There’s no such thing as affordable housing
strongtowns.org
strongtowns.org
(1) make it easier to build high density housing
(2) make housing an unattractive financial asset
Many have already talked about (1) but few understand (2) and what types of policies would promote it. This would include
- heavily taxing capital gains owning land (not taxing the improvements)
- limiting ownership to a very long lease (e.g. 99 yrs) similar to what they do in Singapore.
Both would be highly politically unpopular for the majority of Americans and therefore they do not get implemented. What people don't realize is that fixing the housing problem actually requires certain people to GIVE UP something:
- giving up the quality of your nice neighbourhood because a giant complex was built next door
- giving up much of the capital appreciation in your house because it appreciated
Both would be be highly unpopular for the majority of existing home owners. As a result everyone complains but politicians don't actually do anything and nothing changes. There is no such thing as additional affordable housing without any cost. There is a price to be paid. Most are not willing to pay it.
Also, one thing that I have never seen being talked about that has increased the demand for housing many fold in the last 50-100 years is the fashion of people leaving their family homes in their twenties. In traditional societies, it was common for at least one child to continue living with their parents for their entire life. It was thus very common for every household to include three families - a pair of grandparents, one of their children with their spouse, and one of their children with their spouse.
Instead, today, people tend to live with their parents only until around 20-30. Getting married while living with your parents is virtually unthinkable. This means that the supply of houses has to be at least three times greater than in a traditional society, with a higher percentage of temporarily occupied housing as well (since even though you can eventually reuse your parents' and grandparents' home, you need to live somewhere while they are still alive.
Of course, there are tradeoffs, and I would be extremely hypocritical to claim that I'd like to live with my parents and grandparents as an adult. But, such preferences are formed by fashion and social expectations. The millenia of this being the norm at the very least show that it is workable.
And yet: https://noahpinion.substack.com/p/actually-japan-has-changed...
> In fact, Japan’s fervor for constant scrap-and-build construction is a major reason why rent there is so affordable, and why local politics haven’t halted dense development as they have in the West. Wingfield-Hayes opens his article by complaining that Japanese houses tend to depreciate instead of appreciate:
> "In Japan, houses are like cars."
> "As soon as you move in, your new home is worth less than what you paid for it and after you've finished paying off your mortgage in 40 years, it is worth almost nothing.
> "It bewildered me when I first moved here as a correspondent for the BBC - 10 years on, as I prepared to leave, it was still the same."
> Weirdly, this is presented as a chronic problem — something Japan should have fixed long ago, but hasn’t. But in reality, depreciating real estate is one of Japan’s biggest strengths. Because Japanese people don’t use their houses as their nest eggs, as they do in much of the West, there is not nearly as much NIMBYism in Japan — people don’t fight tooth and nail to prevent any local development that they worry might reduce their property values, because their property values are going to zero anyway.
> As a result, Japanese cities like Tokyo have managed to build enough housing to make housing costs fall, even as people continued to stream from the countryside into the city.
The structure becomes worthless after 40 years or so, however the land does not. If you're in some dying little town, then yeah, your property will be worth nothing eventually. But if you're in a nice location in Tokyo, that land will always be very valuable, much more valuable than the structure ever was.
Famously stagnant (and for the past decade, even Negative) population growth and low birth rates, coupled with very restrictive immigration policies, together play large roles in Japan's real estate situation.
Second thing is that they might make much more money if they move out. Which might be much more beneficial strategy - when their parents get sick and need financial help even if they own their primary living space and don’t have to pay rent - than staying and getting what local market gives.
My own country had an authoritarian government that owned all land and property, and everyone was living as renters paying their rent to the government. In most cities, these properties were themselves actually built by the government, often on previously unused land (as they greatly expanded many cities). Once the revolution came and we had a (quasi-)democratic government, one of the very first acts was to give everyone ownership of the property they were leasing from government - and this was hugely popular.
This is the policy in Japan, which is not an authoritarian government… well, not in terms of housing anyway.
You just can't get a mortgage for a used home and they don't let local governments control zoning.
Huh? Yes, you can get a mortgage for a used home. People do it all the time. Where did you get that crazy idea?
Yes, zoning is controlled at the national level, and in a very permissive way, so that works really well (you can legally build new housing almost anywhere).
I think this should be revised to "make housing an unattractive financial asset if you don't live there"
Both would be be highly unpopular for the majority of existing home owners.
"Homeowners" as a concept needs to be substrated. Is Blackrock Capital a "homeowner"? Yes, the corporate entity owns and rents out domiciles people think of as homes. Are they the same as the person(s) wanting to "buy" the enclosure that provides privacy and puts a roof over their head in a neighborhood with a decent school for their kids[1]? No.
For this particular niche of economic policy, we need to start talking about things as a "homeowner-resident class" and a "land(lord/owner) class" and crafting public policy around that.
[1] I'm trying not to pigeon hole this point to single occupancy dwellings, it's part of how they divide us ;)
Here in the UK older people with kids who've left the nest often continue to live in large houses because there are a wide range of strong incentives to do so, from low council tax, capital gains tax treatment, inheritance tax treatment, and the protected status of housing wealth for some benefits.
The housing crisis could be mitigated to some extent without building any new homes, just by reshuffling the existing stock to people who need the space more.
My recommendation would be property taxes that reflect the implicit income you get from living in a home you own i.e the avoided rent.
That way, we could invest in productive assets instead of land.
Housing is worse than "land". The building itself is inherently depreciating, yet many think that they "invest" when they get a new kitchen or bathroom.
For example, if one buys flour, and bakes a cake that a classic depreciating asset. In two or three days, that cake will be worth less than the flour that went into it. However, if you sell it today to someone having a birthday party then you may make 3x on your investment.
Buildings work the same way but with a longer timeline. That’s why developers build houses then sell them with the land, and don’t just sell land. It’s also why home owners invest in their own houses.
If one builds a kitchen in their own house, they get to use it during part of the depreciating timeline. Let’s say kitchen costs 10k, they use it for 5 years and it’s depreciated to 5k worth. Now so long as it doesn’t cost 5k to raise it back up to 10k worth, then they have gained if they sell the house. Alternatively, they could rent out the house for 5 years at a higher rate because it has a kitchen.
Like the cake, housing is an asset class where more strategies apply to it than “buy and hold”.
Near me, $10k-$20k of landscaping can go a long way in affecting the listing and eventual sale price.
Without owners there needs to be either easy credit or state funded housing. However, without a free market there needs to be a way to prevent abuse.
Housing has to remain attractive but there is no need to artificially inflate housing value by limiting supply. With enough supply, rent should go down to production costs plus reasonable profits. Real estate is a secure investment so interest rates on government bonds should be the upper bound for those reasonable profits.
Housing should be a highly financially attractive to build. The land under the housing should be highly unattractive as a financial asset. There is a clear difference between the two. The distinction can be made by taxing the capital gains from LAND very different from the gains from improvements. If you tax the capital gains from land at 75%, I promise you will get the same amount of building but a lot lower overall housing cost.
You can also lower interest rates for housing construction/refurb companies but also remove the tax incentives for actual home ownership.
They say it should be unattractive to hold, not to build and sell.
> - giving up much of the capital appreciation in your house because it appreciated
> Both would be be highly unpopular for the majority of existing home owners. As a result everyone complains but politicians don't actually do anything and nothing changes. There is no such thing as additional affordable housing without any cost. There is a price to be paid. Most are not willing to pay it.
This is a pretty limited view, frankly. Your first point is spot on -- housing density needs to increase. But this does not mean worsening quality of life.
For decades density increases barely touched quality of life; a couple houses would be replaced with a tasteful 3-story apartment building, not "a giant complex was built next door" -- neighborhoods changed relatively slowly. Like Rome, Manhattan wasn't built in a day.
These days, in many places, there are exactly two practical options for construction: detached single-family homes, and massive complexes. Why? At least in California, because any kind of development not by-right will face years, and potentially a decade or more, of citizen action against it in every venue imaginable. If you're going to incur that kind of delay/anger anyway, you might as well build a giant thing and make your pile; there's no room for smaller buildings because they're not profitable enough to pay for the years of fighting the neighborhood groups.
Look at San Francisco, for example. Even if the population were to double, all you'd need is to double the housing units. This does not require massive complexes, it would be enough to convert single-family homes to duplexes, build ADUs, small apartment buildings where townhomes are, etc. -- except that those activities are more or less impractical.
So, we get today's dichotomy: single family homes, allowed by zoning, and massive complexes, conditionally allowed (requiring approval) because that's the only new housing that is worth pushing through the extreme regulatory environment.
Allow just a doubling of density in any SFH zone, and watch how quickly you end up with reasonable duplexes, ADUs, etc., that increase housing stock without a giant complex next door.
The only thing you have to give up is the fetishization of the single family home inside the urban core. Your neighborhood will stay beautiful and nice. And your existing home will continue to appreciate, because it will still be more desirable than the duplexes being built, which are in turn more affordable.
I really think this is over-simpifying. That take might explain SF, but what about all other places across the world with housing crises - London, Sydney, Toronto, Vancouver, Lisbon, Austin, Denver, NYC....
What they all have in common are strong zoning and neighborhood preservation laws that prevent density growth.
NYC has its own special problems, but also prohibits density increases (read about “air rights”).
It's been noted many times that a large fraction of buildings in many cities could not be built today, because they violate zoning.
Isn't one of the other reasons for building the massive complexes because as long as you're going to be building something there, you might as well build what will get you the biggest profit?
I've heard of this being the case in several areas in recent years, and it seems to me to be just another casualty of the increasing obsession with maximizing profits at all costs on the part of far too many companies.
It’s only the huge developers that can acquire large parcels, or many parcels that can be joined together, that are able to push through the current nightmare to get projects done. The small developers that would be happy to do small conversions don’t bother — because they can’t spend 3 years fighting city hall with no guarantee of success, incurring taxes, fees, paying for staff, etc — for a measly $300k gross profit; it would be eaten up by all the waiting!
That's not just the case for housing, but a whole range of regulations, many of which only still exist because removing them will lead to voters becoming upset about short-term changes, even though it may benefit the economy in the long run.
I suspect two things. One is that NIMBYs are often more well-off and can inflict more pain on the politician who would oppose them than would be the gain from the pro-density crowd support. Another, sadder, is that enough of those who complain about housing not being affordable would like to become NIMBYs themselves, but can't yet afford that.
Because wealth predicts propensity to vote.
(Also, to the extent decisions are made locally, the people that would live in area but are excluded by housing affordability don’t get a vote. In fact, often a major reasons for the NIMBY policies isn't financial, but keeping the outsiders outside. For instance, when you've got a nice segregated community created by overtly racist policies that you are no longer allowed to employ, the main way to slow the erosion of what you worked so hard to achieve is to make it hard for new people to move in.)
And to elaborate on this, real estate owners already have "skin in the game." They fully understand the negative impact of a policy that is obviously meant to reduce the value of their investment and vote/lobby against it.
For the non-real-estate owners, it's way less obvious why they should mobilize or care. It's tough to get terribly excited about economic policy that is intended to gradually improve the housing problem by making it less attractive for the capital class to horde their assets forever. These effects are longer term and nebulous/uncertain for somebody who needs somewhere to live NOW.
Yes, we might move to smaller homes in much denser housing models to increase housing. With that perspective, we can just build glorified chicken coops for humans too, however no one would like to live that cramped.
Optimization for economic indicators tend to erode the things humans enjoy. High quality goods? Too expensive to produce and lasts too long to be economically viable. Low-density neighborhoods with nice, open spaces? Inefficient land use, long commutes, etc. In return, when a person wants to enjoy life, it becomes impossible, because enjoyment becomes economically not optimal (or viable).
The current system is a trade-off between comfort and economic indicators. There can be other ways, I think. Maybe increasing working from home to reduce commute where possible, moving work to neighborhoods instead of moving people to work, etc.
I do not know dynamics of USA very well in this regard, but it looks like this situation is the result of "money first" philosophy (i.e. strong capitalism), instead of being human first.
When people see people as "expendable workforce", they can normalize "putting" people into glorified chicken coops.
I think that's a false dichotomy. Free markets typically produce higher-quality goods and services than non-free markets because quality is part of the dimensions among which firms compete. Throughout history, quality of goods in all kinds of areas have gone up when government restrictions were loosened and competition was allowed.
Preventing a free market in housing benefits exactly one group: Those who are lucky/rich to already have such a nice big house.
What I'm telling is, when I buy the same thing with x% of my income, in two different time frames, the latter item is of inferior quality, even if it's the same brand and model. This is because everything is optimized for economic turnover now.
The previous dishwasher we had never seen a wrench in 20 years, it's only serviced to changed a brittle hose after two decades. Current one's water pump/heater/dryer unit is changed after ~10 years. Again, it's a long time, but its life span is shorter. Let's see how long this (original) replacement will last.
The paper quality of the notebooks I get (yes, I write a lot) is always getting lower, despite price is going up. A good quality notebook is now more expensive than a tome of high quality printer paper.
Higher end electronic devices (or goods in general) get more expensive in terms of relative income every year, and they almost keep the same quality of their previous selves. Optimization means less parts, less repairability, shorter life spans and more profits.
Free market optimizes for maximum money movement (pressure), maximum profits for minimum costs. The goods become inevitably better (because the baseline improves inevitably), but slower than it should be. This improvement is due to integrated parts which has to be above a certain quality threshold to even work.
I remember reading a comment about textile production:
> Older textiles were much more durable because older machines were not able to lower quality this much. Now we can, so we do.
I fear that when there's a lack of better options and the alternative is being homeless, people will indeed very much live like that.
For a sobering view of just how bad things are in certain parts of the world, here's a video about the apartments in Hong Kong: https://youtube.com/watch?v=Qj7KtWhGrAE
And that affects "just" a few hundred thousand people. I'd say it's very dystopian regardless.
I know. "glorified chicken coops" is an implicit reference to these apartments. It's a very dystopian direction, and we're heading towards it, yes.
If you let brute-force raw capitalism run roughshod I would build a japanese style capsule megavault and trick a bunch of college kids into thinking it's the cool thing, selling them each 100% ownership of their personal pod for $X. I could probably buy a shitty old warehouse and fill it with these capsules and you could own your own fucking capsule in a coop for maybe ten grand and aside from whatever services your coop votes to buy you wouldn't owe jack to a landlord.
Could HN pull this off and seed such a vault? Once there is one successful vault, people will copy it and the housing crisis could be a thing of the past.
Where would be a good place to start such a vault?
I've pretty much resigned myself my game plan is to suck all the capital I can out of the united states and then play the same game somewhere else where I can be the big bad foreign investor buying housing.
This is absolutely beautiful showcase of the core issue here, and HN is definitely not above it - if you own, you are happy to see your (potentially only ever) investment to gradually rise in price (or often more like matching inflation) and all is good within limits of reality. You don't care about some social justice or poor people yelling.
If you are on the other side, then all is bad, social injustice, we should rehaul whole system because owning my fucking big house is a basic human right given by some Geneva convention (writing this from same Geneva right now). There is no middle ground apparently.
Mankind is selfish, simple as that, and absolutely nobody is above that, its just a basic human trait in same way as having 2 hands.
I've done few (happy to say now) rather small investments in stuff like stocks, crypto etc. They all bombed in medium term although were stellar short term, crypto probably long term. No way I am ever pouring money into that casino again, and most people don't even have my level of knowledge of those topics. Housing is something most people reasonably grok, can understand + and -, cashflows and maintenance required, etc. Plus you can actually live there. You would have to make owning properties in general absolutely horrible for people to not invest in it, if they can. Ie here in Switzerland there are various punishments for owning, ie imputed tax on potential rent even for your primary residence, and people still buy whatever is available.
And with earth population growing higher and higher, while everybody wants to live in the rich cities or very close to them, the policies would have to be very draconical to reverse the trend. Now which politician, regardless of country, would ever do that to their voters.
Just like racism can be systematic, anti-competitism can also be systematic and illegal.
1. remove restrictions on building low cost housing like dormitories
2. allow people to turn their homes into boarding houses
This allows for things in between an apartment lease and living on the street.
The way out is a gradual reduction in the amount of. Interest allowed to be entered (e.g., 1-2% reduction per year) to avoid spooking markets.
And if business ARE allowed to deduct interest expenses, but individuals not, then rich people will just have their company own their house, and rent it from themselves (or some similar adaptation).
In particular, for real estate, if loans become more expensive, fewer people will want to build housing, making the market even more constrained. (Now, I do see reasons for making lending more expensive, but that would be for financial stability reasons, not housing.)
To "solve" housing, I think the main approach should be to encourage the supply side. Make it easier and cheaper to build, and harder for local communities to enforce their NIMBY inclinations.
Within reason, though, because if take to the other extreme, you may end up with an oversupply of housing in many areas, which can lead to slums forming.
Yes, there could be a hit to overall investment, and it could be argued to set a lower bound of allowing deductions for up to 50% of interest paid or something.
Yes, the benefit is less for married, because standard deduction becomes $26k so marginal deduction is an extra $22k, $9k/yr in the bank, $750/mth.
One of the reasons why so much money pours into real estate is civilizational pessimism. People suspect that the recent inflationary episode wasn't the last one and don't want to hold much value in currency. The stock market has cooled too, even the Silicon Valley is going through the downward part of the cycle. Plus, the newly rich Chinese want to get their money out of reach of Beijing at almost any cost. So where does all the superfluous money go?
Into brick and mortar, because those do not lose their value anywhere as quickly as cash does, especially in highly coveted places.
(Real estate is by no means expensive everywhere in the West. You can buy an entire house in a depopulated Italian village for 1 euro. Real estate is expensive in attractive places.)
If you somehow block the influx of money searching preservation into brick and mortar, there will be consequences somewhere else, much like blocking a massive flow of water will cause it to divert, not disappear or stop.
I think about it a lot, and I'm not sure this is the problem, more like a symptom of something else.
Building a house is a capex exercise. Someone needs to provide the capital to get the house built. This can be someone who has outright cash, or a stable salary to get a mortgage (rent the capital for a fee) or an investor with their own capital, looking to charge rent.
What happens if you make the last category unattractive? Well a few things, possibly:
- Ideally, home builders would start charging less money for new houses, as the supply of buyers has dropped. The highest bidder has less money so prices will drop.
- But presumably, also less homebuilders would stay in this business. Inasmuch as they do build new homes, it is because the market price is attractive. Some will stay, but some will be pushed out. This in turn will drop supply of housing.
My fear would be that the net result would be prices staying where they are, supply of housing dropping, and the renters being pushed out. If anything, what we need is just more houses, built by someone, anyone.
Therefore the only way to make housing affordable for everyone in the long run is to guarantee housing. That means social housing or rent-geared-to-income housing in combination with cooperative housing and market housing.
No one solution will fix the problem. For example for the mental health problem if you give an apartment to someone really far gone they will just destroy the apartment and walk outside to live on the street. You need supports for them maybe communal living. So the right type of housing matters for each person. For someone who will never make enough money, the housing has to be free.
Streets with less poo and needles, lower amounts of civil unrest, more green spaces due to less sprawl, and less noise & emissions pollution from cars is a net win on this front.
The resistance from NIMBYs is almost squarely financial. Homeowners like the fact that they're subsidized by the government (due to lenient tax policy and the like). As with all people who receive unjustified subsidies, they will fight until the bitter end to prevent the gravy train from being disrupted.
Instead figure out some way of differentiating between a house as primary residence and a house as investment, and tax former less and the latter more.
This, and the expectation of this, is the main problem. It causes a lot of economic misallocation. Also the long term risk is massive. Buy a property in SF today, and it may be the best investment you ever made. But if SF goes the way of Detroit, it could be the worst one, especially given the leverage often used in such "investments".
And since people see the property as their main economic security, it strongly reinforces any NIMBY tendencies, creating incentives to make it harder for non-owners to find a place to live.
Imo, housing should be seen as depreciating asset, just like a car. People should build houses to live in them, not as security for their retirement, and it should be allowed to be cheaper when possible (remove regulations that jack the price up, whether it's zoning or excessive requirements to the standard, as well as limit how much local communities can prevent land owners to build on their own land). Whether people want to own or lend/lease should be up to them, just as with cars.
And if housing gets cheaper, any funds freed up should be invested elsewhere. For long term investments, I think index funds or conservatively managed (and low fee) managed funds are ideal. They allow people to grow capital at approx the same rate as the economy grows, and protects against local fluctuations, and they also provide some protection against inflation risk.
The idea is that if a farmer has a field it's worth its agricultural value - something like 5-10,000 per acre currently. If government turns up and says this field is where we shall build a railway station, hospitals, schools and permission for 50,000 houses, then the farmer is a fool to sell for 10k, and instead sells for 100k. Meaning the cost of the hospital just became untenable and frankly nothing gets built.
But, if there is 100% capital gains, then the land stays at the agricultural level because no matter who buys the land, the government says "it was worth 10k last month, if you sell it to us for hospital at 300k you owe 290k in tax"
And thus no-one feels a fool for selling at agricultural prices, and capital gains remains normal for non-land improvements (ie actual bricks and mortar)
Of course the towns built was Milton Keynes, a concrete monstrosity of roundabouts and soulless planning. But hey. People live there
> This paper incorporates speculation into the standard supply-and-demand frame- work used to analyze housing booms and busts. Speculation reverses the common intu- ition that elastic housing supply attenuates housing booms. Housing market frictions make land a more attractive speculative investment than housing. As a result, unde- veloped land both facilitates construction and intensifies the speculation that causes booms and busts in house prices. This insight explains the frequent housing booms and busts that coincide with high construction activity (e.g. Las Vegas, 2000-2010). These episodes are most likely to occur when a housing market nears but has not yet reached a long-run development constraint. Consistent with the recent U.S. housing experience, the model predicts higher price volatility in neighborhoods where housing is more easily rented. Land is an asset whose price volatility can increase with its float.
Creating a large disincentive to ever sell it.
I like the idea of a different incentive structure: no taxes on the sale of a newly built housing, high property taxes on houses with an exemption for primary residence, and leave the existing property tax structure for business and fallow properties alone. This way you encourage new housing being built, encourage ownership and not renting out housing as a business or sitting on houses to flip them.
Tax the land high enough, and you'd be losing money to just sit on it hoping it appreciates in value. You'd need to build something (like housing) to make a positive return, so you're incentivized to do so.
If you tax houses higher, people are directly incentivized to not build any, and instead just hold vacant land.
...and China.
I wholeheartedly agree with (2), but this is not the way to do it, for a number of reasons.
Example: https://www.propublica.org/article/when-private-equity-becom...
Also Adam Smith has a lot of rants against rent seeking behavior and landlords if you want to go with that "communist" writing.
> The rent of land, therefore, considered as the price paid for the use of the land, is naturally a monopoly price. It is not at all proportioned to what the landlord may have laid out upon the improvement of the land, or to what he can afford to take; but to what the farmer can afford to give
Funnily enough, check how far back the 1/3 income for rent comes from and the context on which it is mentioned:
> The rent of an estate above ground commonly amounts to what is supposed to be a third of the gross produce; and it is generally a rent certain and independent of the occasional variations in the crop. [..] This rent “is seldom less than a fourth ... of the whole produce.”
A simple rule is that nothing people blame on corporations is ever caused by corporations. People and governments are legitimately more powerful than corporations! And they often use that for evil.
In a country of 330 million people.
3.6% of apartment units are owned by private equity.
https://ourfinancialsecurity.org/2022/06/letters-to-congress...
SF has both banned new SROs (flophouses) and made it illegal to tear down the old ones.
If we must live in a world where no one gives a fuck about the poor I honestly am not so sure they should be denied at least their slum house rather than freezing to death behind a dumpster.
https://www.realtor.com/realestateandhomes-detail/1882-Quesa...
What's the cheapest legal free standing residence in san francisco? I couldn't find anything under half a million. That's an easy 1/3 the price of any legal freestanding structure.
1. Eliminate the investor and land lord element from real estate and you reduce a significant reason as to why housing is so expensive. Do it with taxes, codes, whatever. You can own two houses and any more than that the taxes go way up. Landlords don't build houses, developers who sell their new builds do.
2. Eliminate foreign ownership of American real estate and limit it to American citizens and legal immigrants. -> see Thailand
3. Unpopular but true: eliminate the influx of illegal immigrants and remove the ones already present. More people + limited stock = high prices
"Importantly, the research finds that immigrants revitalize less desirable neighborhoods in costly metropolitan areas, opening up new alternatives for middle- and working-class Americans to buy homes, and immigration supports the housing market without exacerbating the nation’s worst affordability problems, because immigrants themselves tend not to settle in the most expensive places."
Where do those existing residents in those working class neighborhoods go when immigrants move in? They get priced out and either end up homeless or on section 8, that's what happens. No new housing units in the low end ever get made, only the high end gets new builds.
See this https://www.newsweek.com/why-are-we-spending-millions-housin...?
That sounds like just introducing new problems not fixing the problem, I'd rather extremely expensive housing over either 1 or 2
Damn I love hacker news. Can't wait for the ballooned tech salaries to pop in the USA when that next generation of engineers graduate
I'm trying to negotiate something nextdoor and the owner has a 150 unit project almost approved with small, rent restricted units. It uses some density bonuses but it's a private funded deal. The lot is also 1/4th the size as the lot I described above, but 3x the number of housing units.
Great right? Except it's over parked so with the restricted rents, it's going to be tough for a private developer to pencil it.
What about an affordable housing developer, who can pursue LIHTC funding?
Here's feedback from LIHTC developers:
It's too many units. The only money right now is in special needs development (housing for homeless, people with mental illness)... way too many units where 50% of the building has to be people with problems in one property. LIHTC is funding smaller projects than this. 9% tax credits only pay up to a cap $2.5M or so in developer fees... so no incentive to do bigger projects. Plus, gov't funding means you have to build lots of "extra stuff" in the project... so you end up losing unit count and end up with bigger units and more non-residential space.
I'm not in affordable, but ask anyone in the affordable space. It's complicated, messy, and incentives are all over the place, not always going in the 'right' direction due to how the reality of the ground is (i.e. affordable developers play the game of making development fees... not building the most amount of units (you get penalized))
Want people to solve the housing crisis? Make it easy and cheap to build.
Affordable housing often times is more expensive than market rate housing, just so you know. There's a lot of B.S. added through the process.
Given that the whole point is to increase the number of units, this seems to be like a massive WTF that needs to be fixed - in the sense of "stop the whole process and fix this one thing", since it seems to be directly disincentivizing the specific outcome that is desired.
That’s impossible to solve. The demand will always be far higher than ability to pay as long it's a desirable place to live. Owning real estate in Paris, NYC, London, Shanghai will always be out of reach for the average, middle class citizen.
In fact, it’s good that people are discouraged from buying in these cities. They’ll go to other cities and buy, further distributing the population.
We don’t need to be like Asian cities (Thailand, Vietnam, Taiwan) where 70-80% of the countries population live in 2 or 3 metro areas. Those countries would love to distribute their populations more broadly.
Also, housing has a lower price limit. Adding more housing is expensive. Building new housing will always be more expensive than, say, ten years ago. It will also be the more expensive the higher you build. This premium needs to be paid for by rent. Thus, new housing will never filter completely to the bottom, unless the owners go bankrupt.
Cities attract ever more people and that's the core reason of the housing crisis. Ironically, housing, and generally the lack of space, is one of the few factors that actually repulse migration into a city. Ease it and migration will increase, worsening the space (and housing) problem again, probably to a new level.
I would argue that it's pointless to try to "solve" that problem, as long as cities profit from ever more people living in them and people economically profit from moving into or close to cities. Any attempt to mitigate the problem will only lead to more migration into the cities, forming a vicious cycle.
One "solution" would of course be to let housing become completely unaffordable (e.g., just stop increasing or even actively decrease housing). Areas then become uninhabited by normal people. For certain areas this seems to be largely accepted: I don't think anyone has complained lately about the housing crisis in London's financial district.
Another option would be to make it completely unattractive to actually live in a city. One could, for instance, restrict all buildings to single-bedroom apartments by law, move schools to the outside if the city, etc. People might then spend the night there, but will hardly live there.
The interesting question should be: Why do people pay as much as they do today to live inside a big city? What makes it so much more attractive than living 5km further outside with 5-10 times the space per person?
So it all depends how independent you are from everything and everyone. If you have complex medical needs or need to be around certain people also in the city, you might have to live in the city.
Homeless and mentally ill get treated by programs and services that can be afforded by major cities (small towns apocryphally throw homeless on a bus to the big city to fix their homeless problems).
And they definitely don't want to hear it when you show them tons of 1,000 sq ft starter homes in the $50k-$100k range because they can't walk to 3 microbreweries and an art gallery from there.
Lucky people moved in, and after meeting the minimum term, were able to sell off their properties into the regular market, pocketing a cool 750k per home profit.
Our local subsidized housing is also notorious for having highend Luxury SUVs parked there. The sweet old ladies that live there, well, their sons and grandsons often do too, exploiting the situation. No party affiliation specific to this issue, just bad systems and laws that didn't work properly.
Maybe I am in the minority here, but I view affordable and excellent mass transit systems as part of the cure for this.
In some parts of the city the wait time is closer to 20 years, and then you are essentially stuck on the scheme which can be wiped away with the stroke of a pen at any time.
All these people currently on rent control now sublet out for market rates and essentially have free government mandated incomes for being a rent-seeker
It's stifled all new property development and made housing some of the most affordable on Earth apart from a select few who are the minority.
Anyone with half a clue would not be waiting for a rent-controlled unit, it's a trap laced with uncertainty. Rent control has already brought down one government.
https://www.reuters.com/article/sweden-housing-idUSL5N2O51RM
I come from the anglo saxon perspective, so I can see the huge advantages for 100s of thousands of people in the city that are insiders and can have great quality of life.
If you remove the system, you have a grotesque transfer of wealth from workers to a rent-seeker class. Like 30% of people's disposable incomes, based on how it is in other countries.
There are also lots of fallacies above in your response. 1. you do not have to live in the nicest part of the city - you have no right, so the 20 year wait is for entitled people. 2. you are not allowed to sublet at market rates - you can be brought to "court" (ockerhyra) 3. the decision to make or not make more houses is a govt decision, it is not the fault of the housing cooperative or the system.
I can see why this doesn’t work for everyone, and I wonder what kind of social effects it will have.
Oh, so the "secret" to Swedish housing affordability is 'have rich parents'. Silly me, why didn't I know that sooner, I would have shopped around for richer parents. /s
>I wonder what kind of social effects it will have
The short term effect will be a much bigger class divide between those with rich parents and those without, basically a ghettoization of cities (which is already a thing in most EU cities), while long term maybe more social unrest, crime, political extremism, etc.
That way you can pay the absolute highest rents when you're young and making the least amount of money.
I'm surprised he managed to write how great housing in Stockholm is with a straight face as everyone knows how terrible this system is for those who can't get a rent controlled apartment.
Obviously this can work in your favor if you're a local and can get in the que when you turn 18 and hit the jackpot when you're 28 but not if you're a foreigner in your 20s or 30s trying to move to Stockholm.
You didn't say Swedish only workers.
By "workers", people on HN understand workers of all origins.
But instead of that lasting forever since their situation never becomes so that they can afford to buy a nice home, which is the case for many people, they only have to deal with that for 10 years at which point they get a lot of choices for nice homes at an affordable price.
It’s the same here in Denmark.
To put it into perspective; at 20 my friend bought a house in the suburbs — 3 bedroom, 2 bath, 0.3 acres; decent neighborhood, driveway for his 2 cars; etc. he’s not college educated and cuts trees down for a living.
Now try doing that in the Bay Area?
It's a bit funny to compare "Europeans" to some place in nowhere midwest and a friend that is almost certainly an outlier.
I'm sure you can find 20 year olds that can do the same somewhere in Europe.
You can look this all up.
While there are homeless and people in trailers, on average it’s because (a) they’re drug addicts who don’t want to live by their own rules (b) people living cheap, trying to get ahead or (c) Elderly, often inept, people who get trapped.
Trailer parks are particularly bad as they lock you into (effectively) renting. Outside of a few major(poorly run & corridor) cities, eg Chicago, SF, LA, NYC, etc the homeless rates are relatively low.
It’s largely that people are interested in particular locations. Not everyone can afford homes in that location, it’s fact of life.
That said, there’s zero need to be homeless in the US. In Detroit you can get a home for free if you promise to repair it.
Not trying to make a joke, that is the reality. Once you get off the waiting list it is essentially a guaranteed second income by subletting.
Wired: work for a decade far from your job so you can wait in a queue for an apartment close to your job
That sounds, odd to me.
Most people buy homes because
(1) it financially makes sense (you can sell and profit off the asset, further often the interest is tax deductible- depending where you live)
(2) legacy. Owning a place let’s you pass it to children. Renting means the house goes to the next tenant
The people who often “win” in these situations are the land lords. They now have a queue of people (paying to be in the queue), probably near 100% occupancy, and will make small increases to rent every year or two.
So yes indeed, renting is not my preferred way of dealing with housing in our society, but it is the reality for a lot of people.
A friend of mine couldn’t afford a house in SF, so he bought 3 elsewhere and the rent income paid for the mortgage on his 4th.
People can always move and make it work. I’ve seen the poorest people I know buy a few acres and quite literally camp as they build a house by hand.
The reality, is people want to rent. While it blows my mind, I agree it’s the reality (people increasingly renting).
However, in my opinion, it’s because they don’t have the drive to build wealth and be independent; self-reliant; etc.
(3) not having to have to ask owner to do anything in the house
in most cases any changes you need to get permissions, some don't even allow pets.
(4) It just doesn't feel good to pay monthly to increase someone's else wealth, with no benefit to society or anyone else.
In order to qualify for new, heavily subsidized public housing (so called "Build to Order" - BTO) you need to be married and below the household income threshold (which is actually very high - $170,000 for a couple).
Well the problem is demand massively outstrips supply, especially in highly desirable developments.
So what do they do? They have a lottery. And because of the way Singapore lets you sell public housing at market rates after a period of time, it's a literal lottery - you can usually flip your unit for double after 5 years.
So what happens? Lotteries are massively oversubscribed. Sometimes 10 to 1. And people have every incentive to enter the lottery because it's cheap ($50) but the pay out is huge.
So as a result, plenty of young couple fail the lottery 3, 4, 5 times and then move to the resale market where prices are much higher.
So instead of allowing the market to allocate housing based on who is willing to pay (with the proceeds going to the government who can use the money for other things), the price is kept low and allocation is based on a lottery.
I'm not sure it's much better?
"japan has changed in important and visible ways" https://news.ycombinator.com/item?id=34509182
specifically the part about affordable housing:
"In fact, Japan’s fervor for constant scrap-and-build construction is a major reason why rent there is so affordable"...
Housing is affordable in Japan because of zoning, full stop. Zoning here doesn't allow NIMBYism, so there's few impediments to building more housing, anywhere it can physically be built. So as long as there's market demand for housing, housing gets built. The devaluation of existing housing structures over time might help some, because it makes it more economically attractive to buy up older properties and demolish them and build bigger, newer buildings on the land. But the real reason is the zoning law, which makes it really hard to stop development.
Policy action to force house prices lower might be socially beneficial - but changing the distribution of wealth to a fairer level also works for social good.
Or another way to phrase your point (uncharitably) would be "if we gave poor people more money, then 'the market' would take it away again".
Which either is giving malevolence to 'the market' for poor people specifically (while it obviously works well for the rich, or means that the market structure only rewards those above certain (relative) income
My point is that redistribution of wealth obviously works at the extreme, so it's a market structure issue for points between that and current situation.
(the 70k was something I worked out few years back by dividing the global GDP by global population. surprised me)
Wikipedia:
> The per capita PPP GWP in 2017 was approximately 17,500 international dollars according to the World Factbook. According to the World Bank, the 2020 GWP in current dollars was approximately $84.705 trillion.
I suspect with PPP or different assumptions 70k is quite feasible. I think my main argument is stronger - if everyone had 70,000 of wealth then houses would be less than 70k.
I am reminded of watching a movie with my kids - "Home" about a group of bumbling aliens who take over earth and move all the humans to Australia. (One girl escapes with a friendly alien and has adventures and learns the meaning of ... etc). It's fun for younger kids.
Anyway, the point is that super advanced (but bumbling and ultimately nice) aliens simply transport every human to Australia and plonk them all down in front of instantly created suburban houses. Some people (elites?) will lose out - their houses will be less nice than pre-invasion, but for the vast majority of people it's a major upgrade - a life changing improvement.
And roughly that's what the "if everyone had 70,000" idea is about. As the plot was not challenging especially on the third rewatch, I would try to imagine what happens next in Australia. Do people live pleasent suburban lives and human happiness is complete, or does it devolve into Haiti-like chaos ?
Sadly my money is on Haiti as what keeps us from not killing or eating our neighbours is a sort of common story about how safe we are, how police and other services are there for us etc
My only upside is that the aliens might do a random sorting of humans. If you were say in Fallujah or Haiti or Yemen and you and your neighbours and society all got moved to the same neighbourhood in Australia, then you take the same social structures, the same pressures of expectation and social performance, the same grudges. Disaster.
But randomly spread (families) out and it seems different - the idea you will hold onto political grudges against a Norweigian neighbour and a Brazilian opposite seems odd - especially now you have to overcome the shock of the chnage and frankly the much nicer living standards you now have.
Also lots of ice cream was available which might have helped
Wealth redistribution could work but of would have to be extreme to the point of curbing demand due to no one having excess income.
Anyway, I'm putting all my hopes on remote work.
Enforce super blocks that are equally residential as they are comercial? ie if X job spaces exist in a super block there should be slightly more than X bedrooms available in the same super block.
Target 100x more sqft by 2030? Instead of targeting 1%^7 more sqft by 2030
> This feels like a damning observation. In terms of the human suffering it points to, it is. But it’s also a really mundane, obvious one.
Usually the person saying this kind of thing is defending the mundane, obvious terrible thing. I’m glad that wasn’t the case here.
Most obviously by owning houses that are mostly vacant, but there are more subtle forms of it with it, like how you use "spare" bedrooms. Someone who needs the money will rent a spare bedroom out.
Who, exactly, is talking about affordability as though it's an intrinsic part of housing?
In effect, the city is forcing the property owner to select some random poor people and give them monthly "cash" to help pay their rent.
Except that "cash" can only be used for one particular unit, which locks them in, so it's economically much less efficient than real cash.
It's basically just an inefficient tax on property owners that gets redistributed to a handful of lucky people.
(Now, strictly speaking, one (less common) definition of access is "freedom or ability to obtain or make use of something" but the connotation intented is really "permission, liberty, or ability to enter, approach, or pass to and from a place or to approach or communicate with a person or thing"[0] because in the former "access" could be dropped entierly in sentences like "they don't have access to healthcare" to simply "they don't have healthcare." So it is clearly being used to create a certain (false) connotation)
So just about everyone with skin in the game, developers, investors, municipalities, aspiring buyers, and economists almost always talk about affordability.
It should be punishingly taxed to own more than 2 homes * (some people are really attached to 'summer' homes), and I will keep saying, the best way is to only exempt a home the family (if married/single/etc) has lived in for at least 35% of the year exempt. (Allows moves, up to 2 homes, etc).
The answer is not to figure out how we can pack YET MORE of us into every visible empty space. But I suspect it will take some time and dramatics for that fairly existential realisation to bed in.
The real estate market in Japan is evidence that land value stagnation goes hand-in-hand with population stagnation. Imagine suddenly doubling Japan's population over the next 30-40 years - you think those Tokyo apartments would keep getting cheaper??
There is plenty of room, and plenty of resources, for the people we have, and the people we are likely to have by the time we peak. The problem is not the amount; it's the allocation. So every time you think "this is only a problem because we have too many people," instead of "this is only a problem because there are a few people hoarding all the land/money/resources," you're moving away from being able to effectively solve the problem, because you're not correctly identifying the cause.
It's painfully obvious that the reason you even mention giant gas-guzzling SUVs and McMansions is because those things are self-evidently terrible even in small amounts. McMansions are naked examples of conspicuous consumption, and the classic "giant gas-guzzling SUV" is a Hummer H3, which is also very clearly something that people buy because they want to make a statement (usually one about their manliness and/or hatred of "the libs"), not because they genuinely feel that it's the best car for a particular job.
Now, there are genuine discussions to be had about just what level of consumption is sustainable for a population of 8-10 billion people, but they don't look anything like what you're offering here.
For example, one of my region's top ecological spokespeople .... years ago, paid my company many thousands of dollars in the detailed designing of their idyllic, hilltop rural mansion and it's sprawling surrounds.
Does that make Japan a proportional hoarder of the global ecology's food and energy resources, by virtue of it's high population?
Or does your concept of proportionality only apply at the individual scale?
We are running out of space that has a sufficient population density to sustain a viable economy for people who aren't farmers and where you are still legally allowed to build housing. The solution to that is simple, you just need to allow housing to be built.
The ecological inertia of the entire homo sapiens species is already too great to be behaviourally overcome within the timeframes necessary to avert significantly disruptive climate change.
The growth trend cannot continue at it's recent historical rates.
If anything, it's the exact opposite. Suburban sprawl and car centric development extending into unpopulated areas is unsustainable. Densifying already populated areas is much more sustainable.
People, acting as rational agents, will pay more to live in good neighborhoods and the market is simply responding to this fact.
I wonder where does QE lay on the list.
And most of those folks had paid off their mortgage or had it close to paid off, and have experienced so much appreciation that their purchase price is less than a current down payment.
That QE activity peaked circa Apr 2022[1].
The Fed subsequently announced monetary policy circa May 2022[2] to reduce the size of their balance sheet; with respect to agency mortgage-backed securities, that means predictably liquidating assets in the open market at a rate cap of $35 billion per month.
The Fed's weekly H.4.1[3] § 3 reports agency MBS assets are overwhelmingly residential. They were slowly ratcheting down commitments to buy MBS, and effectively reached 0 circa end of Oct 2022.
[1] https://fred.stlouisfed.org/graph/?g=ZcQw
[2] https://www.federalreserve.gov/newsevents/pressreleases/mone...
Sadly this doesn't often seem to be the case. Sometimes new housing is purchased in order to have an additional permanent residence in another state, sometimes the new housing is purchased as an investment and kept empty. Sometimes housing is rented out (literally an economic rent) where the wallets of those less well-off are squeezed to line the pockets of the propertied class.
There is a fundamental mismatch between real estate and housing. The feudal lords of centuries ago may have been far fewer in number and with far more day-to-day power, but the effect of private ownership of real estate being the lever of economic power is still quite real and true today.
This isn't an argument for public ownership. Transportation and gridlock aside, suburbanization, where middle class people owned a small parcel of land on which their sole residence lay, was an enormous boon to those fortunate enough to access it. A modern approach that prioritizes density and modern transportation approaches while keeping that inherent formula - one residence for one family, with no other real estate holdings - will fix the housing market.
How does this look like?
* New development may not be purchased by private people, but by a public sector entity only, single-payer style. This public sector entity is then responsible for putting long-term housing on the market via rent-to-own at an auctioned price, i.e. the public sector entity establishes a price and holds an auction for the monthly rent, the person who bids the highest gets stable rent at that price for thirty years, after which the person becomes the registered owner of the property. If there are no bids, then a new auction is held; whether the price drops in the new auction or not are subject to market and political pressures. * Private sales of older developments are still legal, as is inheritance. Private renting is illegal. * Maintaining multiple residences incurs heavy property taxes at the federal level, with a three month overlap grace period to permit people to move into a new residence and put their old residence up for sale. Property owners may purchase adjacent properties (or buyout adjacent rent-to-owners) and combine them into a single property without incurring the tax, and subsequently may decide to parcel off some of their property and sell it (which would be tax neutral), but still may not rent out any portion of their newly-combined property. Property owners may decide to privately pay for redevelopment on their own, sole property, which would be tax neutral, and a grace period would be extended to ownership of a second property if that property is under redevelopment, for a maximum of one year, to not force people to live in a house that is under construction.
If that could be enacted, watch real estate prices crash.
Pretty much everyone is worse off since the pandemic except for pfizer. The decline continues, but the gaslighting intensifies.
Soon ...follow up articles:
"There's No Such thing as an Affordable Big Mac. " and "You will eat the Bugz"
If housing cost really was keeping people from having kids, then billionaires' families would all look like the Duggars. They don't.