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Comment by ivan_gammel | Hacker News Reader

Property and construction are the most distorted markets in a half of the world and this article is yet another proof of that. Our society as a whole would actually benefit if state intervention would make property market unattractive for investors by oversupply: government could invest 50-100B€ in creating non-profit construction verticals that will oversaturate market. The next logical step would be to allow some of the constructed apartments to be privatized by tenants at low cost: maybe not by everyone, but only by those who has a socially important job (police, firefighters, healthcare and social workers, teachers) and majority of difficult problems that government has to deal with would go away. Yes, a lot of people who bought expensive properties may forget about any returns, there could be some margin calls and banking system won’t be happy. But this would be a necessary sacrifice for a healthier economy in which money go elsewhere.

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There's no reason the government needs to invest in it.

The market will take care of it on its own as long as regulations allow it. The government just has to ensure zoning allows it, height restrictions are relaxed, environmental reviews are sped up, and so forth.

Of course, all those restrictions are there for certain reasons, which is why getting the balance right between those and new construction is so hard.

Edit: Also, the idea of prioritizing housing for "socially important" jobs is backwards. Why single out housing? If we truly value teachers, just pay them more in the first place. That way they can choose whether they want to put it towards a nicer home or fancy summer camps for the kids or something else.

> The market will take care of it on its own as long as regulations allow it.

Unless there is more profits to be made by colluding, monopolizing, and scheming. In which case market will reward those who monopolizes the hardest.

Which is why we have laws against collusion and consolidation into monopolies.

These aren't reasons to abandon markets, but simply to ensure they're properly managed as they are across the world.

Thank you for explaining why markets can't be self-regulating simply through competition and why they need external regulations.

Sure, my original comment was about getting regulations right. (Nobody suggested markets are inherently self-regulating.)

1. Market has already failed. The incentives are simply wrong, maximizing profits instead of maximizing number of people having big enough place to live. 2. Cash is not the only and the most efficient incentive. We need workforce to go to the places where they are needed, not where is the best ratio of rent to income. If you just increase the salary, you will simply redistribute more of the taxpayer money to landlords. If you pay the same amount in property ownership, you create strong incentive to stay in the same place for long.

You obviously have not been around non-profit, government run entities. The waste they create, the inefficiency inherent in such enterprises is terrifying.

Yesterday I looked at a huge box full of perfectly fine laptops and monitors we will scrape because selling them or even giving them away would be inconvenient.

At the same time, I have to pay parts of a business trip out of my own pocket because I chose not to fly but to take the train. The best part: My trip was CHEAPER than flying. But it was out of regulation, so tough luck.

have you ever been around a for-profit, privately run entity?

Your experience at a big company in those two scenarios will likely be no different.

Whereas at a company, the equipment would be destroyed because it checks a box on some asinine security requirement.

Or because it would be inconvenient.

For a larger company, the bureaucracy may be thick enough that even if you'd find a soul brave enough (read: suicidal) to push for the initiative, by the time it's set up and verified to fulfill every relevant rule, bylaw, as well as the law, organizing the sale costed the company more than it stands to profit from it.

To be honest - and this applies to every such story I've heard - it's exactly the same in large corporations.

Turns out, it's really not about government vs. free market. It's about size. The larger an org is, the more bureaucracy it has and the more stakeholders are involved. Eventually, you get this weird inversion of priorities that seems to defy common sense. But it's all locally rational - a corporation or a government both can trash a shipping container full of brand new computers, because doing it is cheaper than selling them, or than any other alternative, once the (real or perceived) process costs get accounted for. Or, maybe it's globally optimal to sell them, but since all the gains go to organization as a whole, while all the risk (financial, legal, operational) is concentrated on whoever coordinates the sale, no one is suicidal enough to try.

> You obviously have not been around non-profit, government run entities. The waste they create, the inefficiency inherent in such enterprises is terrifying.

I have been wondering recently about the value of a market-based approach has to exceed the waste and inefficiency of government entities, and whether it's always better to have government do things in those cases.

I don't have a lot of data on this yet other than really high level things (e.g., the cost of healthcare in the US being very high compared to other approaches), but it seems likely to me that having a single entity coordinating things is going to be more efficient under most circumstances - even accounting for the waste - once you remove the market challenges.

e.g. I think about this a lot in our local energy market while prices are sky-rocketing and I'm seeing useless ads everywhere. Simply removing the cost of advertising/marketing/CaC would drop prices significantly in many markets. It's regulated out the ass anyway so there is basically no real competition outside of pricing shenanigans and complexity to confuse consumers, so there is very little advantage to it pretending to be a 'market'.

It's just a huge play to enrich shareholders at the expense of citizens and offers very little benefit. A single entity, even if it was very (almost spectacularly) wasteful seems like it would probably be less expensive.

> whether it's always better to have government do things in those cases.

if there's gonna be waste, i don't want my tax dollars to be wasted. I don't care if private dollars are wasted, since it's not me taking the hit.

> if there's gonna be waste, i don't want my tax dollars to be wasted. I don't care if private dollars are wasted, since it's not me taking the hit.

Well, it depends on what it is - if it's a service that you consume, even indirectly, you /are/ taking the hit, because the price you pay will reflect the costs of the company providing the service.

Using the example of energy again - if you're in a place where the energy production is fully privatised, any waste that happens there might impact shareholders more, but you can absolutely bet some of it will be felt by customers.

I have bad news for you: in a for-profit property market with increasing margins your money are effectively wasted, because the higher the prices, the more employees in the public sector pay. To fill the vacancies government has to pay more and more, effectively redistributing your money to landlords and construction industry. Inefficiency of this spending is much higher than that of any state-owned enterprise.

> because the higher the prices, the more employees in the public sector pay

i dont' quite get the rationale for this claim - are you saying that higher property prices somehow increases public sector pay? And why is public sector job vacancy have anything to do with the price of real estate?

According to the recent data of Berlin government, high property prices and scarcity of affordable apartments are one of the reasons for labor shortage in public sector here. In order to fill the vacancies they need to significantly increase the salaries increasing burden for taxpayers. IMO causal link here is pretty obvious: if a teacher cannot afford living in the city, they won’t work in that city as teachers and either find a different job or leave. The same thing is happening everywhere in the world, where teacher or social salaries aren’t high enough.

If SOE wastes 10% of the budget but still delivers on the market where profit margins are over 20%, it will still be more efficient in reaching the goal of affordable and abundant housing than private investors.

The overhead for public Healthcare in my country is 18 to 23%. Ie each time you pay 100 euros, 83 to 77 are paid to Healthcare providers, and the rest is paid to bureaucrats and administrators.

Each 100 euros I give to Swisslife, 65 are going to Healthcare providers.

I don't mean to invalidate your experience, but we ought to be better when talking about inefficiencies. I really find it odd that each time no numbers are provided.

What? Only "socially important jobs" could buy the cheaper apartments? What the hell

Why not? It makes sense - not every job is equal and some are both important and usually not paid enough.

Society or your local town won't collapse if there's not enough web developers but it may do if it lacks firefighters.

That would be a payment, just not with money, right? So why it's better than just paying this money directly and letting the person decide, rather than introducing an extra step by putting the money into a development and then giving the property instead? The direct payment looks more efficient to me.

That could be true indeed. I am just arguing in the scenario of "what if we build lots of flats", hah!

I do wonder how did similar scenarios worked out historically?

Speaking about historically, that was implemented in Soviet Union, and I don't think it worked well. Though it certainly gave extra tools to the government to control the people.

If you have a thousand people competing for 700 apartments, prices will adjust until 300 are priced out of the apartments. Giving the 200 of those people with socially recognized jobs enough money to not be priced out any more will still mean that 300 will be priced out, it will just be different people.

In other words, rents will just increase. The solution is to build 300 more apartments, and make them available at the bottom of the market, not the top.

But it's highly unlikely that all 200 of those people would choose to spend that extra money bidding up those apartments, and that's the whole point. Distorting another market as a proxy is worse than directly addressing the compensation issue.

The real estate market is extremely distorted by local governments, through imposing restrictions on where houses can be built, how large they can be, etc. To some degree this makes sense, because you want people to be able to enjoy nature or the city wants to be able to plan which roads to build out, but on the other hand, the focus on SFH urban sprawl plus the prospensity to avoid density increases leads to extreme price increases and losses to quality of life. There is huge demand for walkable high density neighborhoods, but the market cannot meet it because government.

This is the Singapore model. Tbf I think it's fine to help most of the people to have places to live in

Yes? Why is that hard to accept? Jobs with positive externalities are by definition undercompensated.

Why don't you just pay them more? Seems easier than setting up a social credit system.

I would guess because people don't like paying taxes even when the taxes are there to account for the externalities.

For prices to go down, it doesn't really matter who gets to live in these apartments, as long as enough demand is taken off the market.

And usually, with few exceptions, socially acceptable jobs are the ones which pay little compared to the effort they require, and also compared to the (non-monetary) value they bring to society. You also want these people in your city because sure it's great that you have tech workers, lawyers and bankers, but who is going to be in the hospitals?

Instead of trying to define "socially important job", how about...

If government is having trouble hiring people for roles they can either increase the wages paid, or enter into the housing market and include "free housing" as a taxable benefit for those roles. You know, like governments do for the military and other foreign service staff.

However, maybe I'm just salty because I've been waiting for 6+ months (with no eta) for permission from the San Jose City Council to do a renovation.

We cannot rely on the gov as the arbitrator on what is “socially good”. Society as whole needs to see the consequences of the status quo.

We need to change. Then we need to vote

Increase in wages goes directly into the pockets of landlords. It’s hardly the kind of redistribution of taxpayer money everybody wants.

Non-profit construction firms with nationally guaranteed access to redevelop land and waive local zoning, subject only to nationally-set conditions, would help a lot of cities.

The enemy is the same as it's always been: landowners.

Set a few KPIs (housing profit metrics, supply/demand, price vs national average) and trigger forced non-profit supply if they exceed thresholds.

The problem now is there's an unbalanced equation in favor of homeowners. (Said as an owner and landlord)

And why would social workers be more deserving than bakers?

Is that some kind of joke? It doesn't seem to be a question in good faith at any rate.

Run this thought experiment. In one world, every banker disappears overnight and banking becomes illegal, in the other, every social worker disappears overnight and social work becomes illegal. Which scenario leads to a worse world to live in? Which scenario causes more human suffering?

ok, but they were talking about bakers, not bankers..

They meant jobs important to society, bakers would probably be near the top of that list

Why would bakers be near the top of that list? Isn’t diabetes and obesity the top health problem around the world?

The point of my comment is to show how ridiculous it is to try and rank “social importantness” of jobs.

Bread has been a staple in most diets for millennia

Why is that relevant? People have not had access to excess calories until the last 100 years.

Bakers can compete with other businesses for physical availability to customers. It is nice to have a bakery at every corner, but city would be doing just fine without a single bakery. Teachers and police must be in every district, effectively excluded from that competition.

We spent most of history without teachers being widely available to the population.

I can't say the same for bakers.

Most of history was the time of enormous inequality, low life expectancy etc and majority of population did not enjoy a croissant and coffee at the local bakery in the morning. People baked bread themselves.

> Most of history was the time of enormous inequality, low life expectancy etc and majority of population did not enjoy a croissant and coffee at the local bakery in the morning.

Ah I understand now. You are simply so out of touch with reality that you believe that bakeries are only used to produce croissants for startup engineers.

Bakeries and village ovens were the basis for survival for a large part of our history.

Social workers on the other hand are a prime example of a wasteful administrative layer between people in need and money from social programs.

>You are simply so out of touch with reality that you believe that bakeries are only used to produce croissants for startup engineers

1. I do not think personal insults are appropriate here.

2. Bakery as a small business did not exist in most places and it’s not the same as a “village oven”, which by the way was not a thing in many agrarian cultures.

3. What do you know about the needs of the people in need? Have you ever interacted with a social worker as a receiver of care? And most importantly, what do you know about welfare system in Germany?

I think this (non-market housing) [1] used to be a more prominent thing in Canada. Basically we used to have a parallel system that was based on fair value instead of price gouging. Once that was lobbied out of existence things started going down hill.

1. https://vancouversun.com/homes/government-support-crucial-to...

> state intervention would make property market unattractive

State intervention is why they are attractive in the first place.....

>government could invest 50-100B€ in creating non-profit construction verticals that will oversaturate market.

Given how our infrastructure projects tend to go, I expect that level of funding would produce a single midrise apartment complex in Boston with construction completing in 2060.

I’d be kind of surprised if the building funded by the German government in euros ended up being built outside of Germany, but you know what they say: location, location, location.

Well, yes. I mean if the US were to undertake something similar to the proposal.

Germany as of late doesn't do much better; see what happened to Berlin Brandenburg Airport, which was a decade and 4 billion euros over budget.

Both governments and corporations poorly execute big projects, but public housing isn’t one of them. It’s thousands of small projects, that can be operationally standardized and thus become perfect job for Germans.

that's a problem onto itself. small scale building projects are very inefficient :/

It depends. Few lessons could be learned from Soviet times, taking Marzahn district in Berlin as an example. You need to integrate suppliers of construction materials, pre-fabricate large construction elements and design buildings from standardized elements, adding some variability on facade and layouts to make it looking more fancy than Plattenbau. Whole district can be designed and built at once to ensure availability of healthcare, child care, public transportation etc. This allows to design projects and build quickly, reducing bureaucracy. One more step to accelerate time to market is to sell without interior elements like floors or shower, just raw walls and connectors to water, sewage and electricity. The new owners/tenants may then design interior themselves or purchase standard design. They may be obliged to finish interior works by a certain deadline in the same time frame as neighbors.

But those people who bought expensive properties are the ones with the power to change the situation.

It would be a lot less disruptive and more efficient to just tax wealth and redistribute it instead.

One can dream ...

Hey, if my money and property is “a necessary sacrifice” then who am I to argue? Come, live in my house; take some of my food. Do you need clothing? A car? I am at your disposal. Together, we can build a better economy (for you).

Ah yes. The classic straw man in the wild.

Not a strawman. Direct quote from the parent: "Yes, a lot of people who bought expensive properties may forget about any returns, there could be some margin calls and banking system won’t be happy."

Saying housing needs to stop being viewed as an investment, and as such will be devalued, is not even remotely the same thing as saying, and I quote the person I replied to here: "Come, live in my house; take some of my food. Do you need clothing? A car? I am at your disposal. Together, we can build a better economy (for you)."

The straw men here is that everything should be sacrificed at the alter of a better economy. Which is not what was claimed.

What was claimed is that OP wants some of my house. Unsurprisingly, I wasn’t in favor. No one is asking whether everything should be sacrificed, I’m just asserting that none of my things should be: not my home or my food or my clothing. When you attempt to steal these things I resist .

This idea that we would all be better off if you simply had some of my stuff is bad and wrong.

>What was claimed is that OP wants some of my house.

That was a pretty strange assumption. Nobody wants your house. I just don’t care if you won’t be able to sell it with any profit or even for the same amount of money. However, if property prices go down everywhere, you will be able to exchange it for equivalent property elsewhere.

Full disclosure: I invested in property myself and I’m fine burning that money if the outcome is healthier economy.

What if property prices go down some places (e.g., my house) but not everywhere? This would be a pretty big problem for me, right? What if I needed to move to one of the regular places all of a sudden for work? Or is the idea that it’s better for the economy for me to be trapped until I can pay off my mortgage as like a penalty for choosing the wrong place without knowing they would conver the market according to OP’s plan?

I’m all for a healthier economy, don’t get me wrong. It’s just kind of annoying for people to treat my largest asset as some kind of externality. It’s super that you are so generous to burn your money to help everyone but I would prefer to explore solutions that don’t intentionally detonate one of the most important markets in our economy and one that I cannot reduce my exposure to because I am naturally less inclined to give things away.

Investing borrowed money is always a risk and it is your responsibility to do your research and have good financial planning to be able to pay the debts. It’s not just regulations that may impact the market. Climate change, financial crises, some big business shutting down in your area and reducing the demand etc etc.

It is up to me to do my own research and see whether people in my state or city are getting set to tank the economy on purpose because their politics are awful. This is actually not terrible advice. Hell, the rest of this post is just wall to wall facts.

I'm a bit at a loss here. I was getting all warmed up to try to have an argument with you but it appears you're probably right. Well, you can't win them all.

The straw man where some dude is like “hey I need your money more than you” and I’m like “could we not?”

Look I get it, it’s annoying to live in a dump where so many people live in public for whatever reason (lack of educational opportunities, structural racism, gender violence, poor healthcare, you name it, I agree it’s important) but if thirty percent of my income isn’t helping I sincerely doubt fifteen percent of my house is going to help much either. Sadly, I just don’t have that much to give.

That is precisely not what would be happening. No money changes hands. An investment is a risk. It can devalue for arbitrary reasons. This is not theft. This is not wierd. This is how it works. No one stole anything from the person/company that invested in property.

I’m glad you were here to explain this to me like I was a child!

But you have contradicted yourself. My “investment” (a strange thing to call my home but if you are more comfortable using your weird language constructs, so be it) is not being devalued for “arbitrary reasons” under your plan. Instead, it would be systematically torpedoed using the same old combination of the political system plus my money, with the additional kicker of some of the value of my home.

No, sir, what you are considering is not an arbitrary reason why my investment might decline, but a concerted political effort to shift the value of my home away from me.

Proposal: you should remain living in Europe and I will hope that your plan is successful where you live.

A government deciding to change course is most certainly an arbitrary reason in the grand scheme of things.

If it's not an investment then there is no problem for you. You continue to own your house, nothings changed. No one comes to take the house from you. You can keep living there. You exchanged money for the utility of owning a house. The utility of the house won't change. So I'm not sure why you are so salty about the proposal.

Besides, it wasn't my proposal. I'm not arguing for or against it. I only called out your strawman.

As the author of original comment I have nothing to add to this. Explained perfectly.

So what's your take on mortgages? If my house happens to be underwater after the Purge or whatever we're calling your rearrangement-of-the-markets, am I just trapped there until I pay off the loan? Pretty dismal if so.

Property bubble bursts happened before and margin calls happened before. Investors who borrow the money must always consider the risk of market going down for various reasons. But realistically, a SOE intervening on the market won’t be able to create an oversupply in years. More likely it will require decades — long enough to pay significant part of the mortgage and balance the remainder with current prices.

My straw man of "you are not welcome to my property." I believe we have covered this ground!

Imagine, if you will, a place where all of a sudden, they did this. Subsequently, some of the people who live there wanted to leave. But they couldn't because they were trapped in their five hundred thousand dollar house. If they sold it, they couldn't pay off the mortgage because now it's worth three hundred thousand dollars.

Would they be salty? Why or why not?

That's the choice they made when they signed a mortgage they had no chance of paying off. If you don't want to bear that risk then don't get a mortgage.

How do you think a person gets a mortgage that they have no chance of paying off? Do you think this happens frequently? We’re you assuming that I can’t pay my mortgage off? Why would anyone take out a secured loan that they couldn’t pay?

I’m guessing that you probably don’t have a finance background.

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