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Comment by mjevans | Hacker News Reader

This article strongly covers a major SYMPTOM of the problem.

https://www.buzzfeed.com/suzystrutner/how-much-you-need-for-...

Housing / land valuation is wildly off from the needs of the people. For more than literally my entire life there has been a chronic shortage of housing, with less built than is necessary for multiple decades of time. The issue has compounded.

We are at the point where the solution is to literally build housing non-stop and just do that for years.

Edit:

The buzzfeed article mentions National Low Income Housing Coalition as the source of it's infographic. Here are some additional links. https://nlihc.org/oor/report-graphics

One bedroom home in hours worked by county: https://nlihc.org/sites/default/files/oor/2023/2023OOR-ppt-f...

Two bedroom rental in dollars per hour: https://nlihc.org/sites/default/files/oor/2023/2023OOR-ppt-f...

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I came to the same conclusion from another place: the nth time seeing news about some block finding it cheaper to live in a cruise ship than in a retirement home anywhere in the US. This is only possible if all land value is inherently overinflated beyond measure that a floating coal burning ship all expenses paid is cheaper than a retirement home that should have 5x less overhead.

This is because the American home buyer isn't competing with other American home buyers anymore.

They're competing with VCs trying to build developments and companies trying to turn a profit. Gone are the days of the "Fixer Upper" that Tim Taylor would buy, drop a reasonable amount in repairs, preform the repairs themselves, and then turn a modest profit.

Everyone who buys a house today wants the value to go up. Nobody who can afford a house needs one. They are not commodities that you utilize and repair. They are now investments, vehicles to grow your money.

That's great for all the snobbish out of touch retirees. But the middle class needs somewhere to hang their hat so they can rest up and make it to work tomorrow.

This fundamentally misses the problem. Investors are only able to speculate because there is a shortage of housing. They are betting that in the future even more people will want that housing, and they are probably right. The only real solution is to crash the housing market by building more houses in places that people want them. Banning speculation won't solve the problem, and it might actually make the problem worse because we will have even less development that people need. We need to heavily update construction regulations to be more sensible like Tokyo, and we probably need massive amount of direct and indirect public housing investments.

I would argue we need to put limitations on what entities can purchase residential property. There is no reason a corp needs to own a 2 bedroom house. It is manipulating a critical market and destabilizing everything. Push them out of the market. They should have have no skin in this game.

You want to increase the supply. I want to tank the demand. Your method won't work because if regular people could afford to compete, they would be already. The players in the market manipulated the prices once to give themselves an advantage. You're just giving them an opportunity to do it again. Only now they have the market cap to do it right.

The price will come down when the demand shifts from mcmansions to regular, affordable housing. It will be funny to see all those $1m+houses sit on the market as the correction unfolds. Nobody asked for them in most places. They were added by developers seeking to gentrify small towns like Rowley MA.

And taxes will come down too because towns will have no choice but to tax property owners more reasonably.

Rentals make up a small percentage of single family homes. Around 5% depending on where you are. Not letting black rock buy a home won't save you from the overpaid tech worker or nurse-account power couple from dropping 1.5x the listing price in cash. We know flooding supply works because we've seen it play out. Tokyo is the biggest metro area in the world, with a growing population, and reasonable rents because the government took serious measures to increase supply. Restricting demand by banning corporate investors probably won't help, but even if they did it did the effects would be minor. Focus on the solutions we know will work.

> Not letting black rock buy a home won't save you from the overpaid tech worker or nurse-account power couple from dropping 1.5x the listing price in cash.

What data do you have to support this?

> As of 2022, investment companies own about one-fourth of all single-family homes in the US, accounting for 22% of American homes sold, down from 80% in 2020-2021

Naturally, the homes bought are all in the most densely populated areas with a relatively new construction (gentrified neighborhoods). I think it's gonna be a couple years before prices drop.

https://www.yardimatrix.com/publications/download/file/2530-...

Large institutions own 5%. Most of these "investors" are house flippers and small landlords trying to "make it big in real estate". It's not the 1% strangling the working class, it's the 10%. Any solution that doesn't hit them the hardest won't be a solution. Infact, we want more density, we need more gentrification, so I don't want to discourage large institutions from investing in a new apartment. But at the very least, if you claim to care about housing prices, don't prevent the government from building more housing.

The average home size in Tokyo is 60 square meters, that's 645 square feet. That's called a one room studio apartment in the US. I don't personally know anyone that wants to live in a box like that, except maybe single people just out of college with little income.

There are plenty of people in the USA who live in apartments today. Building more apartments is outlawed in many areas due to land use rules. If people truly won’t live in the apartments, land use rules can be abolished and developers and builders won’t build those homes because they’ll find them unsaleable in the marketplace.

There's lots of people with little income. Many would find a tiny apartment preferable to not having a place to live.

Yeah but you get so many local amenities and conveniences in that 600sf place in Tokyo. In the USA you get none of that

How can this correction take place?

Individual home owners and business interests have a vested interest in maintaining a very tight grip on the status quo with regard to zoning, which is the primary tool for driving housing reform.

They will continue to do everything in their power to prevent the construction of affordable housing, because it will destroy their current real estate investments.

The non-landed folks have zero leverage within the political system.

If we do that you'll have two social classes. You'll have the price fixed low income housing that looks like it belongs in a Command & Conquer game and you'll have the corporate owned HOAs that are just out of control expensive. Oh, and plenty of tent cities.

You don't need low income housing. Just make government housing at market rate. If you really want to be kind, offer it at maintenance cost. Even if housing prices don't fall(they probably will), they won't rise faster than inflation if the market is sufficiently flooded. Eventually wages will catch up to prices. Yes it will take a long time, but that's why we need to do it now. No. Twenty years ago.

I'll take C&C barracks (a basic Quonset Hut) at this point, as long as I can own it and it's legally habitable. I don't care about aesthetics. In fact, something like that would be ideal as I could customize it completely.

Unfortunately those sorts of structures are banned by most municipalities.

https://en.m.wikipedia.org/wiki/Quonset_hut

> If we do that you'll have two social classes. You'll have the price fixed low income housing that looks like it belongs in a Command & Conquer game

It does not have to be this way.

https://www.youtube.com/watch?v=sKudSeqHSJk

https://www.youtube.com/watch?v=d6DBKoWbtjE

Well it's two problems: the monetization of non money assets and the artificial housing shortage to encourage housing as an investment vehicle. A significant percentage of property investment is simply hedging against inflation. Even someone speculating is doing so to a large degree.

So the other fundamental problem is that it is impossible to save money because it is constantly being debased.

I think this is flipped. VC's wouldn't compete here if the the supply was much bigger because than the price globally would dip they wouldn't have a leverage advantage. If there was no shortfall in constructions for multiple decades that VC see houses as an opportunity.

I think if we allowed house densities to increase and changed zoning laws to allow houses to be built. The cost of housing would fall significantly especially if VC saw a wave a new house they would be prompted to sell before the wave (at a lower prices) or risk significant loses.

Whether you could actually build enough houses to fix the supply inversion is another question. However, without changing zoning laws I don't see how you'd even be able to try catch supply at this point because the places where houses need to be sold prevent multi family units which are much more efficient at soaking up demand per unit than single family houses

If they're using it to "house cash" then the only thing they need is continued inflation of housing costs. Even if it were lower than today, the inflation is the only thing needed for them to continue investing in it as its then considered to be a protection against inflation if nothing else.

They will get burned on interest rates and transaction fees

that's not true, these things exist today and they don't stop anyone from investing.

What you're trying to say is that it would be less profitable and that may be true but as long as it tracks with inflation it would be worth it as an investment tool.

That’s a big caveat. Inflation is 4-5% officially, bonds are 7-8 ish maybe more for real estate investment. But real estate prices are falling or flat. If you suddenly need to earn even 6% off a house you need to rent it for quite a bit. It might make sense still at the low end (under 250k) but a 500k property needs to rent out for 2500a month to break even. And that’s not including taxes, maintenance, vacancy, admin, and transaction costs at sale. House prices need to come down for this to be a profitable venture again. The bet is that real estate prices will rise to new highs faster than inflation or at least comparable assets. If that doesn’t happen then you lose money

you want what you're saying to be true because you want reality to agree that you're going to make it unprofitable to invest in real estate.

good luck with that.

?? It’s not always profitable to invest in real estate. When interest rates go up that’s not favorable for real estate for basic math reasons

I keep re-reading my post and I can't see where I've used the word always there.

Can you point it out for me?

> This is only possible if all land value is inherently overinflated beyond measure that a floating coal burning ship all expenses paid is cheaper than a retirement home that should have 5x less overhead.

This isn't all land. It's just desirable land - in cities basically. The urban to rural migration has been going on for many decades now and doesn't seem to show any signs of slowing down.

https://ourworldindata.org/grapher/population The massive growth of the global population is hard for people to grasp, but is a big part of the cost of housing. Even if we've built billions of new homes in the last century that isn't enough to compensate the bigger still population increase.

The limiting factor in population is the ability to construct housing?

Growth in the developed countries with housing shortages keeps getting revised down.

Since 1968, 77 million housing units have been completed in the US. At 2.5 people per household, that's enough for 190 million people. The US population has increased 133 million over that time. We have plenty of housing.

Just looking at new housing units is only half of the story. I can't and won't speculate on how many homes were torn down during the time it took to build 77 million housing units, but it had to be a significant number.

If two single-family houses were torn down to make room for one new-build, single-family house, then it is a loss of housing. Not to mention natural disasters, condemned housing, rural housing being torn down for farmland, urban housing being torn down for new highways. I do wonder how many houses were destroyed in that same timeframe.

>Housing / land valuation is wildly off from the needs of the people. For more than literally my entire life there has been a chronic shortage of housing

If there is a housing shortage then the unaffordability is reflective of proper valuation.

If people need more housing than they are getting, a free market would indicate valuations to go higher. I would suspect that you’d like to see housing revalued lower, though

> a free market

Housing supply is not a free market. At least in the US, there's a committee reviewing each parcel deciding how many sqft of interior space, how many kitchens, how tall, and what uses.

Exactly. Multifamily housing is banned in most parts of the US (by area).

1 - market is not free, 2 - some regions have zones, prohibiting building medium to high density buildings, 3 - building materials got more expensive, 4- labor too

>with less built than is necessary for multiple decades of time.

I thought there was more housing sqft per capita in the US than just about anywhere else? If so it seems more like a distribution problem.

Absolute footage is the wrong metric of the average per household is also larger. You want to look at the number of units. One thing that can happen is a single family home split into multiple units

I believe the US is near the top in second homes per capita as well, and near at the top in owning additional homes on wheels (RVs).

I'd believe that, there's also a trend towards Airbnb over long-term rentals adding to the problems

The US contains also huge mcmansion-style houses that are actually only classified to hold a single family. I think if you speculated more for the average person, housing is less and less available to them all the time... Although the above poster attributes it to a lack of housing, the actual cause of housing shortage is likely far more complicated. The crash in real estate in 2008 froze construction for over a decade arguably, and also, real estate is considered a commodity/investment as opposed to something like a car. So people plan their financial futures assuming their assets will go up in value, ignoring that this means their assets will by necessity price out their own economic band.

Sweet spot is houses go up by wage inflation. Paying the mortgage off being a big source of the benefit.

The section about housing being an investment in your comment can't be stressed enough.

We were turned down for a mortgage at the first bank we tried because we refused to finance enough to improve the landscaping. The bank wanted to see what the ROI on the home was. We were buying a forever home. Increase in value is someone else's problem after I'm dead.

It was. Well. Fascinating.

This is in the USA? I have never heard of anything like that.

The bank would just be tasked with handling the paperwork (underwriting) of ensuring it is a conforming loan by getting an appraisal done and verifying your income/assets so they can get paid by the US government (fannie mae/freddie mac/ginnie mae/etc).

Not to mention that a lender does not get a piece of the collateral's sale price, so why would they care what improved landscaping would do to the price of the home if and when a homeowner wants to sell it?

Your scenario only makes sense if the lender was also getting a piece of the equity.

That’s wacky, I’ve never heard of that in the USA. You mortgage is a commodity that is packaged and sold off within a month or 2. It just need to meet the checklist of requirements and it gets sold off as a CDO or some other financial instrument. The mortgage writer just needs to make sure you meet the checklist and don’t default while they do the transfer.

US houses are very large.

I don't think it's realistic to expect that multiple families will start living in houses intended for one, so the amount of sqft doesn't help as much.

> I don't think it's realistic to expect that multiple families will start living in houses intended for one

That is common in other countries, though it is usually a single extended family.

It’s more common in the US than many think, at least in some communities.

It is quite common to have 1-2 retirees living part-time on a quarter acre of urban land in a premium location.

Not saying we should evict random people, but it is objectively a terribly inefficient allocation of societal resources. There's no easy answer.

move.

I live in "flyover country" and we don't have those problems here.

This is absolutely false. Since 1968, 77 million housing units have been been built in the US. Assuming 2.5 people per household, today's average, that's enough for 190 million people. US population has increase 133 million since 1968. We have plenty of housing. It may just not be where you want to live and the type of housing want at the price you want. But no one is guaranteed any of those and shouldn't be.

https://fred.stlouisfed.org/graph/?g=1aeIa

If you want to understand the housing price problem, look no further than the irresponsible monetary policies of the last 20 years.

Simply looking at median house prices to median household income we can clearly see the impacts to housing prices from the stimulus following the dotcom bust, the stimulus following the housing bust, and the stimulus from the pandemic. Hint, they're the big upward slopes.

https://fred.stlouisfed.org/graph/?g=1adYW

Take away the irresponsible and unnecessary stimulus and you have a reasonable housing market at 4x income, not 6x.

New builds never recovered from 08.

But where were they built. Often there is a mismatch between where you need housing and where you get it

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