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Comment by JumpCrisscross | Hacker News Reader

> "Housing is an investment that should only go up in price" will eventually kill any market

It doesn't have to. Housing can be affordable while going up in nominal terms.

Neither do I think most San Francisco homeowners think about housing supply strategically. They're pissed off about a specific view being blocked. Or construction noise. Or their area's average rent going up. (?!?) Alternatively, they're comfortable and can't imagine someone might be better off housed in worse conditions, cheaply, than struggling to make rent in a decked-out flat.

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> Housing can be affordable while going up in nominal terms.

Housing cannot be affordable if it goes up in real terms though. In an ideal world house prices would increase 1:1 with wage growth from an affordable baseline.

There are 2 ways to fix it: either crash the market or introduce policies which will cause either stagnation or below inflation growth in housing prices for at least 20 or 30 years.

> In an ideal world house prices would increase 1:1 with wage growth from an affordable baseline.

There's only one way to do that - a command economy, with all housing owned and doled out by the government. That just doesn't work, anywhere, ever.

You have to work very hard to ignore the fact that some places are more desirable than others to live in, and sometimes those desirable places change. Also, different people have different priorities, desires, and ability to afford both for their housing. How do you accommodate that pressure without 100% control over the entire real estate market?

It's a good question and how we "did" it in the past might need to be investigated.

House prices and appreciation were basically the same throughout the US until something like the 1950s, when places like CA began to far outstrip other parts of the country. I don't think that CA became a desirable place to live suddenly in the 50s, but perhaps it did?

It became a lot easier to move across the country with the rise of cars and commercial flying, and CA is a really nice place (from a climate and natural beauty perspective, plus the thriving industries). So it may not be the only reason, but I think if prices were equal, many people would choose CA over Indiana for example, if they were looking to move somewhere new.

In the 50’s, the population of the U.S. was under half of what it is now. And lots of professionals (and their high wages) like to live, or must live, in urban areas driving prices up in those same areas.

Supply and demand, combined with “rugged individualism” valued so highly in the states. That individualism is largely what drives NIMBY mentalities.

The relevant metric is did a place become far more desirable to far more people. Which seems obvious when information becomes more and more available, culminating with instant transmission of pictures and videos and forums that create lists of the most scenic or best weather or best beaches, etc.

This is also ignoring sheer population growth, and the unrivaled economic behemoths that have come out of California since the 1950s and produced a ton of wealth for Californians.

Huge population growth without corresponding new home growth.

>That just doesn't work, anywhere, ever.

Except for Vienna.

Yes Vienna does an amazing job but nobody in other cities seems to notice :(

You don't need to have "100% control" of the market. Government policies can help steer the situation in one direction or other. It's not like there must be either 100% or 0%. There are 50 shades of gray in between.

Nobody's trying to realistically get to the "ideal world". What you want is an "improved world".

> and doled out by the government

Not necessary. A land value tax provides a market-based solution to this problem.

Singapore?

> a command economy, with all housing owned and doled out by the government. That just doesn't work, anywhere, ever.

We need a shared definition of "working" then. There are plenty of ways to disincentivize low-density real estate development and incentivize high density and affordable housing, and all of them involve regulation and tax reform to control the market to some degree.

This post apparently assumes any non-free-market structure that "doesn't work" would be a worse outcome than we have currently, where there are more vacant homes than homeless people.

Why can’t new housing reflect the actual cost of materials and labor, with a marginal land value, and existing housing generally increase in land value because it is more desirable? That’s the way it used to work, and many people gained appreciation in their houses simply because of growth.

The real underlying problem is a lack of new housing stock, at least partly due to the decade long neglect in the construction trade following the housing bubble collapse.

I think in an ideal world housing would continually fall in price (in real terms), just like other goods and services. Why shouldn't it? In most places, there's plenty of space, plenty of room to increase density, and in most western countries population isn't growing that fast (if at all). Any policy designed to prop up housing prices is just welfare for the rich.

> Housing cannot be affordable if it goes up in real terms though.

Yes it can. It just cannot be better than other comparable investments. If single family housing appreciated, on average, 0.25% per year in real terms, we'd likely be looking at an entirely different housing market.

> It doesn't have to. Housing can be affordable while going up in nominal terms.

For how long? If housing is a good investment, eventually the cost of housing will outpace the ability of new entrants to the market to afford it. If you're already "in the market", you might be OK. But if you're not, even the down payment may be completely out of reach.

> For how long?

Infinitely. Wages go up in nominal terms, too. What matters is the real housing price hovering around zero. (Slightly above, localized, is also fine if balanced by migration.)

Real "house price" for a given house should actually go down over time, because it gets older and worn down and just not quite as good as the new hotness.

> Real "house price" for a given house should actually go down over time, because it gets older

House, as in structure, yes. Home, as in structure + land, probably not. Real wages are higher today than they were in the 80s [1]. One would expect some of that to filter into land value.

[1] https://fred.stlouisfed.org/series/LES1252881600Q

Most people are constantly doing upgrades to their homes, as well as maintenance.

Inflation and real wage growth.

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