The global housing market is broken, and it’s dividing entire countries
bloomberglinea.com
bloomberglinea.com
1. Statewide bans on short term rentals
2. Huge increase in short term rental taxes to the point where it's barely profitable
3. Adjustable property taxes based on vacancy. Something like a 5x property tax multiple for 50% vacancy and scaling down to 1x for 5% vacancy.
These proceeds should go toward a public/private partnership to build more housing.
I live in Canada, but we have the same issues.
It's going to be a very interesting cross-generational political battle. The sheer number of "normal people" who own investment properties and AirBNBs now is extraordinary. I know people scraping by working average jobs that own multiple units. Meanwhile, the younger generation can't buy a home.
We've normalized the idea that real estate can't lose and everyone should own multiple properties, and we can't come back from that without one side suffering a ton of pain.
Of course, a major answer to this problem is to simply ban non-americans from buying american property, but that will implode real estate and hurt a lot of homeowners.
That is the voting middle-upper class. The majority are voters. And they won't want any of that.
You can’t have your cake and eat it too. Homeowners need to get hurt in order for housing to be more affordable. Housing taking up huge chunks of earnings is a terrible state of affairs for citizens and the economy.
Given we already have chronic undersupply, shouldn't the default position be to prioritize citizens and others who can demonstrate a greater need?
> That should drive down our prices
No, in Canada, foreign owned properties make up a tiny percentage of the total, so banning it doesn't actually have any impact. Works as future protection for sure, but that's all.
The "foreign investors" are a convenient strawman that hides bigger underlying problems.
The way to fix this is painful but it is to revoke all incentives and to make people put down 25-50% as down payments. It will cool the market to near absolute zero short term but it will help long term in keeping housing to actually be housing.
Now that doesn't mean the incentives aren't skewed. But I don't think landlords buying their 20th house are getting the same benefits as a first time buyer.
I have no idea what "the governments offers cash back" means; but certainly the mortgage interest tax deduction is only available for homes in which you actually live for at least part of the year - it's not available for rental properties.
You can deduct mortgage interest as an expenses if you're renting a property, but that's exactly the same as any other loan used for a business activity and not specific to real-estate.
The big one being taxpayer funded 30 year fixed rate mortgages, and subsidizing the existence of 0% and 5% downpayment mortgages.
>Your interest on your mortgage is tax free,
Literally 90% of US tax filers do not benefit from this, since it requires itemizing.
>the government offers cash back, etc.
I have not heard of this.
There are a variety of state, local and sometimes federal tax credits or down payment assistance for new home buyers.
There may be additional tax benefits that accrue to a business that is paying interest, but that’s separate from personal deductions.
I wonder, though, what percentage of buyers this would affect. Lots of houses are behind purchased now with 100% down.
Then there'll be plenty of stock.
Investors made up 20% of buyers in the last quarter across major metro areas: https://therealdeal.com/2022/06/15/investors-seize-record-sh.... Historically they’ve made up much less than that. Housing prices are skyrocketing where I live in exurban Maryland, and in Eugene Oregon where my wife is from, but there’s no investors to be seen in those places. I’m not certain what the cause is, but I’d suspect it’s two decades of central bank policies dumping cash into the economy.
Correct. This article has the receipts:
https://www.vox.com/platform/amp/22524829/wall-street-housin...
And the conclusion is worth sharing:
> The role of institutional investors is still being studied, but the popularity of the narrative strikes at something dangerous: People want a convenient boogeyman and when they get it, they often ignore the structural problems that are harder to combat. Housing undersupply is the result of decades of locals opposing new home building. It’s not something that can be blamed on Wall Street greed and the nefarious tinkering of a private equity firm. And that’s a much harder truth to stomach.
A huge part of the problem is the NIMBYs.
Also one of the largest investors, Accel, totally didn't own Trulia, which was totally not bought by Zillow. And Zillow totally isn't a major advertiser on Vox[0].
[0] https://www.vox.com/ad/16158882/zillow-zestimate-explained
Or they all don't believe it's the investors because they're right and that's what the data says.
Where's my check? Should I contact Accel? If I'm owed money pro-rata vs. Vox's readership, I should be able to buy a new car with the money.
[1] https://www.vox.com/22789296/housing-crisis-rent-relief-cont...
Just off the top of my head, in a town of 100K, I can pretty easily think of 100's of homes that were not built because of NIMBYs.
Also, did you miss the bit where Zillow got their asses handed to them because they screwed up and lost a lot of money?
But I don't think we should blame the central bank for the low interest rates anymore than we should blame a thermostat for running the heater all the time during an unprecedented cold spell. The central bank if anything was probably not keeping interest rates low enough for the last two decades considering how low the employment to prime age population ratio and inflation were. Interest rates are just especially low compared to historical standards because of the sovereign wealth funds, growing inequality, reduced population growth, and Asia becoming much richer with crazy savings rates.
A vacancy tax can be trivially avoided. Would there be an exception for renovation? Again, easy to game.
Airbnbs are legitimate demand. We just need over-supply now. The government should be able to step in.
Why solve a problem when you can just nuke it, right?
I hang out with AirBnB investor folks. There's a simple solution that works: Require the owner live on the property. Every AirBnB investor will skip the city/county if that is the rule, but still leaves room for legitimate residents to make some money (e.g. rent out the basement, etc). The latter isn't taking housing away from anyone - for most owners it's not economical to convert the basement to make it a long term rental.
If people bought their houses anticipating high rental income to make ends meet, that's a separate problem, and less bad than "people are becoming homeless because there are too few housing units".
It's not like the inventory of lots for sale doubles -- it stays exactly the same, but some of those lots increase in price because the ADU adds value.
> When a house with an ADU will reliably fetch 20% more than one without, then eventually all houses on the market will have ADUs, with the consequence that people buying will need to depend on short term rental income in order to make their mortgage.
If you significantly increase the number of units available via ADUs, then there's a lot more options to rent, and the demand to purchase houses goes down, bringing the prices down.
If the number of properties with ADUs doesn't go up enough to have that effect, then STR via ADUs will not significantly impact the housing market.
The reality is that if every house in the city had an ADU, most of them will not be used for STR, as the demand for STR isn't that high. They bring in a lot of money precisely because there aren't many options. If every house in LA suddenly had an ADU, you wouldn't get a proportionate increase in visitors. There will be an equilibrium point.
This is also ignoring the pain involved in building an ADU on an existing property. Depending on the locale, it can more than double your property taxes. Most existing homeowners will not build an ADU. Too much hassle, with uncertain income - most AirBnB hosts don't make much money via AirBnB - it's a fairly active investment and requires a lot of time/coordination.
Why would demand to purchase houses go down? People aren't buying houses because they can't find rentals. People buy houses because they want to be homeowners.
One classic example is the case of a very popular event happening in a small market that is otherwise unremarkable. Say, the Masters golf tournament: for about two weeks a year, Augusta, GA, is full of non-locals. Many residents will take vacation during this time and rent their home out to golf fans from around the world. Very few people want to rent a home in Augusta any other time of year. (It's also small enough that you're not required to fill out any additional tax forms, just report the income.)
Another is the case of a home that, for whatever reason, will not sell in the current market but would reasonably be expected to in relatively short order. A brief, 3- to 6-month rental for, e.g., a family that is constructing a new home that is not yet ready but who have sold their existing home and need somewhere to live is an excellent use.
Like I said, somewhat niche uses, but it's worth keeping in mind that there can be legitimate, minimally-distorting uses.
NYC bans short term rentals in multi family buildings already, unless the host is also staying there and not renting the whole apartment. So the short term rental restrictions probably do help, but it is hard to compare nyc to more suburban and rural areas
I also don't know what a "short term rental" is, that would devastate beach areas that rent out homes to tourists. I don't think that's a viable solution.
Housing prices have not gone up in any major way in a few major industrialized countries, Japan, Korea, Germany. You know what they did? They built more housing. Building in San Francisco, New York, etc is near impossible, especially if you aren't connected. Communities often vote against new housing because a) they don't want certain people in their area and b) we've wrongly viewed housing as an investment vehicle and more housing hurts values.
I get tired of bringing it up but I lived in a Tokyo apartment, 5 walk minutes from a train station, 10 min walk to a large park, nice schools, very quite area though just 5 minutes walk to lots of restaurants. 750 sq ft, 4th floor with elevator, 15 year old building (at the time). Rent was (at the exchange rates of the time) $860/month. Inflation adjusted that’s $1,075 which can’t gets you a spare bedroom in first tier American cities.
At the time Tokyo had no restrictions on short term rentals nor on foreign investment or property investing or any kind.
Tokyo’s big secret is that they let developers build apartment buildings.
I have several friends in the contracting/home services industry. The stories I hear about home flippers buying houses, asking for the cheapest paint/flooring/light fixture work possible, and then relisiting the homes with a 50% markup are wild. It seems a lot of people got into flipping homes around the start of the pandemic and lucked into one of the sharpest real estate market increases in a long time. They assume it's an easy way to make a lot of money with their interior design skills, but really they would have profited just as much or more if they just sat on the home from 2020 to late 2021 and sold it after the market went up.
I generally don't think outright bans work because the binary solutions become controversial and prone to political manipulation and stalling. Increasing taxes on these speculative transactions is the way to solve this, I think.
Simply eliminating the 1031 exchange that allows investors to defer tax liabilities on real estate investments would make a huge, immediate change in the velocity of speculation. The real estate lobby would go ballistic at the proposal, but I think it needs to be done ASAP. It doesn't make sense that real estate investors get such special tax treatment.
This is a problem for people who want to move. But, and this is mostly speculation, this is bad for everyone else too. It makes the market less liquid, which means that people are less likely to live where they want. It also reduces the incentive to build the kinds of units people want to live in. Suppose you want to build 100 nice condos. It’s harder to sell them to existing homeowners, and, in turn, those owners’ homes don’t go on the market. With fewer houses on the market, a smaller stream of buyers with lots of money can keep buying houses at unreasonable prices, and the market prices get pushed up.
A neighboring city of my suburb has large swathes of ranchy style homes on half an acre, those can easily be converted to triplexes or at least large family homes rather than tiny 3 bedrooms. We don't want to discourage investors from that sort of development.
However, we do want to discourage investors from 'flipping' homes and riding up appreciation, or even worse, investors buying houses that just sit empty.
We can discourage investments simply with more equitable property taxes. Currently, more expensive apartments are taxed at a much lower rate than cheaper ones.
https://www.bloomberg.com/graphics/2021-new-york-property-ta...
https://www.airbnb.com/s/New-York--NY/homes?adults=1&place_i...
Drive through New Delhi’s suburbs and the towns nearby and you’ll see vast empty towers. Many have been on the block for years without any price cuts.
Property prices have been largely stagnant and have underperformed inflation for a decade. Even now, the prices are beyond the reach of the vast majority of working Indians.
You need to look elsewhere for the cause of the problem.
I feel like we'd have non-anecdotal evidence about this somewhere. Nationwide, the number of investor buyers is 15%. Foreigners, the other boogeyman is below 5%
First it was for money laundering but now (in addition) increasingly it’s “regular people” in foreign countries who are seeing each neighbourhood explode in popularity, thinking that if they buy the rental income is how they will feed their families. They have no idea that the prices are simply inflated and unsustainable, let alone that they are most likely buying an unliveable property sight unseen.
The net result is that each speculative group is boosting the other as they race for the sky and leave all the renters on the ground.
Currently:
“For years, foreign money has been coming into Canada to buy residential real estate,”
“This has fuelled concerns about the impact on costs in cities like Vancouver and Toronto and worries about Canadians being priced out of the housing market in cities and towns across the country.”
These are direct quotes from our Prime Minister Justin Trudeau. In addition, he's hoping that a plan to ban foreigners from purchasing residential real estate will get him re-elected. There may not be hard data YET, but it's clear that what the govt sees is in line with what we the public see.
As for what we the public see:
- Foreigners flying in to major airports, then taking taxi cabs to small towns and remote properties with the intent to purchase. And we're not talking one or two, we're talking about enough that taxi drivers are talking about how concerned they are about the pattern
- Properties that have been un-sellable for years suddenly being purchased by foreign investors sight-unseen as the market heats up in that specific area
- Rental properties being taken off the market: first purchased, then renos started and never finished
- Residential houses (including house hacks and house rentals) being taken off the market by being purchased and held (in the past these kinds of properties were owned by holding companies that had a vested interest in making sure they do not have any more transactions and therefore fly under the radar, but more recently people are buying and holding until a future time where they can sell for more): A for sale sign goes away but no one ever moves in.
- Property values going down when a buyer purchases a property then fails to hire a property manager (resulting in the house falling in to disrepair). Turns out they had no idea that there are no local property managers and it's just communities of people doing favours for each other.
As for how that explains
> exploding house prices in small towns 2 and 3 hours outside of major cities, where vacancies are hitting record lows
Foreign investors aren't looking at proximity to cities, they're looking at what areas 'are hot'. They're typically overpaying which urges everyone to overpay, and we still have all the expected real estate purchases: people who want to escape the city after earning their down payments, new home buyers, domestic investors (including speculators), and so-on.
The result is higher and higher prices being paid for less and less properties. Vacancies have severely dropped because in multiple local areas that are on my radar (either I'm there, have talked to someone there, or have contacts there) mainly because the number of places to rent have been reduced.
Most of the housing stock in NYC are co-ops, which have fairly strict rules about renting out units. Condos are significantly more expensive to purchase, and there is pretty much nothing you can purchase right now that would yield positive cash flow given how pricey real estate is even with rents so high.
Airbnb is technically banned in NYC, and while I'm sure there continue to be illegal Airbnbs I don't see many listings myself that are for the entire unit as opposed to a room if it isn't a monthly rental.
Here, let me do the legwork for you, this one shows 413 stays:
https://www.airbnb.com/s/New-York--New-York--United-States/h...
Instead, only allow short term rentals where the owner is present. This means multi family units or rooms in houses or apartments.
As for taxing them, it’s a nice idea but AirBnB is already not paying hotel taxes.
As for vacancy taxes, I’m more skeptical just because this hasn’t seemed to have worked anywhere it’s been tried (eg Vancouver).
We just need to stop being so friendly to people parking money in residential real estate with punitive taxation and restrictions.
They are very useful for victims of domestic abuse where there are no shelters available and other things like people working on short assignments - sure they could get a hotel, but for small business competing with big tax avoiding corporations is often an only way to make it work. Also people not always want to commit to long term rental if they don't know area or they change jobs often.
> 2. Huge increase in short term rental taxes to the point where it's barely profitable
These taxes will be moved on to the renters, so it will make crisis worse.
3. Adjustable property taxes based on vacancy. Something like a 5x property tax multiple for 50% vacancy and scaling down to 1x for 5% vacancy.
This could work to an extent, but you'll find corporations hiring fake tenants if it makes financial sense.
I think the crux of the matter is that residential property is treated like a legitimate investment. We should start from banning pension funds and other funds from investing in such packages - they drive prices up, as they want properties at any cost and tax property flippers.
Cranking this up may be a way to reduce rentals and investment properties.
There are a lot of things that 1 person can do that are essentially harmless but when a hundred million people do at the same time can cause huge social and ecological damage.
Obviously this wouldn't be a silver bullet, but I really wish North American urban planning would allow for more freedom in housing structures, and put more emphasis on public transportation. Hard to have faith though.
Many of them don't even care if they have 50% vacancy because the investment of the property/land is worth more to them than anything.
Lastly, many of these investors are foreign or even money laundering and just want to dump their massive cash flow into some kind of a physical investment (in this case, Canadian land/property).
We have whole malls that are just ghost towns sitting in the Northern part of my city that aren't even properly built (incorrect piping/HVAC) to function solely for the purpose of legitimizing money laundering and foreign ownership of Canadian land.
Building more housing is good, I won't argue that, but the players in this market are so rich they will just buy ALL of it the moment it appears on the market and our local builders are all so corrupt they would love nothing more than to sign a deal to build 20,000 apartment units and immediately sell them all over to these crooked investors. There are literal video recordings of our 3 major builders bragging to one another about how "they own this city" and "we can keep selling these empty properties forever, the city can't do anything about it" and "if anyone opposes us, we'll show them who owns whose ass".
This is becoming so obvious it's ridiculous here. We have had a 15-30% vacancy rate for both business and residential near our downtown sector for the last 3 years during COVID, yet we have a record high of buildings being built. The foreign investment is so huge that they just keep building even when there is no market for the space. They don't care, it's all about moving money out of foreign assets into concrete assets here in Canada.
Canada has become the money laundering capital of the world: https://nationalpost.com/opinion/sabrina-maddeaux-canada-bec...
Vancouver tried, but I don't think they aimed high enough; many speculators just view the tax as the cost of doing business and subtracted it from their gains. At least it's up to 3% now; the 1% initial was way too small.
Added bonus if we measure vacancy right it will kill the short term air bnb market at the same time. I have no issue with people renting their home out a few weeks a year while they are on vacation for some extra cash, but it's heinous there are apartments owned solely for short term rental when tons of people can't afford homes.
The solution is to spread out from concentrated megacities. Overcrowding happens in cycles historically, and every time it happens it's bad for human health and the health of human society.
Everyone wants the space of a single family home and the slew of "modern amenities" a city offers, while lamenting they can't afford it. Our parents and their parents lived in far out areas that were cheap / semirural at time of purchase and matured to very nice places to live over decades of hard work put in by the local community. Of course those well-built-up areas are expensive, and of course the people that created those communities don't want to see them completely changed by density. We just need to build more opportunities like these, and people need to be willing to sacrifice on location at the start to see the area build up around them over time.
1. Not being introduced to the breadth of options that are available
2. Being told, or else insinuated to, that certain options represent higher status or achievement than others
Americans want small detached houses because the ubiquity of the social construct known as "the American dream" drilled it into everyone's heads from the postwar period onward. Sitcoms through the television era both represented and reinforced this ideal. But choices can be unmade as easily as they are made.
...Do...do you even program? Or build?
Because that right there tells me that you've never, ever been realistically engaged with a long term decision with long tails (read: other people that aren't you as stakeholders, or strings of dependent decisions).
There is nothing more permanent than a temporary stopgap, and bells that can be unrung are exceedingly rare, and never ever trivial to implement.
You constantly stress that your neighbors are going to come down and yell at you because your kid is throwing a tantrum, you have to deal with your idiot neighbors downstairs screaming and yelling at each other till 2 in the morning. If you have a newborn baby you are plauged by the constant fear that your neighbors are going to be too loud and wake the baby up.
So no it isn't just a status or American dream option it's a significant change in quality of life.
It seems like too many of these discussions on HN consider only young single people and they just ignore that many people have families and children they need to keep around all the time.
Adding multi-family homes just adds a new, cheaper option that increases density. There are lots of benefits to it, and its really reductive to say "The 'missing middle' is bad because I wouldn't want to live like that".
I also don't know how you can see into the 30-something-story windows of high-rise luxury condos to determine whether or not they are being used.
These are obvious considerations and I am surprised they did not cross your mind.
I have my doubts about the CA change. Zoning is one of many tools that local governments use to restrict housing. Water rights, parking minimums, setbacks, impact fees, environmental review, permitting, historic preservation, architectural review, etc, etc, etc.
And in California, Prop 13 means its structurally unprofitable to allow construction of housing because over time the taxes on a home won't cover the cost to the school district for any children that live there. So its fiscally irresponsible for local govs to allow housing, regardless of any preferences the residents have.
It seems you don't mind your kid making noise but you don't like neighbours yelling either. Living with neighbours may be difficult but most likely you are making their life difficult too. You don't need a detached house. Good acoustic isolation solves this issue but comes with a price.
But perhaps more importantly, the problem of nosy or overbearing neighbors doesn't go away when you move into a single family home, it gets strengthened and bureaucratized into what's commonly known as an HOA.
I personally would rather have close neighbors that I have the opportunity to make personal relationships with, versus the dispersed set of homeowners over a much larger area who get to fine me if they don't agree with how I decorate "my" house.
In my experience the tyranny of HOAs vastly outstrips any conflicts that may arise between apartment neighbors, but then again I try my best to treat the people with whom I share my space with respect instead of contempt.
Pretty sure most americans have experience living in apartments before they buy. I am just too old now to live below a toddler who decides 3 am is a good time to burn some calories running around.
It has nothing to do with 'status' , i just want peace and a good night of sleep.
I don't agree with your analysis that people don't want to live in dense house because of they are brainwashed with "american dream"
Single family homes are objectively nicer in many ways. Some, like mine, are even in very walkable neighborhoods. I've lived in apartments and houses, and I'd take the house every single time. That's not because I grew up in a house, either. I hated housework as a kid and the family thought I'd be a downtown condo dweller until I actually wanted to buy a house.
The vast majority of people do not care about walkability. Maybe that's because they grew up without it--even given that, you can't seriously tell me the vast majority of people would pick the "missing middle" over a small house in a walkable area given the choice.
If I was forced to pick between walkable + apartment or house + long commute to anything, I'd do the commute every single time.
If I was forced to pick between walkable + apartment or house + long commute to anything, I'd do the apartment every single time. Especially since it would likely be cheaper.
Wow, such authority. Sources for this strong factual claim? More likely, the vast majority of people have never experienced living in a walkable neighborhood, and can't imagine the benefits it confers, and so do not (literally cannot) consider that option. This reinforces the point I made above -- people's desires are shaped by the level of exposure to various ideas and experiences.
> a small house in a walkable area
You mean all those that are already owned, and for which there is no more space available in cities? This is an imaginary alternative that has no basis in contemporary reality, unless you wish to build an entirely new metro area.
Not to belabor the point too much, but obviously this is the wrong direction re: walkability. The geometry of the situation simply doesn't make sense when you can only fit an average of 3-4 people on lots each of minimum 10k sq ft. Walkability and density are highly correlated.
> house + long commute to anything, I'd do the commute every single time
Everyone I know who grew up in these kinds of living situations (especially ones with such domineering parents who impose their own preferences for housing instead of considering the factors important for early-life development) have pretty severe social deficits now. Your kids would spend all their time in front of screens while at home because there's literally nothing else to do when your parents are busy.
If you don't have kids and you live in a single-family home, you're, objectively speaking, wasting space, unless you regularly open your home to others for events.
Which, I suppose, is why single family zoning continues to live on. It’s the nicest way to live for many people.
But going back to the pro-density thing. I think what is misunderstood is that most people arguing for more density aren't arguing for everyone to live in Manhattan - that's a big problem too. They're advocating for mixed-use, medium density walkable neighborhoods. These neighborhoods would include single family homes with yards and sidewalks, but also cafes, elementary schools, gyms, grocery stores, bars, and office space too. You wouldn't have to drive a car everywhere but obviously you could own as many as you'd like. This would also help the local economy because you can pay a barista that lives in your neighborhood (maybe in a townhouse or a condo while they attend college) instead of a rubber manufacturer 4 states away.
Society has already decided that these costs are well worth it for the value of living in suburbia
> and political unrest since people won't be able to afford to live in homes.
It's debatable whether it's the need for a detached house that makes housing unaffordable outside of city cores. Again, the solution is to decentralize.
> They're advocating for mixed-use, medium density walkable neighborhoods.
Great, but they love to select their desired area then try to force changes on existing residents that purchased a home in the area for a suburban feel. That's the concern people have. Nobody would mind if density advocates founded a new jurisdiction to build a place like this.
Maybe - I mean I'm not sure that society is really making a choice since there doesn't seem to be any sort of market mechanic to decide what to build. But also you'll notice that houses in dense areas are more expensive than suburban homes so the market has decided that the suburban homes are less valuable. It's also not necessarily a good argument in terms of what we should or should not do.
> It's debatable whether it's the need for a detached house that makes housing unaffordable outside of city cores. Again, the solution is to decentralize.
We are decentralized.
> Great, but they love to select their desired area then try to force changes on existing residents that purchased a home in the area for a suburban feel. That's the concern people have. Nobody would mind if density advocates founded a new jurisdiction to build a place like this.
See point #1. Alternatively if the people who move there "decide as a society" that it should be different then that's an equivalent argument from your perspective.
One problem is that these (as you call them) stopgap options are mostly non-existent or if they exist they exist in good neighborhoods that were built properly and are economically out of reach. Another problem is that it probably doesn't make economic sense for everyone to be a family in a single-family detached house. Plenty of young people or widowers or whatever may not want to live in a single-family detached home with all of the associated maintenance and work that goes into it. We need options, and a variety of living arrangements available for different lifestyles and different economic factors. Frankly, nobody is going to build cheap SFH. It's a contradiction. Focusing on that just means you build houses for the extremely wealthy or the extremely poor.
If you are wondering why, it's because home builders like any business chase ROI so they're going to build homes with $350,000 in materials and labor that they sell for $600,000 and then the poor don't have housing but the government has the political capital to build low-income housing, so nobody in between has great options. Home builders unfortunately aren't going to buy land and then build $175,000 3br/2ba homes and turn around and sell them for $250,000. It just doesn't make economic sense for them to do so. They can build condos, townhomes, and other mixed modality living arrangements and make enough money on them, but that's about it. And naturally they're not going to build in the middle of nowhere because they have to find workers and also because people still need to live near jobs.
Today's Slow Boring newsletter (https://www.slowboring.com/p/a-bold-agenda-for-dc-housing) explained the numbers pretty well:
But the factual situation is pretty clear: (1) Dense, walkable neighborhoods feature very high home prices, indicating a large amount of unmet demand for high-density living. (2) Surveys show clearly that a majority of Americans prefer to live in auto-oriented suburbs and do not want to live in dense, walkable neighborhoods.
The way to resolve this apparent paradox is to note: (3) Currently only a tiny minority of Americans live in dense, walkable neighborhoods.
We then concocted a lot of policies to sustain demand, and hamper supply, the keep this scheme afloat.
Housing cannot be both affordable and a good investment.
You make it sound like a nefarious plan or some backroom deal. It seems more like real estate became our de facto retirement scheme due to everything else paling in comparison.
Pensions? Gone.
Savings? Nope, no interest (ha ha) in that.
Stock market? Sure, but its volatility prevents sane people from putting their entire nest egg into it....
If housing prices drop, the middle-class homeowner gets vocally angry at the presiding administration.
What's new is that it is harder to build housing than it used to be. The escape valve for an overpressured market used to be building new housing -- and if the new housing meets demand it does not cause the prices of existing housing to tank. The market simply reaches an equilibrium. That's what is not functioning today.
We don't need land value taxes or weird rules about rentals or discouraging investment or any of that -- we need to make it easier to supply new housing. Any solution that does not involve making it easier to build new housing is just not going to work.
No, a good investment is something that increases in value over time. Not "quickly." That's a get-rich-quick expectation, not an investment expectation.
You also seem to be assuming that housing prices increase but incomes do not. That is not the case in a healthy economy. (And growth in an economy is normal and expected and good, not unsustainable.)
This is not a theoretical situation. We know, for sure, that housing can both be a good investment and affordable because it worked that way for a long time. And we also know what changed -- barriers to building new housing have increased.
Since housing is a large and increasing portion of CPI, this is mathematically impossible. As housing increasingly dominated the inflation calculation it determines inflation. QED.
You could make the same argument to say that bonds are a bad investment. It's not true, depending on what the investor expects. Raw performance is not the only criteria by which investments are evaluated.
Another aspect of investment vehicles is the risk:reward ratio. Bonds are low-risk and thus expected to have lower returns than a higher-risk investment like stocks. That does not mean that bonds are a bad investment. It simply means they have a risk:reward ratio suitable for some investment purposes but not others.
Before the current supply crunch, housing was a reasonably safe investment that resulted in a reasonable return over the lifetime of a homeowner -- and it did tend to keep up with inflation. It was not a "bad" investment. It was not growing over 10% a year like it is today, but that's a recent phenomenon caused by shortages.
This is truly semantics and is quite pedantic. I’d highly recommend avoiding these types of arguments.
You’re digging in for a very specific and weird reason - I’d suggest not.
So far, we have not seen economic growth without proportional growth in material inputs, including energy.
https://en.wikipedia.org/wiki/Dematerialization_(economics)
"We know, for sure, that housing can both be a good investment and affordable because it worked that way for a long time."
You are referring to a period (the 20th century) that saw tremendous urbanization due to one-time advances in technology. Those will not be repeated. For details, see "Rise and Fall of American Growth" (Gordon).
Housing rose with inflation for 400 years. This bullshit is a 21st century thing when housing became a bitcoin-like financial scam.
It wasn't turned into a scheme by anyone, it's the nature of land. See Ricardo's Law of Rent; owners of land are able to extract rent from the tenants, and in desirable locations they can extract larger amounts of rent. If you want to make money without doing any work, buy land in desirable, growing locations and rent it out.
The solution is a land value tax, accompanied with a citizen's dividend or a reduction in other taxes such as income taxes.
It's easy to blame Wall Street, corporations, immigrants, but the reality is much simpler: these policies are wildly popular with the first few generations of voters who saw their property prices go up, so governments are deathly afraid to touch them.
The next generations are the ones who suffer, but they don't vote (yet). Politically safer to kick the can down the road and make it someone else's problem in 10 to 20 years' time.
What changed? It got harder to build because the government empowered NIMBYISM and nonsense “environmental impact” rules (hint: nobody actually cares about the endangered burrowing owls, they just don’t want affordable housing near their homes).
The affordability crisis was caused by government.
Any solution that piles even more government on top of the current government-caused problem is a no go — especially pie-in-the-sky solutions like land value taxes.
The only solution is to make it easier to build. But that's politically painful so it’s not going to happen. We even see places like California making it more expensive to build by requiring solar panels on new homes, in order to virtue signal about climate change without actually solving anything. So, invest in expensive areas, they are only going to get more expensive!
They might have overdone it, but still. They did exactly build entirely new cities.
What makes people think housing should be affordable in the "most wanted" locations? You can't physically fit unlimited people in a small area.
Although before WFH (and maybe even afterwards), the world's top billionaires were insisting engineers live within 20km of them so they can work at their companies. Industries like tech (and finance, and defence) heavily cluster, leading to certain cities/regions getting horrendously expensive.
You can certainly fit a lot more people in most major Western cities, without even much difference in lifestyle. Simply allow people to build what they want on their land, within reason. We've seen this in New Zealand, where recent law changes have allowed townhouses (terraced housing, with shared walls but otherwise freehold) and many many townhouses are being built everywhere.
Most houses are still standalone houses, no one is forcing you to develop your property, but if every 20th section is turned from a single house into 6 townhouses, a lot more people are able to fit into a smaller space while still having a comfortable, quiet home in a good location.
Our intertenancy walls have good soundproofing, enforced by regulations, so you don't really hear your neighbours. You can pay more for a standalone house, or less for a house with shared walls.
E.g. look at Austin TX, it's housing prices have skyrocketed in the past 5-10 years. It's not particularly dense, but the vast majority of the existing housing stock is typical single family homes - there are very few open tracks of land where you can just build dense housing. So to increase density, you have to change existing neighborhoods to be more dense, and I'm not sure I've ever seen folks that I previously thought of as rational, compassionate individuals fight tooth and nail over even modest increases in density.
dangerously oversimplified
source: professional urban planners
we AMPLIFY the rhetoric because, yes, you (and I) want to be heard. UrbanPlanning is not new! as well as ugly and counter-productive tactics on all sides of this debate.
This doesn't address in this global ponzi scheme how banks are fueling the competition between home buyers by dumping toxic credit, and how wage stagnation makes it impossible to escape this trap.
No solution is possible that doesn't wipe hundreds of billions of asset value from banks and homeowners, and we need to accept that.
That's not really new. The big cities in the United States grew dramatically during the 20th century, at rates far higher than they are growing today: For example, a hundred years ago cities like Detroit, NYC, Chicago, San Francisco, Los Angeles etc. were growing far faster than they are today.
Shadowy "government" is not the problem, existing home owners are the problem. And it's not hard to see why, if someone buys a house, they then have incentive to make their house as expensive as possible after they've bought it (within reason, and this is something land value taxes are meant to address). All this "government intervention" that makes it harder to build is nearly always done at the local level at the behest of the people who live there.
If anything, this shows why, e.g., state governments can be a part of the solution, by restricting local governments from putting in tons of roadblocks that make it harder to add housing (which is exactly what California did, though obviously they still have a long way to go).
On the other hand, that’s the same state government that is adding $25-30k to the cost of building even an ADU/in-law unit because now all new residential construction has to have solar panels!
In retrospect the combo of Cal and Stanford may have made it inevitable, but it's still a dump.
Imagine if you could just put iron ore in a warehouse and make a 25% return every year, we'd have no steel!
Its like Dr. Jekyll and Mr. Hyde. Central banks will have to fix the inflation monster that they partially created.
Another part is globalization was causing deflation pressure but central banks measure domestic inflation on a global wage market. Now that trend has partially changed due to protectionism.
Perhaps one reason is that they did build a lot of housing in 2008 and got burned? (At least, in less fashionable places.)
We're essentially operating an eternal monopoly game (someone got there before you, sorry future kids, you're out of luck) when it comes to housing.
How do we fix this?
Someone owns them, raise the taxes on them until someone lives in them.
> - 6,694 of those vacancies were units currently listed for rent that hadn’t yet found tenants. Another 1,031 were homes for sale that didn’t yet have buyers.
> - 6,294 were homes with either current owners or renters that were just not living there. This can happen for any number of reasons: hospital stays, long trips out of town, delayed move-ins, even cases of homeowners who have died but are still technically counted as the resident.
> - 8,523 were “occasional use” homes—i.e., these were second homes, vacation homes, some types of short-term rentals, or just any unit that was accounted for but not lived in most of the year. (The Mercury-News references these but classifies them separately from vacant homes, whereas the census considers these vacancies in themselves.)
> - Finally, the census designated 11,760 homes in the catch-all category of “other vacant.”
"Other vacant." Is a hodge-podge of condemned units, units in foreclosure, units in renovation or seismic retrofitting, a plethora of other corner cases and odds and ends, and homes actually just sitting empty doing not much.
(source: https://sf.curbed.com/2020/2/24/21149381/san-francisco-vacan...)
https://www.lendingtree.com/home/mortgage/vacancy-rates-stud...
I'd prefer if we focus on simply increasing the supply. Ban single family house zoning. Encourage more high density apartment buildings. Build more cities.
How is this supposed to un-break the housing market?
This is an exception to the tax rule and it’s a significant factor behind house prices (artificially low interest rates, and supply being other causes). It actually became a “smart” investment to over leverage for a primary residence because it’s a tax free investment that outperformed interest rates and other taxed investments.
It's not compatible wih the strange religious belief that homeowners should be handed free money from the government at the expense of everyone else, including their own children, for not doing anything socially useful.
That's the root problem, but it'll take a while to fix, because people like getting free money at the expense of other people as long as there's enough hoops to jump through that they feel like they deserve it, even when they don't, and enough hoops for them to not click that they are everybody else's "other people" and probably losing on the deal overall.
That doesn't preclude ownership - condos and co-ops work as well as apartments.
Out in the boonies a land value tax wouldn't discourage single family, because the land is not valuable (in comparison to a city).
They lead to increases in density (i.e. more housing) because there is stronger incentive to build more living units on smaller pieces of land.
Currently, in kentucky, if you own a certain acreage (it's something low like 10) your property is taxed on it's agricultural value instead of it's real value. So you build a 2.5 million mcmansion on a 10 acre lot and you pay taxes on 10k in agricultural value instead of taxes on that 2.5 million.
All the huge property speculators own large lots in the big cities and they won't subdivide and sell to individuals because if they subdivided they would have to pay taxes on what it's worth instead of some ridiculous "agricultural" value. One of the big builders here owns a 300 acre plot in the heart of the city. They pay taxes on like 50k agricultural value instead of the millions it's worth and drive up the prices of other lots because of it. They can speculate at no cost.
Mind you, they sell the lots in .2 acre plots when they develop them and the new homeowner pays taxes on the full value of the plot + house.
Shifting land to large housing use cases is one of the main ideas.
This "conversationalist" approach is what NIMBYs hide behind. We can't build in Las Vegas because of a tortoise species. We can't go beyond N levels due to "conserving" the history of a district.
Let the public (ideally across a broad area like a state or country) decide what areas need to be conserved for habitats. Don't let private land trusts / conservationlists be the mask that NIMBYs hide behind.
That aside, the point here is that if something is being held for the common good, it should be held in common. "The Government" isn't a perfect check or steward, but there's actual accountably there, something which does not exist at all in the case of private ownership.
Of course, it would be a change from the existing setup, resulting in a different layout, so some ecosystems might be damaged and "replaced" by worse ones.
One would hope that, if a big change like this were to occur, it would be paired with some support to protect existing habitats.
This is a bug not a feature (but yes, is a problem).
It's basically "inflation that affects you less the more property you own" and people seem aware that inflation can collapse societies if not tamed.
A counter-balancing wealth transfer like a UBI or some kind of pension scheme for people not yet retired that ties into the tax raised from land would work. But we'll bumble into it step by step as usual, no point rushing to create a better world when we can keep making it worse for a few decades.
A temporary one. Ensure only people over a certain age who own land are excluded, and only while they are alive. Once they die (or sell), the inheritors/new owners are not excluded. And ensure you can't make it perpetual by placing it into a trust.
Oversupply will take care of the downstream issues. They will cease to be good investments and become commodities. Rents will have to come down in a competitive market.
Oversupply will have to be on a regional level. A vacant house in a small town doesn't compensate for an occupied house in a city 100km away.
Zoning laws prevent this in the US/Canada in many places. Existing homeowners don't want to change. More houses means more crowding, higher traffic, construction noise, obstructed skylines, more pressure on schools, police etc. We can't accept that argument when weighed against homelessness or poverty anymore. Fuck their skylines, shelter is a basic necessity and it often has to be close to work, shopping, school etc. Living in the middle of nowhere is not an option.
Land redistribution (which is structurally similar) only really tends to happen after a revolution and that tends to be bloody. Landowners throw resources at violent and politically extreme reactionaries to send off the threat of their rent entitlements being democratically revoked.
So, it's unlikely to happen soon and if it does happen it'll probably get pretty ugly first. The path of least resistance will be a gradual slide into a kind of neofeudalism.
https://threadreaderapp.com/thread/1510262323176374278.html
https://news.ycombinator.com/item?id=30891217
Great comment from the above thread: https://news.ycombinator.com/item?id=30897398
And when they do stop, it’s only to tear down a building so they can build another one in it’s place.
Japan is a deflationary case study.
https://www.asahi.com/ajw/articles/14538387#:~:text=Tokyo's%....
[1] https://robbreport.com/shelter/home-design/japanese-homes-ar...
Helps that the whole country is on a fault line; nothing is going to stand up for a while anyways so you may as well establish a culture of rebuilding.
https://gestaltu.com/wp-content/uploads/2016/08/120927-Japan...
Buildings always depreciate, and North America has its fair share of homes not intended to last generations. In Vancouver it's become common for wealthy homebuyers to knock down houses that are less than 20 years old to put up something fresh, but that didn't stop property values from appreciating.
And in China it's perhaps even more the case that homes aren't built to last, and they even have an oversupply issue if anything, as well as a much more advanced population decline than Japan did circa 1990. And yet real estate in China has still attracted so much investment speculation that it's even less affordable, and my guess is it's following the same trajectory that Japan did. Property speculation is a powerful force.
I think a much better explanation is that the Japanese RE bubble taught Japanese speculators a lasting lesson, and the subsequent demographic decline, universal zoning, and widespread availability of mass transit kept it cheap.
Land and real estate are also a huge income shelters for Chinese elites. They cannot appear too wealthy, so they buy real estate to hide their wealth. Only recently, last 5 years, has China instituted a national real estate registry. I wonder how much of the market disruption of the last few years is due to large players trying to divest themselves.
It's not clear that tilting the rent/own preference toward ownership results in a net increase of housing prices, because for every unit of homeowner demand it adds to the market, it also removes one unit of landlord demand.
I know there was stuff like proposing to pay people to move away, but I don't know if that's a real thing?
If you reward people for conserving a scarce resource, they'll use less of it.
If you reward people for wasting a scarce resource, they'll use more of it.
There's some natural human value attached to space, but in the current system people are incentivized to own more than they need, because to do anything else would be giving up free money, but the fact that everyone else is doing the same, ruins things for everyone.
Things have changed a lot since then but it seemed to have been very successful at fixing the housing crisis of the time.
Building housing is expensive but we manage to fund the military today. We were able to build a massive countrywide network of roads and highways and train tracks a 100 years ago. So fuck capital too. Of course they don't want to build it, and this is a _necessary_ consequence of making housing not be an investment. It will not be profitable to build. But it will be good for humanity anyways. So it has to be atleast partially funded by taxpayers. That might even mean we all collectively get screwed by high rents and high taxes for a decade while we do that. As long as it actually does benefit future generations, so be it. There's plenty of room for efficiency in building as well so that's not necessarily the only way. Subways cost 10-50x more to build today than they used to and there are hundreds of companies that live off leeching public funds.
The wealth of most of our political class is also tied to their real estate holdings. 1/5 of our politicians are landlords in Canada; our housing minister has multiple properties. Make it make sense.
> We were able to build a massive countrywide network of roads and highways and train tracks a 100 years ago.
Building the first road/train track connecting A to B pays for itself (probably many-fold) in increased revenue from taxes you can collect because such a connection significantly increases the economy.[1] It's not clear that more housing will have that impact.
And for all the people complaining about zoning and NIMBYISM: That's a very local phenomenon in a few cities. Where I live we have neither of these problems, and housing is still a major issue. I'd wager that's true in most US cities that have housing problems. Preaching about zoning and NIMBYism is merely showing a disconnect with the rest of the country and is a red herring.
Solve the incentive problem - at current building prices builders cannot afford to make housing for lower income folks. Either make the cost to build cheaper or, as the parent says, get the government to subsidize building it so they can make a profit.
[1] Fixing up existing roads doesn't, which is why if budget isn't properly allocated for maintenance, you'll get poor infrastructure.
The main thing that impedes is is regulatory/zoning limitations
And while I'm mostly in favour of code limits (so, minimum size, insulation requirements, fire-proof requirements, etc) most of the impeding regulations are things like maximum height size, blocking developments based on the "character of the area" (read: NIMBYS complaining) etc
That's one of the reasons of past housing bubbles
"Oversupply" is also dependent on the actual target market. Several places lack cheaper housing but have an oversupply of more expensive ones (more bdrs, fancier areas, etc)
The other recent phenomenon/issue is loose monetary policy. When interest rates are too low, asset values increase. We have just had a period of very low rates for an extended period of time. As interest rates rise, prices should level out or drop off.
While I agree with this, bear in mind that for some people, housing is the only "investment"/inflation hedge available to them. Without public pensions, lower to middle class people need something to fund retirement and we should be careful that " make residential property a much less attractive financial investment" doesn't just hurt those people vs the REIC, Berkshire Hathaways, etc.
If there was any more leeway to raise rent and keep renters, it would have been raised already by landlord
In the longer term and at the macro level, renting ultimately competes with cost of mortgaging. If the cost of home ownership goes down, so should rents. Again, government backed loans could help those renters who can afford the monthly repayments but lack the upfront deposit/capital to purchase.
What is needed is lower residential house purchases prices which will flow into rental costs (eventually). In the long run, rents are always based on the underlying asset value.
The other thing that could help lower residential property prices is obviously on the supply side, which I have deliberately avoided.
Monopoly prices = increasing prices reduces revenue.
Also look up "rent seeking".
'lack of space' is not the issue for the most part.
It's largely a choice, not a need.
You don't get to live in the choicest places in the country, that's not part of the equality deal.
- Overriding local governments and HOAs and loosening zoning regulations. Let developers build almost any kind of housing almost anywhere they want.
- Banning or severely restricting the sale of residential units to companies, LLCs, and corporations.
- Using taxpayer money to train more construction workers and building more houses, then selling them on the open market
- Banning the sale of land and housing to non citizens or non residents
I'd also note there are plenty of cities with massive housing affordability problems but little in the way of historic buildings (Hong Kong, San Jose & much of SV etc.). Even in my own city (which often rates as one of the least affordable for housing), historic buildings make up a small percentage of total housing.
Most houses built since 1920 don't have the same value. But the meme of "old=worth preserving" still lingers on. In San Francisco there are old row homes built as temporary housing after the 1906 Earthquake. They are preserved only due to their age, not any intrinsic value. Houses built in first half and mid century are developing major structural issues. Their foundations may be cracking beyond repair. Their plumbing and electrical are several generations beyond current standard. They may have been built in a more temperate climate and lack central heating/cooling. Their layout may not make sense for a modern lifestyle.
These houses should be torn down, and new ones built in their place. But this is really difficult to do in some areas due to preservation committees holding on to every scrap of history. Instead you get completely insane practices like gutting a house except for 4 posts and rebuilding a new house within it. Or building a new houses around an old one.
The lot next to my apartment was like that. Instead of razing the structure and building a new one, they had to engineer a way to build a new house around what was a literal rotting shack. The new structure retains almost 0 of the original framing, and definitely retains none of its architectural features. So the project cost probably hundred of thousands more, and took months longer, just to satisfy some petty council's need to never tear down an old building.
As the oldest generation dies off, I would hope to see these attitudes change, and the USA open to more rebuilding. But unfortunately these rules will remain on the books. The capital class has no incentive to change it, because it would disrupt their control over the housing supply.
Right now we are trading housing (and food, water, government services) for cheap labor in many countries.
Individuals, or lenders through financing.
> Which party eats the losses?
Lenders
> How would this actually result in more housing?
Really interesting in how this would be modeled.
Or not yet anyway; if we see the bubble pop it perhaps will, but that's far from a clean solution. The crux is how do you incentivize building a lot, and I mean a lot, without expectations of appreciating property values? And yet if you have expectations of appreciating property values, how do you prevent speculators from driving up prices and making things unaffordable?
No thank you.
There aren’t enough future kids for this scenario.
An interesting thought experiment, in any event.
Landlords would subdivide houses into individual rooms and rent them out.
> they wouldn't be able to evict someone if their circumstances changed and they were unable to pay the extra.
Maybe not via the courts, but they would just shot off the water, and the heat, and then invite unwanted guests to live in the "unoccupied" apartment, until the non-paying tenant left.
Isn't our current crisis primarily a shortage of low income housing? Is all low income housing a "slum"? Landlords would be competing for good renters, so they would be incentivized to offer good living environments.
>Maybe not via the courts, but they would just shot off the water, and the heat, and then invite unwanted guests to live in the "unoccupied" apartment, until the non-paying tenant left.
They couldn't do so legally as long as the tenant continued to pay the official rent amount, any more than any landlord can currently shut off utilities to a tenant who is paid up on their rent.
Additionally, remove all zoning laws. The free market will handle zoning.
In the West in the 20th century governments implemented some common sense policies to keep socialism at bay. Countries that didn't, like Russia, were engulfed by socialists.
Look at how many young people openly admit to being communists. If this rent-seeking is sustained we'll eventually get the Khmer Rouge.
Woah there, let's not throw the baby out with the bath water!
Zoning laws in the US seem very broken, but they are much more sensible in much of the world.
A free-for-all seems like a bad idea - would you really want to live next door to a knackers yard, an abattoir, a tannery, a coal power plant, a chemical plant, a fish processing factory etc, a rubbish dump, a night club?
I'm not sure about all of that, but I think having bars, restaurants, stores, etc. intermingled within short walking distance of houses in suburbs would certainly be great.
The answer is just to build more housing.
[1] Reproduced here: https://i.redd.it/7loen1tjhqd91.jpg
All EU countries, all next to each other - Germany is bar far the biggest success - also the most densely populated - and yet hasn't seen home prices run away like in France and Spain. On the other side - Portugal hasn't either.
Like Spain, it hasn't exactly had an amazing economic boom...
It helps if you compare against a point in time, where you have just absorbed an impoverished communist economy that has to start from 0.
I think that has little to do with WWII.
It's also strange that South Korea is at -40% when the article states:
>In South Korea, President Moon Jae-in’s party took a drubbing in mayoral elections this year after failing to tackle a 90% rise in the average price of an apartment in Seoul since he took office in May 2017
In addition, the exponential tax could start much higher e.g the first residency held by an LLC is charged at 8% the second at 16% etc.
Or we could just blanket ban LLCs from holding residential property. As far as I can tell, the arguments for allowing it to do so are pretty weak. If a company wants shelter for workers it can: A) partner with a construction company to build and sell them to workers B) put money into the local economies in which it operates by paying for hotel rooms
The crux of the matter is that until landlord is relegated to small scale side gig rather than ‘most lucrative profession’ as it currently is, this problem will continue to get more and more out of hand.
Personally, I think the way out of this is for affected countries to form single issue political parties. Agree or disagree with Brexit, no one can argue that ultimately UKIP was successful in changing the face of British politics. I think it’s about time for a United Kingdom Housing Party to do the same on the real issue underlying much of the discontent of the last few decades.
As it is, it's a good investment because supply is globally constrained. Investors have parked a huge portion of the world's wealth into land. It's obvious when you talk to investors. This investment can spur development, or it can greedily be sat on.
How do you expand supply if you buy existing apartments? If they had taken the $2.9 billion and had built 15,000 new apartments, that would have expanded the supply.
- Restrict and tax short-term rentals.
- Introduce a scaling speculation tax on three or more properties to remove the incentive for small-medium size investors to hoard. It will return supply back to the market.
- Limit residential real-estate purchases to citizens and permanent residents (i.e. taxpayers).
- Remove barriers to development to increase supply. Ignore the NIMBYs.
- Cap rental increases.
- Introduce a vacancy tax.
- Limit immigration until the housing issue is resolved.
- Eliminate "blind bidding" from real estate sales.
I doubt any government has the political will to truly tackle this though, especially when most politicians are landlords and speculators themselves.
a) Not enough housing supply to meet population demand (in a purely physical people-in-homes allocation sense)
vs.
b) Too much housing wealth tied up in boomer ownership (e.g. overly large houses with just 2, 1, or even 0 people living in them most of the time)
In other words, to what extent does the solution correspond to:
a) We absolutely need to build more, there's no other way
vs.
b) Significantly higher redistributive taxes (e.g. land/property taxes, wealth taxes) to incentive people to both "right-size" their living situation as well as compensate for how lucky the boomer generation happened to be in terms of housing
I'm sure the answer is "both" to some extent, but I'm just wondering if there's hard data that actually compares the two rather than just opinion.
I stopped reading after this. There is no mention whether the cost means a monthly rental price or a purchase price, or if the considered resident's salary is monthly or annual, gross or net.
Buying a house that costs 44x my monthly gross salary is nothing unusual and well below bank mortgage limits. Renting an apartment that costs 44x my annual salary per month makes no sense.
Journalists should put more effort into data quality and focus less on the sensational part. Unfortunately, the latter sells better.
Make it hard to be build and there will be immense pressure to build but it won’t happen.
The two ends are constantly trying to find an equilibrium. The only way to make housing affordable is to overbuild, but private money won’t do it for obvious reasons.
The government could subsidize building but in essence that’s just making rich people richer. Perhaps that’s the only way short of forcing people to build (like prison labor or something horrible like that).
—-
I used to believe that eliminating zoning and increasing density is the solution (still think so), but induced demand is a thing. When I studied this I found no evidence denser areas are cheaper. In fact the denser areas tend to be more expensive from my own research.
Denser areas are more expensive because that’s where people want to live, and land is at a premium.
And the land becoming more expensive is the point. If an area becomes more popular then it will be denser meaning the land is more expensive meaning the housing is more expensive.
Building denser does not necessarily result in cheaper housing in the net.
There's an insane premium on zoning and permitting the land to build, as well as having the irreplaceable liberty to be covered by a grandfathered structure that is no longer legally buildable.
I mean, look at all the private equity buying up properties in the US, causing our shortages, who is funding that? Is that an actual threat to security?
It used to be we were paranoid about foreign ownership of production, well we don't make anything anymore, so this is another means.
Sigh, Gen X, forgotten again.
Housing is, though. Everyone should have a roof over their head.
Two different things
Somehow Russia is ahead of time and went strait to the wild stance.
But demand comes from capital, not from the housing needs of individuals. In one tier of the economy, a house is a home; for another, that same house is an investment. The poor cannot afford to outbid the wealthy for housing, and the gap is widening at an accelerating pace. That's why building more houses won't solve the problem in the long term, because the rich are getting wealthier much faster than the poor (or middle class), and any increase in supply will go to serve their demand for rental property.
Actual problem: Seems to be mostly in western countries.
This all basically boils down to defined benefit pension schemes being a thing of the past. My dad worked for the same company for 30 years, paid off his 3x gross income mortgage, and retired on a final salary inflation-linked pension.
I'm earning 3x as much as my dad ever did, still borrowing almost 5x my salary over 33 years for a worse/smaller home, and have no guarantees on my pension beyond what I sacrifice and what the stock market yields.
There's a reason why it's called a title.
Solves 90% of all economic problems.