon and dad who were there to buy their kids a nest.
The middle class who could buy a house while still enjoying luxuries like vacations and a car, from average salaries without inheritance, is dead and buried here.
As a double whammy to millennials and younger who will not own their homes, rents are going up, wages are being eroded by inflation and the retirement age is also going up, and the pensions sums to be received are going down. I just hope I can still afford a noose and a second hand chair on my future pension.
Boarding houses filled a need, but modern safety codes say every bedroom needs a window. I bet people would rather have a roof over their heads, without a window, than sleep outdoors.
Want to do work on your house in Seattle? Touch the roofline and you'll need obscene amounts of rework and basically a band new roof. There is a serious shortage of space, so let's make increasing the # of bedrooms in the city as expensive as possible!
We need regulation, but regulations need to be created balancing out real world needs.
People not dying should be the priority.
It already is, but like all things the costs and benefits must be weighed. You can prevent 100% of electrical fires by prohibiting buildings from having power.
Relaxing safety requirements is not the solution to housing crisis. At best it will just increase the divide. We're going to be packing people like sardines into the cheapest (and consequently most dangerous) "housing" we could build, while people who can afford the luxury live in homes built to modern safety standards.
These regulations aren't created just for fun, they're created because people died. Let's not take a step backwards.
I'm not saying roll building codes back 100 years. I am saying that cities are experiencing an extraordinary problem and we may need to start rethinking some of our fundamentals and sacred cows if we are going to solve these problems.
Of course, and I realize that, I think we all do. The question, though, is at what point is a regulation more expensive than it is practical? It sounds heartless but some regulations don't seem worth the expense of how many lives it is designed to save. One of the reasons why the 4 prong outlet is required for dryers is because someone was changing the inner light bulb in the dryer and killed themselves because they didn't shut off power to the circuit. The regulation is meant to help prevent this in the future, but one has to wonder just how many people are actually being saved by this update. Especially when you personally have to shell out something like $750 to update your three prong outlet.
Land use is. NIMBY policies that ban multi-family tenancies are. Lack of SROs is. Lawn and parking requirements are.
The kind of housing we need can be built to code. But it can't be built when political stakeholders actively work against it.
Mandate only ADA accessibility for the first floor of a residential building.
Before someone says that is a terrible idea, I'd like to point out the majority of housing stock in Manhattan is just that.
For those who don't know, the city requires a switch on the exterior that cuts power to the whole house. It is meant for first responders but the problem is that you can't lock the box (so literally anyone can cut the power to your house at anytime, think of thieves and vandals) and the electric company actually has the ability to remotely cut the power already. The Fire department can call this request in on the dispatch, so the point of the physical switch is primarily moot. But the requirement still exists and it must be paid for.
I'm not defending NIMBYs but I don't want to dismiss what the GP is talking about. Compliance costs are significant and especially so for non-new construction.
I think we need to be very careful about relaxing safety guidelines.
I'm not saying it is nice, but I am saying that flop houses and boarding houses filled a need in society that, for many people, is currently being met by living outdoors in tents instead.
There's a middle ground here. Boarding houses were often just little hostels for having a safe place to sleep and keep your stuff with the expectation that you do most of your living outside, in worksites or parks or public houses (a.k.a. pubs). It's not really inhumane if you don't assume a lifestyle that is lived in the bedroom.
Yes, I would’ve missed some spectacular murmurations and a fireworks show in the valley, but it was really cold and the heating wasn’t enough to overcome that.
I’m not sure that window would’ve been particularly good as a fire escape in any event — as I recall only the top opened, so I’d have had to smash it and climb through broken glass and then jump one story down onto soil now covered in broken glass.
I still think a windows should be a requirement for bedrooms regardless of size. Natural sunlight is important for sleep regulation.
I am 30 years old, lived in more than a few cities/countries now and since I was a child, the cost of rents/houses have always been increasing, literally everywhere.
At what point it is too much? What happens then?
The vision that we need to paint is one of density and verdancy, at the same time. Of single family homes, but maybe with smaller yards, but impeccably maintained. Single family homes with a granny flat in the back, for granny when she's infirm, or for uncle joe who failed to launch. 4-5 story apartment buildings everywhere. More rail, for sure, but also more biking and walking. Space efficient housing for vagrants and students housing with with small rooms and common areas. Mansions for the C-level suite, but shotguns for their personal assistants. Back-to-back, in the same neighborhood.
The vision of the american city of the future is not Beijing, it's the lush verdancy of Charleston, Savannah, New Orleans. But not only for tourists. For everybody. That is the future, even better (yes, better!), than what we have now.
It amazing how short people's attention span is. It's not the last housing crash in the US or Asia was that long ago.
We may have it completely wrong about what makes land valuable, but it seemed that way due to a series of coincidences.
But now we have had asset values rising out of control during a prolonged period of low inflation and effectively zero interest rates therefore it will be different this time? More likely we will again see the usual. House prices will stagnate while inflation does its work and people will come to understand that housing is not an endless free money game but in fact a depreciating asset that is difficult and expensive to transfer especially when it is transformed into a boat anchor.
NIMBY politics are a major factor here. Another factor is that the expansion of the suburbs has hit the limits of practicality. Suburban size is limited by things like commute radius from major city and town centers, the ability of roads to take more cars, and whether or not mass transit is available. Housing too far out starts to become indistinguishable from rural housing. Coupled with NIMBY politics this creates an environment for scarcity to explode.
If housing was going up during a period of otherwise tame inflation, it's possible that housing will now really explode. That's what seems to be happening so far.
The only thing that is going to bring it down or at least tame the rise is taking on NIMBY politics and zoning and other artificial barriers to increasing the number of housing units.
Edit:
Of course yet another possibility is that there's some truth to the allegations of inflation hawks over the past 10-20 years: that inflation is actually a lot higher than we think and has been masked by the deflationary effects of technology and globalization. Tech and cheap overseas labor have held down the price of manufactured goods and kept the price of some consumables like food in check, but things not subject to these efficiency gains like college tuition and housing have exploded. In general anything that can't easily be automated or outsourced has gone up in cost.
Personally I think all these factors are in play.
Any resources for reading up on this point of view?
In wealthy societies, housing becomes a way to store generational wealth. In the USA, the complaints about high housing prices seem to ignore to how much housing costs in other countries. 10x homeprice to income ratios are very common abroad. There's nothing inherently unreasonable about that. It means location accrues a long time value, and land becomes a more favored asset class.
US is somewhat unique, in that undeveloped land was effectively worthless for the longest time, and cheap horizontal expansion was possible because of the car, still so in the 70s. That is why Americans are fairly unique in thinking of housing as a commodity (it's just some some wood and bricks after all).
The conditions that enabled that though or over. Horizontal expansion (and thus commodification) is no longer sustainable, and we will see an ossification of the urban landscape, freezing value in place. It's a ratchet upwards.
The only way out is boost supply through heavy infill, which is possible in some US metros, mainly the ones with depopulated urban cores (fly-over country basically). It's going to be much much much harder on the coast. Since the average American (who's in their 50s) absolutely loathes what densification seems to imply (pedestrians, cyclists, and mixed income, riffraff), I don't really see that happening at any kind of scale or fast enough to ease pressure on prices.
Canada has a lot of land, but most of it is either unlivable or a pain to live in (due to weather).
Repealing prop 13 is basically impossible because you have to deal with sob stories about seniors getting priced out of their homes. We should double down and enact rent control on the same principle.
IMO, that program was well-intended and even reasonably well-designed, but the rental and housing market got healthier after rent control was abolished (and after the inevitable dislocations cleared and the older buildings could once again be profitable to maintain).
HN is biased towards tearing down beautiful old high quality of life neighborhoods for more multifamily housing.
I think that’s fundamentally the wrong approach, because that isn’t what the market wants. What we should be asking is:
* how can we construct new neighborhoods similar to early 1900s single family neighborhoods? Walkable urban cores surrounded by houses in small lots?
* can we decentralize jobs over more area to enable less dense housing options for more people—Why aren’t we building new cities?
* How can we make housing construction cheaper? Low density housing is generally the cheapest to construct by square foot excluding the land (see above on decentralization of jobs). Still, what makes new construction so expensive is extremely high labor and material costs. Why did a new house cost a few years’ average salary in the early 1900s, and 6-10x the average salary now?
There are plenty of towns like this in the Midwest and almost all of them are dying unless they have an industry, or more than one, supporting them.
You could have white collar remote towns, but you’d still have to solve the issue of getting service and retail people to live there.
A lot of what we're seeing with COVID is a temporary overshoot in the other direction. Houses and apartment buildings didn't disappear during COVID. And you don't need a long elaborate logistic chain to be able to rent or lease a space.
I have seen in countless areas of the economy the prices only jumped up AFTER it was news.