Comment by Baloo | Hacker News Reader

Comment by Baloo | Hacker News Reader

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>Those price increases incentivize builders to increase the housing stock (which subsequently lowers prices).

This is not reality though. Here in the UK our housing is in major crisis because people simply cannot afford the insane price increases. Pretty much everyone I know shares their living situation, on their own they would not be able to afford basic amenities.

The guardian today published an article showing:

>Average monthly rental payments were now 40% higher than they were 10 years ago, while typical mortgage payments for the same properties were up 13%.

Landlords and property owners are hiking the prices way beyond reasonable value, in some parts of the country rent is up by over 20% in the last year alone. By your logic there should be an incentive for builders to increase the housing stock, but private enterprise aren't building anymore homes now than they were 10, 20, 30, 40, 50 years ago.

We do however have a situation where the average mortgage is about £900 per month, whereas the average rent has skyrocketed to £1600 per month (£1100 outside of London, £2200 in London). Available rental stock is down 25%, with demand up 5%. It's great for property speculators, buy-to-let landlords and property developers, people are offering above asking prices simply to secure a home.

>My landlord takes all the risk of owning the property (prices don’t always go up after all).

Sure there is risk, but when you charge 30% more than you repay for the mortgage, while at the same time property prices rise 75% in 10 years, it's safe to say that the cash cow is being thoroughly milked for every last drop and as a result many people are suffering.

Ultimately there shouldn't be 'risk', this mindset is a big problem. Homes are a fundamental, basic human need. Using them as an investment method, business model or means to hedge against inflation, is causing rampant speculation and quite honestly extorting people that have no other choice, exploiting vulnerable families that need a home. It should be an extremely tightly controlled market, with sufficient funding to ensure that quality & affordable housing is available for everyone.

> Here in the UK our housing is in major crisis because people simply cannot afford the insane price increases. Pretty much everyone I know shares their living situation, on their own they would not be able to afford basic amenities.

The housing in UK is in crisis because there have not been enough homes built. My rent has gone up too, but it's not because my landlord is greedy. The cost of maintaining the building has gone up thanks to inflation (plumbers/electricians/superintendent/etc.) all have to be paid higher wages. Replacing broken fixtures is more expensive. If the landlord has a floating rate mortgage, the cost of paying the mortgage went up. For commercial apartment rentals, those companies have debt that now needs to be rolled over at higher rates.

> By your logic there should be an incentive for builders to increase the housing stock, but private enterprise aren't building anymore homes now than they were 10, 20, 30, 40, 50 years ago.

So is it a problem that they aren't building more or not? If we agree that more housing needs to be built, then the proper incentives must be in place. And a proper incentive may actually be as simple as eliminating a disincentive (e.g. 4 years of environmental review prior to the project's approval).

> Available rental stock is down 25%, with demand up 5%. It's great for property speculators, buy-to-let landlords and property developers, people are offering above asking prices simply to secure a home.

It's great until it isn't. Interest rates are rising, and mortgages in the UK are much shorter term than in the US. That means the impact of rate hikes is more immediate on housing prices. And if available stock being down is a problem (which it is), the obvious solution is to produce more. Alternatively, I have a modest proposal [0] that would also solve the problem.

> Ultimately there shouldn't be 'risk', this mindset is a big problem.

Risk is omnipresent. If I purchase property, I have all sorts of risk. My building may burn down. My neighborhood may become undesirable to live in. I might not be able to take a job in a new location. I tried to pick examples that aren't about investment. These are risks that the landlord assumes for me.

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

>The housing in UK is in crisis because there have not been enough homes built. >So is it a problem that they aren't building more or not? If we agree that more housing needs to be built, then the proper incentives must be in place. And a proper incentive may actually be as simple as eliminating a disincentive (e.g. 4 years of environmental review prior to the project's approval).

And this is a part of why it should be administered by governments and not just let loose to market forces. Homes can't just be built wherever, whenever. It should be meticulously planned and integrated with various public services. There's no real financial incentive to build 100,000 houses in the middle of nowhere, it needs to have schools, hospitals, infrastructure etc. A property developer would rather squash a bunch of apartments or buy some old stock, refit everything and charge a premium.

>It's great until it isn't. Interest rates are rising, and mortgages in the UK are much shorter term than in the US.

They actually suggested recently to offer multi-generational mortgages... That's how crazy the market is getting.

>These are risks that the landlord assumes for me.

Those are risks your landlord should have insurance for. In a world where property isn't such a commodity, those risks don't really have the same meaning or value.

We've largely left house building to the 'market forces' and it is failing us, that is the reality. What happened to the second largest construction firm in the UK? "The largest ever trading liquidation in the UK – which began in January 2018" - Carillion collapsed with £7 billion in liabilities.

"One of the UK's biggest landlords, owns over 1,000 properties, tried to ban 'coloured' people from renting because of the curry smell" - What happens to people that are 'undesirable' to landlords, they need a home too or should they simply be destitute or constantly bounced around the lowest standard of housing stock available?

Rent caps are probably not effective or radical enough to actually solve this crisis. I think if we really want to do something, it's going to hurt a lot of peoples 'net worth'.

> And this is a part of why it should be administered by governments and not just let loose to market forces... There's no real financial incentive to build 100,000 houses in the middle of nowhere

That's exactly what the Chinese government did, only at a larger scale. It hasn't worked out well.

> They actually suggested recently to offer multi-generational mortgages... That's how crazy the market is getting.

I saw that, it's absolutely wild.

> Those are risks your landlord should have insurance for. In a world where property isn't such a commodity, those risks don't really have the same meaning or value.

There are risks that can't be insured against. Suppose my employer relocates to another region, and I have the choice of following or finding a new job. If I own a house, I now have to sell it (incurring a 3-6% transaction cost and lots of headache). I can only sell it if there's a willing buyer, and there's no guarantee there will be any.

My rent is covering the building's mortgage, taxes, and maintenance, which I would be paying if I owned the property. It may be marginally higher than the cost of ownership, but I have a strong preference for flexibility. That flexibility is worth the liquidity premium to me.

> What happens to people that are 'undesirable' to landlords

In the US, there’s legislation that prohibits discrimination across a variety of protected classes (race, religion, sex, etc.) Does the UK have similar legislation? Putting aside ethics for a moment — discrimination is inefficient. It’s in everyone’s best interest to eliminate such behavior, whether through market forces or legislation.

You should have that flexibility. There should be enough housing stock that you can move to another city and not have to worry about struggling to find a place, arranging visits for them to be cancelled or leased before you can even view it. There are parts of the world where government rental housing schemes are extremely successful, it also typically caters for those that would be left with nothing if we didn't intervene with the market. Yes there are laws against discrimination, that landlord was overruled in high court. That does not stop it from happening, in many different forms - there is never ending prejudice and difficulty simply getting a home for young people, disabled, minority backgrounds, immigrants, welfare recipients. The landlords have all the power when it comes to deciding who they allow to rent, they do not have any obligation to tell you why you were refused. Even though the court says it's illegal for him not to rent to certain races, what is stopping him?

We live in a world where it is entirely feasible for every person to have good quality shelter, clean water, food and energy. For the most part, we allow market forces to control the access to goods and services. Wealth is being concentrated, property along with other vital services, are just another asset in the portfolio. It's missing humanity. We need homes, healthcare, water, food.. I think it's about time we prioritise this vs high profit, monetary gain, corporate excess and 'free markets' (they're never really free, always tipped in favour of the owners of capital).

It takes two parties to increase the price of a housing unit. If rents are up 20% that means people are willing to pay 20% more.

I don't know about the UK, but here in California, prices have skyrocketed, but so has the price of construction.

There are two reasons that has happened:

1) Shortage of construction workers. The ones that are here are either (well paid) first generation immigrants, make more than Silicon Valley windfall money because they speak fluent English and are competent, or are completely incompetent. We don't have enough of the first group, so be prepared to pay 2-3x the cost of materials to get anything done (with the second group acting as middle men, and the third group taking your money, only to have you pay someone else to fix it later).

2) Policies that discourage the building of new rental units:

2a) We have a vacant house on our property. A non-structural remodel for it would cost > $50K to get through permitting, and we're looking at >> $300 sq/ft for the actual remodel. If we did all that, we could either pay a special tax on vacation homes owned by individuals in unincorporated areas that the townies just passed (to help the housing crisis by somehow freeing up housing units in town, where the tax does not apply), or we could rent it out. If we rented it out to a problem tenant, we could literally never get rid of them (unless they decided to not pay rent, but even then, it's 5+ years of court battles). So the house stays vacant.

2b) We just built a house. It took almost a year to clear permitting, and $100K's of wasted nonsense work. Many developable plots in this area are purchased, planning bankrupts the new owners, and then they're sold to the next saps. According to the neighbors, getting permits to build a house around here in under 3 years is unheard of. The result? We have a house, but we are way, way, under water in terms of money put in vs. current valuation. At the lower valuations, the houses around here are not "affordable" by any means. However, if you look at what it would have cost us to develop this land anywhere else in the country, we would have paid way under market value.

Problem (1) could be fixed by encouraging contractors from out of the state to fly in to work here. Apparently, the state has erected licensing barriers to make this hard. I think a lot of money ($1B) is waiting to be taken off the table via arbitrage.

Problem (2) is consistently worsened by voters that think that capping housing costs, "protecting tenants" and other things that further constrict housing supply will somehow lower prices.

The easiest way out of this problem is (1) allow out-of-state firms to build housing and (2) fast-track all new housing permits, including financial liability if the planning commission creates unnecessary delays, unnecessary work, or approves / passes inspection on substandard work.

They should also replace the state wide mandate to reduce commuter miles (which is basically a mandate to increase congestion by tearing out roads) with a mandate to reduce the total carbon emissions per capita spent on transit (which would be a mandate to invest in public transit, bike lanes, and in reducing congestion).

None of those things are politically tenable, so I guess the millennials will just live in RVs or 4-to-a-bedroom until the voting population turns over.

There's good and bad regulation. Bureaucracy in the wrong place is a pain, but without crucial regulations I feel that private capital would be even more ruthless and we'd be left with badly built homes, in badly planned communities, lacking services and infrastructure, without much care for the environmental impact..

It's really hard to see a way out of this for me without extreme interference by government..

In practice badly built, badly planned, lacking infrastructure, etc. are just code phrases for being different from status quo and accommodating too many people. And it's nonsense that an urban apartment building could have an "environmental impact" offsetting the sprawl and vehicle-mileage costs of not building in cities.

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