this ignores the basic economics which is that it’s too expensive to build housing. Labor is expensive, materials are expensive, and permitting is expensive.
We can make different choices.
As Keynes said: is we can do it, we can afford it. We can build more housing.
The market is the result of regulation, and the regulations right now do not permit more housing, but do allow the highest bidder clear the market.
The market has been set up to only serve those with the most money, through a conscious choice of how the regulations were chosen.
The thesis being offered - which you will likely disagree with - can be read as - the economic capacity certainly exists, but the regulatory regime prices it out of the market.
Until they change this bad regulatory regime, and regulate to provide enough housing rather than regulate to keep existing conservative homeowners happy, then they will continue to put regular folks in Hawaii through a meat grinder of housing austerity.
My perspective is that you can only regulate things out of production. You can't regulate things into production. If that were true, politicians could have made us all rich by their wise words and actions. But they don't. Because they can't. That's not the source of wealth.
The prices were intentionally set high for new housing by regulation. That can be changed.
Further, it's slightly more tricky to regulate things into production, but we do it all the time. Take for example, roads, or water treatment, or any other public service. That's entirely the product of regulation, not of the free market, and would not happen otherwise.
Further, we can regulate non-publicly owned entities into production, and we do so frequently. For example financial products like a 30-year mortgage are entirely a creation of regulation, and would not exist without hearty regulation backing them. We can do similar things for construction loans, for training in the trades, for social housing, for pretty much anything.
Housing is a very solvable problem. However we actively choose not to solve it, and in fact we actively choose to make it more expensive in order to benefit those who already have housing, and to benefit those who speculate on it.
So if I have these views of housing, why am I not opposed to AirBNB? Because AirBNB is actually meeting some real need from real people, it's not pure speculation, or pure rent-seeking, like the regulatory regime that institutes housing austerity. There's real human gain from AirBNB, it's not merely an economic gain.
And I'm not entirely in favor of AirBNB either, it's just that it really really grates me that this is being falsely sold as a solution to the housing crisis. It is not. It's barely related, but related in a way that shows the true underlying problem: supply versus demand for housing.
Agreed that housing on vacant land isn't the answer. The answer is to build up, in more socially-orinted ways.
You can no longer live in Podunk Michigan and go down the street and get a good paying job pushing a broom at the local factory. That work is done by a contractor who pockets the wage and gives a quarter of it to their employees. Or the factory closed because it was cheaper to build and ship widgets from somewhere else. So everyone has to either suffer the economic depression, drive for an hour or two to go to work, or move. This housing crisis is the end result of our economic policies of the last 40 or 50 years and the hollowing out of middle America and the consolidation of a lot of industries into two or three huge competitors slugging it out.
If we can fix that system and give people outside of major metros a shot at making a decent living again then the housing crisis would disappear. There are plenty of cities across the entire US that are tearing down houses because nobody wants to live in them and otherwise they become animal nests. Meanwhile there's a housing crisis on the coasts.
One thing I'd like to see is a federal payroll tax credit for remote workers. That would do a lot to reverse the "return to office" mandates of the last couple of years. If you disperse a bunch of bright and talented people into the middle of the country, at least some of them will find ventures locally that bloom into something big.
Building housing takes anywhere from 3 to 4 years for any significant development that can make a dent. When the average investor can get 7% with minimal risk in the S&P500, you’re looking at rewarding investors a lot more than that in returns over this time period. People would rather invest elsewhere.
Once you factor that in, you’re looking at a large % required return factoring risks like lawsuits, construction mishaps, etc.
There is a reason every new development looks like luxury housing or luxury apartments. The economics don’t favor Levittown style massive buildouts anymore.
The market will reward those who can bring efficiency to something that’s clearly an opportunity to be more efficient. That’s not where we are with housing right now.