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Comment by huevosabio | Hacker News Reader

The issue is 100% that we make it very hard to build in the areas that have highest demand.

It is not short-term rentals, it is not individuals owning too many houses, it is not rich people moving in to a neighborhood, it is not Chinese money fleeing the PRC, and it is not private equity "commodifying" housing.

It is that we suppress the construction of housing through to byzantine permitting, incredibly harsh zoning, vetocracy, and overburdening regulation.

This shortage is at the core of so many of our woes, homelessness being the most visible, but it really underscores _the entire economy_.

I created some slides over a year ago to present to friends and colleagues how I view the problem, you can peruse at your leisure: https://docs.google.com/presentation/d/1O1_oW0Ci2SJEIIhXzuzV...

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Almost agree with you - but I would put that at 90%. The short-term rentals, and rentals in general are definitely part of the problem.

I strongly believe, that we should help people buy their first home and increasingly tax the second, third etc. In several developed countries, it's very lucrative for rich / upper middle class people to use their credit capability to just buy another house and rent it out - with tax incentives and deduction, it basically pays for itself over time. While the young renter who is living in it, do not have this possibility.

No, that's not a problem. If there is demand -- any kind of demand -- whether it's for people's primary residence, a vacation home, or a short-term rental property, you build more.

If someone can't find a house because there are short-term rental properties, the solution isn't to force someone to give up their STR, it's to build another house.

I absolutely recognize that short-term rentals have other undesirable effects on a neighborhood or building: noise, constant random strangers in the building/area, etc. I think those are reasonable reasons for banning or restricting STRs, but "housing shortage" is not among them. If you have a housing shortage, the solution is to build more housing, full stop.

> No, that's not a problem. If there is demand -- any kind of demand -- whether it's for people's primary residence, a vacation home, or a short-term rental property, you build more.

In Spain, there was high demand for property prior to 2008. In areas in the UK, there was high demand for property across most of the country. Then credit became harder to get after the GFC, and suddenly the demand just wasn't there. In Spain, property prices in many area more than halved within a year. What happened? Suddenly everyone moved out? No, the demand was just demand from a different source.

Actual house price increases outstripped rent increases by multiples, but suddenly all of that demand to own just disappeared when the credit driven boom went bust (not everywhere).

There is often more to it that just build more.

It's worth pointing out that UK house prices are higher than the US, despite incomes being ~30% lower or so, _and_ homes being significantly smaller.

The base demand for housing compared to supply in the UK is that much worse.

The thing is, we are talking about building homes and apartments - it's easy to say 'just build more', but harder to do.

We would need 'China style' decisions - which ended up with building so many apartments, that they end up with a significant percentage of them being empty, and the ripples of those decision will crush their economy for the years to come.

Central planning is kind of where we are now already — housing construction is severely restricted, housing costs are subsidized in some areas for some people but not others, etc.

Competitive markets in general are pretty good at matching supply and demand, even when demand is pretty all over the place.

Cars are a great example in the US — sure, there are times when prices go haywire from supply shocks (e.g., due to chip shortages in the pandemic), but outside those no one really complains about a “car crisis”. There are new and used cars available at very many price points, old vehicles get retired and new ones are manufactured, etc.

In housing, one major reason we don’t “just build more” is precisely because of regulation that either prevents housing construction outright or makes it very expensive, nominally in the public interest. We don’t need state owned enterprises paid to construct vacant apartments — we have plenty of companies and individuals willing to build, we just need to let them.

We tore up all the train tracks and put down roads and parking lots everywhere. You can't get away from the effects of "central planning" just because you want to pretend the market is perfect.

I’m not pretending the market is perfect at all. I’m saying what central planning we do have has been very anti-housing development.

Your example perfectly supports that!

My point is that the world is complex. You can't just ignore external causes/effects for one case but not for the other. You can easily flip everything you said and it makes just as much sense. Look:

Central planning is kind of where we are now already — transportation options are severely restricted, transit costs are subsidized in some areas for some people but not others, etc.

Competitive markets in general are pretty good at matching supply and demand, even when demand is pretty all over the place.

Housing is a great example in the US — sure, there are times when prices go haywire from supply shocks (e.g., due to mortgage bubbles or material shortages in the pandemic), but outside those no one really complains about a “housing crisis”. There are new and used houses available at very many price points, old buildings get retired and new ones are manufactured, etc.

In transportation, one major reason we don’t “just build more” is precisely because of regulation that either prevents rail construction outright or makes it very expensive, nominally in the public interest. We don’t need state owned enterprises paid to construct unused trains — we have plenty of companies and individuals willing to build, we just need to let them.

Hmm. I sense you are trying to make a point here, one I might even agree with, but I confess I have no idea what it is.

People have been saying this forever but their economy keeps going along and does not look like it will stop until a dmeographic crisis.

Well, it's only recently that their home builders and lenders started collapsing.

The music has stopped. It will take some time, but the outcome is almost inevitable.

3 years ago, and it was induced by government policy. At any given point since I've become politically aware (around 08), there's been at least one narrative around China's coming collapse, and it hasn't materialised in the slightest yet.

Even if that happens, they will have plenty of housing. Worse things to make too much of abound.

Land. You can’t create more land. And neoliberals complain if local government has sufficient power, and the resources, to provide mass transit and build out housing schemes like they did in the past.

You can't create more land, no, but you can build higher on the land you have - unless some NIMBY-driven zoning code stops you.

We have a housing crisis because restrictive zoning codes prevent housing density from rising to meet demand. The market is not being allowed to work properly, and has not been for decades now in many places, so we have accumulated a huge backlog of unmet demand.

You can actually create more land, but we usually just do that for airports. Hong Kong is a great example of building up and up while prices are still sky high. I guess you are just referring to the states though, right?

If short-term rentals were a problem, you cold just build more until you have abundance of shelter.

Anyway, short-term rentals are basically a symptom of making it hard to build hotels. Most of the time staying at a hotel is much more comfortable than staying at an airbnb.

> Most of the time staying at a hotel is much more comfortable than staying at an airbnb.

Sometimes! If I'm staying in a place for more than just a few days, I want a full kitchen. That's pretty rare to find in a hotel. Even small efficiency kitchens are pretty rare. And in most markets I can rent an Airbnb with a full kitchen for much cheaper than a hotel room with any kind of kitchen.

Beyond that, I generally prefer the Airbnb experience over that of a hotel. I know I don't speak for everyone there, but I think there are quite a few people with my preferences.

> That's pretty rare to find in a hotel

Is that possibly because it is so hard to build hotels, though?

> Most of the time staying at a hotel is much more comfortable than staying at an airbnb.

It's trivially easy to see that this isn't true: you probably don't live in a hotel (or a structure resembling one), for example. Why not? The answers to that question generalize to travel.

I find the entire experience of staying in a hotel to be weird and unpleasant. When I travel I try to rent AirBnBs because I specifically like them better than staying in hotels.

It has only been beneficial to own and rent during times of incredible appreciation. If you do the math over long periods of time, being a landlord is a mugs game.

So why many sophisticated and rich people are doing it ?

It's a very good business. In many developed countries, there are very strong incentives for owning several properties. Once you've reached a certain level of wealth, it's basically free for your - since you're buying it with a mortgage. And quite often you can deduce the interest paid, from your taxes. We are effectively subsidizing this behavior, instead of taxing it.

Simplifying a bit - you want to put 100k$ to work, and you are wealthy enough so that the bank will lend you whatever you want. A great business is to buy another home, for say 500k$ - the rent and tax deductions will cover your mortgage, so you effectively turn 100k$ to 500k$ over the span of the loan. It's basically using your leverage, which first time buyers simply cannot most of the time. It's an unfair game.

In short - the system should be set up in a way that owning a second home should not be a good financial decisions - it should be an expensive decision. If you're rich enough and want to own a second holiday home - no problem. But in the current state of affairs, it's not expensive - it's actually profitable to do that.

> use their credit capability to just buy another house

Hence why most Western countries have jacked up interest rates, and will have to keep them quite high for the next several years.

But in a very real sense that's just pulling the ladder up and further securing the position of those who got there first. Something else / additionally has to happen here.

How do you force house prices to drop when

1. THERE IS A LABOR SHORTAGE IN CONSTRUCTION

2. ZONING WILL NEVER BE REFORMED AT THE LOCAL LEVEL

3. EVERYONE ASSUMES THE PRICE OF HOUSING WILL CONTINUE TO GROW MORE THAN INFLATION

All 3 highlight a broken market due to inflated costs. The only solution is to slow the market down and play chicken with owners.

> pulling the ladder up and further securing the position of those who got there first

Such is life. You can't drastically change a market overnight. You'll get voted out of office.

Welcome to the late 70s. This is how it was then too. Be happy we don't have a Volcker

Nationwide rent control.

We've done it once before (World War 2 - in that case it was even retroactive, so you couldn't hike rents in anticipation), and it increased homeownership rate by the highest rate in the 20th century (something like 5% jump in a few years) by making leasing less profitable than selling.

Would also have to be combined with more building, but it does work. If you make investing in real estate less appealing (via rent control), people will sell - unless they're just hiding money (i.e. overseas investors).

You would probably have to go on a crusade in order to promote it, and it would require a massive anti-landowner propaganda push (of the sort that existed during WWII), but it's theoretically doable.

Rent control does not produce units. You get units by reducing barriers and costs to construction.

One avenue is stronger property rights. Don't let local governments and randos have an opportunity to make demands or issue denials.

It took me nearly four years to get approvals and permits to repair an existing home in California. Building a new one seems impossible.

I agree with you that the best thing to do is to relax the regulations for building (and permitting, etc etc). I was talking about fallbacks when building is not an option (either politically or because of a labor shortage or otherwise).

"New York University economics Professor Edward Wolff, a specialist in real estate statistics, said 4.48 percent of American households owned three or more residential properties in 1998, compared with fewer than 1 percent in the early '90s."

I wonder what that number is today...

One of the first things they teach in Econ 101 is how bad rent control is for an economy.

Rent control has worked spectacularly well everywhere it has been tried, and never has any downsides.

I mean that’s the theory, right? It’s never been truly tried?

There are great new ideas here though like seizing all the beachfront vacation homes

The great idea is to greatly increase property prices on unused/underutilized land/non primary homes.

I would even tie some portion of primary home property tax to the density of people living on a lot.

And then what? That's a very short-run solution. Eventually, you have to build.

This is sarcasm.

WW2 was done via the War Powers Acts, and being at war with half the world is a bit of an edge case. Also the mechanism used to do that was ruled unconstitutional after WW2 [0]

> it's theoretically doable

So is a constitutional amendment banning sloppy blowjobs but that is completely unrealistic.

Jesus HN has gotten dumb.

[0] - https://openscholarship.wustl.edu/cgi/viewcontent.cgi?articl...

If you mentioned china, then we should look at China’s massive building of housing there for inspiration? They have none of the restrictions you say is keeping us back, but because housing is a speculative asset (and the only generic one of value given a untrusted stock market), prices still go up, people cant get places to rent in Beijing or Shanghai, one bedroom apartments going for $1 million, etc… of course, the issue is the speculation, not the lack of supply.

We already rely on market forces to ensure that everyone doesn’t just move to one of a few popular cities. We don’t just need more housing, we need them specifically in Seattle, SF, LA, Denver, Manhattan places where people want to live. I still don’t see how SF achieving Manhattan density would cause its prices not to be Manhattan comparable. Something else is going on with increased supply having the ability to induce even more demand.

Overbuilding is also a danger. Berlin had excess capacity of housing and work space for a couple of decades before demand could fill it. Just because there is demand today doesn’t mean there will be demand when your project is finished, eg interest rate increases can put a damper on speculative demand. A Japanese style mega property crash is something no one wants to deal with.

Speculation only works when the asset is supply constrained. China's problem is that they've moved 600 million people from rural areas to urban in the last 70 years.

They have enough housing for twice their population now, supply isn’t the constraint.

The original argument mentioned China as a country that does not have a housing shortage. Somehow you just decided that the poster is suggesting we transition our system to a complete free for all, unregulated market. It's unclear why or how you arrived at that conclusion.

Also, the Chinese have been simulating the housing sector to encourage domestic growth. The Chinese housing sector did not grow out of control just due to lack of regulation. It was also financial stimulus and incentives to encourage building.

So, you just pounced on that other commenter, accused them of something they didn't say, and despite believing that you understand the Chinese housing market you actually have no clue. You are literally the Dunning Kruger effect manifest info a hacker news commenter.

No ad hominems please, this isn’t Reddit.

I said the problem in China is speculation, they don’t have a housing shortage. You can’t just build your way out of a housing problem if the demand signals are messed up.

You remind me of two things I have read here at hacker News in the last few months: 1. We have made substantial gains in productivity over the last few decades in many areas, but not in construction. The leading candidate for the cause is that we have increased regulations to keep things stable.

2. A private company in San Francisco was going to buy a downtown office building and converted into housing, hoping that even though that is incredibly expensive there would be enough demand. But then they realized that San Francisco had mandated a large percentage of new multifamily housing units must support low rent tenants and it made the whole project completely infeasible.

There are regulations, and regulations. Those regarding, say, fire safety are pretty important and worth it even at the cost of productivity.

Zoning, on the other hand, that keeps corner stores, apartments and condos out of some neighborhoods... that is a huge problem and doesn't really exist for safety reasons.

Even fire safety is frequently done in an overly onerous and ineffective way, e.g. the double staircase requirement that doesn't apply in many other places because other, more space efficient solutions were found.

https://www.youtube.com/watch?v=iRdwXQb7CfM&t=648s

I have a friend who is putting in a temporary tent structure for a party on top of a swimming pool. Fire Marshal said it must have a sprinkler system...

> It is that we suppress the construction of housing through to byzantine permitting, incredibly harsh zoning, vetocracy, and overburdening regulation.

This isn't the cause everywhere. There are absolutely places that don't have such overbearing regulations but still have a serious housing shortage.

Almost nowhere in the US has a truly liberal zoning system. Houston kinda sorta. Where are you referring to?

Houston is on multiple "places with the worst housing shortages" lists, something I wouldn't expect if zoning was the only/majority cause of the problem.

Houston is gaining hundreds of thousands of people. They need to build even more to keep up.

How is that possible? Houston has some of the most lax zoning laws in the US. If housing shortages are caused by zoning laws, why does Houston still have a problem? Is it possible that housing shortages are caused by more than just zoning?

One city cant overcome the shortage the rest of the country creates. People are moving to houston because it is among the cheapest big cities because theyre actually building new housing. Houston is working on catching up with demand but it takes time. We have underbuilt for decades, this isnt something that can be solved instantly.

I suspect that we disagree on what constitutes "overbearing" regulations. Fair enough.

I couldn't even build a simple 10x10 deck 12 inches from the ground without having to perform $8,000 worth of work to pour concrete piers and do several other destructive things to existing structures that make no sense.

This was for a deck that was going to be used by 1-2 people at a time, that could be built for $1000 worth of materials.

Same thing doubly applies for housing, except the numbers are 10-50x higher, because Karen in Bumfuck Permitting Services can't fathom that it's not necessary to build a single family dwelling up to Fort Knox standards, especially when it's made out of sticks and drywall anyway. It's almost like the code is designed to be especially convoluted to be a make-work program for local contractors.

From what I understand Wyoming outside the cities may be the closest to what you want, there’s basically rules about setback and not much else.

Yes, I'm aware that moving out of city limits tends to relax the building code & zoning a little bit. Planning to do that eventually.

But it was just an example of a thing that can contribute to rising construction/housing costs. I don't think it's particularly helpful to tell a young person "whoopsie, we could have built housing for you, but thanks to the last 10 recent code updates, the house is now 2x as expensive and you can't afford it".

Zoning should keep 1) noises 2) smells and 3) dangerous things away from where people live and schools and such. Not keep a 6-plex out of a neighborhood with luxury single family units. Or stop people from building on 1500 square foot lots.

Any idea why, though? If these places have fairly easy, quick processes to get new construction greenlit, why is no one building there?

At least where I am it’s relatively cheap and easy (usable land goes for $10k, permitting, etc is $20k) and they’re building and selling.

About three or four builders, but not many more.

Having house be store of value/investment rather than commodity is a big part, it's not just "getting permission is hard", because as long as it is a an investment, everyone that has housing will do everything in their power to keep the status quo, including pushing the lawmakers to make it hard to do anything that would lower housing value.

Option A: The housing shortage is 100% a product of public policy and the only solution is to support someone's favored political candidate or party.

Option B: Housing shortages are caused by a combination of factors that include public policy, and solving the problem requires understanding and considering all of them.

There is something to be said of the shifting demographics: people moving more into a few hot-spots cities, a lot of rural areas emptying and small cities dying that put dramatic pressure on the demand side. The legislation and processes to get new housing done haven't kept up

High demand areas in the Bay Area would be places like Atherton, Woodside, Los Altos Hills. The existing home owners have a lot of resources to fight developments such as high rise apartments or condos. They have no incentive to allow such development.

Why fight high-rise apartments? Those are going to preserve the character of a city better than anything.

Atherton, Woodside, and Los Altos Hills are not cities (at least not the way you're thinking). They're relatively small communities full of people who live in large single-family homes on multi-acre lots, often surrounded by a fence or some other privacy-type barrier.

The "character" they want to preserve is not that of an urban center with multi-family housing.

They're absolutely not cities. They're small wealthy villages with a tiny population that exist in rural California.

If this were true it should be trivial to point out specific laws that went into effect around the time of the drop off.

My armchair economist opinion is that we are still dealing with the effects of the 2008 housing crash.

And that is why you are an armchair economist. While you may be able to point to a causal chain from the 2008 recession to what's going on today there are so many other things happening and contributing to the economy that saying "2008" is an insufficient answer.

The irony here is that you’re saying this while providing none of those many things.

Why not add more meat around the bone while criticizing others for not doing so?

In my area, a condo complex of 93 units was purchased by 16 individuals (or companies). All of the things you mentioned are definitely a part of the problem.

It would be pretty easy to overcome all that if they didn't have to spend so much money actually build the housing.

Make it cheap to build housing and it will be done.

> It is not short-term rentals, it is not individuals owning too many houses, it is not rich people moving in to a neighborhood, it is not Chinese money fleeing the PRC, and it is not private equity "commodifying" housing.

It's all those things. Stop looking for a single explanation. That's not how the world works.

> overburdening regulation.

Last two times my country tried to cut out the red tape it ended up costing trillions in fixes, and meant fewer builds in the end. Building regulations are good, there is a reason they exist.

Can you explain how you got from "overburdening regulation" to "all regulation must go"? I think I missed that in the original argument.

If you're arguing for less regulation without naming specifics, then you don't care what goes. If you don't care about specifics, then "all regulation must go" is your position.

If they actually cared, then they'd be complaining about the particular onerous regulations and why they shouldn't exist. Rather than just complaining about "regulations" in general, ignoring why such things are necessary.

> It's all those things. Stop looking for a single explanation.

Yes, it is all those things. They all contribute some non-zero amount.

But if you just build more housing, those other things end up not mattering.

Consider:

There are too many short-term rentals, and people can't find houses to buy -> Build more housing, problem solved.

Too many people own second homes, and people can't find houses to buy -> Build more housing, problem solved.

Rich people / foreigners / private equity are buying up housing, and people can't find houses to buy -> Build more housing, problem solved. (This one also solves the cause as well; if there's enough housing -- because you keep building -- this housing becomes less attractive to rich people / foreigners / private equity, because they don't envision a return on their investment that's worth it.)

> Last two times my country tried to cut out the red tape it ended up costing trillions in fixes, and meant fewer builds in the end. Building regulations are good, there is a reason they exist.

Those aren't the kind's of things the GP is talking about. Safety standards are of course something we should not relax. What we're talking about:

* Restrictive zoning (e.g. "only single family homes", "no street level retail", "max height two stories", "must have parking for N cars per household", etc.).

* Allowing people who live nearby to object to construction on any grounds, which kicks off months (or years) of hearings and legal fights, that often results in projects being greatly scaled down or cancelled. (Ultimately, the homeowners just don't want more housing because they fear it will affect their own property values. Pretty much everything else is just an excuse to attempt to avoid sounding greedy or classist.)

* Laws like the CEQA (California Environmental Quality Act) -- a reasonable law with good intentions -- that is abused by other homeowners to tie up development projects in court.

* Capricious city planning departments that can hold up or deny approval for arbitrary reasons having nothing to do with building codes.

* Long permitting processes that are necessary, but the bureaucracy spends more time than necessary.

All of this ends up killing projects, or making projects prohibitively expensive. If you're a developer looking to build a condominium building, even though the actual build might only take 6 months, you will have to factor in legal costs, and just the cost of sitting around doing nothing for possibly a year or more (while the loan you took out to buy the land still needs its interest payments) before you can start building. And that's if you're lucky; maybe your project gets cancelled, or maybe it gets scaled down to the point where it's not financially feasible at all. And if you do finally get approval and finish your build, you now have to sell the units at what many would consider "luxury" prices, because your costs to build ended up being far higher than they needed to be.

That’s the thing - allow builders to build insanely expensive luxury flats with no minimums of anything, and they’ll develop tons of lots. And luxury apartments don’t cause rich people to spawn out of nowhere, increasing the supply at the top allows everyone to move up, somewhat.

Fighting NIMBY has been a thing since the 80s. Have there been any successes?

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