The economy writ large is doing stellar. The housing market is fucked.
We need to eliminate (most) zoning, bring in a bunch of immigrants, train them up on construction, and build moderate-density housing like crazy.
We need to eliminate (most) zoning, bring in a bunch of immigrants, train them up on construction, and build moderate-density housing like crazy.
But the economy in general is not doing stellar, regardless. This bifurcation of wealth is going to lead, or is at least a marker, of an instability in the system. The fact that the Fed just decided that they’re looking at lowering interest rates means that they can’t lower inflation because the stock market and housing prices will crash. Housing prices increase because money printing increased.
Part of the problem is that the US isn’t one “the economy”, it’s localized, primarily due to housing markets. There is no way that the top 10% of income earners qualify as “upper class” in the US, because the majority are in high COL areas.
When you make $400k/pa, but pay $5k/mo in rent/housing, that’s a very different outcome than making $400k/pa and paying $1k/mo in rent/housing. Both of these situations exist in the US, but the former is much more common than the latter. Looking at income only without accounting for cost of living presents a skewed view of things. The person paying the higher cost of living in this situation is solidly middle class, if and only if they own that property, renters by definition aren’t middle class. The person paying the low cost of living almost certainly owns the property and is able to invest heavily, so is almost certainly upper class or a HENRY.
Earning $90k/pa puts you in the top 10% of income earners, and isn’t even six figures. The new middle class for non-Boomers starts in the top 3%. You only need to earn $300k/pa to be in the vaunted 1%, and in most high COL areas you’ll never be able to afford a house.
Looking at income percentiles without looking at cost of living is a really skewed viewpoint, and it ignores the huge wealth chasm between the top 0.1% and everyone else, even 1%ers struggle to make rent.
You’re only “qualified” for what you can make the down payment on, and starter homes in high CoL areas are nonexistent.
You seem to have rose colored glasses.
>You’re only “qualified” for what you can make the down payment on
You sound like you've never applied for a loan.
>You seem to have rose colored glasses.
You seem to consider only the housing you cannot afford "decent" and then complain as if it's the reality.
If you think something you can buy in SFBA under $1M is livable rather than “bulldoze ready”, you are the one that is out of touch.
It's been also doing great for the lower classes. The bottom quartiles have seen far higher wage growth than the top quartiles.
Or rather, unless you put them up in hotels and send them back when done, how do you account for providing them housing when housing is already constrained?
>> when housing is already constrained?
By removing those constraints. OP accounted for this.
It takes two years [1] to get a building permit, and the two-year borrowing rate for the U.S. Treasury is 4.44% [2]. That delay alone will cost a developer at least 10% more.
That permiting process, alone, raises housing costs by double digits [a].
[1] https://www.sfchronicle.com/sf/article/housing-permits-san-f...
[2] https://home.treasury.gov/resource-center/data-chart-center/...
[a] 1.0444 ^ (627/365) = 7.75%
My point is the housing being built isn't going to serve the those who are housing insecure or migrants working construction jobs. If anything these places are taking over the neighborhoods that used to serve that sector.
Why would any of this change developers' profit motive?
> the housing being built isn't going to serve the those who are housing insecure
We agree. This is because housing supply is constrained. That raises its price, which makes it unaffordable for more people. Removing supply constraints changes that.
Also, new luxury housing absolutely lowers housing prices. I've seen it personally. A luxury building opened nearby. I figured there was a 10 to 15% difference after accounting for amenities like its gym, in exchange for more space and a quieter apartment. Others clearly did the math, because we lost two people in the building to it. I showed my math to the landlord, told them I was considering decamping, and negotiated down my rent. I told my neighbours and they each did the same. We had more choices, and so had to pay less. Basic supply and demand.
Developers have the same incentive, they are not incentivized to build properties they'll make less on, even if supply goes up. I've seen lots of properties built, they can be half unoccupied/empty and the rents/leases don't change. They're simply not going to lower the value of their own properties, they'll keep it inflated because at least then it’s a tax write-off/loss.
This increased supply concept is being parroted but no one can provide examples of supply being increased and rents going down, or the very least demand can't be kept up with and no area gets saturated to the point prices go down. Usually the opposite happens, new apartment/housing = nicer neighborhood = more desirable area = rent/housing values go up. We usually call this gentrification. Not unless it was a government subsidized project or section 8 housing or a local economic collapse and people leaving (which cheap rent means little if there are no jobs/economy).
Developers are very risk adverse, they’ll never build in an area that risks supply outstripping demand.
I don't understand how people can live for 20 years, see these patterns and still believe the theories they get taught in economics 101 in school and think they're fully educated on the matter.
Not only do we not see a decrease in house prices and rent prices when new housing is developed, but there’s literally a higher vacancy rate than the amount of housing we’re supposedly short on.
In particular, corporate landlords have figured out that it’s better for their bottom line to keep units vacant than to lower the rent, partly due to plausible deniable collusion via RealPage et al.
No, it’s because of loan covenants. Leveraged landlords can’t lower the rent without defaulting on loans. It works in the short term, and then the market either corrects or they default. (You see the same effect in CRE. And China.)
There have been cases of collusion. I can also cite company towns. These are scandals because they’re an exception; the housing crisis is one across continents.
Sometimes there are international conspiracies. More often, it’s emergent behaviour. Particularly in the landlord market, which features a lot of cottage industry, it’s a bit ridiculous to propose scandals as the universal solution. (Do you really know zero individual landlords?)
> they’ll never build in an area that risks supply outstripping demand
You’ve clearly never been to Phoenix. Or any other city that overbuilt on the back of zealous developers.
> no one can provide examples of supply being increased and rents going down
Literally did in an anecdote. Also Japan.
This has been deeply studied [1]. It’s difficult to find counter examples. Yet we continue to see the gentrification hypothesis parroted because most voters never got past high-school economics, nor learned to read academic papers.
> see these patterns and still believe the theories they get taught in economics 101
I mean, yes. Same here. That said, I’ll take the silver lining: I’m glad I’m a homeowner and can count on folks who think limiting supply will keep the gentrifiers out. (I’m still waiting for my price-fixing membership email.)
[1] https://www.aei.org/wp-content/uploads/2017/04/Overview-Talk...
If you're living the suburban dream, there's nowhere to walk (it's all neighbours' lawns), no tram or metro is coming to pick you up, so you need a car to get anywhere. There's traffic on the way in, parking lots when you get there, and you can't even drink.
Low density is low traffic for the simple reason that low density means few people, few people means low traffic.
Too many cities and inner ring suburbs in the US are basically locked in amber and it's a real problem.
EDIT: Though I agree with the goal of "low traffic," and agree with the other commenters that low density areas in the US tend to not be low traffic. (At least not near cities - again, get far enough away from cities if you want low density and low traffic.) I suspect you won't like the ways a city might get there though.
Not that I'd simply delete your planning laws: I would copy the high-level stuff from Europe, and keep whatever your local rules are for fire, hurricane, earthquake, and tornado safety etc.