Priced out of home ownership
bbc.co.uk
bbc.co.uk
Ask yourself, do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same inability to build or is there maybe some other common cause?
In my view this is symptomatic of a more fundamental issue - global asset price inflation driven by a broken financial system (i.e. a system being artificially pumped up with cheap credit). Housing is just where the rubber hits the road and regular lives are directly effected. Just look at the tight correlation between the increase in the money supply and property prices.
For those who insist that the number of properties is inadequate, take a look at the numbers for each of the countries I mentioned in the first chart here: https://www.oecd.org/els/family/HM1-1-Housing-stock-and-cons... (Total number of dwellings per thousand inhabitants, 2022 and 2011).
This is a problem of underutilisation in my view. Too many properties are being used as investments and not as a primary residence.
Cheap credit causes an increase in demand. This is not demand for homes but additional 'artificial' demand for properties as investments. Think short term rentals, second homes, land banked properties, etc. By definition, only investment properties can be underutilised - owner occupied homes are occupied! So in an environment that encourages property investment you will see more underutilisation.
What will cause prices to fall is higher interest rates. This is what has been happening in NZ.
I've believed for a long time that heavily taxing income from second+ properties, similar to capital gains, would help reduce rent-seeker hoarding, to help free up and reduce the cost of properties for primary-residence owners.
Personally, I think LVT would be the best approach.
Vacation homes are in beautiful tourist areas. That can be a problem for local workers but I doubt this is much of a problem for most markets.
* https://www.businessinsider.com/real-estate-apartment-rent-p...
* https://www.propublica.org/article/yieldstar-rent-increase-r...
These sorts of suggestions generally seem hugely biased towards buyers at the expense of everyone else.
Yes, the investor makes less, but the expected result is less supply so rents are higher, not the same supply but with strictly lower rents.
Higherand higher marginal property taxes for owners of non primary residences disincentivizes owning secondary residences, hence disincentivizes renting, hence decreasing supply of buyers wanting to buy homes.
There will still be first time buyers or people moving, so builders should still have incentivize to build homes, hence supply should not cease to come online just because there are fewer landlords.
The entire framing of the issue as a false NIMBY/YIMBY dichotomy is a distraction from the reality that there is not and has never been a supply issue. The only issue is artificial demand from speculators who choose to withhold and deny a basic human right in the hope that it might magically raise in value for no reason instead of depreciate like every other asset.
We are still subject to space time.
What about people living in an area temporarily? People who just moved?
Honestly, these ideas come across as you personally being ready to buy but wanting a lower price rather than wanting a more sustainable housing market.
And with not for profit housing, rent is much cheaper and gives a much greater opportunity to eventually no longer need to rent.
Nobody is going to want homeless people living in it in the meantime.
Houses are also "empty" while they are undergoing renovation.
A thought: Disincentivize having them for sale for too long, tax a % of the listing price every year it's on the market. That way gougers get penalized for crazy asking prices and there's some additional negative price pressure.
Most houses are listed publicly, require it for all of them. Transparency issue solved.
> Or worse people would just hang onto properties and not sell them at all, biasing towards turning houses into rentals.
This is done already? Still an improvement over leaving them empty indefinitley.
How will you do that. Remember: "I wasn't planning to sell my old house at all, but when I got this offer out of the blue I decided to take it".
I'd argue it's not expensive enough since it's frequently done.
EDIT: This has already become a common issue in locations like NYC, big money parked into properties with many commercial and residential units vacant. Better to pass those fees and borrow against artificially inflated value than it is to realize a loss.
EDIT2: I typo'd and meant to say 'pay', not pass those fees. (as a cost of doing business)
Commenting on Walter's comment below:
> I've sold houses before. I hated every day it was sitting there sucking up money.
I understand, my problems are with institutional/large wealth artificially constraining supply.
> As for artificially inflated values, bank lenders are not stupid and are not going to loan against a phony value.
Do correct me if I'm wrong but is it really their problem if they can sell that risk or the gov bails the whole sector out when there's a panic?
> Better to pass those fees
to whom?
> and borrow against artifically inflated value than it is to realize a loss.
Borrowing does nothing to stop one from losing money.
As for artificially inflated values, bank lenders are not stupid and are not going to loan against a phony value.
Homelessness is the most visible sign of a much larger systemic problem. For example, it's quite likely that many homes today are overcrowded, and people don't have as much space to live as they desire. This is bad! Not as bad as homelessness, but depending on the specifics still quite bad. The good news is that building vertically permits more private space per person, so we don't just have to accept things getting worse.
Are you suggesting we deport homeless people from cities with low vacancy rates, to cities with high vacancy rates?
> There is absolutely no barrier to housing every single human being beyond greed.
I suspect your answer to the question above will reveal a barrier.
In my experience, people "intuitively" jump to basically every conclusion besides this one. "Greedy landlords" or "[favorite scapegoat] collusion" are intuitive conclusions which are far more common than supply and demand.
> Ask yourself, do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same inability to build or is there maybe some other common cause?
Yes they do, to varying degrees. The Anglo land use regime is a disaster.
When people say the issue is land, that usually implies a very particular smaller subset of land which is in proximity other populations, economic centers, and with certain features and infrastructure.
There are only 5 states with federally owned land over 50% (Nevada, Utah, Idaho, Alaska and Oregon). Other states west of the Mississippi don’t necessarily have a large percentage of federal land. For instance, Texas only has 1.78% that is federally owned, Arkansas at 9.38%, Oklahoma at 1.59%, Kansas at 0.52%, and the Dakotas at 3.91% and 5.41%. In fact, there are only ten states with over 30% of federally owned land in the Union, granted they are all in the Western part of the States.
2024 https://worldpopulationreview.com/state-rankings/federal-lan...
These have a cleaner interface but are from 2018
Chinese housing market is completely messed up, with turn over almost halted since the government won’t let prices fall no matter what, while they have overbuilt like crazy.
They're generally lower than the US, despite having a higher population density.
> Chinese housing market is completely messed up, with turn over almost halted since the government won’t let prices fall no matter what, while they have overbuilt like crazy.
A place with the government policy objective of not allowing housing prices to decrease isn't much of an argument that supply and demand doesn't work in general. China is just its own kind of broken.
Whereas prices are significantly lower in e.g. India, not just Japan.
China is simply repeating what Japan went through in the 80s/90s. Maybe market sanity comes only after a period of crazy insanity.
The urge to measure everything by income leads to absurd results, like putting Saudi Arabia and the UAE near the top of the "housing affordability" list because they're flush with oil money, and for the same reason the United States.
> We really should have that lower end housing, I agree, but then we are comparing apples to Orenjis.
But that's the point. Someone in the US who makes 20% of the median household income still needs somewhere to live, and by refusing to provide smaller units, we make things cost more for everyone else too. Because now they have to spend their entire salary on housing and make up the rest with government assistance, which bids up housing costs for people in the middle -- who are also the ones footing the bill for subsidies made necessary by the high costs.
It's not just about the cost per square foot, it's also that small units aren't even available because the rules proscribe more units from being built on the same lot. The result is a de facto prohibition on smaller units because ordinarily it costs a similar amount to build a small number of large units and a large number of small units, but now the latter is unlawful and a small number of small units is uneconomical.
If you believe housing is for people to live while doing the work they can get at the salaries those jobs are willing to pay them, then it is absurd not to consider income in housing affordability.
My family bought an apartment couple of hrs from Delhi for about $100K which is huge amount for locals considering it is center/ hub of nothing. And as far as fit/finish goes one can easily spend another $50K on it to bring it barely to level of basic rental apartment in US.
There is a minimum amount that it intrinsically costs to create housing, e.g. the cost of lumber, and in some places local wages are too low to afford that, and that sucks but the reason for it is low wages rather than housing scarcity. Then there are places where housing is unaffordable, not because wages are low, but because housing costs are artificially high, and that is a different problem with a different solution.
First, it costs way more than $200k/unit for new builds where I live (Seattle). Unless they go for scale, then maybe they are getting $200k with lots of profit and a $1k/month HOA. The biggest cost these days is simply labor. Construction workers aren't cheap.
Second, the housing is not at all equivalent in Asia. The standard 30 story overbuilt concrete apartment buildings, completely un-renovated (but at least you can get that done for cheap), but it keeps migrant workers employed (they overbuild on concrete for less technical builds, at the expense of increased building maintnence and/or reduced building lifetime). China and India just don't magic up these buildings, and often times it is used as a jobs program (or they would move on to more expensive but longer lasting builds, the fact that the buildings will be torn down in 20-30 years is seen as a feature and not a bug). But those cheap to build flats are still going for $1 million/each in cities like Shanghai or Shenzhen.
That's the point. If you restrict where they can be built, and how they can be built, they cost more to build. And then prices go up.
> The biggest cost these days is simply labor. Construction workers aren't cheap.
This is part of the regulatory cost. Rules that require labor-intensive construction methods (preferred by both labor and landlords because they both want new construction to be more expensive), and licensing requirements that statutorily take a long time or significant money to satisfy (e.g. multi-year apprenticeships, expensive licensing exam fees) rather than immediately licensing anyone who can pass the exam and not charging to take the test.
> China and India just don't magic up these buildings, and often times it is used as a jobs program
At which point it's a government subsidy, but that doesn't really get you out of anything at scale. Somewhere or another somebody is paying for the construction.
> But those cheap to build flats are still going for $1 million/each in cities like Shanghai or Shenzhen.
You can allow something to be built without allowing enough of something to be built.
You can also build enough of something and still have high prices because of some other constraints or regulations preventing the people paying the high prices from using some of the supply, so it goes to waste.
But these are not the reasons that a $1000/month flat in India is unaffordable to locals. The reason for that is that local wages are low.
What? Measuring relative to income is the only criteria that matters. What would be absurd is not to compare to income.
There isn't any absolute number at which housing is affordable or not affordable. It is purely a function of what percentage you need to spend of your income to be housed.
Whereas if the global price of materials means that it is possible to build a housing unit for $40,000, but local regulations make it cost $800,000, and then as a result local housing costs are $800,000, that is a problem in the local housing market.
I don't think so. Ask any indians about the cost of buying a property in eg. Mumbai.
This really is a global phenomenon. I don't know where the reluctance to admit that comes from (not you specifically, but in general).
It's global in the sense that it's present in multiple countries, often for the same reasons. For example, the costs are high in the UK for similar reasons as in the US. But many of the comparisons just don't apply.
If you look at a country with a very low median income, of course housing costs a lot compared to the median income -- everything costs a lot compared to the median income. And housing in particular requires skilled labor and global commodities like timber and steel, which put a floor on the cost regardless of what local incomes are.
So housing in India or Vietnam costs a lot relative to local incomes because wood costs a lot relative to local incomes, even though housing there doesn't cost a lot in absolute terms. Which is not the problem in San Francisco, is it?
There is more to it than just "anglo countries don't build enough".
For example, suppose you don't have artificial supply constraints and then you lower interest rates. No problem, more people can get a loan to buy a house which causes more houses to be built and them more people get to be homeowners. But long-term prices stay the same, because it's easy to add supply, so it keeps getting added until prices fall to the construction costs, which acts as a long-term ceiling on prices.
Now suppose you do have artificial supply constraints. Prices are at $200,000 but you've made it cost $1,000,000 to create a new housing unit. Now if you lower interest rates, prices are going to go up, because you can't increase supply at the current price so people just end up having to outbid each other on the existing supply. And the same thing if local demand increases or anything else like that, because you've prevented supply from responding to demand until prices hit a million dollars.
But the problem isn't low interest rates or growing cities or anything like that, because the only reason those things are a problem is that supply can't increase until prices are unaffordable.
Prices haven't plummeted in China. Sales volume has seized since the red families control the real estate agencies. They have added more incentives, like easier access to hukou, and have eliminated limits on how many homes you can buy.
https://www.reuters.com/world/china/chinas-new-home-prices-d...
Population growth (which is mainly concentrated in relatively small number of areas) is not helping either.
e.g. in European countries which have comparable population growth to Ireland/UK like Norway, Sweden, Belgium real estate prices have been increasing at a similar pace.
It's always amusing that this implies back when housing was cheap, landlords weren't greedy.
The UK, Ireland, Canada, and New Zealand are at the bottom of % vacant dwellings indicating the opposite of underutilization.
Unfortunately the document doesn't show changes in vacancy rate.
I don’t know if I’m just misunderstanding your point, or misreading the material, but that is also not an example of underutilization.
What I am suggesting is that incentives to invest in property have led to an increase in the number of properties that are not being used as a primary residence (i.e. are underutilised) and that that is the most significant factor causing the shortage of available homes.
Given a market like NZ’s size, growth/prices, and attractiveness I can see demand like speculation, STRs, and 2nd homes possibly affecting utilization more than supply.
Given US markets that are larger, cheaper, and less attractive where investment properties fueled on cheap credit were rented out or to a much smaller degree flipped, it’s truly, significantly more difficult to imagine vs simple lack of supply (especially given historically low US rental & homeowner vacancy rates).
Add to that, things that might be desirable for other reasons, like garden space, rooms for use as offices, large kitchens, etc. all tend to scale with bedroom count too.
Equally, houses in Cornwall are of little use when the jobs are in London.
It's basically a tax that punishes labour mobility and not oversizing property.
Of course, you have to pay to heat and maintain that bigger house and pay higher council tax on it, so your saved stamp duty will probably be used after a few years, so in an ultra-rational way, it comes out in the wash, but it certainly doesn't feel like it at the time.
I have more rooms in my house than people, they have purposes.
They are not dead spaces, and they wouldn't somehow become more useful if I knocked a wall or two through to reduce the room count or reclassified them.
I don't know anyone that has an empty room in their house, or one that no-one enters for weeks at a time, etc. Maybe the odd country estate is like that.
To a communist, the concept of having a guest room, office, storage room etc might feel like "underutilization".
If we apply that more generally, then the park outside my house is underutilized because the maximum capacity are not sunbathing in it at all times. I think that's a pretty silly use of language.
This is true. The problem tends to be that people become settled in an area, and would prefer to downsize there so they don't need to uproot themselves. This is often very difficult, as there may not be availability in that area for a suitable smaller property.
I'll never understand how someone could think that completely normal things like a house, garden, car, etc are somehow "too much". But they do. It's baffling.
I can understand, though not agree, with being angry with someone who owns say, tens of thousands of houses, millions of acres of land, and leaves it all empty.
But the idea that a house is underutilized if it doesn't have as many people as could possibly live in it? All I can say is, Hong Kong exists, Manhattan exists, feel free, I'm not in for that.
I don't have any statistics to hand but, based on experience, there are a lot of houses in the UK like this. Particularly among middle class couples in their 60s, whose children have left home. In fact, my parents have two spare bedrooms that are only used a handful of times each year.
Nothing in the ONS link says otherwise, they just ask
"How many bedrooms are available for use only by this household?"
Or, you could, you know, make it more affordable to build smaller homes with fewer bedrooms so people actually have options when they become empty nesters.
Can confirm that as interest rates went up, people just can't afford the enormous loans anymore and prices of houses (and apartments to a lesser extent as they're a bit cheaper overall) fell, up to 20% at the worst, I believe. But as soon as interest rates are expected to go down, prices already shoot up again (even while interests are still high as people and banks estimate how much they may expect to spend in the near future).
The problem is that the private housing production system responds to increased credit availability only at the margins and does not over produce. That’s largely because houses are still hand built and not really substitutable like a vehicle. You don’t generally have a choice of two houses on the same site.
However if you produce houses publicly then you can force private housing to compete outside the margins. At which point you get excess supply, as we see with cars and then house prices start to stabilise and even depreciate. At which point the “investment” hoards would start to liquidate.
We need the housing market to behave like the production car market, not the classic car market.
The fix is public policy producing housing in order to force a situation of excess supply.
So... we should have paid builders to build more houses during the pandemic?
Hopefully they will be thrown out soon. The really fun note is that these boards are almost entirely made up of architects who are getting the chance to single-handedly destroy a competitor’s work.
One of the ways government can help us by funding counter-cyclical building, keeping the sector afloat and preventing supply crunches when a recession ends.
You cannot realistically build enough so that the rents decrease.
And when you build you just fuel the vicious cycle of people -> opportunities -> people.
I'm curious what makes you think this.
Suppose you built twice as many housing units as you had residents. Rents wouldn't decrease? Why not?
Or do you think that a sufficient amount of housing wouldn't fit? For reference, the San Francisco metro area has ~7.5M people in an area of ~3500 square miles. With housing at the population density of Manhattan, the number of people who could be housed in that area is approximately 250M people, i.e. three quarters of the entire US population. Obviously you wouldn't do this, but you could, so that can't be the constraint.
> when you build you just fuel the vicious cycle of people -> opportunities -> people
So long as a place is desirable to live, people will keep moving there. Obviously there's a logical limit to the argument- things get weird when you build more housing than there are people- but then so too do the logistical issues of sewer, water, electricity, and geology (some locations simply aren't economical to build high rise buildings on).
The underlying premise being that they're moving to this place from some other place. But that has an obvious solution: Build more housing everywhere. People can't increase the population of everywhere by moving from everywhere to everywhere.
It also implies that building it in one place still helps to reduce the cost somewhere else. If you make San Jose more attractive and people move from San Francisco to San Jose then you're reducing demand in San Francisco and lowering the prices there.
> Obviously there's a logical limit to the argument- things get weird when you build more housing than there are people- but then so too do the logistical issues of sewer, water, electricity, and geology (some locations simply aren't economical to build high rise buildings on).
The constraints at the physical limit are irrelevant because you don't need to get anywhere close to it. The point is that you could if you had to, not that you actually have to.
People make the same specious arguments about gpu production during mining booms etc. Surely producing more gpus will lower the price, or reduce the profit per gpu at least? Are you saying prices don’t fall with increased supply!?!? that’s a counterintuitive statement, Mr Bear!
it just also turns out to be a true one. Getting more people into the bubble etc, or building more hype around the bubble, often only drives the bubble higher even with increased supply. Macro and micro are different things and the forces can work very differently!
now, ponder the way we’ve turned housing into a bitcoin-style money machine full of people who never want the number to go down… yeah there actually is all sorts of counterintuitive and hazardous second-order effects involved in housing, why would you ever think there aren’t?
(The American housing market is basically the exact same kind of “deflationary asset” as bitcoin by design, in fact - if the system is built around the idea the number can never go down (can never be allowed to go down, in fact) that’s what you’ve got, regardless of any actual utility delivered in the process. We have turned housing into bitcoin instead of a place to live and that’s the overarching problem here.)
Maybe increasing the supply only increases the supply of luxury condos, which if they are all consumed by wealthy individuals might push housing prices upwards etc. Such activity could, similar to bitcoin, actually stimulate enough economic activity in an area itself to sustain upwards trajectory on pricing, or merely crowd everyone else out without prices actually dropping “on older condos” as everyone blithely handwaves. These effects are observable in real towns - Colorado mountain towns have a massive worker shortage yet no workers able to afford housing, so the area has been wracked with crippling labor shortages for multiple decades now! Markets are weird and inefficient in all kinds of exciting ways!
https://www.rmpbs.org/blogs/news/breckenridge-historic-home-...
https://www.nbcnews.com/news/amp/rcna17970
Basically economics 101 is barely sufficient for economics 101, and frankly every assertion you can pull from such content is somewhat incorrect and massively oversimplified, even one as simple as “prices will decline if production volume increases”. No, not always - and that’s not the only case I can think of where that simple, confident assertion is completely wrong, it’s not true of giffen goods either for example.
But that is what happens. The issue with GPUs is that a) there are only a small number of companies that make them b) fab capacity has to be booked in advance, and c) they know it's a bubble, so they're not going to commit to buying a large amount of future fab capacity when it could pop at any time. So then they don't actually increase supply, and prices don't go down.
> Maybe increasing the supply only increases the supply of luxury condos, which if they are all consumed by wealthy individuals might push housing prices upwards etc.
Only in the sense that the average cost might increase because the average unit is now larger, not in the sense that the existing smaller units would cost more rather than less. After all, their occupants no longer have to outbid the wealthy individuals who have put their money into the new luxury units instead.
> Such activity could, similar to bitcoin, actually stimulate enough economic activity in an area itself to sustain upwards trajectory on pricing
The premise here is that if you make an area more attractive then more people may want to live there. But that's fine. Suppose building 10 units increases demand by 5 units. So if you need 10 more units, build 20 more units.
In some kind of hypothetical edge case or rare circumstance, building 10 units might increase demand by 11 units, but that is obviously not sustainable -- if you built 50 million units, there aren't 50 million people in the region to live in the city, so at some point it stops being true, if it even ever was.
> Markets are weird and inefficient in all kinds of exciting ways!
This isn't markets being weird. If prices are high then construction companies want that money, which they get by building new housing. Weirdness only occurs when regulations interfere with their natural market incentive.
Especially for nvidia, who have been badly burned by crypto bubbles going from 100->0 very rapidly in the past and ending up with massive oversupply of both used and new GPUs.
Especially given the AI people are buying dedicated business GPUs and not gaming ones like the crypto miners were, that's probably good news for gamers that nvidia haven't gone full bore AI only. If they were, it wouldn't make sense to spend fab time on a new series of gaming GPUs as they have leaked they're doing.
Continuing to also produce gaming products give a few advantages, besides simply to serve as something to fall back to if the AI boom turns out to be a bubble.
For instance: - Having consumer GPU's out there has marketing effects and can also increase the population of developers who experiment with AI development.
- Consumer GPU's can be built with cheaper memory types (no HBM needed) and less efficient process technologies (like when the 30-series used Samsung's).
- Having an installed base of consumer GPU's out there allow AI companies to deploy AI products (inference) to edge devices.
- Related to the previous: In the future, AI technology, VR, gaming and TV/film may merge into a single entertainment class, with everything happening or being told in an interactive VR environment, complete with fully AI agents acting within. Having much of the processing power in the edge device may increase the quality of such experiences, and may cause consumers to be willing to significantly increase spending on such products.
That is not the argument. In your example, demand is increasing more than supply, so obviously prices would not fall.
Supply has to increase at a rate greater than demand (including higher property taxes to incentivize sellers to increase supply of properties for sale).
Traffic lanes work this way, notoriously. It’s also fundamentally one of the mechanisms underlying Jevons Paradox.
https://en.m.wikipedia.org/wiki/Induced_demand
Again, the practical example in real estate is Colorado mountain towns. Demand, supply, and prices all accelerate together, and this is particularly amplified because of the customer base in question not having any real price sensitivity etc, and then driving out the portions of the market which do have price sensitivity.
Like it or not, induced demand is a very real phenomenon, and in real estate and similar markets it observably does not always occur at a lesser price due to other positive feedback loops being induced. And you cannot “peel away” those effects separately - the price increase will not necessarily occur exogenously without the demand induction and vice versa.
Again, you’re trying to pick apart the “but that’s separate from the supply increase!” and unfortunately that’s not really severable. The demand increase wouldn’t have occurred without the supply increase. Jevons Paradox being real doesn’t mean gas prices will never go up, so to speak.
This is not a practical example because Colorado mountain towns are not fungible or reproducible. This applies to much of the western US that features amenities in very limited supply that cannot be increased, such as low humidity, tall mountains, surfing, and vast expanses of public land. So the US west will always be expensive, especially if you have an airport/Costco/Apple/Trader Joes nearby.
NYC has a similar dynamic, since no other US city will come close to having a comparable subway transit system.
But this would not apply to places that are relatively fungible and in greater supply, which include many metros in the southeast/midwest/northeast.
Induced demand is a thing, but the population of people is limited hence total demand is limited.
I don't think that's the fundamental/underlying dysfunction of the real-estate market, because the same induced-demand effects clearly exist in other areas. Again, things like Bitcoin pretty clearly demonstrate that supply can induce its own demand and then build a positive-feedback loop that would not have existed exogenously.
But regardless, it's equally true of the real-estate that both grandparent and I were talking about. If induced demand doesn't count because every real-estate parcel is a unique good, then you also can't ever compute a curve for price, because supply will never exceed n=1 either. Therefore the Law Of Supply and Law Of Demand do not exist in this universe and GP's assertions are still false.
I'm not sure that's a useful way to think about the world, clearly real-estate is at least somewhat fungible (people don't not buy an apartment because they lost a single bid) but if you want to use that model, grandparent's arguments are equally broken, for whatever value of broken you are asserting here.
The more useful analysis imo is that real estate is mostly actually not about real estate - it’s about community, economy, etc. And those are clearly things that are highly susceptible to induced demand. There is a near-infinite supply of beautiful mountain slopes, but that’s not really what people are buying homes in Vale or Breckenridge for. They are buying it for the social factors, which is effectively 100% pure induced demand in this context.
And what would happen to prices in the new area if you kept building, instead of stopping? Finding an inflection point in the curve and passing legislation forcing everybody to live inside it is no proof that there isn't a point higher on the curve where more supply reduces prices again.
Induced demand is a specious argument because the demand is not actually induced by the new construction, it's suppressed by its absence.
If you have traffic congestion, or a housing shortage, then people who would have used the road or moved to the city instead do something else. The normal amount of demand that would exist in a functioning system is suppressed.
If you then alleviate some of the shortfall, that demand comes back. But you haven't induced it, you've just stopped suppressing it through congestion or high prices.
The most important thing about this is that the amount of demand at the lower cost isn't infinite. It's just more than there is at the higher cost. What this means is that you thought you had a shortfall of 100,000 units but you actually had a shortfall of 250,000 units. What it doesn't mean is that you can't solve the problem by building more units -- you just have to build 250,000 rather than 100,000.
It would seem to me that more supply = more construction + more maintenance + more taxes = more costs. And these costs must go somewhere. Obviously, they would fall under the landlords responsibility, but they probably would try to pass on these costs as much as possible.
Now this is where it gets iffy...
Vacancies don't earn revenue, and so obviously would be costly to landlords. If there is more supply than renters, landlords would be competing with each other for the renters (or risk having vacancy and the costs falling on them), so they would have to compete (such as by lowering rents) in order to attract the renters. Rents therefore decrease.
However...
Let's assume again that there is more supply than renters, but this time there is few landlords (for hyperbole one landlord). Competition for the renters is thus low, (in the case of one landlord - none), and so there is less need to lower rents to attract renters. In fact, in the case of one landlord, he can raise prices despite there being more apartment supply than renters, and have them pay for all the units, including the vacancies. Rents therefore increase, despite there being more supply.
More total costs divided by more total units is just the same cost per unit, if not lower because of economies of scale.
> Rents therefore increase, despite there being more supply.
If there is a monopoly landlord then rents will be at the monopoly rent whether you increase supply or not. Even then increasing supply could lower rents, because the monopoly landlord could capture more rents by charging $9000/month on twice as many units than $10,000/month on half as many units, and can't charge $10,000/month on twice as many units because there aren't enough tenants who can afford that.
Also, the premise here is that you're increasing supply. The monopoly landlord would have to outbid everybody else for the new supply or they'd lose their monopoly, and have to pay the monopoly price or else the new units would be cheaper than their existing ones. But then the construction companies would be receiving the monopoly price and become flush with cash to build even more housing until the monopoly landlord ran out of money.
There is a reason landlords collude through zoning boards: It's otherwise quite easy for someone new to enter the market.
All of which presumes the risk here is all on the monopoly landlord, when this isn't the case. Even disregarding zoning, construction companies have to compete for bidders, and the monopoly landlord may not have to compete with bidders. Additionally, if insufficient housing is really a problem because more people and businesses are moving into the neighborhood, then the monopoly landlord isn't likely to have problems running out of money. If that isn't the case, and there is sufficient housing (or renters are struggling to afford rent), then they have market advantage over new entrants to the market in the appropriate pricing of bids. This increases risk and pressures margins for new entrants, limiting their ability to compete, which puts risk onto construction companies in bids. In other words: it is quite possible the new entrants or construction companies fold before the monopoly landlord does.
Again, it's all iffy, but, fact is, every new supply constructed comes with a cost, and it falls on someone, even if cost/unit goes down. The assumption that that cost won't fall on renters, isn't a certainty, nor is the assumption that renters will be the ones to benefit from a decreased cost/unit.
What?
The premise is that there is a monopoly landlord but it's possible for others to create housing, e.g. the landlord owns all of the existing rental properties but anybody can buy an empty lot or single-family home and build a multi-unit building there instead.
Obviously if the monopoly landlord owns all of the land then you have a different problem, but that isn't even close to the case in any metro area in the US. (Though neither is anyone owning all of the rental properties for that matter.)
> Additionally, if insufficient housing is really a problem because more people and businesses are moving into the neighborhood, then the monopoly landlord isn't likely to have problems running out of money.
Won't they?
Suppose it costs $200,000 to build a new housing unit, but because of the existing monopoly they sell for $1,000,000, whether it's to the monopolist to sustain their monopoly or to someone else who would break it. To sustain the monopoly the monopolist has to remain the high bidder.
But now the construction company has a million dollars, and it still costs $200,000 to build a housing unit. So they build five new housing units, and now they have five million dollars. So they hire more guys and start training new apprentices because in the next round they're going to have 25 million dollars and build 125 new units which the landlord will still have to buy for a million dollars each.
It doesn't matter how much money the landlord has, the landlord is going to run out of money, because now the construction company has its own R&D division dedicated to construction automation it's only five more rounds before the landlord is paying the entire US GDP to the construction company.
> In other words: it is quite possible the new entrants or construction companies fold before the monopoly landlord does.
It costs them $200,000 to build something the monopoly landlord has to buy from them for a million dollars, or someone else will buy it from them for $999,999 which then happens again and again and destroys the monopoly.
Anybody can buy and build? Yeah... only if they have the funds for it!
That's what you're ignoring: running out of funds isn't just a possibility for the monopoly landlord, it's possible for new entrants to the market, as well as the construction companies. The new entrants and construction companies are facing that risk, just as the monopoly landlord is.
For example, a new entrant to the market may have to go into debt to fund his bid or construction in order to compete with the landlord. The monopoly landlord on the other hand, might not have debt and instead has large capital reserves. Depending on the circumstances, it is even possible for the new entrant needing to rent ABOVE what the monopoly landlord already does to just to break even on costs that the monopoly landlord doesn't have (e.g. because of debt, and/or they overbid for the risk in the market, higher land costs, and other reasons). If done in a market where there is already more supply than renters, it would be a very risky venture for the new entrant.
And again, it's also entirely possible that there are 0 bidders showing up to compete with the monopoly landlord (due to shear lack of other participants willing to step in to compete). In which case, the monopoly landlord doesn't have just a monopoly on rents, but bids, and the construction companies would have tough time running the monopoly landlord out of business, no matter how much they build.
> It costs them $200,000 to build something the monopoly landlord has to buy from them for a million dollars, or someone else will buy it from them for $999,999 which then happens again and again and destroys the monopoly
Look... we can make a bunch of "what if" scenarios, but the scenario you made doesn't necessarily have to be the case (nor any of my examples). But, you had inquired about:
>> You cannot realistically build enough so that the rents decrease.
>I'm curious what makes you think this.
The construction costs are much lower than property values, so construction would be highly profitable. Every wealthy person in the world would be lining up to invest in a hundred construction companies because they would be yielding a 400% year-over-year return until the monopoly is broken.
> All I need is one possible example to demonstrate how that can be.
You need a real example, not a contrived one. "What if the emperor of the world declared that rents have to stay high?" Then you don't have a market anymore and we're no longer talking about what happens in markets at all.
You have purchase property to construct something on. So high property values works against your own argument.
> You need a real example, not a contrived one
No I don't, as I did not make the original argument you inquired on. That poster needs a real example, I however, only need to entertain how that possibly could be.
The basis of construction is that you're converting fewer units into more, on the same piece of property. If a single-family home is a million dollars then you can buy one for a million dollars, build a 50-unit condo tower on the lot at a cost of $180,000/unit, apportion the original million dollars across 50 new units so the cost per unit is $20,000, and you're creating new units at a cost of $200,000/unit while selling into a market where a unit goes for a million dollars.
> I however, only need to entertain how that possibly could be.
But that's only interesting if it's something that might plausibly happen in practice. You can make anything possibly happen given an arbitrary set of unrealistic constraints.
>Suppose you built twice as many housing units as you had residents. Rents wouldn't decrease? Why not?
I gave you an example of how that would not happen: in an uncompetitive market such as a monopoly, additional supply doesn't impact price if it is simply hoarded. Now we could argue whether that's realistically to happen or not, but I see not why that is relevant to your question.
Let's consider whether this can even possibly happen. In order for a monopolist to own all the housing, there would have to be somebody with that much money.
The largest wealth fund in the world is China's, with a total value of around $2.75 trillion US dollars. This is the entire fund across all asset classes. Jeff Bezos with his paltry $200 billion can't even hold a candle to it. By contrast, the total value of US housing is north of $47 trillion dollars. So if you were to double the amount of housing in the US, no one in the entire world exists who could afford to buy all of it. Even the entire government of China isn't within an order of magnitude of it.
> I'm curious what makes you think this.
> Suppose you built twice as many housing units as you had residents. Rents wouldn't decrease? Why not?
It seems entirely logical that rents should decrease.
Not the OP but I do always question this, despite sounding logical. Why? Because it has never worked that way in practice. Can you think of a city that built so much housing that rents became cheap (relative to local income)?
It's easy to say "built twice as many housing units as you had residents" and I agree if you could do that overnight, rents would free-fall. But in practice it would take years to build so much housing. Meanwhile, more and more people and jobs are moving in, attracted by all that new housing. The area becomes ever more popular and more expensive. So you end up with a city that is more vibrant, with a lot more people and a lot more jobs and economic activity. All good things, but rents don't go down, given all this success rents go up.
Most cities with a declining population. They built more housing than they needed, then people moved out, so now housing costs there are low.
It's hard to find other examples of places that have built too much housing, because there is no market incentive to do that. In practice the best you can do is prevent there from being too little.
But the areas with less restrictive zoning do have lower housing costs.
Houston metro, not very restrictive zoning:
Per capita income: $68,344
Median home price: $192,500
Per capita income: $50,407
Median home price: $393,000
It isn't the housing that attracts them, it's jobs etc. The housing is then needed to give them somewhere to live, or you get California.
In some ways having more people will create more jobs and attract more people, but the idea that it's not possible to keep up with demand is just defeatism. You can't build a million new units overnight but neither do a million new people move in overnight, and even if they did, you would then be better off to build a million new units over five or ten years than to not do this.
Whereas the argument is simply that building the units should not be prohibited. You obviously don't need a law against it if your actual problem was people not doing it fast enough, right?
However, we don't live in a world of perfectly spherical cows and because we don't live in a world where we can double housing units overnight, realistically the reasons we're in this problem is because we can't build enough housing units. Given than, we're not going to be able to double the number of housing units, so realistically we can't build enough to lower rents.
The reasons we can't build enough housing aren't going away overnight, so even pretending they did, it would still take many months, if not years, before new housing units were being sold. Given the time it would take to double housing supply, the natural increase in demand over time because the population is increasing means it would rise to meet supply to keep rents at the current level. Lets say demand increases by 9% each year and it takes 10 years for double the housing stock to come online. Demand is basically doubled by the end of 10 years if that 9% remains constant.
With those problems not disappearing, new housing units are going to be slow to come online, so realistically, again, realistically, because we're not going to double the housing supply, so the best (and my bias is that of being in the SF Bay Area) we can hope for is for rents to increase at a slower rate. (Aka the derivative of rents goes down.)
I just don't seeing the rents themselves decreasing, relative to inflation of money, as well as inflation of the population.
What higher interest rates? We're nowhere near high interest rates.
This is why NY is cheaper than the midwest.
The number is irrelevant - people want to live in desirable areas where's there are jobs, and are constrained as such. Rebuilding high density in towns and cities is an issue, as well as maintaining decent services ( hospitals, roads, public transport, post office etc).
You say that houses are being treated as investments, that's why these crises happen; but then why are building materials and tradespeople also at sky-high prices (in Ireland)? Is it all competition on investment building?
Similar issue in NZ. Cost of building materials was getting extreme. There's an argument to be made that these are linked to profitability of building and so increased during the speculative boom. Helped along by the fact that many suppliers are monopolies. Cost of building materials has however started falling considerably since the property market crashed here. Likewise the cost of labour and building quotes overall.
Sort of? See eg https://www.ft.com/content/dca3f034-bfe8-4f21-bcdc-2b274053f... for some graphs that show Europe vs anglophone countries in an obvious way. Obviously there are lots of differences between the countries, eg the specifics of their planning systems and economies. The US is different because of the big diversity of local governments – housing is more affordable lots of people outside of desirable cities, and places like Austin and Houston do build lots of homes and that seems to be a possible reason they haven’t grown like prices in California.
Credit costs have followed similar trends everywhere (obviously there are differences, especially in the US) and yet house prices have not followed similar trends but rather behaved differently in different places. I agree that when interest rates are lower you should expect to see higher prices, but that’s because interest rates change the price that a given income can afford. I don’t think interest rates are good at explaining the changes to affordability over time, or why affordability is different in different places.
Also, in your linked chart, you see something like 20% more dwellings per person in developed EU countries vs English-speaking countries, which doesn’t feel like no difference at all.
The issue in the article of affordability becoming worse across the US recently is probably interest rate related – prices change more slowly than interest rates, 30-year fixed rate mortgages mean rates change more slowly, and the higher rates mean existing mortgage-payers don’t want to move as they’ll lose their low rate, which reduces supply. I don’t know why prices are still up though – if interest rates being high was making housing unaffordable, one would expect prices to be down.
I was attempting to highlight the change in numbers for those countries I mentioned and how they are clearly inadequate when trying to explain the change in prices over the same time.
In NZ there was little change from 2011 to 2022 but median house price went from NZD350k to NZD900k.
I agree with regard to demand being different in various locations within a country, but those localised demand differences would have had to shift pretty dramatically over the same ten year period to explain much I imagine.
Housing is still extremely expensive in most major European cities relative to income. e.g. Milan, Lisbon, London, Rome, Munich are significantly more expensive than San Francisco or San Jose (e.g. Milan is more than 2x more expansive) if you're earning the median income.
It's not like most people in some European countries chose to live in rented cramped apartments they simple have no choice because they can't afford anything else.
> you see something like 20% more dwellings per person in developed EU countries vs
It's not clear how much of that is because of lower (or negative) population growth. e.g. Italy has one of the highest dwellings per person ratios and there are towns/villages which are basically giving away houses for free Milan is still relatively the most(?) expensive city in Europe and housing in other major cities is still less affordable than pretty much anywhere in the US.
US cities are vastly larger by land size, because America is larger allowing it, added with fewer public transit options.
Look at Houston, massive sprawl and some of the cheapest housing in the country.
People now commute from Stockton to San Francisco which is already a 2.5hr drive.
Sad to think the obvious solutions can’t happen in the SF Bay Area due to its politics.
I agree that the local land use is a total disaster, but even if they made it better, SF has a few skinny tendrils of transit which creates a few skinny corridors of transit-accessible area.
The constant excuse I kept hearing when I was living there was that there isn't enough space!! But that's only true if you won't do anything to increase the viable space to live in (and optimize the space that is present, through better land use). Even densifying the transit along these corridors, San Franciscans will still whine and complain about how there's no space, ignoring the obvious solution.
The answer to me is to do it both, yesterday. But I'm not a San Franciscan anymore and I understand that my values differ from theirs.
Aside, it's also worth mentioning that in Tokyo as well, single family homes near train stations abound. The difference is that they're smaller and denser, and mixed in with apartments. There aren't that many towers here! But the roads are mini-sized and they pack units tightly to better use land. If San Franciscans hate towers that cast shade, they have alternatives.
[1] https://en.wikipedia.org/wiki/Transport_in_Greater_Tokyo
https://kinder.rice.edu/urbanedge/report-houston-second-wors...
Texas is only 2% behind CA and the total amount is exactly correlated with state population growth. Not a very insightful study.
Set this charting tool to Density, plug in Tokyo with a number of other major world cities, you’ll see the effect in the data.
Probably because income there is higher than in the province of Milan, and quality of life is better for some indicators.
This is counterintuitive, but also persistent across high-interest rate environments. I asked my mom what the housing market was like in 1980, when rates went up to ~20%, and she said "Prices were basically stable, but nobody was selling houses." Similarly, if you look at historical data, you'll notice that home prices usually remain flat during recessions but don't really go down. Even in really bad recessions (eg. the Bay Area from 1989-1994, which got hit with the triple whammy of interest rates going up to 10%, a tech bubble bust in the workstation & AI market, and the crash in defense spending after the end of the cold war), you might see at most a 10% decline.
The reason comes from a fundamental asymmetry in the housing market: everybody needs a place to live, but most home sellers do not need money. If they fail to sell, they can take the place off the market and continue living in it, or rent it out, or just leave it vacant in hopes of better market conditions next year. So the negotiating leverage usually lies with sellers in the housing market.
When rates go up, affordability goes down, but sellers are usually unwilling to take a multi-hundred-K$ hit. So they don't. They rent it out, they live in it, or they hold onto it. It's usually worth taking a few thousand dollar hit in property taxes to avoid a $100K hit in home value. Liquidity dries up - instead of prices going down, inventory disappears. We're seeing that now, and the older generation saw it in 1980 and 1990.
To make prices actually go down substantively, you need those forced sales, where owners want/need to get out at any price. This could take the form of a foreclosure/bankruptcy crisis like in 2008, where the owners legally lose possession of the house, and the banks need to sell at any price to avoid bankruptcy themselves. Or it could be rising crime, like what happened to Detroit & the Rust Belt after the 1970s or SF in 2020. But many things that you would think would destroy home prices don't actually - New Orleans did not see a significant decline after Hurricane Katrina in 2005, and Silicon Valley did not see one after the dot-com bust in 2000.
One other thing to note is that when prices in a region decline, it's almost always because nobody wants to live there. This is actually rather intuitive - if rates and affordability go down but people still want to live there nobody will sell, while if people are forced to sell but others still want to live there you will still have competition among bidders and prices will go up. But it means that there's no magic bullet: "affordable" housing means that home prices stay stable while incomes rise, and if you can't get your income to rise, you are just screwed.
“The median home sale price, external in the US has jumped by nearly 30% since the end of 2019”
So I guess you could have the increase due to Covid effects (or whatever else happened around then) and then seller hesitancy due to high interest rates, even though most potential sellers don’t stand to lose much.
If they sell, they need to buy again at a higher interest rate. So they can sell at a profit but then monthly payments will be higher.
Anyway, this is only 1 scenario. Urban areas are hit hard NYC/SF and sellers are sitting out waiting for recovery, so they rent them out.
Affordable is a different issue. Housing assets exhibit strong depreciation under normal circumstances and extreme depreciation under any kind of stress. Affordable houses are used houses in a way similar to how used cars are fundamentally more affordable than cheap new cars.
But then US wants to 'invest' in current wars.. sorry, national security ... and money has to come from somewhere.
I feel like I should explictly state this is not an attempt at derailing this thread.. politics and rates are part of the reason we are in this mess. I agree that 20% rate would clean it all up really quick
I think you have to be careful with the definition of "unaffordable".
Housing, at this moment, is unaffordable in the sense that the cost of housing squeezes many people's discretionary budget, savings, and even sometimes the budget for necessities. It is not unaffordable in the sense that (most) people do have enough money that they can pay for it, even though paying for it might cause them hardship elsewhere.
Housing is an inelastic good - particularly for demographics who have limited access to transportation and therefore need to live very close to where the jobs are. The price increases until it consumes all the money available to pay for it.
Housing is not rising in price because it is an inelastic good. Housing is rising in price because the growth in the supply of housing is less than the growth in the demand for housing.
Indeed, the very fact that housing has inelastic demand means that it is particularly susceptible to price reductions when supply is higher than demand.
Lack of supply would cause prices to rise - but so would cartel behavior on the part of those who control that supply. Housing of the type necessary for relatively low-income individuals, where the location must be close to jobs (see above), is typically controlled by a set of entities who exhibit cartel behavior in how they price the rent.
Anyway, supply and demand are murky concepts that don't map well to reality when trying to take them out of the supply/demand chart. You can't actually quantify potential "demand" because "someone wants a good or service" is not a data point for demand, only actual trades that happened do.
We printed ~25% of all money in existence since 2020 so that obv means more diluted money chasing scarce housing (applies to everyone worldwide)
High real estate prices might be the new norm :(
Why would money printing postpone its effect on prices until after interest rates increased?
Because most of the freshly printed money wasn't immediately used to increase the demand for consumer goods. Instead, it only kept consumer goods demand about neutral, until the summer of 2022.
Without inflation in consumer goods, most businesses don't have increased profits, and no incentive to try to hire more people, which kept wages down.
Instead, the extra money found it's way into assets, pumping up the stock market and housing market.
That started changing in 2022, as inflation hit (which SHOULD have surprised nobody). But the inflation was kept in check by increasing the interest rate.
The increase in the interest rate stopped the amount of money from continuing to grow and even fall slightly. But not nearly enough to reach pre-covid levels.
That means that there is still a lot of excess money in the system slushing around. As long as the real interest rate on bank deposits is still low, people are not tempted to keep them as deposits. So the money stays in assets, maintaining the high price.
> Why would money printing postpone its effect on prices until after interest rates increased?
I'm assuming you mean consumer prices here, not housing prices. Consumer prices stayed low during the pandemic, since people generally reduced their consumption, especially the consumption of services (restaurants, entertainment, etc). A lot of "regular" people paid down credit card debt or increased the size of their savings account.
In 2022, that changed. "Regular people" started to spend more of their savings again, and this caused inflation to rise. As inflation was going up, the fed (and other central banks) slowly increased the interest rate, but not quickly enough to stop the sharp rise in aggregate demand. (And war in Ukraine and continued lockdown in China didn't help either, nor did various initiatives to re-shore production of anything from microchips to ventilators, or for that matter the huge investments of capital currently going into AI infrastructure).
And as demand pushed inflation up, that lead to some increase in the demand for labor. So even if the salaries haven't kept up with inflation, inflation definitely has been increased by the increase in salaries.
Naively, one might expect that the inflationary pressure will cease once aggregate inflation reaches 25% relative to 2020.
And if you wonder why wages haven't kept up. I think this can be explained by a weakening of the demand side of consumer goods, driven by various inefficiencies in how capital allocation, due to the cost of building new and robust supply chains, due to the situation in Ukraine/Russia and China and AI investments etc (as listed above, too).
The statistics are skewed because the demand varies a lot between different regions .e.g there are towns in Italy selling houses for $1 (well sort off...) that doesn't mean that housing is affordable in Milan or other major cities. Same Applies to US, Canada, Ireland etc.
1. People have mortgages with very low interest rates. If they sell the home, they give up that cheap mortgage for a much higher mortgage interest rate with the next home. So, they stay.
2. The capital gains tax exemption of $500,000 has not risen with inflation. Selling your appreciated home will result in a large tax bill. It makes sense to sit in the home until you die, then it gets a basis boost when transferred to the heirs.
For (2), absolutely. Tax advantages play their part (adding to investment demand relative to other investment options). Is it not also the case that interest payments on a residential mortgage are tax deductible in the US?
They are only if you itemize your taxes nowadays. During the Trump administration the tax law changed so that the vast majority of Americans now take the Standard Deduction. I received the mortgage interest deduction for about 15 years but haven’t received it for 5-6 years now.
This may be true only in the US. In Canada, for example, the maximum term a mortgage rate is fixed for is 5 years, after which you have to "renew" your mortgage and renegotiate the rate. So a lot of people are already being forced into higher interest mortgages here.
The people who suffer are those who bought 5 years ago -- prices going down means negative equity so you can't sell and move to a cheaper place, and you reach the end of your 5 year fix.
That said, wages have increased a lot over the last 5 years, so higher rates aren't the end of the world. My mortgage increased last year by about 25%, but as average wages are up at least that much that's not devestating.
It seems difficult to believe all the medical treatment advances and insane amounts of money spent are having zero effect on postponing date of death (Or even the date of loss of ability to live independently including death).
Of 100,000 people born in a nation 80 years prior, how many still alive and living independently in that nation. Compare with the same metric in 2004. This is to net out immigration, which can be considered separately.
Do we know if older people are living unassisted in their homes longer? That’s all we really care about in this context. Or not even unassisted, but family members moving in and taking care too.
I wish there were a $500k capital gains exemption for turning my ETFs into a house.
Yet another way in which real estate receives massive privilege.
Yes! Yes they all do! None of them are producing housing at anywhere near the rate required.
One thing that's surprised me is that I'd expected this situation to lead to building being relatively cheap compared to buying. But land + labor + materials price increases seem to have left building less competitive in most areas meaning new supply can't actually undercut the market much, if at all. Or seemingly won't. It really feels like there's nothing that can give at the moment, like it's some kind of doom loop.
Half of my city and many other cities around my country were built during the communist 70s and 80s... and then we stopped building and maybe built 5, 6 apartment buildings in the last 30 years.
Then urbanization came, centralization, everyone wants to live in a city.. but we're not building more housing.
We can look around europe.. how many apartment projects were done in the 70s and 80s, and how many are being built now.... we built whole new neighbourhoods back then, and now we have 4 people sharing a two bedroom apartment.
Housing more people in a concentrated area creates more demand for services, which creates more demand for housing which jacks up prices. Packing 1,000 people into an apartment build creates extremely high demand for plumbing, house cleaning etc, services, which jack up housing prices. But if cities were low-density with commerce centers decenteralized across many neighbhorhoods or towns, you don't create location demand hotspots (e.g. cities) that jack up prices.
Property taxes and interest rates are a forcing function to keep unoccupied properties in check, as long as the appreciation doesn't dramatically exceed the risks of being a LL. For Tier 1-3 markets in the USA, you can't cash flow properties as rent is drastically lags property ownership costs.
Hong Kong has all sorts of crazy building restrictions and is a different story
Taxes, Transportation and food costs are cheap, but property is not.
Almost any other Asian city from Bangkok to Ha Noi has room to expand. In fact speaking of Bangkok buying a condo there is widely considered a bad investment because there is so much supply.
Not to mention, it's about the only extant example of a benevolent dictatorship.
I hear Shanghai is much worse, but never lived there before.
It seems more likely that costs are higher in cities because there are valuable opportunities for skilled people who demand high salaries, simultaneously encouraging dense living to maximize access and increasing cost of living through the Baumol effect. High prices causing density, not the other way around.
I think we are starting a conversation about gentrification: Rich white-collar/coat workers move into an area creating demand for service work. There is some price competition for their service work labor, raising wages, but typically housing costs are too high for these workers, so they leave (lowering supply, pushing up wages).
So it's a feedback loop, but one which is prevented by keeping supply enough to meet demand, because then lower paid workers aren't priced out and cost of living doesn't increase.
Increasing building and increasing density are different things. Singapore and Hong Kong are dense because they have a very limited geographic area to build in. You can’t point to their density and conclude that adding housing doesn’t help lower housing costs. They would be even more expensive if they weren’t so dense.
Rent prices are 72.9% lower in Tokyo compared to New York [1].
[1] https://www.numbeo.com/cost-of-living/compare_cities.jsp?cou...
Spot on. You're not alone. For a more thorough and clinical review of how we're f'ed and why see Lyn Alden's "Broken Money".
To your point, ppl are fond to talk about the economy. That's a distraction. It's a false god. Fact: the economic system and the sociopolitical system both side on a foundation. That foundation is the financial system. Full stop.
You need to increase carrying costs. Land value tax is the best way but it's about as far as you can get from what's implemented anywhere
The past few decades (coinciding with the property price boom) have been all about ever decreasing interest rates. What is happening now looks a lot like a paradigm shift. I wouldn't bet on rates falling substantially anytime soon.
You need a recession.
Do they all have zoning, urban planning requirements, and restrictions on what landowners can do with their property? Yes?
This isn't a complicated issue, this is 100% a self inflicted "problem" that can be solved with the stroke of a pen.
Pro-tip: abolish all restrictions on what landowners can build in the property. No licensing requirements, no filings, no nothing.
The sum total requirement for someone to build something anywhere should be them asking themselves "do I have permission from the landowner to do this?" And getting to work.
Also there is a shift from people living in families to living single or just with one person which is more inefficient and requires more space.
You picked culturally-similar countries with common law systems and a history of local zoning.
However, the tax is still far too low and it contains various loopholes that allows developers to hold condos empty for years until deep-pocketed buyers show up [2].
Vancouver isn’t unique. Housing is being traded like poker chips everywhere, often but not always by ultra-wealthy foreign nationals with zero regard for the local consequences.
[0] https://vancouver.ca/home-property-development/empty-homes-t...
[1] https://dailyhive.com/vancouver/vancouver-empty-homes-tax-st...
[2] https://vancouversun.com/news/local-news/dan-fumano-some-new...
The entire city and all of the NIMBYs cried about their "neighborhood character" and tried every legal trick they could to block the development: threatening to not connect it to utilities.
Vancouver literally has single family homes within half a mile of downtown! Clearly there is room for growth.
Vancouver is full of a population which kicked out the ladder after they got theirs. We moved away a few years ago and haven’t regretted it since.
That's not 1/3 of Vancouver's condo supply. Not by a long shot.
Still, it doesn't sound like that'd make much of a dent in Vancouver's housing supply. (Razing them and building higher density buildings might, though.)
0: https://vancouver.citynews.ca/2023/02/03/bc-condos-investor-...
Why do you choose to just tell lies?
Did you misread something? Maybe from this post:
> https://dailyhive.com/vancouver/vancouver-empty-homes-tax-st...
> Empty Homes Tax has reduced Vancouver's number of vacant homes by 36%
> After five years of the EHT being in effect, the total number of vacant properties within Vancouver has fallen to 1,398 homes or 36% fewer properties compared to 2017, when the tax regime first launched.
The statement about 36% is a relative percentage, not absolute percentage points. What happened is that ~2184 homes were vacant in 2017, and fell by 36% to 1398 in 2022.
It's saying that of the homes that were originally vacant, there is 36% less of that now. It is not saying that of all homes that exist, the vacancy rate decreased by 36%.
Immigration. It's not that immigrants buy up the houses (opposites, we tend to live cramped up in flat shares). It's that they support landlords profits (with cream on top of not knowing your rights) and have overall pressure on market.
Building should at least match immigration/population growth.
Also not building dense enough. Kiwis always tout "I wouldn't wanna live in a house without a backyard" - well I don't wanna rent forever either. Given choice of no housing and shitty housing I choose shitty housing.
Flats tend to be horrible here. Townhouses are ok and are growing, albeit too slow and too far from public transport.
There was some news yesterday about new row of townhouses around Auckland being classified as rural and unable to receive mail (rural mailboxes must be grouped in one spot, not on each house).
It's my view that this implosion will happen, just later, with less control and with more devastation.
Thing with politicians is (depending on party) something like 90-100% of them are property owners and 30-70% are also property investors [0] so I just can't see how they would be willingly taking a haircut.
(Cherry on top - most of them couldn't even afford to buy their homes now on MP salary)
0: https://www.newshub.co.nz/home/politics/2021/12/the-full-lis...
Somebody has to do this work: it's essential, as well as hard, unglamorous and badly paid, and societies must take their pick from:
- Family members, almost always women, who have to give up paid work.
- Paid labour from less educated parts of their existing/indigenous population.
- Migrant labour, whether temporary or permanent.
The great mistake of Brexit is that the UK has now replaced temporary migrant labour (Poles and so on, who'd mostly come here in their early/mid 20s, stay for ten/fifteen years and then go home to raise families and be closer to their elders) with permanent migrants from much poorer countries who won't want to go back if they can at all avoid it.
Yes, housing prices are determined by supply and demand.
This was found to be true by a California Circuit of Appeals: https://x.com/CSElmendorf/status/1774115015551074434
This is found to be true by Blackstone, who frequently notes that shortages and low increases in new supply are fundamental to their strategy of buying and building housing for rent: https://x.com/RikAdamski/status/1643477536695803904 https://x.com/IDoTheThinking/status/1378737834824060931 "We could also be adversely affects by overbuilding or high vacancy rates of homes in our markets, which could result in an excess supply of homes and reduce occupancy and rental rates."
There are plenty of sources which show a strong correlation between new supply and housing prices: https://x.com/sam_d_1995/status/1762597879154123241 https://x.com/JeremiahDJohns/status/1761205726230216943 https://x.com/ArmandDoma/status/1770961181093859375 https://x.com/jayparsons/status/1761028332781478227 (STRONGEST:) https://x.com/JeremiahDJohns/status/1761205728356802806
There is plenty of unused space in our cities for new housing: https://x.com/ftw_cool/status/1779228107754623084
Texas vs California; Texas builds a lot and has lower housing price growth, California builds little and has high housing price growth: https://x.com/jburnmurdoch/status/1760995124690231526
This effect holds regardless of if the new housing is "affordable", "below-market rate", or "luxury": https://x.com/jayparsons/status/1712110658601255211
That supply and demand applies to housing has been reported repeatedly in the news: https://x.com/AlecStapp/status/1757939504126832802
Lots of new apartments have been built lately. The effect on rent growth is obvious: https://x.com/mnolangray/status/1755818637750161540
Landlords themselves acknowledge the difficulty of finding tenants and getting high rents when there is a glut of housing inventory: https://x.com/sam_d_1995/status/1752346758254887132
Surprisingly, supply and demand also affect housing prices in the Midwest: https://x.com/StatisticUrban/status/1752008654734147718
Real estate investors and landlords acknowledging that new construction lowers rents and increases vacancies in their properties: https://x.com/SmackTrout/status/1652396524389961731
See my earlier comment regarding NZ. The number of homes per 1000 people changed very little between 2011 and 2022. At the same time prices went from NZD350k to NZD900k.
I think my suggestion that finance is the most significant factor here is a stronger argument than a supply shortage.
>I think my suggestion that finance is the most significant factor here is a stronger argument than a supply shortage.
You have zero evidence for this claim and cited zero sources.
>The number of homes per 1000 people changed very little between 2011 and 2022. At the same time prices went from NZD350k to NZD900k.
You cannot look at an entire country's housing/population ratio and think that explains everything. New homes in Queenstown don't reduce housing costs for people in Auckland or Christchurch. You need to look at the supply of housing in an area where it is a substitutable good: where you can switch housing without switching your job, school, friends, and life.
A new house 6 hours from me does not lower the price of housing in my neighborhood.
Are you sure finance wasn't the main cause?
sources: https://www.oecd.org/els/family/HM1-1-Housing-stock-and-cons... https://www.globalpropertyguide.com/pacific/new-zealand/home...
Edit: Also compare what happened to the money supply over the same period: 2011(NZD180 billion) to 2022(NZD400 billion). https://tradingeconomics.com/new-zealand/money-supply-m3
I don't think anyone would disagree that finance has an impact, but these are only indirect evidence.
It seems to me that increasing urbanisation and desire to live in cities could easily have pushed city prices up much faster than anything else, while less populated areas stagnate.
https://www.forbes.com/sites/hyunsoorim/2024/05/20/here-are-...
Sorry but it's true.
Also known as sufficient property tax.
Another one is the hyper-concentration of high paying jobs and other opportunities in a small number of cities.
There's always been a power law distribution for cities and opportunity with larger cities tending to win out, but since roughly 2000 it seems like it's greatly intensified. I've asked this question to many older people and have looked up some stats and both back up the sense that this has gotten significantly worse in the last 2-3 decades.
In the USA if you are not in one of maybe six cities you are second-tier, and it's much harder to find high paying and upwardly mobile jobs. The very top tier cities of SF Bay, NYC, Seattle, and LA are of course fantastically expensive.
Telework helps a bit but generally you still have to do time in one of those cities to establish yourself enough to get good high-paying telework jobs. Telework is often a senior-level thing or something you need a strong network to land.
I hear this argument a lot and always wonder if the causal direction is flipped: people use housing as an investment because it’s scarce, not that it’s scarce because it’s used as an investment. If there weren’t so many restrictions on building, the supply would grow to meet the demand and parking your money in property wouldn’t be such a hot idea.
Now, why dont governments better fund those departments and emphasize faster throughput? Well, let's ask their main constituents - who are largely homeowners and companies in the industry - whether they'd like to dedicate more taxes to a service that would speed up construction and drop their housing prices.
I don't believe this to be true. If someone wants to build a single multi-story building in an area, no additional infrastructure should be required. It's one building, the existing infrastructure shouldn't have so little slack in it that this could be a problem.
If lots of people are building lots of buildings, the city government can notice this taking place and while the buildings are going up they expand the capacity of the infrastructure in that area. It's no excuse to refuse the construction, it's just something the city has to do as a result, because that is a city's job.
Their job is not to decide what can be built, it's to allocate the property tax on the new buildings to paying for the things the new buildings need.
Then why is that the level at which the decision is made?
> But you can't make rules just for a single building (what are you going to do for the next building... And the next).
The point is that you can respond to demand rather than legislating it. If four high rises are going up in a neighborhood, the city officials can notice this and use the new tax revenue to build infrastructure those new buildings need, and then go on the MLS and find a local property for sale in the area which is in a good location to turn into a park etc. None of this requires restricting the construction.
> There are plenty of examples where local governments have removed lots of restrictions and essentially created Airbnb wastelands
This is really the opposite problem. If you have restrictions that heavily constrain where you can put short-term rentals, and then you set aside an area where they're permitted, of course that area is going to be saturated with them -- you're still prohibiting them from being anywhere else, so they all end up there.
This is the fatal flaw in the zoning board. "You can build anything here" should be the default, and then if you want to set aside 20% of the land in the area to be exclusive for e.g. single-family homes for the people who want that, that's fine. But we do the opposite -- 80+% of the land is required to be single-family homes and not even the entire remainder is allowed to be multi-unit buildings.
Monocultures are shitholes. Nobody wants to live in a place which is exclusively short-term rentals, or exclusively office towers. It even sucks to live in a place which is exclusively single-family homes, because then you're isolated from the community and have to spend half your day sitting in traffic to get anywhere.
What you need is the majority of the land area to be mixed-use zoning. Which is the opposite of having an area set aside which is predominantly short-term rentals.
It obviously doesn't work as housing, but even its value as an investment is at least nominally tied to the fact that someone, somewhere could value it as a house. Otherwise, eventually it's found the emperor has no clothes and it comes tumbling down.
For example a single floor dwelling that is the socle of a giant statue depicting a person appropriate for that street. Each must come with a plaque describing who they are and a qr code to a website about them that lives up to some high standard. Think what you will, it is considerably more interesting than "buying" a picture on some blockchain.
The main thing is that the US has been printing dollars for several decades - primarily to deal with or prevent periodic financial crises. Ben Bernacke's "Helicopter Dollars" speech was infamous but nothing has changed but the (increasing) scale (and, yes, all the central banks of the developed world are doing it too).
Effectively, the modern order has come to involve an endless hand-out to those who already have money while "market discipline" prevails against those who don't. Of course, this has long term problems aside from its immorality.
Yes, it is. It’s everything.
It’s inflation.
It’s that none of the countries you mentioned built anything during the covid craze (word selected specifically).
It’s regulation and complexity and permitting and zoning.
It’s AirBNB.
It’s remote work.
It’s manipulated stock markets and poor returns on other investments.
It’s blackrock and VCs and MBAs.
It’s out of country investors.
It’s everything.
So why these reductionist “well, I know it isn’t X” posts are supposed to be insightful, I have no idea.
Who told you it needs to be one thing, or can be disproven as one thing?
Take Australia for example. People in NZ often say a CGT won't help because AU has one and it doesn't seem to make a difference. What they forget is that there is 50% discount on CGT there, so the relative advantage of property investment remains. Also negative gearing.
In the US I believe there are two obvious advantages given to residential property investment - 30 year fixed mortgages and tax deductions on interest payments.
I think it wouldn't be too much of a stretch to guess that all of those countries I mentioned earlier have different reasons for residential property investment being favoured relative to more productive investments.
https://genus.springeropen.com/counter/pdf/10.1186/s41118-02...
1. Asset price inflation generally
2. Population growth (incl. immigration)
3. A lack of building (housing stock is inflexible, e.g.: if we need more two beds, then no number of 1 beds or 4+ beds is sufficient, really).
4. We are changing our ways of living (see 3), that’s partly social norms and partly demographic
5. Working from home changed the market. If the economic hub of your country is priced well above the national average excl. the hub, then WFH will see prices move towards the average incl. the hub, if not higher.
I don't know about the others, but we're building about 50% of what we need for Australia's population growth. Neo-liberalism has resulted in decades of de-funding of public education, which trains tradespeople, and now we have a shortage of tradespeople. And we're getting another tax cut in a few weeks so I guess that problem, plus all the others with same cause, is just going to get worse.
I think this part is what kills the anti-investment argument. If we hypothetically got rid of all the property investors we’d have only owner-occupied units. So then where do you find a vacant house when you want to move out of your folks’ place? Everyone has to find land, buy it, and build? (I won’t even get into the fact that single family homes aren’t really a sustainable use of land)
As long as there are enough vacant units investors will lower rent enough to fill them to an equilibrium. Nobody makes money on apartment buildings that are 50% empty.
Let’s not forget that low financing rates allows companies like homebuilders to build homes and subdivisions on credit that are intended to be owner-occupied. These developments are never intended to be rentals.
I think it’s a little funky that, especially in the US, nobody really had a problem with apartment buildings being apartments until landlords started owning single family homes. Now everyone has pitchforks over it and want to ban investors from owning homes - which seems kind of insane when you think about how cities with skyscrapers work. It would make condo and apartment buildings impossible. There’s nothing different about a single family home compared to an apartment besides form factor.
The thing that all those countries have in common is low supply in the tradespeople. Those are all countries where you’re better off learning to do a desk job rather than working for a construction company. In addition, a bunch of home builders went bust in 2008 in the United States.
In the case of Canada and the US they also have some horrible bad habits when it comes to city planning. Single family home building causes the growth Ponzi scheme raising the cost of city services per capita and pushes affordable housing crazy far from the city center and strains single occupant car highway infrastructure. You’ve got to own one car per person in the US in Canada in addition to your mortgage. Then load up student loans on top of that.
The issue here is that demand shifts regionally over time. Dwelling units in Detroit don't satisfy demand in San Francisco. The result is that you continually have to increase supply in the places demand currently is. To keep prices flat, the number of units per thousand inhabitants has to increase over time, because the number of empty units in areas that have fallen out of demand will increase, but the high prices you're trying to avoid will be somewhere else.
> By definition, only investment properties can be underutilised - owner occupied homes are occupied!
This is also not true. You can have e.g. a 3-bedroom home with one occupant, even if the occupant is the owner. You can also certainly have underutilized land -- any single family home in an area where there is demand for more housing but zoning prevents it from being constructed on that piece of land. Because then you have that acre of land providing housing for one family when it could have been two or twenty.
> global asset price inflation driven by a broken financial system (i.e. a system being artificially pumped up with cheap credit).
This can only happen when supply is artificially constrained. If it cost $200,000 to add a housing unit and suddenly everyone can get a bigger loan than before, the instantaneous effect would be for housing prices to increase -- but once they're above the construction cost, construction occurs until they no longer are, i.e. until they fall back below $200,000.
At that point cheap credit might cause people to buy bigger houses, or use the loan money to buy things other than housing, but long-term you can't get the price of the same housing unit to increase above the cost of creating more of them, or supply would just increase until it fell back to that cost.
What you can do is increase the cost of creating supply, e.g. by restricting where it can be done, so that the cost of doing it goes up and with it the price of a given housing unit. Which is what has happened.
They do help though. Individuals need to realize they can’t afford to live in a place like California and have to give up that luxury if they want more affordable housing arrangements.
But this is no solution at all because everybody knows that. People want to live in California because there are jobs in California and not in Mississippi. In Mississippi you pay $100 less for a house and then make $200 less in income, so who is going to do that?
To fix this you either need to make housing cost less in California or make jobs pay more in Mississippi. But if anybody knew how to do the second one they'd be doing it already, whereas we do know how to do the first one -- build more housing.
I understand your point but you’d have to validate this assumption.
You’re also not accounting for the costs to build more housing in California. Instead something you may want to look at is moving employers to Mississippi (or wherever).
To take your point to its logical conclusion everyone in America would move to California for the highest paying jobs relative to housing. But that would never work in the real world even if we had no restrictions on housing development.
When you look at the entire planet I think this becomes more pronounced. When you look at hyper-local environments as well (say Manhattan) it also demonstrates the point.
This is basically the efficient market hypothesis. If it was better to live in Mississippi then people would be doing it. Which allows housing in California to be overpriced by the amount that jobs in California pay better, before it starts happening. Which is bad, because then all of the people still in California are overpaying for housing.
> You’re also not accounting for the costs to build more housing in California.
Stop inhibiting it from being built and people will voluntarily pay to build it.
> Instead something you may want to look at is moving employers to Mississippi (or wherever).
But how? And is that even good? There are some benefits to having regions specialize in things.
> To take your point to its logical conclusion everyone in America would move to California for the highest paying jobs relative to housing.
The high paying jobs are for people in particular industries that are currently concentrated in California. Those people do live in California, or other similarly situated places like New York, rather than places like Mississippi or West Virginia.
The way you prevent everybody in that industry from wanting to move to the same city is by creating more housing in every city, so that it balances and the result is not net migration but rather just an increase in real wages at the expense of incumbent landlords.
Every area that's a candidate for urban density and public or active transportation has people living in it already. Those people are not any different from San Franciscans in terms of their concerns about gentrification, traffic, parking, shadows, or change.
If they don’t like it they can relocate to other financial services jobs in other locations, make less money, but have more discretionary income to spend on houses. Everyone can’t work at the most prestigious companies or life in the most prestigious zip codes.
Alternatively maybe Goldman should open tech and investment banking jobs in Poughkeepsie.
To counter this may be impossible; there are limits to how small you can build a SFH, and there is only so much land commuting distance from job centers.
Condos and apartments are generally a very bad investment, have huge disadvantages of high fees and lack of green space, so are a poor substitute. It’s sometimes better than renting, but it can swing wildly based on build quality of building, the maintenance, and competence of the board — very hard to evaluate or hedge against versus a SFH where you have autonomy. And in the US we rarely build family focused condos — so few have playrooms or playgrounds or 3 bed room units (outside NYC)
I've been told that immigration isn't a driver for the housing problems in the USA though, interestingly.
But yeah, the root of the problem is because governments are subsidizing housing/costs, and the problem with subsidies, is that the money for them has to come from somewhere, meaning they come with a burden (ie cost) placed elsewhere.
In the US this is primarily done via the government backing mortgage debt. It creates a vicious circle where homeowners raise their prices, the Fed ensures the funds for the mortgages, and the buyer is on the hook for paying it.
This is also why college prices are high. The government offers student loans to help people afford college, but colleges see this and raise their prices to capture that additional funding, and the student ends up on the hook for paying the price. Rinse and repeat...
Why would the law of supply and demand fall apart under captive/uncompetitive markets? A captive or uncompetitive market may impact the quantity of a good or service available and/or the quantity of a good or service willing to be purchased at a given point in time, but that doesn't change the law.
> Many also assume trade volume is necessarily representative of a supply shortage, when that isn't always the case, as " supply" and "supply for sale" are two different things.
Huh? Supply is characterized by being "for sale". Of course, a shortage occurs when price is prevented from rising. Housing certainly doesn't have that problem. The so-called "housing shortage" is really an issue of latent demand – people desire homeownership but can't afford it.
For the law to hold perfectly and describe prices, everyone in the market (both buyers and sellers) must be a "price taker". That is, the amount anyone supplies(sells)/demands(buys) is entirely a function of the going market price of whats being traded, and no one believes they will influence prices. (If anyone isn't a "price taker" , then supply/demand of the good being traded are no longer the only variables in the function of price). So, typically under competitive market conditions (that is there are many buyers/sellers), as prices rise demand from buyers will drop and selling increases from sellers, whereas the opposite happens when prices fall.
However, in captive markets such as one consisting of a monopoly seller, the seller can test demand to find the most profitable price for them specifically. At which point the seller is no longer operating as a "price taker", as they will reduce selling as prices rise to find that optimal price point for themselves (as they have input costs which have their own price curves that buyers don't know or care about). Remember, a "price taker" cannot influence the price, but must take or leave it depending on price. Thus price is no longer determined purely by the market supply/demand of the good, but also profit margin of the monopolist.
> Huh? Supply is characterized by being "for sale".
It often is, and there is nothing wrong with it being defined that way. But the idea which is being expressed here is what is important. For hyperbole, if I hoarded all of the worlds water, but only listed 2 liters of it for sale (much less than the population needs), would that indicate the world has a water shortage? One would argue yes, if you defined supply as "for sale", but no if differentiated in the way I did.
In fact, the price is "purely determined" by supply/demand in the scenario you gave. The monopolist is using their monopoly position to create artificial scarcity, thus driving up prices. This is consistent with the law of supply and demand.
> would that indicate the world has a water shortage?
Impossible to say without more information. What is happening around the 2L for sale? Are you rejecting the sale based on price (i.e. preventing price from rising), instead selecting who gets it using some non-priced-based mechanism, such as a lottery or first-come, first-served? If yes, then that indicates that there is a shortage. If it is sold using a price-based mechanism, then clearly not. That is a "normally functioning" market.
Once the water is all used up and there is no remaining water supply, where no amount of money can buy more (i.e. preventing from rising), then perhaps you might say that there is a shortage. However, in the real world, absent of some other factor (e.g. price gouging laws), price will keep rising until you are compelled to make more of that water available, so that still wouldn't be a shortage situation.
Yes, if you look at it from the perspective of only the "supply for sale", then everyone still is a "price taker", so what I said is in full agreement. But if you draw your boundaries to include that additional supply that's hoarded and not for sale, the theory no longer holds. Do you see what I mean now?
In other words, this is entirely a matter of how we define things, and draw our boundaries. How we do that isn't what's important. What is important is that everyone holds the same axioms. For example, we can define 3 means 3 and 3 + 3 = 6, or we can define 3 means 27, and 3 + 3 = 54. But if you think 3 means 3, and someone else thinks 3 means 71, it's hard to have a fruitful conversation as people will be in disagreement. This is why I made the distinction of "supply" and "supply for sale".
So when it comes to building more housing supply, it will never help housing prices no matter how much we build, if that supply which gets built is never for sale. You need to address the issue of what's for sale.
Now you might think this is a silly distinction to make, but it isn't. If the data provided in the top post is any accurate, then there are quite a few more vacant properties than what's listed for sale in many markets, suggesting that needing more supply isn't the core of the problem, but obviously needing more supply for sale is. And IMO, as the top post had earlier mentioned, cheap credit is largely to blame.
> Impossible to say without more information. What is happening around the 2L for sale?
It was just hyperbole to demonstrate a concept. You can of course disagree depending on the circumstances and the axioms you choose, but hopefully you understand the point I was trying to make.
In the same vein, if we consider the earth to be flat then the law of universal gravitation no longer works. I see what you mean, but I have no idea why anyone would ever want to convey such meaning. Of course you can "invalidate" every law in existence if you completely redefine the conditions under which the law is made, but that's rather nonsensical.
> So when it comes to building more housing supply, it will never help housing prices no matter how much we build, if that supply which gets built is never for sale.
While I am unsure of how this relates to our discussion, I expect you will find that virtually every house is for sale. Sure, there is always a "stubborn old mule", but I'm certain the vast majority of homeowners would not say no to you dropping a billion dollars in front of them.
The biggest trouble is that new construction costs even more than used houses. Nobody is going to purposefully go out of their way to build a home in order to lose money on it. So while building endless new homes would theoretically reduce prices, it would never happen in the real world because who is going to do it? Houses most certainly don't just magically spring out of the ground.
Anyways, as what I meant about building more houses...
You can see elsewhere in this thread that people disagree on whether or not the core issue is that we have a shortage of houses. Some people are holding the assumption that, building more houses will increase the inventory for sale, and therefore help prices. Good old supply/demand. That's a perfectly rational assumption, and I don't necessarily disagree, but like you note, new construction is costly...
Additionally, as data given above (and elsewhere) indicates, housing per capita in 2022 is similar or better than in 2011 for many markets, but as we know, prices (even adjusting for inflation) are higher than 2011. From the theory of supply/demand, this suggests some degree of hoarding is happening, but as to how that is happening is not certain, as people could simply be living with fewer people than the past, or people could be living more or less the same amount people and investors are more of the ones who are buying up new construction. If the latter, then that new built construction might not really be for sale if you get what mean, as investors may simply rent it out or use it as a seasonal. Hence why I said "building more supply won't help if it is never for sale".
Now of course everything is for sale, just a matter of price, but who does cheap credit / inflation help more, people with assets or people without assets? That's right investors. And, given vacancies are higher than inventory for sale, I just have a hard time finding support for the idea that the core issue is that there is insufficient houses and we need to build more. The only reasoning for it seems to be the idea that more supply = lower prices (an idea which falls apart if it is simply hoarded). But of course, that's not to say, that many markets likely do need more supply, just that it doesn't seem to be the fundamental issue.
It doesn't need to be for sale to help with the situation, of course. It still relieves pressure on the demand side. An individual can never afford an infinite number of houses. Even if someone is, as you say, hoarding houses, at some point the last house they build will be the last house they can own and then they drop out of the demand side of the equation.
> who does cheap credit / inflation help more, people with assets or people without assets?
Whomever finds opportunity in it, I suppose. Same as always. Someone sitting on cash assets will be worse off (after all, that's what inflation is: a devaluing of a currency), while someone with no assets can leverage the situation to build real wealth. Even the job market tends to improve in a cheap credit / low inflation environment as businesses use that to chase more labour-requiring opportunities, which is a boon for those who have nothing. There is no one answer here.
It doesn't if it's sitting there, with no one really occupying it, and priced out of the free market's reach. You're assuming a competitive free market is always determining the price here. That's another thing people don't understand, the theory that supply/demand fully determines prices again assumes a perfectly competitive market, which is almost never the case in reality, especially in places of low liquidity. (keep reading if you don't know what I mean).
>An individual can never afford an infinite number of houses
But there is still someone who practically can afford an infinite number of houses - those closely tied to the infinite money printer. Banks are deemed "Too big to fail". Take the SIVB failure for example, yes they failed, but the assets did not and got absorbed by other big banks. Just because those assets changed hands, doesn't really change anything in the grand scheme of things. I mean hell... there's a $25 million dollar estate with a private horse track and an observatory tower near where I live, whom locals are very familiar with, which has been vacant for 25 years ever since it was built. No one has ever lived in it. I happened to meet a greenskeeper at a golf course who happens to maintain it a while back. Who is paying his salary for maintenance? The banks. How can they afford to perpetually maintain those costs? Well, when they struggled like in 2008, they got bailouts, and the assets were never sold at whatever the market would bear. So the banks just sit on it, maintenance costs just get tacked onto the price or onto the banks customers over time, and if shit hits the fan, they'll get absorbed by another bank, and they'll just sit on it until hopefully someday someone will pay the price. It's technically for sale, but if the price is set by the bank and outside what demand for it actually is, its price is not really being determined by a competitive free market.
And that seems the case in a lot of places. I mean Miami has some of the highest vacancy rates in the US, but median price is like $660k, which is also amongst the higher end in the nation. China has 65 million vacancies, and literally multiple ghost cities where there is like a few dozen people living in skyscrapers, but prices are still sky high. There's a Toronto man who owns 30,000 houses. The US has just under ~15 million vacant properties, but housing inventory for sale is ~ 1.2 million.
I mean... I don't disagree that more supply is badly needed in some places, or fixes to zoning, but how does this not look like what the top post mentioned as the core underlying issue: underutilization of housing, and cheap credit creating an asset bubble virtually around the world? It just seems to me we do in fact have supply in many places, it's just no one is really being forced to adhere to the principles of supply/demand, due to cheap credit.
It does. Reiterating: Supply and demand, not just supply. When someone builds a house and keeps it for themselves, occupied or not, that is "one less demand" for a different house. Not even banks want to own an infinite number of houses.
> price is not really being determined by a competitive free market.
What difference does that make? Supply and demand says nothing about competitive free markets. Hell, supply and demand is just as applicable to socialist command economies and everything else you can imagine. Supply and demand is even observable in animal populations. It is considered a law, and not in the legal sense, for good reason.
Not necessarily. Are you saying that if I demand to have $1 and keep it for myself, that is 1 less demand I have for different dollars? Seems to me I can still have demand for more dollars. In practice, there may be a point where I don't have demand for more dollars, but I don't see why demand could be unlimited. Are you implying prices have a theoretical maximum? Like $1000000000000000 and once that limit is reached, prices could never go above that?
> What difference does that make? Supply and demand says nothing about competitive free markets. Hell, supply and demand is just as applicable to socialist command economies and everything else you can imagine. Supply and demand is even observable in animal populations. It is considered a law, and not in the legal sense, for good reason
The difference matters when it comes to determining prices. Again, when it comes to prices, the law only holds true under certain conditions: competitive free market conditions. If the economic environment is not a free market, supply and demand are not influential factors when it comes to prices. We already discussed this above. In socialist economic systems, the government typically sets commodity prices regardless of the supply or demand conditions. In which case, if the price set by the socialist economic system (or monopoly) is higher than the price determined by what supply/demand for it really is, it is essentially being hoarded, and thus not for sale.
I am definitely not wrong on this [1][2].
[1] - http://ingrimayne.com/econ/DemandSupply/SD_2.html#:~:text=Su.... [2] - https://www.investopedia.com/articles/economics/11/intro-sup...
Only to the maximum capacity of your ability to fulfill the wishes of other people. A dollar is, after all, an IOU. For someone to willingly give you an IOU, you have to give them something first. While a single dollar may not satisfy you, there is an eventual limit to how much you can meaningfully give. Of course, as IOUs can be traded, the value is also subject to the properties of supply and demand.
> The difference matters when it comes to determining prices.
That's fine. The law of supply and demand isn't some kind of enacting force. It is not a law in the legal sense, if that is where you confusion lies? It is an observational law. The observation does not concern itself with the exact mechanics of how the price is determined, it merely notices the relationship of price as a function of supply and demand.
> the government typically sets commodity prices regardless of the supply or demand conditions.
And you will notice that the law of supply and demand still holds.
Not necessarily, someone can just hand me a dollar for nothing in return.
> While a single dollar may not satisfy you, there is an eventual limit to how much you can meaningfully give
Agreed, that limit is what total supply is.
> It is an observational law... it merely notices the relationship between price as a function of supply and demand
Agreed.
> But you will notice that the law of supply and demand still holds. This idea that supply and demand only applies in a competitive free market is completely unfounded
Yes, it still holds from the perspective of what's actually being traded. But notice it's possible to withhold something from being traded. The stuff withheld is not priced according to the law. However, the price of stuff which is still being traded, still is.
Value is certainly subjective. While it is possible you might find someone seeing a dollar as being worthless, just as they might give you a house for nothing in return, I don't expect you will find that to be scalable. If you have a thirst for all the dollars you can get your hands on, you are bound to go thirsty relying on this.
> Agreed, that limit is what total supply is.
There is a limit on supply, but also a limit on demand. That's why we call it "supply and demand", not just "supply". In a "normally functioning" market, demand actors start to drop out of the market as price rises.
In fact, you can see this happening in the housing market. A lot of people can't afford a house, so they are no longer participants in the housing market. They may still wish to own a house, but that's not demand, that's dreaming (or what you might call latent demand).
Hence why a shortage occurs when price is unable to rise. When price is unable to rise, there is no price-based mechanism to see that people leave the market, creating a situation where "demand exceeds supply". Which is why you will typically see alternate mechanisms step in instead, such as a lottery, or offering on the basis of first-come, first-served, to force people out some other way. A medical doctor with an ethical, and often legal, obligation to not allow price to rise is apt to use a needs-based mechanism, serving the patients in most need of care ahead of the richest patients with the common cold. That's certainly not the case in the housing market, though. Price is most definitely able to rise – demonstrably so.
> But notice it's possible to withhold something from being traded.
Of course – at which point it ceases to be supply. Just like, as above, it is possible to withhold on the other side of the transaction, at which point that ceases to be demand. This is exactly what the law of supply and demand describes.
Again this is a matter of where you draw your boundaries. Latent demand is still demand which exists just demand withheld from the market (ie priced out).
>Of course – at which point it ceases to be supply
But it is still supply which exists, just supply which is withheld from the market (ie not supply for sale). This is why I made the point of "supply" and "supply for sale". You're never going to help home prices by building more houses, if what you build is withheld from the market, because, if we use your definition of supply:
>it ceases to be supply.
Do you disagree?
Just as with the boundaries of what shape the earth is. If you want to consider it flat, good on you. But if you want to talk about the law of universal gravitation, you'd better be prepared to accept that the earth is approximately a sphere (at very least, toroidal). Otherwise you are contradicting yourself.
> Latent demand is still demand which exists just demand withheld from the market (ie priced out).
It exists in the world where the price is lower. It does not exist in the world where the price is higher. That divide is what supply and demand observes.
The law of supply and demand says: When the price of a good or service falls, there tends be less willingness to sell said thing (decrease in supply) and when the price of a good or service rises, there tends to be less willingness to buy said thing (decrease in demand). Likewise, when the price of a good or service rises, there tends to be more willingness to sell said thing (increase in supply) and when the price of a good or service falls, there tends to be more willingness to buy said thing (increase in demand).
That's it. Not exactly groundbreaking. If you've ever stepped outside, even if only in Soviet-era Russia, you probably already reached the same independent observation. Why you think you need a "competitive free market" for that to stand is a head scratcher.
> But it is still supply which exists, just supply which is withheld from the market
It is something that still exists, but it is not supply as the law of supply and demand considers it. If "supply" was all things out there in the world, and equally "demand" every last wish someone has for something, we couldn't talk about supply and demand. It fundamentally could not be a concept. So what is it that you do think we are talking about?
Secondly, I’ve done a lot of engagement with policy makers and builders and you are not going to get affordable housing being built if you relax zoning laws (which I’m in favor of across the whole city). Instead, what is supposed to happen is that the older properties become less attractive and hence their prices (or rent) are supposed to fall. That’s the theory anyhow. Anyway, the builders all say there is no financial incentive for them to build affordable housing, they make so much more on luxury buildings. You’ll only get it if the local government does it themselves and most in America are reluctant to get involved (it’s why they like saying 15% of a complex should be ‘affordable’ because they don’t have to do anything about it, the builders do, and it’s too small an impact to fix the issue).
Is this increase in absolute number of sales, or increase in the percentage? Because, if the house affordability due to high interest rates goes down, one of the only buyers with money that remain are hedge funds. So, in the past you had 1000 homes selling per year, 100 of those going to hedge funds, now you have 400 total sales, with 100 going to hedge funds. The relative percentage of houses bought by hedge funds increases from 10% to 25%, even though the absolute number remains flat.
(This is where investments in risky things like flipping various cities' "downtown' commercial real estate into additional consumer real estate are starting to look really interesting, especially in some of the cities that had massive corporate tower investments just pre-2020. It's also where you see some cities directly and indirectly pressuring major corporations into RTO policies in the hopes of it releasing some of the pressure on the consumer real estate market in those cities by encouraging hedge funds to reinvest in corporate real estate. It's hard not to feel those pressures are somewhat futile long term, but to feel sympathy for why they seem like necessary short term sandbagging projects.)
This is only really a problem insofar as building luxury homes reduces the throughput of new supply because they take longer to build than affordable housing. In terms of overall market effect, as long as you're not allowing places to sit empty, it doesn't particularly matter if you're adding new homes at the top or the bottom of the market.
I've been looking at getting a house built, and that starts at about €200k*, but the land in Berlin is at least another €200k on top of that (and usually more).
If I was willing to live in the back end of nowhere, I can get the land for almost nothing, halving the total cost.
But then I'd be living in the back end of nowhere, and turning that into an interesting town (let alone city) would need some very expensive infrastructure to be built, just to support that many residents.
Make the infrastructure cheap, and you can build New Towns.
Most of the developed world seems to struggle with infrastructure during my lifetime, be it major roads, railways, sewage, electricity networks, or anything else.
* list price €100k but that's a cheat as it's the outer shell only, no plumbing or interior plastering
Houses, like other goods, decrease in value over time. A new house should be significantly more expensive than a 50 year old house - just like a car.
I was picking the absolute lowest cost for an example, so on one hand it should have.
On the other hand, what's that in "years of average income", and does it seem reasonable that half of this is the land itself?
I know that the salaries in Berlin are in the lower end, but 100k EUR a year in household income seems like a reasonable expectation for people wanting to live in attractive areas.
But even if the median income were €100k, the €400k level was around the cheapest I could find that you could actually live in and wasn't a weekend house, or a reverse-mortgage you'd only get to use when the seller died, or a building opportunity with no land, or they're rented out and as Germany has fantastic protection for tenants you are not going to move in etc.
If the standard is 4 years, even then you'd be excluding 50% of the households from ownership at €100k/year and €400k minimum prices. As is, €43k/year is closer to 9.5 years income still not being enough for 50% of households.
Not everyone gets to live the most popular places.
> The median pre-tax household income in Berlin is €43,572
Seems like Germany can not afford to not allow mothers into the work place.
Edit: At a median household income of EUR 43k the issue is not housing prices. in Denmark the median salary (not household) is 73.000 EUR a year. I think Germans need to negotiate their salaries.
Definitionally, everyone who actually lives in a place must be able to afford that place. If people suddenly can't, they leave, it's now less popular.
Right now, it's rent controls which allow most Berliners to live in Berlin. Without that, many would be forced to leave, making the city less popular, and thus less expensive.
(Perverse incentives, yay!)
> Edit: At a median household income of EUR 43k the issue is not housing prices. in Denmark the median salary (not household) is 73.000 EUR a year. I think Germans need to negotiate their salaries.
Negotiate with whom? Where would the extra money come from? https://www.wolframalpha.com/input?i=germany+gdp+per+capita+...
Making a country richer isn't as easy as printing more money. They tried that, it didn't end well.
Anecdotally, Tesla Berlin pays in the range 50-60k/year in Berlin (for SWE roles) - I am quite sure they are able to pay muuuch more.
So either are workers in Berlin less than half as effective as Tesla's other offices or Berliners accepts a much lower pay.
GDP is a number - If the Berliner kebab was priced at 12 EUR instead of 6 EUR, then they could afford paying double the salary - The rest of the world is about to add zeroes to everything. Why wouldn't Berlin?
My thinking is that this is Europeans focussing on "budget rather than profitting".
And then the houses and the land also double, or house builder's salaries real term wages halve and the workers leave and stop building stuff. Land prices are harder to draw conclusions about, but the owners have to want to sell at the price being asked, which is ultimately what the market will bear.
> The rest of the world is about to add zeroes to everything. Why wouldn't Berlin?
Fear:
https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...
This is roughly 1/3 of the Danish household income. If I were German I would riot for higher salaries - we simply can not accept such disparities in a modern world with movement of labor and remote work.
It seems like German fear is what forces the ECB to lower the interest rates causing severe asset price inflation in Denmark.
Please - negotiate your salaries in Germany.
IMO it's yet another network effect caused by fewer people being willing to work in these kinds of fields, and a decreasing birth rate. Infrastructure inherently requires maintenance, so as it increases, so does the amount of people required to maintain it. Yet we have fewer and fewer people to do it, so adding new stuff just becomes unreasonably expensive.
Maybe? 2008 happened. At that point, there was a policy choice: allow a deflationary collapse, or prevent it. If we allowed it, there would be a lot of ruined businesses and ruined people. There would have been a lot of people who lost their houses. Instead, we chose to prevent the collapse, and we wound up here, where people can't afford houses. That's almost the same place, except that 1) the numbers are higher, and 2) it happened gradually rather than in a shock. That is, people didn't lose their existing houses, but new families can't buy their first homes.
So is this better or worse? My impression is that, for all the problems, it's still better than a collapse in 2008 would have been. But given the situation in 2008, some damage was inevitable. This amount of damage 16 years later is actually pretty good, considering.
One thing that has definitely not helped is hostile building codes that prevent density. In some cities in the US, building height is constrained by the nearest single family home. Then there’s the parking minimums for buildings that allocate more space for parking than for building space for people.
In Austin, TX (USA), you frequently see buildings with massive amounts of multilayered parking but a smaller fraction of the building used for residential or commercial space. Some “clever” developers have tried to disguise the parking structures as part of the building itself to hide this fact from public view.
Problem with America is that we think this is 1950 and we can scale by building more deadass suburbs, expensive regional highways, and further strain our limited pool of resources (water, sewage, electrical infra) to support suburban living without any consequences.
That doesn’t explain why it’s so hard and expensive to build things. We built those suburbs in the first place when we were much less rich as an economy. Indeed, we built all the water and sewage and electrical infrastructure all over the place too.
In the 50’s these were mostly empty range land, or timberland, or farms, or swamp, or whatever. One (or just a few) owners, low property values, little to no political/environmental resistance - relatively easy to buy someone out and develop.
Now? HOAs, tons of urban zoning rules and environmental rules, thousands of stakeholders for any sizable project.
Which also now means more stakeholders, more political resistance, more BS if you want to increase density there. Or building in not-so-easy places, like steep hillsides, more remote locations, etc.
Most of the existing folks don’t want change. In 1950, especially out west, there essentially were no ‘existing folks’. Even the natives had been wiped out.
And as an economy, we were used to building things at a war economy pace, and had reasons to continue to want to do so.
Now everyone would rather blame someone else (or ensure they get their sizable cut) rather than do anything about it.
As the boomers slowly die out and assets change hands, the momentum will change. Eventually. But we’re talking about a decade plus.
Then it will be the millennials turn to be the ‘bad guys’.
Ultimately, these empty homes are investments and sometimes investments fail, and if they're big enough sometimes those failed investments cause people to lose a lot more than what they invested. That's literally the definition of investment risk. We can't keep doing status quo with this shit while the market continues to sail further and further out of reach of all the people who actually need what it's selling.
It won't fix everything, of course, but it will give us a much more normalized market to then attempt further reform on, rather than the current one which has more in common with a casino floor than a market.
For one, the city did not "ban housing investors," they banned some investors from purchasing a subset of homes, which is already weak, and only made weaker by the fact that the first study analyzes only a few months of market activity under that new restriction.
That being said, both studies do indeed conclude that a link cannot be established with certainty between the policy and house price reduction.
> Results from the difference in difference analysis show that the null hypothesis that the policy effect on home prices and days on the market is not significantly different from zero cannot be rejected. This means that it cannot be concluded that the buy-to-let restriction reduced housing prices or increased the days on the market.
However, this is one city, not in America notably where the problem is at it's worst, and they did not restrict lower income housing which is the most liable to be outbid on by private investors and rented, so I would hardly say these two studies by themselves utterly disprove anything in the way your dismissive comment implies they do. I don't think a partial restriction on a housing market in one metropolitan area out of the roughly ten-thousand currently on the planet is definitive proof.
In the UK, we have an issue with immigration that nobody wants to speak about. The birth rate in the UK is 1.49 in 2022 [1], meaning that housing demand should be going down. We build houses to last, and yet there is a massive shortage - why? In 2023 the ONS reported we had a net migration of 685k people [2], where 9% of the population do not have a British nationality at all.
The demand for housing in the UK (and related infrastructure) can be entirely explained by net migration. The reason the housing market is bubbling is because the demand is so insanely high. We need to build 340k houses a year to keep up with demand [3].
The fundamental issue in the UK is that we borrowed too much from the future, in terms of loans, but also pensions. They think that increasing the population dramatically will solve the problem, but it's actually destroying the UK. We are building on farmland, the infrastructure (water, gas, electric, roads, schools, etc, etc) is failing under the weight of the new housing. The interest on the debt owed [5] I believe is projected to exceed spending on the NHS (national healthcare system) by 2035.
The question we need to ask is whether large net migration is worth it, or whether we should largely reduce it. It seems clear to me that the UK is currently trying to grow too fast. It'll be a bitter pill to swallow, but at some point you need to deal with the spiralling situation.
> This is a problem of underutilisation in my view. Too many properties are being used as investments and not as a primary residence.
In NZ and many other Countries they put bans on foreign buyers exactly to stop this investment [4]. I know many, many professionals living in NZ that cannot afford to buy a home. They are all stuck renting, despite all earning in the top 25%.
[1] https://www.theguardian.com/uk-news/2024/feb/23/birthrate-in...
[2] https://commonslibrary.parliament.uk/research-briefings/sn06...
[3] https://commonslibrary.parliament.uk/research-briefings/cbp-...
[4] https://www.pittandmoore.co.nz/publications/foreign-buyer-ba...
That doesn't necessarily reflect a shortage, it also reflects availability of money - and therefore the market bearing higher prices. It also reflects the unevenness of the UK economy: the expensive and unaffordable housing is mostly in and around London (where ~all the economic activity is), and in the most scenic of rural areas which is retirees, second-home owners and AirBnB investors. There's plenty of the UK which has affordable housing, but it's too far from anywhere with decent jobs.
The boom in house prices began when it became the norm for educated women to have lifelong progessional careers. All of a sudden there was a huge amount more discretionary income in the educated class. If you consider that, circa 1970, perhaps 20-30% of one male earner's income went on housing and the rest on life's essentials, all of a sudden the potential amount of cash to spend on housing goes from 30% of one income to 130%, a more than 4x increase. It took a while to filter through, sure, but in the end, it has - to the point where most families are now obligated to have two full-time earners.
Housing is a positional good (think about an auction where demand of the most desirable items will always exceed supply), the prices bear almost no relation to rational economic utility and every relation to how much cost people are able to bear. Which is one reason they're so responsive to interest rates i.e. debt affordability.
A 1.49 birth rate and 685k net migration isn't a desirable situation for any country, but the other issue here is the health and productivity of our own population, we're using migrants to prop it up and provide much of the labour needed by the NHS, childcare and elderly care. Our government is massively anti-immigration, and yet immigration remains high, the country can't and won't go cold-turkey on that: it's not practical to do so without further increasing the retirement age, cutting pensions and increasing "sin taxes" to keep a greater proportion of the population healthy enough to work til 70. And that'd be even less popular, politically, than mass immigration.
The reforms the UK needs are to get the economy functioning better in the regions, and to make it much easier to build higher density housing close to where the jobs are. The current system where they can't build apartment blocks on train-station car parks because a bunch of pensioners complain that it spoils their view is massively counterproductive.
Other than very undesirable areas, the house prices are pretty bad. I have friends living nowhere near London in remote Scotland noticing the house price increase. I've seen a local property double in price after ~11 years.
> That doesn't necessarily reflect a shortage, it also reflects availability of money [..]
It's not clear who has an availability of money. I'm aware of zero people within recent years buying a home without a mortgage. Availability of money has never been worse.
> It took a while to filter through, sure, but in the end, it has - to the point where most families are now obligated to have two full-time earners.
I don't think we're seeing 4x the living standard of 1970. It also doesn't explain that we see house prices increase by more than 4x relative to wages [1].
> Housing is a positional good (think about an auction where demand of the most desirable items will always exceed supply), the prices bear almost no relation to rational economic utility and every relation to how much cost people are able to bear. Which is one reason they're so responsive to interest rates i.e. debt affordability.
It's didn't used to be like that. A house would feasibly cost between 4-10 years of one man's wage. But this would defend what I said, that demand outstrips supply. There is a saying at auctions: "it's only worth what somebody else is willing to pay for it."
> we're using migrants to prop it up and provide much of the labour needed by the NHS, childcare and elderly care.
It's not working, the NHS is failing. Where I live I cannot get an appointment any more. If I am lucky the doctor calls me and essentially prescribes anything I ask for. I recently saw a similar situation with midwifery.
I generally don't find myself convinced that migration is a net good. They typically have dependants and create massive burdens on our infrastructure and systems. We are now at the state where children are deferred from starting school because there just are no palce
> Our government is massively anti-immigration, and yet immigration remains high, the country can't and won't go cold-turkey on that: [..]
I suspect not. If I am right in saying that immigration increases demand for housing and therefore the price, it would make sense that the Conservative party would keep this in place as their largest donors are property developers [2].
> The current system where they can't build apartment blocks on train-station car parks because a bunch of pensioners complain that it spoils their view is massively counterproductive.
I don't think that is fair, the answer isn't to build on every square metre of the UK until it's gone. Besides, if they get rid of the train station car park, where will all the commuters park? (I've seen this one play out, they park everywhere else.)
[1] http://news.bbc.co.uk/1/shared/spl/hi/guides/456900/456991/h...
[2] https://www.theguardian.com/business/2024/mar/14/who-are-the...
"Availability of money" includes the ability to apply for, and service the debt on, a mortgage.
> I don't think we're seeing 4x the living standard of 1970. It also doesn't explain that we see house prices increase by more than 4x relative to wages [1].
I don't remember 1970, but there's no particular reason we should expect to have 4x living standard.. competition for housing can eat up a much bigger slice of the overall pie, as long as people are willing to compete.
> But this would defend what I said, that demand outstrips supply. There is a saying at auctions: "it's only worth what somebody else is willing to pay for it."
100% - but if nobody CAN pay (the asking price), nobody will be willing to pay it. And that's where positional goods matter, because effectively people are jostling for a place in a ranked queue. The prices are a function of "how much money are the people in the queue able and willing to raise and deploy". And so it's natural to have situations where incomes might only go up by 50%, but house prices can rise MUCH more if interest rates are low and the bulk of that extra income is discretionary.
> It's not working, the NHS is failing. Where I live I cannot get an appointment any more. If I am lucky the doctor calls me and essentially prescribes anything I ask for. I recently saw a similar situation with midwifery.
Bad here too, but most of the staff are immigrants or of immigrant background so I find it hard to blame that on migration, it'd be a lot worse if they turned the taps off. It's more to do with our population (native Brits and 1960s/70s immigrants) being elderly, unhealthy and generally decrepit, and a health service that tries to do too much. It excels at keeping people alive, but it sucks at keeping them healthy.
> We are now at the state where children are deferred from starting school because there just are no place
Not the case here, in a high-immigration area: they're actually closing primary schools because there aren't enough kids to fill them.
> I don't think that is fair, the answer isn't to build on every square metre of the UK until it's gone. Besides, if they get rid of the train station car park, where will all the commuters park? (I've seen this one play out, they park everywhere else.)
They should walk or take the bus. I'm talking about stations that are at most a mile or so spread out and usually served by half a dozen bus routes, suburban zone 3 & 4 London. Wouldn't work further out where distances are longer.
If this is the case, then the best way to lower house prices would be to get rid of mortgages entirely? I don't think this would work of course. We would simply see more foreign investors who have access to mortgages.
> Bad here too, but most of the staff are immigrants or of immigrant background so I find it hard to blame that on migration, it'd be a lot worse if they turned the taps off. It's more to do with our population (native Brits and 1960s/70s immigrants) being elderly, unhealthy and generally decrepit, and a health service that tries to do too much. It excels at keeping people alive, but it sucks at keeping them healthy.
My point is that after lots of immigration, we still have a massive recruitment crisis in the NHS. It never really solved the problem, and worse still, there are now more people using these services.
> Not the case here, in a high-immigration area: they're actually closing primary schools because there aren't enough kids to fill them.
If immigrants are not having children in the UK, then that would lead towards another crisis of an ageing population. Again, I believe increased immigration is a temporary solution.
> They should walk or take the bus. I'm talking about stations that are at most a mile or so spread out and usually served by half a dozen bus routes, suburban zone 3 & 4 London. Wouldn't work further out where distances are longer.
Not everywhere is London. Where I live, there are no buses to the train station. People commute by car up to 30 minutes to catch the train.
Prices are a function of people's ability to access money, not their direct income.
And to your last point.. they need to build housing in places where there's the infrastructure to support it, or build the infrastructure. Building to suburban-like density in areas with a rural-like level of services (not just transport but shops, schools, leisure) is a recipe for misery.
The big new housing developments they're putting in outside midsize town ring roads are a case in point. Too far to walk to the centre (and indirect routes, because of the ring road), but the centre itself doesn't have room for them to park cheaply. No bus so no independence for teens. Nothing at all to do on the development itself. And that's before we get to the quality and design of the actual builds.
It's American style living done on the cheap. At least in the States they build large so there's room to do more at home, and the whole place is low density - their solution to the challenge of town centres is not to have town centres.
https://migrationobservatory.ox.ac.uk/resources/briefings/mi...
I agree with you about the reforms but basically Brits live beyond their means and need to lower expectations or face a very uncertain future. The NHS is a good example. Demand is literally infinite. We're all going to die and likely suffer an ailment demanding treatment so how can a health service which fails to match that hard reality, survive. As you say, we can use stick and carrot to attenuate demand but it's finally going to crack IMO as was prophetically illustrated so tragically in the pandemic.
Agree re the NHS, my overall views are left, but the centre-right analysis that it's a National Sickness Service is correct, where is the investment in public health to reduce demand? Most Brits barely get out for a walk once a week, our environment doesn't prioritise health (driving everywhere, fast food outlets..) and the complaints when the state actually tries to do anything about it are endless.
Here in Canada, the desirable places to live all have relatively low vacancy rates for residential housing, and have for quite some time. Ie, it's rare to see cities with vacancy rates for apartments exceeding 3%, let alone a healthy 5%.[0] The CMHC estimates that by 2030 we will need 3.5M additional homes beyond the expected number to be produced.[1] The PBO has come up with similar numbers; roughly speaking, Canada needs to complete a new home every 50 seconds just to maintain current price levels.
There's much gnashing of teeth up here over our housing crisis, and it's clear to me that it's a multi-factor concern[2]. While there simply exists much more demand than the supply can service, the reasons for low supply are many and complicated. There are the obvious zoning and infrastructure issues; we don't build for mid and high density nearly enough, and we rely too heavily on cars. There's the labour supply issue the politicians focus on. But most unnerving, to me, is the suggestion that we simply do not have the capacity to produce or source the raw materials necessary in construction.
0: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=341001...
1: https://www.cmhc-schl.gc.ca/blog/2023/estimating-how-much-ho...
2: https://thoughtleadership.rbc.com/the-great-rebuild-seven-wa...
Consider a city of 10 million people vs 1,000 small towns of 10k people. The variability for demand in those small towns is higher and vacancy rates can’t drop below zero. So some towns hit 0 while others might be 20%. But in a city if some apartment complex is full people just go to the apartment down the street.
It's harder live further out, when traffic slowdowns extend commute time 10x. And governments love the idea that expensive roads can be waved away using environmentalism as an reason.
Yet these same governments don't build fast transit either, and without fast amd efficient transit, trips take far far longer than a car.
At this stage we should be building both, as we're that far behind.
The point is, there is a move for 'dense urban areas'. Pack 'em in. Increase that housing density. Yet there is another way in North America, where there is often an endless bounty of space. Better transportation corridors.
Better transportation corridors means that housing costs plateau, because it's just easier to drive 10 minutes more, 20 minutes more, than spend 4x for housing.
That said, even the laptop class often does need to commute:
* Many remote workers have to attend once a week, or more often.
* People make lives, friends, contacts, have relatives in specific areas.
* Every once in a while, you may need to go to "the city" for something important. Medical treatment or specialists, specialty products, etc. Not everything can be shipped, or is shipped.
Anyhow, it seems you sort of missed the point, that is... the faster you can get into a city, the further you can live from the city and still be part of it.
This reduces housing value close/in the city.
https://www.macrotrends.net/global-metrics/states/california...
That includes both births/deaths and in/out migration. Population growth rate has been generally falling since 1990 (except for a peak in 2000) and significantly so since the GFC in 2009. However, prices have skyrocketed.
China has overbuilt their population by 10-100million (yes, and there are even more outrageous numbers) homes over the last 10-15 years, and yet prices in Shanghai/ Beijing/ Shenzhen still exceed NYC or SF by 50%. They have a falling population.
https://www.numbeo.com/cost-of-living/city_price_rankings?it...
This is not even a new problem. The imperial landed gentry was so named because bureaucrats would shovel their money into land.
Population geography also shifts from rural to urban and from declining to rising cities even as the total population size holds constant or shrinks. The fact that there is space for you on a farm or in a coal-mining town is cold comfort to someone with a STEM degree and a job offer at a corporate headquarters.
Average house size has increased significantly over time. Average household size trends broadly downward, with rare counterexamples.
When is "better" also "more"? Because better costs more, just like more area costs more. What resources should be redirected from quality to quantity?
It’s similar to how totally full employment is actually a sign of a labor shortage.
3% may represent local shortages as Santa Monica is more desired than West Adams etc. So increasing availability in undesirable places may not reduce rents in general.
In aggregate, 5-7% seems to be a sweet spot where landlords can find tenants in a reasonable amount of time and tenants are not scrambling to send out a dozen applications a week.
Though I agree less desirable locations should definitely increase the average, as should purchases vs rentals etc. It’s just 3% is already including a lot of mandatory time from cleaning, painting walls, replacing carpets, etc. So prices could fall heavily at a sustained 4% long before you hit the 5-7% range.
The other metric is median rent as a percentage of median income. Nationally it has hit 40% when the affordability mark is 33%.
Just because what you are experiencing has been a norm for a while does not make it good, or the goal.
Is it that there isn’t enough housing period, in the entire country. Or is it is people and investments abandoning rural areas in favor of a handful of city neighborhoods?
I’m also curious if those vacancy rates can be / have incentive to be gamed by the homeowners, or otherwise don’t paint a very accurate picture. I lived in a wealthy part of NYC for a while, and my apartment faced a courtyard on the interior of the block. As a result, I could see into the windows of 100s of apartments of 3 adjacent buildings. Only maybe like 5 out of 100s of apartments consistently had someone living in them. This reflects my feeling on the street: the streets were empty, especially given the relative density of the apartment buildings.
I know this is anecdotal evidence, but everyone I know that lives in NYC has the same observation.
I wish scientists and experts would take these concerns seriously and research by this gap in perception and the reported vacancy rate is so different.
I would be highly surprised if this were true. I lived in NYC for year and the myth of tons of empty units is pernicious and just won't die. There has been a TON of research on this topic and it all points to there being a huge shortage of housing in the city. As a percentage of total housing stock vacant units make up a fraction of a fraction of a percent.
Anecdotally, i know quite a few boomers that own multiple properties (>3) in manhattan, some of which they rent some of which they keep vacant for when they want to come to the city I feel like at least some % of apartments in the city are visibly vacant most of the time because they are just part time homes for the wealthy.
[1] https://www.brickunderground.com/buy/what-is-a-nyc-pied-a-te...
[2] https://www.nyc.gov/site/hpd/news/007-24/new-york-city-s-vac...
My best friend's brother has a rent controlled manhattan apartment that sits vacant 80% of the time and is used as a crash pad for a rotating cast of ~12 people, what do you call that?
The median household income in NYC is about $70k almost no one relative to the population has a $2.5mm net worth. There are only 350,000 people in NYC with a net worth of more than 1mm.[1] Anecdote is clouding your understanding here, the idea that there are tons of empty units in NYC is just another luxury belief, it stands up to 0 scrutiny.
[1] https://finance.yahoo.com/news/n-y-c-more-millionaires-11000...
A good friend bought her Hell's Kithen flat (read: condo unit) from a Japanese company. Years ago I had another friend who worked for a company that had a sizeable place in the Village.
Anecdotal, but probably common enough.
Growing housing costs and wealth inequality have been extremely correlated, anyone looking for other reasons for the housing inequality really needs to have a very good explanation why they are not related.
¯\_(ツ)_/¯
And you can't necessarily see the lights on when somebody's home because we use the most blackout-y blackout curtains we can get. Urban light pollution has gotten so bad - especially since the switch to superbright LEDs - that they've become a sleep hygiene necessity.
So while there might be enough physical houses around the country/province/city, what makes a place desirable to live extends far beyond the walls of your home.
A few high profile jury nullifications would probably be sufficient, but we gotta be the rational economic agents that the theories think we are and work together on this.
Think San Francisco or New York in the 70’s type of ‘urban decay’. [https://amp.theguardian.com/cities/2015/may/18/welcome-to-fe...
A one-off broken window, or never cutting your grass isn’t going to do anything.
Realistically? High central bank rates for awhile does the same thing.
1974 had a fed rate of 10.74%, 1975 5.82%, etc. [https://www.macrotrends.net/2015/fed-funds-rate-historical-c...]
There are problems which feed into there not being enough building; the biggest one is definitely that property represents a major portion of Americans' investment portfolios, and thus our democratic system is filled with people (and companies) (and their representatives) who are heavily biased toward any decision that will raise property values. But its not that low building causes this; its just NIMBYism. This causes low building; it causes weird municipal rules about density; it causes expensive permitting; etc.
People also say "well, there's not enough land in the place people want to live so of course house prices are insane". Also bullshit. The "place people want to live" changes and expands all the time. Exurbs that were forests 15 years ago are now extremely hot. Why? BECAUSE WE BUILT. That's it. That's all it takes. Build housing. Build parks and sidewalks. Allow cool businesses to open.
Everyone, including and especially local governments, has made this so freakin complicated when its seriously not. Its freakin MBA prediction brain all over again. They're so afraid they don't understand the full problem, or the implications of their decision, that they refuse to act (build) and instead blame the lack of action (building) on intractably large problems like "interest rates" or "blackrock".
But where will this end for a lot of investors (which in Canada seems like a lot of the influential population) ?
Its really just building.
I grew up in a somewhat rural part of the US, basically just farm land and forests, but a few dozen miles from a city of ~100,000 people. The amount of NIMBYist "we gotta protect the farm" "we'd never sell to some big developer (spits on the ground)" you hear day to day was extreme, to say the least.
Ten years later, that city of 100,000 people is 115,000 people, a half-dozen miles closer to the rural farming community, and they just opened a strip mall outside of town. In another ten years they'll likely have a Starbucks and a luxury apartment complex. In thirty years that small community won't really exist; it'll be called an "exurb" of a city of 250,000 people.
My point in saying this in response to your comment is: Density brings money; and money trumps everything else. It trumps NIMBYism. It trumps Good Ole American Values. It can also trump inequality, weirdly enough; because density (aka money) increases the efficiency of our land use. The issue is: We aren't building enough.
> where will this end for a lot of investors
Constant-ish property asset values relative to baseline inflation. Its really not the end of the world. There's so many places to park money in the US economic system, its weird that we're so caught up in something so real and ugly as residential real estate. Go park your money in Nvidia.
Here's my take: the government should back low interest rate and high eligibility loans specifically for the purchase of housing which has never been lived in before. There should be some provision which allows the loans to be used in the case of initial development, or redevelopment if the new development has a higher density than the previous development on that lot (e.g. the lot had 1 unit before, now it has 4 units, you're good). These loans should be made available to individuals; two per person, some reasonable market-dependent limit per loan. That's it. If the specifics are correct, a program like this would fix an extreme number of problems the US housing system has. It would create a few problems, for sure, but critically: a program like this would create liquidity in the housing system, and its far, far easier to fix problems in a liquid system versus an illiquid one.
A parallel problem is immigration and, as the top comment pointed out, cheap credit encouraging vacancy.
The reason "not building" is not the issue, is because even brand new homes are being scooped up in investments.
Raise property taxes for all non-occupied, airbnbs, and fuck even rentals, and while it might cause rentals to temporarily go up, housing prices will drop like a brick. Make it unreasonable to rent out a home. Heck make it unreasonable to own a second home unless you're Bill Gates.
The only way I see out of this mess is to ban ownership of SFH by anyone other than…single families as primary owners. Corporations, foreign owners, secondary homes, etc.
But we need to address other issues too: zoning (make Houston’s approach nationwide) and construction costs.
Maybe a home owners break, and a second weaker first rental/vacation home break would match the current approach (and dodge more of the individuals who'd kill the legislation for for your idea. Alternately, a discount for occupied properties.
I was initially thinking corporate owned rentals or anyone with more than 2 properties, but the above seems cleaner.
As per the usual government mouthpieces, it was a roaring success -
"NAMA's overall contribution of €10.5 billion to the State, comprising its projected surplus €4.9 billion and recoupment of the €5.6 billion of state aid it paid to the participating institutions, represents a significant outperformance relative to expectations at inception in late 2009" https://www.rte.ie/news/business/2024/0306/1436280-nama-ibrc...
Sadly it has resulted in arguably the worst housing crisis in the EU. 68 per cent of people aged between 25-29 in Ireland still live at home. This figure is nearly 26 per cent higher than the EU average of 42.1.
https://thecurrency.news/articles/86599/we-had-our-chance-to...
The Irish housing crisis has very simply and abruptly come about because of the massive growth in population that has occurred here over the last nine or ten years. Due to the catastrophic implosion that occurred in the indigenous building industry after 2008, speedily ramping homebuilding up to a level that can keep pace with inward migration is essentially impossible.
We may eventually be able to build fifty thousand dwellings a year, but the shortages will persist until then. There are other factors that exacerbate the problem, most notably our sclerotic planning system, but the fundamental issue is the hollowing out of the private construction sector that occurred at the start of the last decade.
You can think back a decade as you say, but your recollection isn't in accordance with the recorded protests at the time https://www.independent.ie/news/protesters-call-for-nama-fun...
Dr Rory Hearne's research from Maynooth sums it up brilliantly
"The housing crisis has also been caused by wider government policy from 2010 to encourage the entry of global investors and vulture funds (via various tax incentives, lobbying and fire sale of assets) into Ireland in order to offload toxic loans from NAMA and the banks. Rising house prices and rents post 2013 were also viewed positively and were promoted as an enticement to investors, while rising prices and rents were also viewed positively for rehabilitating the balance sheets of the banks, a core aim of all policy post 2008. The impact on the housing system was not considered an issue, despite myself and others highlighting the potential problems.
We can see now that these policies have contributed directly to the crisis with vulture funds hoarding land purchased from NAMA. Vulture funds are more likely to repossess houses in mortgage arrears and raise rents on buy to let properties (for example, Ireland's biggest landlord Ires Reit has raised rents substantially). The increase in investors purchasing homes means they are competing with potential home owners. We need to cool off this speculative inflow of investors into our housing system (investors bought up to a fifth of all homes in 2017) and extend the vacant sites tax to derelict property and increase it further to force either sale or development." https://www.maynoothuniversity.ie/research/spotlight-researc...
Not only does the pump of money increase housing purchases (it's a short against the currency), but unstable currencies also cause real estate to go up as wealth looks for safety.
The person with the second vacation home isn't a priority but the fund with hundreds or thousands (or 10s of thousands as is the case in the US) should be a focus.
Dubai is expanding like there is no tomorrow, and the price of down town and marina just keeps increasing, regardless of how many new high rise areas the emirate undertakes.
China has hundreds of literally empty cities, yet people are being priced out of living in Beijing.
The question is not about a lack of new buildings, or under utilization of current buildings but simply you cannot built _dense_ enough to follow demand.
I think a lot of people in the market are still holding on with a strong expectation that the interest rates will go down.
Personally, I think high interest rate environments are better for most people - it compresses asset prices and adds more value to a salary. But it will take some years for that compressions to kick in again.
Note that Trump's tariffs on Canadian lumber increased the cost of new construction by 20% over a period of a few months (the article mentions the cost of materials, but not the root cause, which was this tariff, and some climate disasters, like when the Texas storms took out 20% of global PVC production for a year or so). Biden has been aggressively increasing tariffs, so they are both directly to blame.
The interest rate spike and high inflation were predicted by pretty much all economists when Trump decided to needlessly keep rates low during his first term, so blaming Biden never made much sense to me
Anyway, lots of studies have been done looking for root causes for homelessness and unaffordable housing. Every theory I've heard (drugs, mental health, nice weather for tent encampments, joblessness, etc, etc) has been shot down by such studies except the idea that if you have fewer houses per capita, then you will have more homeless people and more expensive houses.
Assuming global financial stuff changed radically but we didn't build more houses, where would these people with lots of money in the bank live, exactly? Also, wouldn't that cause the price of housing to increase (increased demand, constrained supply, and inflation from the increased money supply)?
The graph you cite says the US has 0.4 houses per person. That means that, on average, we don't have enough houses for people that are single, couples without a live-in kid, or single parents.
It goes on to say that 7% of US houses are vacant, but that wouldn't make up the gap. Also, many houses in the US are vacant because there are in places where the economy has dried up, and there aren't adequate utilities, schools, groceries, etc. Even if those houses were somehow renovated, many people would still be better off financially if they chose to live on the street instead of in those places.
This is a quadruple whammy for people who just want somewhere to live. It means people who only have budget for an older home need to be hasty with purchases so they can get ahead of the speculators. It directly reduces the supply of homes by extending the period in which they aren't occupied. It reduces the supply of more affordable housing by quickly converting it all into more expensive housing. And it robs people who might want to fix up their own home of the opportunity to choose their own decor.
It's not actually front running, but it still feels like a similar kind of problem.
Yes, everybody does. The population exploded everywhere, and rent-seekers enriching themselves out of land price increases popped out everywhere. All at about the same time.
> Ask yourself, do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same inability to build or is there maybe some other common cause?
This is something I've wondered, and I'm of the opinion there's two reasons that are rarely discussed. One is the great recession/sub-prime crisis, which, at least in the US, caused a collapse in housing construction - I'm not sure how much this is true for other countries. The other is the coming of age of millennials, leading to a "bump" of people in their 20-30s trying to get their first home - I'd expect this to apply to most of the countries listed.
Properties are made up of a building and a plot of land that it's attached to. Whilst we can nake more buildings, we can't make more land, so the land in a given location is by definition going to be in a permanent state of shortage. If more poeple want to live in that location OR (the main driver of this crisis) if more money is chasing the same fixed supply, then the prices rise. The land component is the part that has become more expensive recently, not the buildings.
Land that you can develop into multifamily that still has capacity is getting ever rarer. If you poll Americans the preference split is 60-40 suburbia for suburbs vs dense walkability, and yet in metropolitan regions the residential land allocation looks more like 93-7. This shows up in square footage prices, where dense walkability is priced much higher per square foot.
It pretty much is - everything else is window dressing. Pretty much every single city in China is 3-10x more dense than any area in the US, so lack of land is a reason I find continually uncompelling. Our lack of density, zoning practices, NIMBY attitudes and car dependency all contribute to this, with the result being a lack of construction.
Tokyo has been and continues to be affordable for anyone who wants to live there by building: https://www.nytimes.com/2023/09/11/opinion/editorials/tokyo-...
Here's a grad student on tiktok who does good, well-sourced analysis on this front (he has an entire playlist on the issue of vacancy rates given how frequently it comes up): https://www.tiktok.com/@divasunglasses?lang=en
Article on zoning law changes in CA and how municipalities have put out estimates for how much they should build and then consistently, for decades, not even come close to meeting them: https://darrellowens.substack.com/p/ca-cities-to-lose-all-zo...
There's endless amounts of info on this front - look up strongtowns, YIMBY, parking minimums and associated issues (https://www.youtube.com/watch?v=OUNXFHpUhu8), japanese vs. american zoning policy (https://urbankchoze.blogspot.com/2014/04/japanese-zoning.htm...)...
https://workresearch.aut.ac.nz/__data/assets/pdf_file/0010/5...
crafting a "i owe you a house" and giving it to the investor while squatting the real estate seems much more efficient
We have lots of secondary and tertiary homes, parked empty RVs, vacant investment properties, and lots of floor space per occupant, empty spare bedrooms, dedicated social entertainment rooms that are only used for parties, etc.
This might be one of those things where the obvious bit (built more!) is both true, and reductively incomplete. We do have a sense that just building more housing in the presence of lots of liquid capital and easy credit seems to create a speculator market -- even down to retail investors. (e.g. The China real estate bubble bursting seems to be strong evidence that this can happen.)
We also have some evidence that building a single type of housing leads to another kind of speculator bubble (e.g. the subprime mortgage crisis of the early 2000s was proceeded by a massive wave of construction of primarily giant single family homes for example). Even if somebody was interesting in buying something smaller at that time, there wasn't inventory anyways - yet those smaller housing units were not where prices increased the most (note: I'm aware I'm not providing specific evidence of this, but if memory serves it's basically correct) yet they often saw large increases in rental prices.
So from those two examples we can likely say that a market that:
1. Speculation causes housing prices to rise, even when millions of units are being built.
2. Lack of diversity in housing construction can lead to both high prices for some types of stock and lack of availability for others.
So how can we solve this beyond the trivial "build more"?
I'm starting to believe a few things are needed for a healthier housing market:
* We need to limit housing speculation, or at least make it less interesting as an investment option. In South Korea, they've introduced various taxation schemes that limit the appeal of owning multiple properties after decades of housing speculation. The idea there is that housing does exist, but occupancy rates are lower than desired. The result seems to have been an explosion in new housing starts with entire districts in Seoul being razed and rebuilt.
* We also need to find ways to ensure diversity in housing. Now that interest rates have gone up and single family homes seemed to have softened as a market, it seems that developers are concentrating on building "luxury" units of various other types. It's a good start, but if these units are still outpricing need, then they'll sit empty or end up speculated on. Many areas have dealt with this by mandating a certain amount of "affordable" housing, but that has turned into a joke in these areas.
There needs to be other ways for developers to build lower budget units, perhaps tax incentives, or changing zoning to allow for more types of housing.
Here's an example of the problem: The D.C. Metro recently added an entire new line to the system intended to connect the major international airport into the city. The areas around the new stations along the line have all been subject of new rezoning plans, higher density, urban fabric, etc. However, the construction that's happening along that line, while adding tens of thousands of new housing units, is almost all "luxury" (e.g. high price). One of the areas along the line is among the largest reurbanization projects on the planet (Tysons), and Reston/Herndon could grow into a contiguous "city" as large as many other "name recognized" cities in the U.S. like Providence, or Salt Lake City. Average housing unit prices in that area have been rising double digit percent per year (quarter over quarter) with the average home price (not just single family, but condos, town homes, etc.) is at around $700k USD. People who bought in this region even just a few years ago would be unable to afford their own homes today given pricing and interest rates.
So we see another example of "build more" and even "build more types" but aren't being met with "limit speculation" and "build more diversity" - and even in the presence of harder to get credit, the prices are spiraling.
Above the median, buyers (and therefore developers building) start incurring increasing transaction costs.
Part of the issue is that builders can dump luxury properties into the market, then wash their hands of future responsibility as soon as it's sold.
Or better yet just tax land heavily.
And many of those "luxury" units don't cater to families, but single people. You'll find 1 or 2 bedroom units with bedrooms where you can barely fit a queen sized bed. So these are units that are not only more expensive than, say prewar or midcentury units, but more expensive per unit area than those units.
This is where discussing the housing problem becomes challenging. Half of us want to burn the whole system down and take housing back to the basic human need it is, while the other half want to work with the system we have.
Its tough
Prior to covid, the global economy was booming. US and UK had low unemployment rates. the US especially was remarkably doing well, with lowest unemployment rate for minority communities.
There is a price to pay for completely disregarding long-term economic costs of reckless responses to a what was a moderately severe flu epidemic. We went nuts and shut ourselves down. And on top of that, we helicopter dropped 4-6 trillion dollars of freshly printed cash.
And the reckless governance continues in the name of flaming conflicts in Europe and ME. A lot of what happened in the recent years is attributable to just atrocious governance.
Working people are perfectly willing to purchase homes they can afford. In fact, it is safe to assume that it is one of their top priorities. If affordable housing isn't being created, something is amiss. See above!
Following this logic it would be a net positive to buy an apartment building, move everyone out, and live in it as a single family home.
An important nitpick: cheap credit intensifies the search for returns. You need to consider why those races end in real estate. In the US, at least, the answer is that the American single family house is the single most privileged asset class in the history of the world. The entire economy assumes that housing prices will grow at a rate that outpaces inflation. You cannot, in that system, be a person who calmly watches to evaluate the correctness of the hypothesis.
No, you shut up and push. Whether you're the President or the Fed or some affordable housing commission, you shut up and push for housing as an appreciating asset.
Personally, I think we should lean into that -- make single family homes completely unattractive as an investment.
Rental units are more debatable, because of the density argument, but I think we should probably disincentize it as an asset class too. In favor of offering townhomes for sale.
There's probably a lot to be said about the secondary market for conforming mortgages, but I'm not the knowledgeable person to do so.
The problem is multi-faceted.
Is there asset price inflation due to cheap money? Yes.
Have foreign nationals been parking their cash in real estate in certain western countries? Yes.
Has restrictive zoning and NIMBY-ism reduced the incoming supply of new homes? Yes.
Multiple things can be true at the same time, all contributing to the current state of affairs.
Fixing the issue has been stymied for too long by each pointing at the others and saying "They're the real problem!" to justify inaction / rolling back fixes on their pet interest.
All need to be addressed.
That's going to be the biggest contributer as time goes on (not right now though), as eventually all desired land will have been bought by what amounts to an oligarchy.
Honestly, land/homes should never be inheritable, and companies should never be able to own land altogether. Not that this would ever happen. The status quo is too profitable for the land/home owners.
Eh, nah. But, there should be inheritance taxes set at a level which prevents the formation of a "landed gentry". Unfortunately, the issue has been demogogued to the point that middle-class people (who won't have anywhere near the assets to be taxed, as in not by an order of magnitude) treat the idea as anathema.
The middle class is afraid of taxes that are "for the rich" being extended to tax them. And not without some reason - income tax was sold as "only for the rich".
In fact, it's really similar to dividends on stocks, just with cost instead of profit.
For a house in a suburb or rural area, maintenance (enough to keep the house in the same condition you bought it in) can easily cost as much per year (on average) as the cost-of-money (interest rate - inflation) for the debt.
And in some case much more than that.
If one such house is twice as expensive to maintain (over time) due to differences in building materials, environmental conditions, size/geometrical factors, etc, the cost of owning the house over a time period may easily be 25-50% higher for the most expensive compared to the least expensive if we assume the same purchase price.
Land and stock tend to go up in value. But land also sometimes go to 0, just like stocks.
With the booming American car industry in the 50's and 60's, who would have thought that houses in Detroit could go from having a premium price in 1970 to be sold for $1 40 years later?
Who's to say SF isn't going to be next?
The rockefellers and other "Old Money Family's" have the three rules to building multi-generational wealth. Land, Art and Gold.
Even for detroit, land prices have only increased since the 80's[0] and over long time horizons, i'm sure will be back in line with other "Single peice land bets".
I believe there are large parts of Europe that would take centuries if not a millennium to reach the peak value it had during the Roman Empire (measured vs gold).
In general I agree, though. A portfolio is fine.
Most people tend to have most of their "savings" in a single property though.
As an example, what do you think this $2500 property cost when it was new? (Edit: make that 1965, since it's quite old.)
https://www.zillow.com/homedetails/3226-Columbus-St-Detroit-...
Without any external influencing factors, a house would not typically depreciate. So a depreciating house isn't normal, there is something external causing it (like the city is going broke, lost most jobs, or environmental factors make the area bad to live in, etc).
But if all is well, a house will not depreciate if it is lived in and maintained. A house can last centuries and inflation means building an equivalent house is always more expensive later than it was to build this one.
So it is not natural to expect a house to depreciate.
Is there any discussion in the scaling/proportion of a given facet when these get brought up?
Your list can be easily sorted this way (Notably, foreign nationals with money are just an instance of asset price inflation, in no way an instance of "nuance" or something).
I see the chain of causation thus - a flood of printed money has increased the value of all capital assets (some of that money appears as the money of foreigners and some of domestic investors, some as hedge funds, etc). Housing has been a focus and areas with restricted supply are where the money has been most attracted (it's spread more and more as the scale increases - a key point of the gp).
Well since Canada only has a slightly declining natural population rate, not many in comparison to births?
They added 500.000 people to their populace since the beginning of the year. The births are on top of that.
It‘s not true that immigration numbers are worth nothing. Immigration happens mostly in densely populated areas, thereby further increasing home prices.
Conveniently replying to something I never said. Clever.
My point still stands.
Yes they do. This is exactly the problem. Specifically in big cities. Zoning and nimby-ism holds back building. Even Toronto which builds a lot doesn’t build enough housing units to keep up with growth. And they only build as much as they do because the province is constantly overruling the city.
Every western major city is blocking building on any meaningful scale. This leaves cities at effectively net 0 increase in supply. In major US cities, new builds are more expensive to own due to changing property taxes. And California is just a huge F U to young people by making new owners have to pay higher taxes than the old ones.
You claim that these countries do not have the same system of building but they do have the same financial system. That is a large claim to make. You should try to offer at least some kind of argument for why you feel the variations in the financial systems are less significant than the variations in their systems of construction.
When properties are being used as an investment, they are rented out. If that's true, it should show up as higher rental vacancy rate and low/stagnant rent. That's not the case in Vancouver, BC as we have low vacancy rate and rising rent.
Homes could be left as left empty as well, but we have multiple annual taxes, ranging from 0.5% to 3% of the total property value targeting these underutilized home, and that hasn't driven price down. In additions, these taxes essentially provide an one-time only increase in the number of homes available. They can be easily absorbed by population growth.
With the population increase in Canada, building more is the only way out.
The reason why we didn't see rampant consumer product inflation in the wave of irresponsible money-printing meant to soften the 2008 crisis was that the stimulus targeted at the wealthy and went into assets, such as the housing you just mentioned. However, COVID-19 stimulus checks were given to normal people, so inflation now hits normal people's daily purchases.
I've been crowing on this since the 2008 crash. The cycle is this:
1. A person has a job, but can't afford things
2. They get credit to buy the things they want, in lieu of demanding better pay
3. Everyone does this, so demand goes up and prices go up
4. The value of their dollar goes down
5. Go to 1.
Consumer credit has _broken_ money. Broken it. We've seen this in housing prices and student loans, and now that we have online checkout buttons that say "you can have this for $17/mo!", we're starting to see it in stock-and-trade consumer goods even more now.
We have to -- have to -- eliminate consumer credit if we ever want to give people a fair shake at maintaining the value of their money and purchasing things. Otherwise, prices will be determined by people who are dumbest with their money.
[...]
2. They demand a better pay
3. Everyone does this, so the cost of everything goes up and prices go up.
[...]
Unless that better pay is somehow tied to higher productivity and overall GDP increase it would not solve the problem.
They all do though, for various reasons.
Of course. Remember, homebuilding continues to be incredibly labour intensive. Meanwhile, all of those countries have enjoyed "full employment" for many, many years. Which means that workers have all kinds of job options.
In other words, you can't build without people. Ask yourself, why would the people choose construction? Wouldn't sitting at a comfy desk programming computers all day be more desirable? The small few who enjoy it can’t keep up.
Do you work in construction as a career? If no, why not? What would it take to get you to start building houses? Higher compensation than other jobs, perhaps? But guess what high compensation brings...
It’s a pretty simple problem: existing owners have an interest in restricting new supply, and there aren’t many costs associated with being a nimby. Housing stops being a good investment when supply is responsive.
Why wouldn't they? They are relatively similar countries in many ways, any problem that one has could easily be replicated in others. For example I imagine zoning laws are all somewhat similar, favoring suburbs and strictly zoned areas vs market driven mixed use areas.
I also suspect they all have significant migration, high labor costs and high building standards.
AKA, not enough buildings / lack of building..
You are just talking about another symptom of constricted supply.
Being able to obtain assets, when you don't have any is a relatively new thing, historically speaking. One could also say that we were living in a brave new world of opportunities and growth for a few centuries. And now we are returning to the historical norm. One thing that all the examples you listed is that they could be seen as "late game" economies.
I might be totally wrong, though. This is just another angle.
https://www.youtube.com/watch?v=kNUNR2NZvFM
It posits that the high prices are caused by rich people parking their money in houses. It explains many problems with a few variables.
While it's not the whole picture, it explains why the middle class is getting squeezed out of house ownership. And why stimulus package didn't much help.
Then again, with higher interest rates, the lower prices don't mean anything unless they drop significantly faster than interest rates are raising, yes?
All those countries killed their manufacturing and offshored it over the last 40 years. Factories and manufacturing meant good jobs located far away from major cities, and towns/communities built up around those jobs.
Now all the jobs are located in large cities so housing prices there are going through the roof. If you are young you almost have to move to a major city if you want to start your career. Meanwhile there are "ghost cities" and other dwindling towns where you can buy a house for pennies.
Not in London - according to a pressure group saying there are too many houses used as non-primary-residence [0] - they claim just 1 in 45 houses are either airbnb, second homes, or empty, and half of those are second homes (i.e. someone with a small flat in the city and their main house in the country)
On top of that you have the hidden demand. A typical 3 bed house will house 4 or 5 30yo adults in a HMO because there simply isn't enough housing.
Lower rates means House prices are higher sure, but that's because the monthly cost will always rise to meet what's affordable. If supply outweighed demand then prices would fall.
[0] https://static1.squarespace.com/static/6553693f7d629a133b6a4...
I hope so. But this assumes a fair market. I believe the NZ market will be pumped up through government action in order to avoid paper losses for property investors, landlords, and also for regular family property owners' unrealised gains.
Case in point: reinstating full interest deductions for residential property, reducing the tax investors pay. A $2.5b kickback to landlords. 60 per cent deduction in 2023/24, rising to 80 per cent in 2024/25 and 100 per cent in 2025/26.
1. There are a ridiculous amount of abandoned properties, when I walk the streets of major cities, sometimes more than half of the buildings even in expensive areas are boarded-up.
2. Meanwhile I am afraid of being homeless soon, I lost my job recently, and the unemployment benefit I can receive is literally half of my rent. Thing is, there is no "worse but cheaper" place to move to. I already live in a "0" apartment, with the "0" referring to the number of rooms. The apartment is literally just an empty square with kitchen sink and bathroom stuff. I don't even have my workstation anymore because literally there is no physical place for it inside the apartment.
People are like: "Build more homes". Yet the amount of abandoned properties (by the way, this also include abandoned farmland! Government is upset that there are tons of that, and the result is land with zero management, with wildfires, poachers, drug traffickers...) is greater than the number of families needing.
- join a group of squatters (hopefully you already know someone) until you get your bearings. The less ideological ones often squat old industrial properties, or long-abandoned houses (its rough in winter, but in Portugal you should be fine). You might meet some Urbex guys, they're nice and always fine with finding squatters.
- Live in a "big enough" car. You absolutely need to rest on a completely flat surface. I knew someone who got the back seats down and put a wooden plank on it. If you're less than 1.80 and don't move on your sleep, you have a lot of choice (the diagonal is nice), else it might be a bit more expensive.
A very short-term solution is squatting with a close friend, but you shouldn't abuse it too much, it strains relationships.
These inholdings, both impoverished and not, were each having their respective parties (cheap beer in common) along the lakeside. Titties abounded - "howdy neighbor" - the no-betterness of being "commoners, enjoying this day upon the lake."
Interestingly, the poverty beach camp seemed to be having more fun; but obviously the multi-million $$$ homeowners are in much easier/better situations (likely).
"What am I gonna do about it!??" is a common way I've heard this sentiment expressed.
[0]https://en.wikipedia.org/wiki/ZAD_de_Notre-Dame-des-Landes
I probably couldn't "hack it" out in the wilderness of NAD, but always regret having not joined a hippie co-op (living situation) while in college [I once dated a gal living in one... it was so neat and inexpensive, but she was a sloot].
I somehow completed my BS(chem) without ever taking a college math class, under a teaching scholarship.
Then I dropped out of grad school, unprepared for reality.
--
To where has your last decade enriched you?
Lol, it really is true that "civilization" is three meals away from being kaput.
Where do the more ideological ones go? and what ideologies are we talking about here
Of those single family homes there is one that was owner-occupied for a year when we moved in. Since, it's been locked up and has had no renters. The couple that own it own several properties across my city, which I came to know as I got to know one of the owners while they lived here. It perplexes me, and the rest of our neighborhood, how someone can float a mortgage, much less an investment mortgage, without a renter. My owner-occupied mortgage costs me somewhere around $2600/m, I can't fathom paying two with one at a higher interest rate. Apparently this situation is common around my city.
On the other hand, and a bit non-sequitur, is two homes will likely become dense housing. They're foreclosures of properties that were inhabited by meth addicts. The whole property from the building to the soil will need to be removed for various reasons. At auction the properties were purchased for the average sale price of a home of that size that had no pre-existing issues. It won't be the kind of housing people need though, if I'm a betting man; my city has plenty of SROs (single room occupancy) but they're at the wrong price point. They're now called "lofts" and "studios" with a price tag to match. What will be lost is two 50+ year old homes, and likely the ability of our street to tolerate the traffic it was designed for as another issue is the city not investing in road-building and maintenance on our street.
In the USA it is happening all the time because, surprisingly, landlords have little skin in the the game. LLC is the name of the game. Each investment property is "owned" by its own LLC that bares 100% of risks and liabilities associated with the property and shields the landlord from the creditors. The property is financed entirely through commercial loans from the banks or other lenders. If the property does not generate enough profits for the landlord they quietly take all the liquid assets out of the LLC and stop paying their loan and property taxes. It takes long time (often years) for banks and local governments to start legal proceedings against the said LLC. During this period of time the property is sitting there boarded up. Finally the LLC files chapter 7 -- liquidation and all its assets, close to zero at that time, are given to the creditors.
You may ask why the banks give loans to such high risk entities? First of all, if the property is bringing profits the loans are being paid of and it is the majority of the cases. Secondly, if the loan fails the banks do not have much skin in the game either. They slice and dice the loans and package them into "real estate investment vehicles". Then they sell the packages similarly to how they did it before the financial crisis of 2008. The terms and abbreviations are different now but the gist of it is still the same.
EDIT: typos
I do know a few retirees who rent-out the home they raised their family in and live in a new primary. But my town also has some developers who build and rent.
Buying makes a ton of sense if you're going to live somewhere for a long time of course, but if you start out not sure and you have a nice landlord that doesn't take advantage of you with perpetual rent increases every year, then it can make sense to ride it out and invest your "inflated" income every year instead. By the time the tenant moves out, they have a nice portfolio to leverage for a new property and the landlord has gotten a decent return on their investment with a stable tenant.
In this scenario, it seems to me that main driver of disparity in our society is landlords' push to always increase rent even when the mortgage is being paid 2x or 3x over each month, just because it's allowed.
I'm not saying we need rent controls necessarily as a way to fix the problem, but that is one problem that rent control solves. Perhaps paired with some other scheme (3% max increase per year for first 5 years of renting, then capped at 1%?) we could find a more equitable way to account for inflation of repair costs while not screwing tenants with "forced" moves every few years when the rent becomes unaffordable.
Oh, and don’t forget that they’re paying interest on the mortgage and that - when adjusted for inflation - the actual increase in value versus what they’ve paid in in mortgage interest over the years is probably far less than the non adjusted gains it looks like.
It’s pretty easy to demonize owner landlords when you’ve always been a renter because you think only about a monthly payment. I’m not going to tell you that’s it’s a relative luxury to be fixated on one simple payment each month, but it’s also not the case that owning a home as an individual is some kind of pot of gold.
An owner that values their tenant and keeps their rent flat isn’t a saint. But they’re also doing a good thing in a time when they could be - by account of this thread - exploiting people for as much as possible. We don’t need to order them a parade, but it might be worth broadening your understanding of what the cost of a home is before you blanket assume they’re worthy of scorn.
Maintenance is just not an argument. Unless you choose – yes choose – to rent to destructive tenants, or in other ways are irresponsible with your property, maintenance cost is a tiny fraction of what you get from rent. The same for insurance, taxes, etc that you list. Nobody is unaware of these costs.
With that said, I'm not demonizing over these landlords. I'm sure they're fine people and could be worse like you say.
A renter should not be any more grateful to the landlord than a worker should be grateful to the shareholder for paying their salary. It is an exchange. I do think it is better when homeowners at least rent out their property instead of just letting it rot abandoned like many choose. The most decent thing of course would be for them to sell property they don't need and we wouldn't be living in this dystopia from the beginning.
The youth of the industrialized nations are vanishing on a grander scale than ever seen - for petty gains to a few. And those gains will be short lived when the economy folds in on itself due to the impossibility for productive people to have a home. In the end you cannot have an extremely highly skilled workforce that is needed to sustain a modern economy, while at the same time keeping them dumbed down enough to accept total life long exploitation and their own genetical extermination.
All true, but there can be a lot of "quality of life" variance in how that exchange is implemented in practice. I've been a tenant a couple of times and now had a couple of tenants myself. Landlords can make things more or less difficult while offering the same agreement, and tenants can make things more or less difficult while complying fully with the same agreement.
I'm grateful whenever someone chooses to do better than the bare minimum required by the agreement. If anyone reading this takes good faith for granted, I urge you to at least read horror stories on reddit.
This may easier to explain than you might expect. Anecdotally, the people I know in a similar position own all those properties free and clear, there is no mortgage. Consequently, the carrying costs of that empty house are quite low and easily afforded. Also if the mortgage is very old. I know someone with a single-family home in Silicon Valley they don't live in with a mortgage of ~$1000 per month; you can imagine how low the property tax bill must be.
While I am sure there are people with several rental properties mortgaged to the hilt, I don't think it is that common.
> The couple that own it own several properties across my city
Without knowing which city you’re talking about I can assure you this is rather common.
The moment a property becomes just one out of many (assets) in your portfolio your necessity to let becomes a mere annoyance.
Many of the housing market imperfections could be at play here, but it certainly doesn’t help that renters are increasingly unable to afford to become first time buyers.
There always seems to be this common thread running through these discussions, but few want to address it. It's just build build build, moar moar moar. The problem isn't that there aren't enough homes. The problem is that so many homes are owned by so few people/entities and are often vacant. We shouldn't allow people (often foreign investors or private equity firms) to buy a home, leave it vacant, and sit on it as an investment as if it were a bar of gold or something.
They probably have an owner-occupied residential mortgage that the bank (/note purchaser) hasn't called them on. Declaring that you're residing in one unit (either falsely or temporarily) seems to be a pretty popular technique for buying rental real estate. If the mortgage was taken out during the past two decades of ZIRP, then the rate is still fixed at something very low and most of that monthly payment they're "floating" is effectively just going towards the principle as a mandatory savings account.
To be fair, the vast majority of cities need to be investing in non-car transit more than auto infrastructure. Yes, probably even Portland.
Under new law, the Portuguese Golden Visa no longer provides Residency status through Real Estate investments.
The golden visa is just a fast and convenient way to get a foothold in the country and do further investments. And what would these investments be? Probably AirBnBs...
This is supported by data presented in [1]: >90% of golden visa holders acquired it via real estate investments. Now, would anyone pour their life's savings in a single property investment in a far away land? I would say no. So these golden visa holders are probably very well-off and they will continue "investing" in real estate, and expecting returns on their investment. Which translates to more AirBnBs.
[1] https://getgoldenvisa.com/portugal-golden-visa-statistics#ft...
Found this article that indicates Golden Visas account for 14,500 of approximately 600,000 home sales per year in Spain. [0]
[0] https://www.idealista.com/en/news/luxury-real-estate-in-spai...
To sidestep the whole "can we trust each other?" issue the owners may want to sell the property instead of dealing with tenants. Properties go to the market at inflated prices, because every house owner in the country hopes to sell to mythical "rich foreigners"* they hear so much on TV and online. Local buyers are essentially priced out of the market because the price-wage gap is simply too wide, one of the widest in the world. An average Portuguese family with two incomes can't afford a two-bedroom apartment even at a 30-year mortgage, even if we're talking about cities other than Lisbon or Porto.
So, properties stay listed for sale for years and years, owners do not maintain them in hopes of making a sale "soon", and buildings slowly degrade. Eventually owners realize they need to invest a lot of money to keep the house presentable, the money they usually don't have, and they start to lower the price way down. As a result, the market is split in two big distinct categories: something livable at exorbitant prices and places that need a lot of investment to even start living there. Like a GP comment said you can walk on a street and more than half of places are clearly unoccupied, with many of them slowly turning into ruins. If you want to describe a Portuguese urban landscape in one word the word would be "decay".
Meanwhile rent marked is under-served. All this is further worsened by the internal migration pressure. Lisbon, Porto and all towns on a narrow shore strip between the two are growing rapidly in past 30 years while the interior areas are getting deserted. Portuguese move to places where jobs are and developers can't meet the evergrowing demand.
*I recall I saw a stat that foreigner buyers account for only about 0.2% of sales each year.
* $53.3B purchase volume
* 84600 foreign buyers (1.8% of total)
* Buyers are recent immigrants (<2 years) or non-immigrants
* Top buyers are from China (13%), Mexico (11%), Canada (10%), India (7%) and Colombia (3%).
https://cdn.nar.realtor//sites/default/files/documents/2023-...
Portugal has started offering financial incentives for restoring properties, but I'm surprised this is a factor in Major cities, which ones do you see this? Is it also an issue in Lisbon?
The reason there were so many derelict properties was a law in Portugal that prevented landlords to increase rent unless tenants were moving. Some tenant who had been renting for decades paid less than $100/mo. No wonder why landlords had no incentive to fix this. This has now changed, I think?
It's certainly a combination of various factors.
The low borrowing costs of the 2010s combined with high inflation make it a no-brainer to hang onto these properties. Figure, someone bought one of these properties for US$500k at 4% interest in 2015, after 10 years, that property is probably worth US$1.3-1.4MM and is growing at well over US$100k each year, while the 15 year mortgage payments amount to amount to only US$45k a year, plus property taxes.
So yeah, these buildings make serious money even left empty.
It's unlikely that taxing these properties is going to force people to sell. Housing inflation is so high that taxes would have to be oppressive (six figures a year) and that's a hard to get legislators behind (most of whom are participants in this problem).
For foreign investors, these properties are basically insurance policies. If they are forced to flee their home country, they'll land in a somewhat stable western democracy with enough capital to land comfortably on their feet. So there is a proportion of people who would make this investment even if it lost them money.
There's also the problem of shell games obscuring ownership to the point that nobody really knows who owns the property. So long as the taxes are paid out of an anonymous escrow account, the government isn't going to care about them.
I also see a lot of empty properties for years on end in the middle of town.
If there are places owned that aren't in use then the political solution seems pretty easy: tax property ownership massively when unused. Make unannounced visits to properties to see if the owners claim of having a property that's lived in is true.
- built 254000 homes[0]
- had 745,000 people immigrate (net)[1]
- had 600000 people turn 21[2]
- had 577160 people die[3]
If you gain a load of people, far more than you increased dwellings for, prices will go up and dwelling size will go down. It's not particularly complicated.
[0] https://www.savills.co.uk/research_articles/229130/357082-0
[1] https://www.bbc.co.uk/news/uk-politics-67612106
[2] https://www.ons.gov.uk/peoplepopulationandcommunity/birthsde...
[3] https://www.ons.gov.uk/peoplepopulationandcommunity/birthsde...
My point elsewhere in this thread is a that demand is not entirely a function of demand for homes (what I would call 'natural' demand). Finance and tax incentives play a large part too - encouraging demand for investment properties that are often not used as homes (what I would call 'artificial' demand).
This is not to say that addressing supply through more building is not helpful, just that there are other things to consider that may not require as much effort and can have broader economic benefits (e.g. changes to the tax system to encourage productive rather than unproductive investment, credit guidance, etc).
Could you elaborate? How often is "often" in the context of the whole country?
> This is not to say that addressing supply through more building is not helpful, just that there are other things to consider that may not require as much effort and can have broader economic benefits (e.g. changes to the tax system to encourage productive rather than unproductive investment, credit guidance, etc).
If the UK is gaining enough people to require multiple cities the size of Oxford to be built each year to accommodate them, it would be surprising to find that the main issue is people are replacing houses with other buildings.
According to this document (https://www.oecd.org/els/family/HM1-1-Housing-stock-and-cons...) 10% of dwellings in the US are 'vacant dwellings and seasonal/holiday homes'. In other words these are not owner-occupied - and what I would classify as investment properties. Now these are not all the investment properties, obviously. There are many investment properties that are permanently tenanted.
Assuming that about 65% of homes in the US are owner-occupied, then we should be able to assume that the remaining are investment properties (remember I include holiday and second homes here). That means about 30% of investment properties are not used as homes (i.e. the 10% mentioned earlier).
Investors are removing a lot of dwellings from the permanent housing stock.
It is worth keeping in mind that when you hear references to a 2% or 3% vacancy rate, this usually means the percentage of dwellings in the permanent rental market that are currently vacant - not the percentage of total dwellings that are vacant.
There were an estimated 28.1 million households in the UK in 2021, an increase of 6.3% over the previous 10 years. [0]
and:
The UK population at mid-year 2021 was estimated to be 67.0 million, an increase of 3.7 million (5.9%) on the population in mid-2011.[1]
So the number of UK households increased by slightly more than the population between 2011 and 2021.
[0] https://www.ons.gov.uk/peoplepopulationandcommunity/birthsde...
[1]https://www.ons.gov.uk/peoplepopulationandcommunity/populati...
[0] https://www.gov.uk/private-renting/houses-in-multiple-occupa...
There is also the consideration that "lifestyle" appreciation can also happen. If an area gets really built up, more things are happening in the neighborhood that make it a more appealing place to live in, the allure of that lifestyle will push people to buy homes that are probably not worth much in another location.
Land can be very expensive. Especially when it has infrastructure built out to it already.
Land: 500,000
Improvement: 300,000
Stop allowing people to buy multiple homes. Stop allowing landlords to "collaborate" on prices.
https://homelessness.ucsf.edu/blog/vacancies-are-red-herring
https://oregoneconomicanalysis.com/2023/10/26/household-form...
You can create a new household without buying a house. For example, if you live with your parents as a 22yo, you and your parents count as one household. If you then move out and into an apartment by yourself, you are now your own household. But you haven't bought a house. As millennials age, more of them will obviously move out from living with their parents, which means increasing household formation.
In addition, you can expect homebuying to increase within a generation as that generation matures and earns more money. Of course millennials will be buying more houses when they're in their 30s than when they were in their 20s. That's to be expected. Something would be seriously wrong if that were not the case. But this doesn't automatically mean that housing is not expensive.
U.S. construction of homes has actually kept up with population growth and moves, by every conceivable metric.
What IS happening though is that landlords (private and corporate) "warehouse" units constantly to artificially restrict supply and demand, and they do it in collaboration with each other.
Every single city and state in the U.S. has a vacancy problem. We DO have both houses and apartments that are ready and able to be rented and owned.
The problem is simply the price, and the prices aren't being driven by legitimate supply and demand.
You can see this effect happen where prices increase NOT to match population (and often in SPITE of it), but they increase to match the upper bounds of regional income.
You need a place to live more than landlords need a few months of rent. This strategy to prevent downward price pressure from the market allows them to justify the current prices while setting up a "baseline" for the next few years.
Some free reading:
* https://www.construction-physics.com/p/is-there-a-housing-sh...
* https://reventureconsulting.com/the-myth-of-the-us-housing-s...
* https://charleshughsmith.blogspot.com/2023/08/the-problem-is...
I once lived in a condo built in the 70s and the materials used were very pedestrian - linoleum counters and flooring in the kitchen, carpet everywhere else. Ceilings were 8'. No balcony. I don't see today's granite and hardwood condos with 10' ceilings ever becoming downmarket.
But we don't see this happening though. Even in this scenario, there would still be downward price pressure. The market should (or would, rather) reach some equilibrium here.
Instead what we see is UPWARD price pressure and vacancy despite legitimate market forces and environment.
I've kind of already laid it out in the previous post but the next question anyone should have is "why is that happening?"
And it's not because the units don't exist or need to be built.
> "Bullshit. It's not population that matters it's household formation. Millennials are the biggest generation and they are at the age now where they are forming their own households and there isn't any housing for them near jobs. Vacancies are all in dying rust belt towns no one wants to live in. California absolutely does not have a vacancy problem. That's just a lie."
This aligns with my (admittedly less-informed) knowledge as well.
Your assertion that "every city" has a vacancy problem is particularly mystifying to me. I live in Seattle, and there does not seem to be a residential vacancy problem of any kind. Some quick Googling shows "a homeowner vacancy rate of 1.0% and a rental vacancy rate of 2.5%." That does not sound like a vacancy problem to me. Quite the opposite. Very, very, very few homes are available for sale, even as the city's population explodes.
I also did a quick and unbiased Google search of "population growth vs housing supply." Here's what came up immediately: "In 2023, the U.S. saw 1.67 million household formations, resulting in 17.2 million household formations between 2012 and 2023. In this time period, 14.7 million housing units were started, and 13.4 million were completed." So again, household formation is outpacing housing supply, which results in more competition and thus higher prices.
Both your comment and the links you included (which I perused) seem less like they're concerned with fixing housing affordability, and more like they have an axe to grind against landlords and the wealthy in general.
Let's see the data then. Other than some "trust me bro" comment. Not sure why you expect me to engage with vague assertions of authority, especially when "he" started out emotionally unstable.
EDIT:
You heavily edited your comment. The stats you are referencing do not say what you think they say, they are not a force for increasing prices. There are already houses that were previously built, they do exist.
Not sure why you would pretend otherwise?
Look at vacancy vs availability rates.
Additionally, you seem to want to ascribe motivations instead of addressing the fact that collusion is most assuredly happening in every major city in America: https://www.vice.com/en/article/ak3vek/landlord-software-is-...
Stick with the facts, not emotional fallacies.
You made the vague assertion that "[e]very single city and state in the U.S. has a vacancy problem." You provided zero data to support that statement, or anything remotely close to that statement. I quoted data in my comment that directly refutes that, by showing very low vacancy rates in Seattle.
So you are the one who needs to provide data, otherwise you're spreading misinformation and not helping the problem.
And again, you quoted data but it is not asserting what you think it is. Look at what the data is telling you. It is a delta over a specific time period. It is not making the assertion you think it is.
>So you are the one who needs to provide data.
I provided 3 different links that go over this in pretty good detail.
Respectfully you've demonstrated you are not going to approach this in a constructive manner or in good-faith, so I won't be engaging with you past this comment.
There isn't any.
I'm not sure what your motives are. But your claim about vacancy problems is false, and your lack of desire to correct that misinformation leads me to question your motives.
The last reference indeed argues in favor of too much financialization of housing units but that blog is also tripping a lot of my crackpot alarms.
Can you succinctly explain why you believe the low vacancy rates in major metros (which I think we agree is the cause of high rents / purchase costs) are caused primarily by units which are intentionally held empty despite demand?
In partial defense of your assertion, the FRED data does show that 1/4 to 1/3 of vacant units are for sale or rent at any given time.
https://fred.stlouisfed.org/graph/?g=1oeIe
Total vacancy rate seems to hover around 10%? Rentable and buyable unit rates are an order of magnitude lower.
I’m not convinced that the Fed owning a bunch of mortgages is evidence that private companies bought homes and aren’t renting them. Wasn’t that a bail out to prevent people from losing their homes (because the companies owning the homes weren’t solvent and I guess if the company fails maybe you get foreclosed? I’m not sure why we did things the way we did in 08)
Could not the explanation also be that a lot of homes are in places that lack demand and therefore the owners don’t bother putting them up for sale or rent?
If housing is an investment, then remove all protections and open up the supply. No height regulations, no minum parking regulations, no mandatory HOAs. No moratoriams or legal protections when loans default.
If housing is a need, then regulate it like a limited resource. Ration it on the lower end. Ban hoarding (vacancies, empty plots). Limited access to repeat consumers.
When the powerful talk about "finding balance", they usually mean having their cake (earn like an investment) and eat it too (protected like a need).
IMO, Georgism strikes the best opinionated middleground of housing as an investment vs housing as a need. Grounding taxation in land's economic value regulates hoarding. Grounding the value of land in its economic outcomes makes it a transparent investment, rather than the cartelized asset that it is today.
I'm personally opposed to too-much-regulation. It always ends up being a tool for the powerful. Rent control, Prop 13, affordable housing, stacks-of-paperwork and similar regulations always do more harm than good.
Yes it can, and it was for large chunks of the 20th century. Imputed rent can have high yields and therefore imply good "investment" income for households with long term stable housing demand.
The 20th century is relevant because it had long periods of time where homes could be bought at high rental yields because there was lots of new construction in the USA.
There are some signs that this trend is reversing, but I think that was entirely a pandemic phenomenon. Big numbers of Americans regret their pandemic moves [regrets], so I think the environment hasn't actually changed.
It's hard to see where this goes. Most other places solve this by becoming very very dense (Hong Kong) or building great mass transit (Tokyo). It really seems like the US won't do either of those things--maaaaaaybe NYC will but that would be all. I tentatively predict that we have to wait for most of the Boomers to die and leave their wealth/houses to Millennials before we know if this is a bona-fide societal crisis or not: if enough Millennials get what they want this way it'll take the oomph out of any kind of policy change (probably reverse the momentum actually--if anyone thinks Millennials will be any better than Boomers they're super mistaken).
But, neither outcome is really good. On the one hand you have the daunting prospect of a dramatic economic reorganization of the most powerful nation on Earth. On the other you have the calcification of the most powerful nation on Earth into something fundamentally unequal, illiberal and corrupt.
[move]: https://www.census.gov/library/visualizations/time-series/de...
[econ]: https://www.pbs.org/newshour/nation/six-charts-illustrate-di...
[schools]: https://insight.kellogg.northwestern.edu/article/education-g...
[health care]: https://www.gao.gov/blog/why-health-care-harder-access-rural...
[homeownership]: https://fred.stlouisfed.org/series/RHORUSQ156N
[urban homeownership]: https://www.census.gov/newsroom/blogs/random-samplings/2016/...
[regrets]:
--
> Housing can't both be an investment and a basic need.
Housing as investment is a beautiful solution to how many people fail to properly save for retirement. For many people entering retirement, their home is a huge part of the investment portfolio, because they always made sure to make that payment.
If properties didn't appreciate, old people would not have the assets to retire on, then what?
The younger generations will find that out.
Let's say half of families divorce. But we then factor in your "long term care costs" and the liens those people will have requiring home sales rather than gifting and we're probably right back at half (at best) of kids possibly inheriting housing when they're in their 60s and their parents kick the bucket.
Why is there not more funding for those departments to make approval/revisions a breeze and make building lower risk and cheaper for construction companies? Welp - home owners (and big construction/investment companies) are the ones who vote. I expect politicians know exactly what they're doing, keeping things a complicated swamp.
But without some sort of governing regulation, I fail to see how anyone benefits in the long run with the tragedy of the commons that would ensue.
Agreed on all the rest, especially Georgism.
What part of Georgism is Anarcho-capitalism ? It is merely a way to reason about land and taxation.
For a country with near-zero historic buildings, the US has some of the most suffocating housing regulations. Making the regulations easier to navigate does not make it anarcho-capitalism.
The US housing crisis is an urban problem. Take California for example. Prop 13 handles land-taxation, which lets you pay pennies on prime real eastate. The Bay-area is the world's tech capital and has the world's most expensive real-estate. Yet you'd struggle to see an 5-floor+ building outside of a small pocket in down-town SF & SJ. Nimbys have practically outlawed any building by exploiting environmental regulations. The troubles associated with the new Apple Campus and the SJ downtown transit extension are recent examples among many.
In the above examples, housing of those who have it, is being protected by the laws as if it is a need. However, it explicitly prices-out those without housing through the same means. The individuals who protect their housing, do so to protect an investment. To me, taking away the ability of NIMBYs to project power outside their own walls limits exclusionary regulation. And standardizing taxation by land value generates the kind of fair-market pressure that keeps supply coming.
Now yes, it fully embraces housings as an investment, and it will inevtiably comes with it's fair share of problems. But first, investments come with well-understood regulations to avoid abuse (cartelization, hoarding). And second, I can't imagine how it would be anywhere close to how bad things are now.
If you have a better solution, then I'm all ears. But, at least don't be condescending if you aren't willing to engage.
Sure, but that's not what you espoused. You mentioned it as the best opinionated middle ground, but ultimately concluded, too much regulation was bad--Georgism involves far more regulation than we currently have. Note that Georgism isn't just about land.
> Making the regulations easier to navigate does not make it anarcho-capitalism.
Sure, but "making regulations easier to navigate" is quite a bit different from listing every current regulation you can think of and saying they are the cause of our current problems.
Even if we charitably assume you're genuinely proposing Georgism as the end goal, that's a complicated ideology to implement. What are the steps to get there? It seems like your only concrete solution is to get rid of the too-much-regulation examples you mentioned--the few weak protections we have--and vaguely "implement Georgism". Whether you intend it as such or not, that's a motte-and-bailey fallacy: the end result of this plan is simply to get rid of regulation and then fail to implement Georgism.
I don't share your optimism that land value tax cannot simply be passed on to renters. Closing that massive loophole involves implementing the rest of Georgism, which I'm not convinced you know exists since you've failed to mention it entirely. And ultimately, I am not convinced that loophole is possible to close.
And then there's the separate problem of accurately valuing land in order to tax it.
> The US housing crisis is an urban problem.
No, it's not. Homeless flock to urban areas because it's easier to survive without a home in an urban area, and small-town/suburban cops have a lot more ability to just imprison all the homeless they encounter under some pretext. But a lack of affordable housing in suburban and rural areas is absolutely a cause of homelessness just as much as a lack of housing in urban areas is. If anything, the lack of employment opportunities in suburban/rural areas creates more housing insecurity.
> In the above examples, housing of those who have it, is being protected by the laws as if it is a need.
Is it? I don't think so, and you conveniently talked around zoning laws which are more obviously treating housing as an investment and not a basic need.
These laws presuppose that housing as an investment is a reasonable thing. I suppose that assumption doesn't mutually exclude housing as a basic need, but the laws you mention completely lack the sorts of protections with real effect that regulate investors in other basic needs. If your water company or electric company fail to provide service, they get fined--who gets fined for failing to provide housing? When food supplies became insecure, we subsidized farming at a level that creates a permanent excess of food: who are we subsidizing to create a permanent excess of housing?
> If you have a better solution, then I'm all ears.
Well, housing is a basic need. You keep dropping phrasing like "if housing is a basic need" or "as if it is a basic need", but the statement "Housing is a basic human need" surely is not under debate? So maybe we treat things the way they are. There's no need for an "opinionated middle ground"--there are not two sides to this coin: housing is a basic need. I do not care about investors in housing: people withholding people's basic needs to collect rent are a blight and should be treated as such.
No one should be able to own houses they do not live in. I have no objection to simply giving landlords a year to sell off their rental properties, but realistically this sort of regulation is hard enough to pass without cutting the oligarchy out of their pound of flesh, so some sort of compromise that reimburses landlords somewhat is a reasonable compromise if we can solve homelessness permanently.
Even the most well-intentioned attempts to implement this will probably be more harm than good. There will always be enough loopholes to create many of the same problems while the added restrictions can introduce other problems of their own.
Some people cannot afford to buy, and some would not buy even if they could, preferring flexibility or a different kind of market exposure. For them to have a place to rent, someone else -- be that a company, family, or individual -- has to own a place they don't live in so they can rent it out. There will always be a need for this, you can't just ban it.
Aside: Don't tell me you want state-built housing projects. People seem to forget that the USA already tried that. Even in Russia and China virtually anyone who can afford to move to private housing does and never looks back.
Australia's state housing projects may have kept some people off the streets but have not prevented runaway housing prices for everyone else. One could argue they took up valuable land that could have helped with the supply side.
It's not "anarcho-capitalist" to recognize that many laws and regulations have had paradoxical effects once implemented. Even the most die-hard planned economy maximalist has to acknowledge that the plan can function differently in practice to how it was imagined by the committee. History is full of examples of well-intentioned plans functioning far worse for both the collective and the individual.
...and crashing housing prices drastically would solve this.
> and some would not buy even if they could, preferring flexibility or a different kind of market exposure.
A lack of flexibility in home ownership means a lack of liquidity in the market. A more liquid market is the solution here, not rent.
Paying rent is not market exposure. It's explicitly excluding renters from any market appreciation. No one chooses to rent so they can "gain exposure" to monetary loss. This is an absurd argument.
> Aside: Don't tell me you want state-built housing projects. People seem to forget that the USA already tried that.
People who hate government housing love to point to urban projects built in primarily black neighborhoods before the civil rights movement, and conveniently forget that postwar housing programs built much nicer housing in primarily white neighborhoods. I grew up in one such house.
> Even in Russia and China virtually anyone who can afford to move to private housing does and never looks back.
Imagine seeing people who would otherwise be homeless become stable enough to move into nicer private homes and seeing that as a failure of public housing.
My guy, people are sleeping on cardboard outside in 10 degree weather here. Grow a sense of perspective. Yes, I also support improving quality of housing, but if your criticism is that my solution doesn't result in perfect housing, I'll point out that your opposition to all real solutions doesn't result in housing.
> Australia's state housing projects may have kept some people off the streets but have not prevented runaway housing prices for everyone else.
Sorry, what was that first part?
Australia's state housing projects couldn't meet the demands of investor greed, because corporate greed is limitless. It should be unsurprising that as long as investment is allowed in housing, housing can't be cheap.
> It's not "anarcho-capitalist" to recognize that many laws and regulations have had paradoxical effects once implemented.
True. It becomes anarcho-capitalist when you see the complexity of regulation and use it as an excuse to oppose any and all regulation.
> History is full of examples of well-intentioned plans functioning far worse for both the collective and the individual.
History is also full of examples of well-intentioned plans functioning quite well. You like working no more than 40 hours a week? You like that your boss can't lock you in your office and let you burn to death if the place catches fire? You like that your food has to be inspected for foodborne illness?
Many of the regulations we have were written in blood and there are many people still suffering because regulations have not yet been written. Your free market ideology brought us sweatshops, cars that explode when rear-ended, paychecks paid in company store credit, black lung disease, prison slavery, Chromium-related cancer clusters, opiods, microplastics, kitchen grease fires--the list is endless, and in every one of these cases people knew what they were doing was harmful, did it anyway, and walked away with the profits of, in some of these cases, literal murder, because people like you are too blinded by ideology to prioritize human lives over freedom of the market and regulate before untrustworthy corporations cause harms that they obviously will.
lol. Yes, I remember at the 2022 landlords meeting we all decided to raise rents… because we never thought of that before!!
Surely it has nothing to do with taxes and inflation, no, as a renter you should be shielded from that and we should pay it without passing it on!
https://www.propublica.org/article/yieldstar-rent-increase-r...
Let’s use simple reason here…
If there isn’t enough supply, rates will go up, coordination or not.
If there is no supply issue, landlords who conspire to raise rents will be immediately undercut by those that do not.
Article makes allegations, and nothing came of them. It’s not illegal to call and ask prices. Prices that they’re “agreeing on” were all what people were paying.
[0]: https://www.ftc.gov/business-guidance/blog/2024/03/price-fix...
https://www.businessinsider.com/apartment-rent-increases-lan...
It’s a blog that pretends it is real. You couldn’t pick a worse example. FYI
All the people and companies with some money in this country are buying those flats to rent them to tourists, and it's the most lucrative business someone can have as the expenses are minimum in comparison to the earnings.
If they taxed heavily having more than 10 homes they weren't whole neighbourhoods of tourists in our cities, and those who born there would have some opportunity to rent or buy something there, instead of having to having really far and losing most direct social relations they had
The poors need to hold themselves accountable and stop working for unsustainable wages that can't get them even a small, run-down home. They continue to drive their own wages further and further down and make it that much harder for those that come after them.
It's ridiculous that they expect other people to sacrifice when they won't sacrifice (unionize, strike, or just opt out) to make the world a better, more equal place.
The wealthy will always try to squeeze everything out of the lower classes. If you accept unsustainable wages for your labor, you are part of the problem in devaluing labor (ie you are traffic). The working classes need to hold themselves accountable for the exploitation of their labor.
They're working on it!
See 'Figure 1' https://www.nimh.nih.gov/health/statistics/suicide
Housing location is really important, not just the total number of vacant properties.
In housing, you have many people struggling to afford to buy anything at all, while investors buy up multiple properties or drive prices for even modest residences into the 7-figure range in some areas.
Essentially, unequal societies bifurcate, and while the vast majority of people have to go without the resources they need to lead fulfilled and dignified lives, a small minority of elites put more and more resources towards trying to eke out smaller and smaller advantages against each other.
If you told me 10 years ago how much I paid for it, I'd ask what the name of my butler is.
Sounds nice, but land/home values in the area I'd like to move to has nearly tripled in the same timespan.
I feel bad for renters priced out of the market, but many of us who have "enjoyed" the upside are actually deeply underwater relative to our preferences, to say nothing of the doubling of insurance premiums, and ~25% property tax hikes in the last five years.
To me this sounds like your city/state is just ballooning their budgets.
Proposition 13 did cause some distortions and needs reform. But it has at least been effective in stopping the former unchecked growth in local government spending and limiting the corrosive effect of public employee unions.
what do you mean by this?
Btw those disproportional numbers can be easily real anywhere in the world even in much bigger ratios, I can confirm them from Europe - if you want to invest in properties, location is absolute top priority as we all know that. Those properties appreciate faster than average market, don't suffer much drops in crises, and of course are at most desirable locations for whatever reason.
Page 7 for AVG sale price: 2019: $485,128 2022: $644,750 AVG build cost: 2019: $296,792 2022: $392,241
- Cities across the world built thorough sewage systems, preventing the need for private citizens to empty their litter buckets out the window – a large river in Chicago was even reversed!
- Cities across the world built mass transit networks, enabling citizens to move around efficiently without relying solely on private vehicles.
- Cities across the world should build affordable housing networks, as Vienna did. This way, citizens don't have to fall victim to the exploitation of speculators and distortions of the supposedly fair market.
Public affordable housing is a necessary infrastructure, just like sewers and transit, to create livable cities for all residents.
How do residents, by definition people who already reside there, benefit from public affordable housing?
If you’re a resident that already owns their home, and has absolutely no unfulfilled housing needs, you will benefit from a more prosperous society with less people struggling and more equality - and that’s a positive on its own right.
(along with its positive knock-on effects)
In fact, it’s the very goal this measure aims to achieve.
I think this probably has decreased house prices to some extent, but people are really insanely reluctant to sell a house for less than they bought it for so lots will wait for years before accepting the change.
It's probably good times to be buying an ex-rental to live in and getting better as mortgage rates fall.
The exact impact is a little hard to work out, because, at least in Paris, it's also coincided with apartment owners wanting to hold on to empty apartments to rent them for the Olympics rather than to locals.
0: https://www.connexionfrance.com/practical/timetable-for-new-....
Sounds like something that can be fixed with laws.
Edit: would you mind explaining your downvotes with arguments please? thanks.
I'm not French but IMHO, Airbnb style short term renting for tourst purposes should come with hefty taxes because housing should always prioritize the locals who live, work, have families and pay taxes there, not wealthy foreigners on vacation.
Sucks for them I guess. Maybe they should have diversified and invested in stocks or bonds instead of going all-in in housing-for-rent "investment" and complaining it doesn't turn up to be a huge profit making scheme like they expected, and expect the government to cover their losses.
Someone's housing shouldn't be someone else's for-profit side-hustle gamble. It's why housing is such a mess in the first place.
You can't have housing be affordable AND provide hefty profit returns in private pockets at the same time. Those will always be in contradiction at odds with each other in capitalism.
Honestly, I expected better from the socialist French, that they would have solved affordable housing for the masses.
I agree, income from property should be heavily taxed, it's essentially private profit from the land value, and that value derives directly from it's location and the strength of the local economy, rather than any effort or contribution from the owner.
Anyways I don't have an opinion about this, just wanted to answer why would people protest - because it's not some faceless corporation but them directly you're taxing.
Owning 1 apartment is completely different than owing 5 apartments in the same city. You can live in 1 apartment but you can't live in 5 at the same time. You're profiting off the other 4 ,so you should pay tax for it.
Many apartments that are being rented are those that house people otherwise, Paris being very well known for emptying out in July/August. For those that are being held back to rent, it can probably be hard to know what's the truth, "we didn't find a tenant" versus "we didn't want to find a tenant."
Also, I think there's also a benefit to the government, as they want to have this empty short-term housing stock available for tourists coming in. A lot of money is being invested in the games, it's important to get the tourism money to make it profitable.
Something about the tax position of letting mortgaged property.
In the UK, if a private landlord receives £1000 in rent, and pays £800 in mortgage interest, they pay tax on the whole £1000, not just on the money they made.
There are reasonable arguments on both sides:
A) Why should a landlord be able to deduct mortgage interest from their income, for tax purposes, when owner-occupiers cannot?
B) Why should a landlord be unable to deduct business expenses from revenue before calculating taxable profit, when all other businesses can?
C) Why can homeowners deduct mortgage interest costs, whilst renters cannot deduct rent costs?
I think you nailed it. This is effectively the government saying "renting is not a business".
Think about it. The ability to "deduct expenses" is one of the characteristics of businesses. Individuals also can't deduct rent, food etc from their taxes.
This is effectively the government saying "renting is not a business".
In the UK, the borrower is on the hook for the full amount of the loan.
Nothing about that has changed recently.
The recent reforms did swap out some landlords for homeowners. It didnt undo the war on affordable housing it just prevented landlords from profiting as much from it.
Which is a good thing, even if some media outlets owned by landlords do like to pretend that euthanizing the buy to let landlord is bad renters.
If a mortgage is recourse, and your home price has fallen enough - yeah, you have a pretty big reason not to sell.
Especially if your alternative is to pay more monthly for a worse rental (often the case).
But taking a more long-term view, in the US the owner-occupied housing rate about 65%, which has not changed a ton in the last 50-60 years (high was 69% in 2005 and low was 63% in 1965). Granted the market has changed a lot, we have much bigger houses, and more two-income families to pay for those more expensive houses.
https://www.advisorperspectives.com/dshort/updates/2024/04/3....
Given that this number doesn't take preferences into account, I think it's pretty reasonable that almost everyone (>80%) making at least the average (median) salary owns their home.
I'd personally bet that there is a gentle imbalance appearing between how much energy the average person can lay claim to vs. how much they need to build and service a house and this is a symptom of the energy squeeze. But it might not be and this article isn't doing much to prove or disprove what the actual problems are because we need more information to make useful observations.
But there is investor demand for an investment vehicle that has the tax and asset benefits that homes offer.
The consequence is that the buying power in the market by humans-who-need-a-place-to-live is relatively weak when they compete against financial investment corporate entities.
It is certainly possible to have situations where someone chooses to leave a house empty. If it is happening at scale then that suggests either tax or rental law is doing an unacceptable level of damage. Otherwise, why leave the house empty? It is giving up free money.
They may have such an incentive. In an idealized market where everyone has perfect information, they wouldn't, but we don't live in such a market. In practice, it may be more profitable to leave a house empty to drive up rent on your other properties, and to save the maintenance costs that tenants would bring, especially if you can indirectly coordinate with other large property owners: https://www.propublica.org/article/yieldstar-rent-increase-r...
I'm not seeing it, rent is usually far in excess of maintenance costs. Run me through how this works. Say I have an empty house, maintenance costs for tenanting it are $5,000 and I have Dan the Desparate who will rent it for $10k/annum, and for the sake of argument his next best alternative is homelessness.
What external circumstances exist here where I'm going to be better off not letting him use the house? Something like not being able to evict him on demand I can see being a factor, which is specific to the deal. But I don't see how what I do here could affect the rent any other properties I might have. I'm don't see how Dan being homeless can serve my interests here.
Why not apply the following: - every house not used for primary living place is highly taxed (removing all speculative ownership) - charge foreign investors heavily (australia will do this soon) - tax reduction for renting places for lower than median per square meter price - incentivising affordable homes
Just trying to understand why this wouldn’t work?
At least in cities or places with a trainstation here the demand versus supply is out of band. What do you want to do against growing population and limited space?
And yet, supply is so constrained that house prices continue to rise. Either cities need to stop growing, or build a lot more housing.
I am in Switzerland an 20% downpayment is a must. Secondly you can only take money out of your retirement scheme for a move-in house. But still supply is highly limited making prices explode. Most people I know have about 500k to 1 Mio in debt (about the same in Euro).
As rent prices seem to go up as well the problem aggravates for low income people.
What else is Netherlands thinking about doing?
I always rented within walking/biking distance to my work. Try that with a house.
Other places, with surprisingly little success, can do and actually do it, but it magically doesn't solve underlying issues, so results don't move needle as much as expected.
I grew up in a 20 square meter per person apartment (with multiple person living there, for a total size of 60 square meters) - and it was definitely not pleasant. But I feel that nowadays people also expect a lot - for example in The Netherlands the reported average of 65 square meter per person https://longreads.cbs.nl/trends19-eng/economy/figures/constr....
Not discussing what it should be ideal, but if (some) people now want 2x or 3x what they wanted 40 years ago for example (without actually needing it due to a larger family), it's no wonder that there are issues (with prices/availability etc.).
I think part of the problem is there aren't 3rd places nearby in the suburbs, because that is the point, so people want more room to have to accommodate their needs.
Why do you think every person should have an “right” to own property? It’s a nice utopian idea, but that’s not how a capitalist economy works.
Further, your claim isn't universally true. You could rent for a while, you could downsize to a smaller house, you could move to a location which hasn't experienced as dramatic price growth, or just an overall lower-priced region (i.e. Californians moving to Texas, Nevada, Montana, etc)
Some people prefer the freedom of not being stuck in one place. Super duper. That’s excellent, they prefer renting.
Trying to convince the rest of the world that it is a sound financial decision in lieu of buying a home and establishing equity is where the argument over “renting is better than buying from a financial perspective” falls apart and the absurdities start getting thrown about.
Its heavily market-dependant, but assuming rent expenses = the cost of interest, from a financial perspective they are close to equivalent. If you take the money that would be paying off the mortgage to invest, you should be in a similar financial position at the end.
1-1 compariaons are hard, though, because in practice houses are huge levered bets on a RE market, so they can have huge returns if chosen well. Those are usually the kinds of markets where rents tend to be lower than the mortgage payment, however, so things might net out more even than you'd expect at the end.
But you cannot make even this simple assumption because rent is not tax deductible but mortgage interest usually is.
Even if ownership doesn't make sense from a financial standpoint it's still somewhat essential for parents of school age children. Renters can be forced to move on short notice if the landlord declines to renew the lease, like if they're planning to sell or redevelop the property. This instability has a cost that goes beyond financial concerns.
House costs $100k
You buy house with $20k savings and $80k debt
In this example that $80k of debt is called "leverage".
Is this what you mean with your question or did you mean to ask something else?
You have to sell the house, right? So you can only cash in on that leverage when you reverse mortgage or otherwise downsize, right?
(And yes you are also correct it's possible to realize the gains without selling by taking a reverse mortgage.)
Could you explain your line of thought (or back of the envelope math)?
I guess I'm just a bit tired of the messaging that real estate is such a great financial investment. Historically it's better than a lot of options but not even close to the best investment vehicle. Houses are homes first, not money makers, and if we continue to emphasize the latter, we will never solve the housing affordability crisis.
Perhaps you're making an argument that even with leverage, most people would be better off investing in the stock market rather than real estate. And perhaps that is true. But leverage does tip the balance in favor of real estate.
Can you show the calculations you made? I would expect the result to depend a lot on the assumptions you put in, particularly regarding leverage ratio, interest rates, stock market returns, and real estate returns.
It does depend on a lot, but the majority of scenarios you’ll put into rent vs buy calculators, for various places across the country, come out in favor of renting. In expensive areas, dramatically so. When interest rates are high, even moreso.
Let's take a quick look at my current situation as an example. Right now my family spends $2650/mth renting a nice home in the Denver metro area, with an excess of $2-3k/mth that goes into market investments at ~11% annual historical average. An equivalent house would cost us $600,000. Let's ignore the currently bleak housing market (where house prices have fallen ~10% in real dollars over the last 2.5 yrs), and assume your RE returns is a historical +4% annually (past 50 years).
Equation for compound interest at a fixed rate with initial sum: P = P_o * e^ (rt) After 30 years we would have the following equity in our home: P = 600000*e^(.04*30) = 1.99 million
This is with a total monthly mortgage payment of ~$4200 (including taxes and PMI), to have 1.99m at retirement.
Now let’s compare to renting and continuing to invest the money we would have spent on the house into market index funds. Equation for previous month’s interest added to $2k/mth (use excel): P_monthly =[previous month balance]*e^(r*t)+[monthly savings] After 30 years we would have the following equity in our investment account: P_monthly =[previous month balance]*e^(0.11/12*1)+2000 (use excel) = 5.73 million
So I'm paying almost the same (2650 rent + 2k/month), but have more than 3 MILLION DOLLARS MORE at retirement.
This is to say nothing of all the other costs of a mortgage besides loan interest (essentially the cost to get you to the point of buying a home). Throw out $12k in closing costs. Throw out the 10 yrs of opportunity costs putting our savings in a secure HYSA (4.5%) rather than index funds (11%) to afford a $100k down payment. Throw out maintenance ($5-8k annually) and all the time spent maintaining the home (thousands of hours).
You would be more than 3 MILLION DOLLARS wealthier if you continued to rent. The leverage helps you, but that 7% differential in average returns makes it inconsequential. The power of compound interest - it's literally the only way average people have any dream of becoming wealthy.
Homes are terrible investments, relatively speaking. It’s not even close.
Your calculation also obscures what is the interest rate on the loan, which is the most significant component affecting the result. Sure, if you assume a high interest rate (currently baked into the $4200 number I presume), then your result will be that home ownership will look very bad. Whereas if you assume a lower interest rate, you will get a result in the other direction.
I'm not claiming that homes are great investments. And I know that renting is currently cheaper than buying a home (with current interest rates). But I am saying that your calculation isn't making a fair comparison.
It's a basic power law situation. The only real question is WHEN the 11% return will overtake the 4% return. The interest on the 4%-returning loan is a factor, but it's secondary.
If we ignore the interest rate on the loan and simply assume stock market always makes 11% and real estate market always makes 4%, then the situation becomes really simple and is in favor of real estate investing.
Suppose a person has $20k to invest and they are considering putting it as down payment on a house, or investing in the stock market. (Let's ignore future cash flows and how those are invested, just consider the initial investment of $20k.)
Stock market option: $20k with no leverage -> 11% ROI on a $20k investment
Real estate option: $20k of your own money + $80k of the bank's money -> 4% ROI on $100k investment (counting both your money and the loan) -> 20% ROI on $20k investment (counting only your own money)
20% is better than 11%, so if you could get a zero interest loan, then the real estate investment would be much better.
Now, if we assume the interest rate is not 0%, but is instead 4% (same as our expected return), then of course the situation looks bleak.
So the interest on the loan is not a "secondary" factor. It's the most important factor.
I think the main point grandparent in this thread was trying to say that it's very easy to get cheap leverage on a mortgage, and basically impossible to get cheap leverage on stock market investments, and when you put the math on the back of the napkin like this, it becomes clear that the access to leverage can make real estate investing more appealing than stock market investing.
But that's only a tiny piece of the money you will spend on the house and ignoring this will obviously lead you to a false conclusion.
Anyway, you don't have to agree with the numbers. I can link you to articles where Warren Buffet also points out the same thing, but you don't have to believe him either. Or you can Google rent vs buy calculators and do the full picture math yourself, if you're really that interested.
An 11% return will always beat a 4% return eventually, no matter what the initial conditions are. The question is just when.
No, it won't. I already gave you a very simple and easily verifiable scenario where that 4% return will beat that 11% return because of leverage. If you don't even accept that hypothetical, then you must be arguing just for the sake of arguing.
> But that's only a tiny piece of the money you will spend on the house and ignoring this will obviously lead you to a false conclusion.
That simple example was not supposed to be a realistic model of the world. I'm fine expanding the simple example step by step into a fully realistic model of the world. But there's no point going there if you refuse to accept very basic arithmetic facts in the simple example.
>if you refuse to accept very basic arithmetic facts in the simple example
I refuse to accept your assertions because they're simply incorrect. Basic power law math - a higher value exponent will always win, eventually.
>Stock market option: $20k with no leverage -> 11% ROI on a $20k investment
P = P_o * e^(r*t)
P = 20,000 * e^(0.11*t)
>Real estate option: $20k of your own money + $80k of the bank's money -> 4% ROI on $100k investment (counting both your money and the loan)
P = 100,000 * e^(0.04*t)
Set these two equations equal to each other and solve for t. This will give you the number of years the 4% return with a 100k initial investment will beat the 11% return with a 20k initial investment.
20,000 * e^(.04*t) = 100,000 * e^(0.11*t)
t = 23 years. After 40 years, the 11% return has beaten the 4% return by 3.3x
If I'm misinterpreting your "very simple and easily verifiable scenario," please let me know. But I don't think so. Your error is in this statement. I'll leave it to you to figure out why, let me know if you need help! ;P
>(counting both your money and the loan) -> 20% ROI on $20k investment (counting only your own money) 20% is better than 11%,*
I tried to do the math now (independently from your calculations) and I ended up with the number 16 as "years after which the stock market 11% return has beaten the leveraged 4% return". I think your calculation result 23 is different from 16 because it assumes the loan can be kept as "free money" instead of paying it back.
$20.000 * 1.11 ^ 16 - $20.000 ~ $86.218
$100.000 * 1.04 ^ 16 - $100.000 ~ $87.298
However, the flaw in this is that most people don't have the discipline to put excess cash they would have spent on a home into index funds and forego touching that money until retirement.
So a mortgage is a very compelling enforcement mechanism to get average people to save for retirement.
If we're being honest that's a much more powerful reason to buy a home than "leverage."
So suppose you have $100, and you believe a stock will increase by 10% in value, then borrowing $900 and buying $1000 of the stock, will leave you with $1100 if your prediction is true. When you pay off the loan, you'll be left with $200, and you will have doubled your money.
The loan thereby acts as a leverage multiplying the 10% return on investment to in this case a 100% return on investment.
Now imagine that instead of having $100, you have $50k, and instead of borrowing $900, you borrow $450k, and instead of buying stock, you buy a home with the 50k deposit and 450k mortgage. The same applies, the home appreciates 10% to 550k, but your equity increases from $50k to $100k. Again, the mortgage loan acts as a lever.
The difference is that most consumers do not have large and cheap capital available to them, say to borrow $450k to invest in the stock market. But most people do have such opportunities to invest in the real estate market with a mortgage.
Anyway, wether it's a good investment really depends on many factors. The NYT buy or rent calculator is still one of the best sources to get an intuition on what is best for your circumstance. https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...
Not everything is a purely financial decision. A home is primarily a place to live, not an investment opportunity.
Property tax isn’t voluntary and as exogenous as a landlord. (Also eminent domain, to say nothing of most peoples’ mortgages.)
> Not everything is a purely financial decision
Making the largest leveraged purchase of your life for an emotional comfort object is irrational. That doesn’t make it wrong. But it ceases to be a policy concern. (I might feel secure having a Fabergé egg in my possession, that doesn’t mean the public needs to give a shit about it.)
The reason home ownership is a public priority is various and I agree with it as a goal. But it’s a bad financial decision for many people, and there is legitimacy to questioning if we can duplicate the forced-saving and civic engagement benefits more simply.
Wants are infinite.
Home ownership is effectively enshrined as a value in most economies. The emotion is part of society’s design. Conforming to this incentive or belief is not unusually irrational,
Agree. But if that feeling of security is all it’s about, it’s still irrational. Even if it’s conditioned and thus common.
If you’re buying a home to feel good about yourself, you’re making a financially ruinous decision.
Anywhere that gives a delinquent property owner years also tends to have strong tenant protections.
This entire discussion is as it's ignoring mortgages, where the entire security argument for homeownership breaks down beyond being an emotional comfort object.
Homeownership is statistically more secure because home owners are richer. The home doesn't make a homeowner more secure, their wealth does. Remove the wealth effect and homeowners are about as precariously perched as renters. In the past decades, home-price appreciation contributed significantly to that wealth. Someone making the smae purchase today is less likely to similarly benefit. Particularly if they're conceding they're making a bad financial decision for emotional reasons.
How so? I just showed that’s not true for evictions due to non-payment, at least for the property taxes issue you raised. When it comes to mortgages vs rent, maybe they’re similar risk, but in that case, the mortgage is not riskier, so the benefits of a house seem worth it, especially considering that as long as you keep up the payments, you are highly likely to eventually get your money back with a house, and 100% guaranteed to lose all your rent.
> In the past decades, home-price appreciation contributed significantly to that wealth.
Right, home ownership has historically been a vehicle for wealth building.
> Someone making the smae purchase today is less likely to similarly benefit.
Why’s that? Are you assuming that real estate inflation might slow down, but the market won’t?
A house is a leveraged loan until you pay it off. If the price goes up, you get the leveraged return. People who paid $200k down payment on a $1M house in 2019 can sell today for $1.5M and walk away with more than double their money, or around 4x the profit that someone who invested the $200k in the stock market and got the same (incredibly good) returns.
I don’t agree that buying a house is a bad financial decision, how do you justify that claim? There is certainly a distribution of outcomes, but on average I think most people profit from buying a house… especially when you compare it to paying rent.
We’re at record price to income levels amidst a stable versus growing population. (Note: I own a home.)
> house is a leveraged loan until you pay it off. If the price goes up, you get the leveraged return
Crazy how 2006 this pitch is. (Together with the “you are highly likely to eventually get your money back with a house.” Maybe we need a housing recession, both so people can buy in and others reminded there is no free lunch.)
Jesus, that’s a bit dark. Getting your money back from the sale of something you owned isn’t a free lunch. It’s just 100% better than dropping most of your money into a hole called rent, and never owning anything, and being beholden to landlords.
If my argument is too old and hasn’t adapted to the 2024 economy, which is entirely possible, then show me what it takes to do better than buying $420k a house on a $75 income with $84k in savings. (I’m just picking the “median” numbers from the article.) A 2-bedroom apartment where I live is anywhere from $2500 to $4k, so let’s say $36k/year in rent. Rent is much higher than this in SF or NYC of course. How long do you have to rent for the interest on $84k in ETFs to cover $36k/year in rent, assuming your rent doesn’t go up?
Edit: I’m not certain that did the calculation correctly, but it looks to me like on a 5% market return it would take 69 years for an $84k investment to break even against $36k in rent.
You take the difference between rent and ownership costs, not just the down payment, leverage that (2x max), and calculate the difference. The Times has a good tool for this [1]. (It doesn’t lever. Securities-based loans are almost always cheaper than mortgages.)
The sucker in the present math is the individual, aspirational, emotionally-motivated buyer. The winner, the sellers and first-lien lenders.
> assuming your rent doesn’t go up?
I’d actually argue this is what most people pay for with homeownership. You may become a bit poorer, but your future is more certain. If you’re savvy you can use that certainty to take more risk in other parts of your life. Buying a home, for most Americans, is buying insurance. The problem is few see it that way, which is pretty great for the real estate industry.
[1] https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...
I don’t know why it would be any other way; the landlord has to pay a mortgage or purchase price, and the rent must be higher than that. The mortgage and TCO costs of the property plus some profit for the landlord are what renters pay.
Landlord is locked in. (They also have search, turnover and collection costs.) Tenant has flexibility. Sometimes the landlord makes money, sometimes they don't. Nothing guarantees them a return. (Ask a real-estate agent about buying an investment property. The pitch almost always turns on price appreciation.)
I’m not saying buying never works for the buyer. (It looks like it might work where you are.) Just that most people buying today are transferring wealth away from themselves in exchange for emotional comfort.
The notion that leasing is pissing money away is a deeply-flawed and probably-wrong theory. It’s also somewhat uniquely American (and British) middle class, which makes me suspicious about its origins.
The thing that would stop me from buying right now isn’t the price, it’s the interest rate. Also one method for dramatically reducing TCO of a house without increasing the monthly payments by that much is to finance with a shorter term loan. It’s harder to get rent to win when financing with a 15 year loan.
And it’s way harder to get rent to win without the opportunity cost, especially when comparing apples to apples on space. I feel like you’re mostly talking about what’s possible but not what’s likely. You might be able to come out ahead renting but I think most people won’t. Most people at the edge of buying a house aren’t going to invest if they decide to rent instead. The choice doesn’t seem to play out as buy vs rent+invest, but more often just buy vs rent. When the choice is buy vs rent, and renting isn’t offset by investing, then it really is pissing money away, transferring wealth away faster than if they bought a house.
Sure. In the same way self insuring is generally a mistake, even if you're wealthy, because most of us don't have the discipline to hold that liquidity hostage continuously. The forced-saving benefit of homeownership is real. I simply ponder whether it (and the increased civic engagement ownership brings) can be replicated some other way.
So FWIW after sleeping and thinking about it, I might be coming around to what you were saying, that buying at high prices and high interest might not be a great financial decision right now. My today thinking is that this whole discussion was perhaps not really about buying vs renting, it was mostly about financing and the often obscured total cost of a loan. I guess if we were talking about paying cash for a house, the calculus vs renting is completely different. I’ve been lucky with my houses and I shouldn’t assume everyone will be as lucky. I did realize a couple of funny ways to frame things. Buying a house might let you leverage your down payment, but a loan is also bank leverage against you, since you will eventually pay back 2x-3x the loan amount. Or another way of putting it is that when I buy a house with a loan, I’m renting the money to buy the house. :P
No you don't. Property taxes are not incident on renters.
Extreme example in California
https://prop13.wtf/2023/05/06/prop13-is-not-passed-on-to-ren...
Not all taxes are passed on to consumers
https://en.m.wikipedia.org/wiki/Tax_incidence
Edit: ok it looks like you're editing your comment to change what you had earlier. So I'll just leave you with a ton of reading on this exact topic https://gameofrent.com/content/can-lvt-be-passed-on-to-tenan...
I edited before you replied, and just clarified. I didn’t change my point at all.
Making 4% in rent isn't great when the mortgage interest is 6%. The difference is made up out of the landlord's pocket, and they gamble on capital gains to make up the shortfall (or rising rents vs a mostly fixed mortgage expenses)
In the very long run, yes. In the medium term, as in decades, home-price appreciation has let landlords in several markets run at a loss and rely entirely on capital gains for profits.
I live in the UK. I have to pay the same rate of council tax for the property whether I own it or rent it.
However that’s completely beside the point: my council tax isn’t suddenly going to double overnight because a single person decided they can extract more money.
> Making the largest leveraged purchase of your life for an emotional comfort object is irrational
You are completely missing the point. A place to live that is truly your own is not like buying some luxury good.
I could buy your argument were it about buying a mansion vs a small family home, but the article is about people being unable to buy any home.
Yes, the housing association absolutely can tell you not to remodel your bathroom. Unless you literally own a house rather than an appartment, you really don't have a lot more rights than a renter would have.
I am speaking as a Finnish homeowner.
Firstly I am legitimately surprised that Finland has HOAs. I had always assumed they were a largely American construct (I’m British).
Secondly I was absolutely talking about owning a house rather than an apartment. I feel an apartment is a slightly different situation by virtue of being an inherently shared space.
That said, I still it baffling that someone would try to exert control over what you do with the inside of your own home.
The Finnish HOAs are a uniquely Finnish construct. They are in many ways different from the American HOAs, even though the name is the same.
> That said, I still it baffling that someone would try to exert control over what you do with the inside of your own home.
In the Finnish system, as a "homeowner" in a HOA, you actually don't own things such as... the walls inside your apartment. The HOA owns the walls. You own a piece of the HOA and the right to live inside the walls. But if you want to fix damage inside the walls, for example, you need the HOA to do that, because they own the walls.
First thing I did when I bought a house was smash a nail in the wall and hang a picture. Well I guess the second, I ripped down walls and painted first.
The direct translation would be "house company", but that sounds wrong.
I am always shocked at how many people simply don't understand this.
For example: no matter how many index funds I buy, I will still have to find a landlord who allows pets in their home if the current landlord decides to kick me out for a better tenant (whatever that means for them).
I don't have to deal with that in my own home. My home, my rules. And this is worth more to me than knowing I optimized my investment portfolio.
Human dignity has value. Shelter security has value. Knowing that you won't be moving in the next few months has value. But the value of these things cannot be measured in dollars.
One of happiest countries in the world - Switzerland, has minimal home ownership, people simply focus on more important matters in life (and rules and their actual enforcement are on next 10 levels compared to general US, yet nobody does biggest financial move in their lives based on those).
In this thread, I mostly see young folks frustrated that their easy investment chance evaporated, although it was never actually easy but people owned and desired to own radically less in the past. A bit of greed, a bit of FOMO, a bit of emotions described above. And an intense sense that a big, well-located house (not an apartment, hell no) is not everybody's right, but their basic human right enforced by some Geneva convention and UN forces. They will happily accept brutal communism with whatever else it brings just that they can get it too.
Or its one of those few topics where HN really isn't the best place to look for balanced opinions. I get it, I would maybe feel the same if I was in such situation bound with such mindset.
Its physically impossible to satisfy everybody who wants that, we don't (yet) build cities in 3D with this in mind. Such demand will literally every single time outstrip supply unless given society is in deep demographic spiral.
There used to be times when people thought about buying houses when they reached cca 40. Worked their way to it, patiently. These days, 30 year old will complain to you how world is unfair since he already doesn't have it all since he wants to retire at 50. Or how they are priced out of some great place since almost everybody wants to live there too, including boss of his boss of his boss. Working class was priced out places like Manhattan maybe 50 years ago in much higher numbers, and nobody bat an eye.
I am not sure that is the case. Or at least there is no natural law that would mandate this. And why is it less of a problem in say, India? In India, big cities see massive growth in terms of number of livable units built. They don't have the NIMBY culture of the US or the oppressive zoning restrictions, and many more people can aspire to own a flat by the time they are in the late 30s or 40s.
I think most people people would be fine if they knew they would be afford to buy in their 40s. But I don't see that happening for a lot more of the Zoomer generation.
I always wanted to build a home gym and have a workshop, I have these things now, I never could before, I'm happier now than I was before, it was something I really wanted to do with my life, rent doesn't allow you to do those things, most of the time anyway.
Could I make more in an index fund? Sure, probably. But I can’t make a rental into what I want it to be, you are often not even allowed to paint the walls.
I can’t plant a garden in an index fund.
The problem now is that property buying at scale for the long term is a model private funds are trying, interest rates are going up, and housing supply at the lower end of the scale is constricted because there's no profit building those houses. All of which means people who want to buy a house rather than pay a landlord are basically screwed.
I get how that seems odd if you live in a big city, a multifamily building, etc. -- associations and their problems are ubiquitous there. But it's not the experience of most American homeowners.
Of course there are tons of people who want to buy it, but not for the price you are demanding. You are unrealistic about price.
In a way, I think this exchange illustrates very well the problems with the real estate market and housing.
Okay on top of all that, a down payment is 20% of the cost of a house. Buying the house is perhaps a little more like a leveraged loan. If the stock market and real-estate were to both inflate by the same amount, your investment in a house gets you 5x the return that your down payment investment makes. In the mean time, all the money you pay in rent goes down the drain, whereas all the money you pay into the house above the down payment comes back to you when you sell the house. From my point of view, a house seems like a far better investment, when you factor in the rent you lose. And historically home ownership has been the single most important wealth-building tool for the average US citizen.
It is legitimately concerning that the median house price is so high, and the trend is continuing upwards. Some of the fuss is concern over the future potential of a crashing economy, and yes that certainly will give us bigger things to worry about.
This kind of reductionism where everything boils down to financials is exactly how we ended up in this mess to start with. Maybe we shouldn't have structured everything around that because ... people just want a house to live in.
You can have a place to live without buying.
Your comment is malplaced.
As many others also told GGP, you cannot have a place you're certain to live in on your own terms without buying.
So yeah, someone's comment was malplaced, all right... But it wasn't the GP.
In one case you can sell your property and get your money back, so you can decide to do whatever you want with it (like index fund if you so chose). And in the other it's your landlord who's either paying their mortgage with your money, or placing it in said index fund...
The cost structure of landlords is often very different than the cost structure of new homeowners. They can make a tidy profit charging rent that is significantly lower than your mortgage payment.
If you decide to move, you pay 6% in real estate fees (extortion) to sell / buy. If you rent, the house never changes hands, and hence this fee isn't paid.
I My calculations (for Denmark) the property taxes are roughly equivalent to kapital gains tax.
Of course reality is nuanced - a friend of mine for example is building out essentially his own apartment in his garage and having his sister pay rent for his house.
I'm still not sure how best to add a "compare buying to renting" feature for the calculator, so any ideas are most welcome!
So, in 10/yr I'm still paying $2000/mo while rents have moved to $3200/mo
edit: Seems like Germany has fixed mortgages but makes it hard to refinance.
For the Netherlands: While it differs per bank, legally you're allowed to pay up to 10% of your mortgage extra per year (some banks offer higher rates, I can do 20% for example) without extra costs. When the rate changes (due to going from fixed to variable, or variable with a large change in a year) you're allowed to pay back as much as you want, without extra costs.
If you want to pay back more/faster, the bank calculates a fee ("loss of income due to lost interest payments") that you have to pay, which is still cheaper than just doing your regular payments.
The above statement also applies if you want to refinance if, for example, your home went up in value. They can and will drop your rate but you have to pay a fine. That being said, in the past, when rate drops were really large, you could go to a different bank, have them take over your mortgage pay the fine for you just so they can get you to come to them (though I'm assuming they're no longer so keen on that).
If this was the case, then there would be more and more renters, and less and less tenants, so rent would increase, and make homeowning a better financial decision. There's a stable equilibrium there, even taking into account the various taxes involved.
Where I live, rents are often about equivalent to the mortgage + property taxes, plus a little more. In other words, in the house I live in right now, my mortgage + property tax is about $2,500/month. If I were to rent it out, I could likely get $2,600/month for it, possibly up to $3,000.
In this scenario, if you plan on living somewhere permanently, there's not a single way to do the math that it works out that renting ends up being the better choice. Not only do you pay more now, but rent nearly always goes up.
> but there doesn’t seem to be a clear financial advantage to home ownership
Just the simple fact that money paid to rent goes into a black hole whereas money paid towards a mortgage that builds equity should be a clear financial advantage to home ownership.
Opting to rent is insanely short-sighted. Like, even if I could rent the house I'm in right now for $2,000/month ($500 less than the monthly cost of buying), over the next 10+ years, rent will very likely go up over time. And again, that money is just being burnt. When you buy, eventually, you don't have a mortgage anymore.
I think the only way renting ends up working out better is if you live in some crazy place where a mortage+tax is double the monthly cost of renting.
My only thought is that it's political, and some voters don't want their houses to lose value.
This system of building houses was completely scrapped by neoliberals, letting the "market" take control of supply with the government taking a background stance of mostly zoning out where they'd incentivise building new dwellings.
I can see in a not-so-distant future talks about this kind of program being reignited in politics, the neoliberal approach has absolutely failed us.
I am not referring to building public housing. I am saying the government should build housing as if it were a for-profit company. Take those profits, and re-invest into building even _more_ housing. Don't try to sell to those in need, sell to those who are speculating on real estate and increase supply at the same time.
It’s also a good way to ensure companies can milk the government of money and then the head of those companies can lobby the government to keep things how they are so they continue to get that government money.
If there is surplus value it should stay in the enterprise and be used to improve the enterprise by improving processes or improving the lives of workers. Failing that it should be returned to the customers through lower prices.
One good thing about government services is they're more efficient because they don't have this value being extracted by uninvolved parties. That means they're able to provide better service or lower prices with the value that would've been sucked out by profit takers.
A lot of the value in government services tends to be extracted by public employee unions. Politicians make excessive commitments around wages, pensions, and job security in order to buy union votes and maintain labor peace. Then the politicians move on and future taxpayers are left holding the bag.
What grandfather is suggesting is something like an ESOP, co-op, or etc. There are a long history of these kinds of organizations, and they thrive in free-market economies--unfortunately, nobody really lives in one of those anymore.
It is telling that you say public employee unions "extract value" by demanding the pensions/job protections that should by rights belong to everyone (and often did, in the past). Conversely, private corporations "extract value" from the labor marker by struggling to provide any job security, any retirement, or even anything resembling a living wage.
Just which sector is failing to be profitable, here?
Profit is surplus value. The opposite of waste. Forcing it back into the place it originated versus letting it transport to the most-useful thing it can do is how you get sclerotic feudalism. Had we adhered to this philosophy during the Industrial Revolution, we would have just kept farming.
You're asking for people to fund the infrastructure speculators thrive on with their money, on top of that you want to depress housing prices which another large cohort of society will vote against, politically your proposal doesn't make sense.
If you cared to read the Wikipedia entry I shared the approach the Swedish government took was to pay 2/3 of the new constructions and sell those houses to people who would pay them back in 30 years, it's not "public housing" as you assumed...
The problem is you create a permanent underclass in the country since you take literally almost all rights from them. Including by the way the right to return where they came from.
[1] https://en.wikipedia.org/wiki/Treatment_of_South_Asian_labou...
They may well have a point, that government should only do things that only government can do, and that by declining to be involved they're leaving space for private businesses to operate.
But yea that's how we got here.
At this point any attempt for a government to be more intentional and interventionist would result in severe push back from the right.
Some governments are trying. In British Columbia, the government has changed laws to allow the arms length public transit agency to be able to buy and develop land around its transit stations.
The most major busts by year:
1837 - caused by land speculation, driven by the gold rush
1873 - caused by land speculation, driven by railroad companies and their investors
1929 - caused by a stock market bubble
2008 - caused by widespread mortgage fraud and speculation on the housing market
Agreed land is totally unique and should be handled very differently from other forms of wealth.
But let's just call them what they are: Trailer parks. I just don't see how trailer parks are going to solve the problem. You may have cheap land but if you put 500 trailers on a plot you're still going to need sewage hookup, power and water for 500 homes.
With tiny houses, you're going to get the opposite effect of the price being lower because if of the "tiny" aspect.
Don't make the mistake of equating inequality with poverty. Specialization is certainly a great driver of efficiency and wealth creation. This trade-off can be fine (in a rising tide floats all boats sense) but we have to keep our eye on the levers.
If you then urbanize, your inequality increases rapidly. But since we already have an urban, industrialized society, increasing density is not going to move the needle on inequality. It's arguable it'd move backwards because more people can suddenly live in a desirable area.
Logically I agree that this is a "distribution" or "social" problem, not solely "the fault" of urbanization (that is, the "correct" social policies ought to be able to mitigate the natural downsides).
Unfortunately, however, we have thousands of years of data in which no society has managed to discover what these correct policies are (or at the very least, they've been unable to be deployed at scale). This observation gives me some pause and causes me to re-evaluate some of my prior assumptions.
A poor reason to oppose urbanization, perhaps. But not a poor reason to oppose kneejerk urbanization without critical thought (a prevailing trend as of late).
Whatever the case, this force is a powerful one and should not be casually dismissed, even by those who believe workable solutions are (finally) imminent.
https://en.wikipedia.org/wiki/Missing_middle_housing
Efficient and healthy land use for housing was solved in the 1900s - we don't need tiny homes.
In England, row housing is quite common and that seems a good compromise between density and comfort.
I live in an apartment block in Spain and it's quite a lot worse than even row housing due to noise from neighbours, lack of parking etc.
It's okay for young people, but it'll be hard to raise a family in, which is probably partly why we have such low birth rates here.
In England, the new-build homes are often of a far inferior build quality to the older ones built after the war.
For some reason people believe that a little baby is the most noise possible and it's often used in such discussions as an evidence of complete sound-proofing of their dwellings. While people do instinctively get agitated from a child's screams the power of these screams is very low. This is why parents get baby monitors as the screams don't propagate well even between floors in a single-family house. Even adults, unless trained, can't scream nearly as loud as a 200W Bluetooth speaker. Get your neighbor upstairs to drop an empty barbell bar and see how you won't notice it. And in the US your neighbor can be dropping a 300 pounds barbell while having a party with people dancing with accompaniment of 2.5kW sound system, at 2:30 am.
All sorts of feasibility studies. Options.
And then out came the NIMBYs. "My grandkids play in the street and I'm scared they won't be able to anymore", "there's going to be cars parked everywhere on the street and we won't be able to find parking" (uh, you have driveways and garages, no?)
"What's this going to do to our property values?" This was the kicker. "Well the most conservative of our studies showed that it looks like we'd go from 11% YoY value increases to 8-9%."
Wow. You would have thought the city was pouring water in everyone's gas tanks, or assaulting their grandmothers.
"HELL NO. I have a right to double digit property value increases!" Even when the lower increases would still be in the top 20% of property markets in the country (and being clear, still an 8%+ ROI), no way in hell were any of those proposals going to pass.
Otherwise it doesn't make sense that prices are high for a good (housing) whose primary input (land) is in great supply.
If you have a high tolerance for crime and other antisocial behavior there is plenty of extremely affordable housing in major US cities with plenty of amenities like walkability and public transportation.
https://www.propertyshark.com/info/us-homeownership-rates-by...
How does someone owning (and living in) multiple properties effect the homeownership rate? They count multiple times!
How does someone renting out a bedroom effect the homeownership rate? Their tenant doesn't count! This includes adult children.
You can not use this metric in the way that you just assumed you could.
> Housing Unit. A housing unit is a house, an apartment, a group of rooms, or a single room occupied or intended for occupancy as separate living quarters.
> Homeownership Rates. The proportion of households that are owners is termed the homeownership rate. It is computed by dividing the number of households that are owners by the total number of occupied households.
> https://www.census.gov/housing/hvs/definitions.pdf
When we get to the bottom of this we should edit the Wikipedia article if I am wrong.
> The name "homeownership rate" can be misleading. As defined by the US Census Bureau, it is the percentage of homes that are occupied by the owner. It is not the percentage of adults that own their own home. This latter percentage will be significantly lower than the homeownership rate. Many households that are owner-occupied contain adult relatives (often young adults, descendants of the owner) who do not own their own home. Single building multi-bedroom rental units can contain more than one adult, all of whom do not own a home.
> https://en.wikipedia.org/wiki/Homeownership_in_the_United_St...
You could at least read the comment you’re replying to before calling its poster a liar.
The United States homeownership rate represents the percentage of occupied housing units where the resident is also the owner. A constantly evolving figure, the United States homeownership rate currently rests at 65.2%, while renter-occupied housing units make up 34.8% of the national stock.
At this point I'm not sure if you failed to read your own link, don't understand what "percentage of" means, or are just obstinately wrong, but regardless it doesn't much seem worth continuing does it?
[1] https://www.propertyshark.com/info/us-homeownership-rates-by...
> "Census Bureau surveys do not collect data on the population experiencing homelessness and living on the streets"
> https://www2.census.gov/library/working-papers/2024/demo/seh...
You got one part of it right: building more solves the housing crisis. But if you built outside cities, you're asking new homeowners (read: young people who contribute the most to economic growth) to live increasingly far away from where the economic growth happens.
It's not a feeling, it's how purchasing things works.
> It's not a feeling, it's how purchasing things works.
He means that people feel they get to control the neighbourhood. Exercising control over property they don't actually own.
This happened in my neighborhood in the mid-20th century - a huge, thriving, dense neighborhood was abandoned and destroyed as the industry in the area slowly failed. Buildings were turned into suburban-style lots, and over the past 50 years gradually gentrified and those empty spaces turned into more, denser housing. We're currently somewhere between the "local amenities can't keep up with the population" stage and the "housing is replacing commerce" stage.
Second is construction cost. A round number for the US is about 150 USD per square foot. So a 2,000 sq. foot house should be in the neighborhood of $300,000. (That does not include land, just the structure). However, in desirable cities this number is higher because labor costs are higher. In sparsely populated cities, that number is (of course) lower. This varies country to country, and in some space constrained cities, vertical is the only direction that you can build. (As one poster noted below, the $150/sq foot is only for single family. Multi-story buildings are significantly more expensive.)
But probably the biggest problem are artificial barriers to construction. The zoning system in the US, for example, prevents the construction of higher density in some areas. For example, a neighborhood can be zoned at 1 per acre. It's illegal to build a duplex, apartment, or to divide the acre into four and build four houses, etc. The zoning is set by a local board elected by homeowners in that locality. Being near high-density housing often lowers the value of existing homes, including making traffic worse and stressing the school system. (Also, to be fair, a sudden, large influx of new people, before the tax base and services catch up, can stress EMS, hospitals, fire, police, public transportation, sewage, water, electrical grid, etc. as well as just schools and roads).
Finally, there are builders, who would rather sell one large unit instead of lots of cheaper units. Building and selling a 1,000,000 USD home is cheaper and easier to manage than 5 200,000 USD homes. If you can only build one house per acre, or the space is constrained by geography, it doesn't make economic sense to build a 200,000 USD house. Even if space isn't constrained, the incentive is to build luxury, high end units as long as you can sell all your inventory.
It's absolutely weird to see land go for $1m for a small lot, then 10 minutes drive there are cows grazing on huge acreage. Then if you do a 10 minute flight in any direction you can see thousands of hectares of empty, good, liveable land.
(This is in Australia)
I was born in, grew up in and currently live in a location that the HN community never even thinks about. Most people in here have no idea of how the regular 99% live and then base their whole world view on expensive capital cities and hold the strangest views of housing.
I bought my current house in the 2010s, my mortgage is still half the price of renting and I could manage to pay for everything by myself even if I were on a minimum wage. The problem isn't anything to do with housing it's to do with your own warped view on the world.
I don't say this to be contrarian or to necessarily make a point. I want you to look up the minimum wage of your country and think about how literally everyone else happily lives without thinking twice about these things. You all live a massively privileged life yet these things concern you more than they should.
You just said that where you live, if you were on minimum wage, you could "manage to" pay for half the price of renting. Think hard about what you just said here. You are saying that someone on minimum wage can't nearly afford to rent. But their problem is their own warped view of the world. The warped view that someone working full time should not be forced into homelessness? How warped!
For example in Chicago in the US, at least in the early 2010s, it was also flipped like in GP's area: My monthly mortgage payment was around a third of the rent I had been paying, for a far far better place.
I'm not sure that view really exists. Like, on a day-to-day basis early in your mortgage, _maybe_, but that's about it.
Also, remote countryside is cheap in most countries, but unless you can do 100% remote, they are very few jobs there.
Suddenly, the 1.5 bed flat we could afford in a good area of London became a 5 bed detached in the best area of Leeds - 15 minutes from the centre. We have huge parks, cinemas, waterfalls, cafes, public transport, swimming pools, yoga studios etc. all within 10 minutes of our house. This is the exact same stuff that I would crave and pay a premium for in London (or any other world city). However, I also have neighbours who are on minimum wage, also affording houses a few roads away from mine, getting to live that amazing lifestyle too. I would arguably say they are living better lifestyles than the majority of my peers in London who are finance bros, consultants, techies but stuck in flats or house shares in Peckham or wherever. This was a massive eye opening realisation for me, and I've recently come across the term 'Deano' to describe it.
Anyway - the answer in my opinion to the housing crisis is decentralisation. Make it feasible to continue to achieve at high levels, but in regional areas. Improve public transport to increase the effective population of these cities so businesses have larger talent pools to choose from, and thus it is more viable for them to relocate. STOP centring so much of global media/films/tv/culture on these fantasy worlds set in New York and help people build fantasy imagines of nice lives by setting them in LCOL areas.
Take the pressure off the big cities, share the wealth, the opportunities, and everyone will be better off for it.
> the measures mentioned in the article — lower interest rates, lower transaction fees, down payment subsidies
Maybe it's like that in America. In EU, where the investment 'culture' is different, there are hordes of people not knowing what to do with their money and buying homes only to sell them at a higher price (flippers). Case in point: Poland, where the housing market is quite bonkers - especially in big cities.
Just having a flat rule against corporations owning property will likely reduce the number of rentals available and a reduced supply will lead to higher prices.
Affordable though? Apparently not. I mean if you have a lot for development are you going to build a $200K home or a $600K one on that lot?
New housing units permitted: https://fred.stlouisfed.org/series/OMAH531BPPRIV
Population Omaha (note: change in statistical area): https://fred.stlouisfed.org/series/OMAPOP
Housing starts per 1000 residents: https://fred.stlouisfed.org/series/OMAPOP
We need laws against corporate ownership of residential housing, simple as.
for one the "ghost towns" of China are in places no one wants to live, the complete opposite of what the US (or anyone) needs to do
I dream of a 100% tax rate on second homes, foreign ownership, and corporations owning single family homes and condos. Or even better, make it illegal. But any politician who pushes such a bill would immediately get removed from office and the law repealed.
That is not true unless you consider having a mortgage equivalent to renting from a bank.
What is true is that in some metro-areas like Atlanta, 1/4 of sales (in certain price categories) are to investors.
Financial speculation happens because people believe (reasonably) that the price of a home will increase. Why do they hold this belief? Because the demand has increased while the supply is kept artificially constant.
That's what's so frustrating about all of this -- it's a complete own goal. If we all collectively do nothing at all, developers will move in to capture the consumer surplus. It will be profitable to build, not buy and hold.
Housing prices are unaffordable in big cities, while abandoned properties are rotting in the countryside everywhere. It's time we start spreading the economy rather than concentrating the people.
Technology is a lot more than InfoTech. It includes core engineering and infrastructure.
You have it backwards. Density makes mass transit feasible. You want to talk about commute times, spreading everyone out is going to magnify that.
Cities are efficient. At least, they can be. Busses and trains/subways work a hell of a lot better in urban cores than suburbs, and are effectively worthless from an efficient standpoint for moving individual people in a rural environment.
It's moving the need for everyone to commute (via mass transit or w/e) to just a much smaller amount of shipping to happen between cities to move goods.
we artificially subsidized sprawl for generations. leading to a periphery of, as you say, rotting/abandoned countryside homes, because the economic activity generated by people living that spread out does not cover the cost of modern standard of living infrastructure over that distance.
https://www.youtube.com/watch?v=gG1T03NuZKM
cities are expensive because they do have the economic network effects of people in proximity, they are simply where the money is, combined with restrictions on building new units.
continuing to pour good money after bad down the sprawl money pit will only make things worse. the only way out is up.
Many jobs can be done remotely today and this will move annex jobs with them. Cities will remain central hubs but this will reduce the pressure and demand.
The problem with most comments in this post is they don't say how they'll get people to build. It requires incentives.
Has anywhere tried LVT?
all housing posts have the following discussions 1. housing shouldn't be an investment
2. 'local democracy' always turns into nimby
3. something about gentrification
4. something about govt incentives/disincentives: don't give tax breaks for homeowners, tax second home ownership ect .
5. something about airbnb
6. some comparisons with europe/denmark
pls let me know if i need to add anything to list
Assuming we aren't giving up on democracy, my theory of how change happens in a democracy is that it starts with changing people's minds.
Most of our friends are still running along the platform, desperately trying to grab on but the train just keeps accelerating.
Our first home price increased by 50% in 4 years when we sold and moved into a bigger home in 2022, and we hardly did anything to it. Just the way the market is. The only reason we were able to afford the new house is because of the rapid gains on our first house and the fact that we had a ~2% interest rate for two years that allowed us to quickly build up a savings nest egg, with a mortgage payment that was far below what our friends paid in rent.
I just feel bad for all my fellow millennials that couldn't catch the train before the market went fucking insane in 2020. Because it really does feel like catching up is impossible if you aren't already in the game.
And politicians love every dollar of price increase.
There’s the homeowners and the renters/serfs and nothing in between.
Dead society, nothing to aim for or live for.
Regular people own the overwhelming majority of homes, and they love every dollar of increase.
The finger pointing at corporations or politicians is totally misguided. It's the locals who collectively are invested in their homes and collectively (through the votes they cast) create the disastrous situation we are in.
Even the most bleeding heart liberal is all about "protecting the character of our neighborhood". Just look at San Francisco.
I love those green and saffron signs about welcoming refugees that they put in the neighborhoods where you can't touch property for under $2M. I want stickers I can slap on those signs that say "...if you can afford this neighborhood, lol."
- Increasing density in older cities requires infrastructure upgrades that are much more complex and expensive to retrofit than it was to plan and build the first time when space was abundant.
- Multi-story buildings are more expensive per floor space area than single-story buildings. As cities become denser, the added expense of multi-story buildings is realised.
- Home standards have dramatically increased. We've forgotten how common it used to be for houses to leak during storms, or how hot or cold houses used to be without any insulation or HVAC systems. We've forgotten flash floods caused by inadequate stormwater systems. Where children used to grow up in bunk beds in tiny shared bedrooms, they now are expected to have their own adult-sized room. Where a small kitchen used to suffice, people now expect a huge show kitchen and butlers pantry that is double the size of old smaller kitchens. Or in a country such as China, millions of people have forgotten what living in a cave house was like for their grandparents.
- Complexity of expected amenities and public services have dramatically increased, resulting in people wanting to live inside large cities rather than spread out across small towns. People want to live within an hour of travel to a MRI machine and healthcare specialists. Or instead of shopping at one food store or dining out in one of two restaurants in a small town, people want to be within a few minutes of 20 choices of cuisine in a large city.
- Materials are more expensive because it has been realised that clear-felling old growth forest is not sustainable, nor is digging up the easiest to extract resources, and we're just starting to realise how expensive sustainable resource extraction actually is. As a result of increased quality of housing and infrastructure, materials are enormously more complex and varied.
- Safety standards for construction labour are significantly improved, even if just by worker and public expectation. It's no longer acceptable for labourers to be working in dusty environments or working at heights without scaffolding and harnesses having been planned and setup first.
- Increasingly affluent populations are aging and naturally reducing in size. In such a demographic shift, workers can prefer safer and easier jobs that don't risk life-long back and joint injuries and all the other types of health risks common to the construction industry.
>Multi-story buildings are more expensive per floor space area than single-story buildings. As cities become denser, the added expense of multi-story buildings is realised.
A lot of that is parking. Parking minimum laws basically hollow out intermediate-density development. In order to meet parking requirements, the only legal and economically viable types of buildings are low-density with cheap surface parking, or high-density with expensive underground parking.
I saw a recent "podcast" on Portugal reality from a business side perspective about this, the calculations are simple (numbers inaccurate but up to scale) - Around 2005, you could build "up-to-code" houses for around 1000€/m2 - Now, you build "up-to-code" houses for around 2500€/m2
The purchasing power has not increased 2.5X so housing now it's less affordable.
His overall comment is that now we have "Nordic" (richer) construction standards but we still earn Portuguese (poorer) standards.
1.hyperconsolidation in lenders
2. Real estate orgs have worked together to eliminate downward price pressures.
3. NIMBYs and generally “home ownership associations “ have created so many barriers to building & reaped the profits in their own home values.
Some good news is that most populations are slowing or declining on the globe, and that ought to be a substantial risk to mass ownership, but that will take 20years to manifest.
The time for selling is on the 2 digit months, but the price of any small apartment is out of the reach of 95% of the people that live here if they save for their entire life. Anything that isn't small is out of reach of more than 99%.
The value of currency went down significantly, i.e. actual inflation is massive. Salaries didn't go up as much, not even close, and here we are.
>inb4 ...
It's definitely a global issue, rising population mixed with late stage capitalism.
These things are worth what they always were, FIAT currencies have lost value.
This makes them even more of a trap. The rents will go up. And yet, even more jobs will leave those places. And then you haven't saved up, because the amounts were tiny
So no, it's not a matter of "nicer places".
-Cheap credit with ever-decreasing lending standards (not like 2006 though, not yet) -Population growth (whether immigration or births — does not make a difference, though babies can't buy houses) -"Pent up" demand, people who wanted to move during COVID but did not because of COVID (somehow), who now do want to move
Factors restricting supply
-Building -Zoning -Most of all: nobody wants to leave their 3% rate, and there is about 11T of outstanding mortgage debt, most of which at the 2020-2022 low rates
Factors inflating prices
-(Mostly) obsolete realtors charging 6% in a world with Zillow -Orgy of money-printing
I don't think the solution is as simple as just "cutting rates". Low rates lead to incredibly fierce bidding wars that can drive up the price by tens of thousands of dollars. An acquaintance of mine and his wife bid $50,000 over the asking price on a house in the Boston area a few years ago. They were outbid by an additional $60,000 (total of $110,000 over the asking price). Another acquaintance narrowly defeated 30+ other bidders (!) to get his house.
My wife and I bought a house last year during a time when rates were _highest_. Ironically, I believe this was actually a fairly great time to buy. Competition from other buyers was low, and sellers were more willing to negotiate because they didn't know if they would be able to sell anytime soon. And yes, we now have a higher interest rate, but that can be refinanced down the road.
It's a complex situation. I do hope for lower interest rates, but I don't think that alone is going to solve the issue.
What is he getting out of making these videos other than playing the populist game? Has he actually been verified to ever have been "Citi's top trader"?
I’ve noticed roommates are not a thing for many people anymore, particularly among younger folk. Is this a post-Covid thing?
Now for the last 3 or so years I have been earning a decent salary in a 7 year long career and saving a significant deposit, but my capacity has diminished significantly.
A house I lived in to rent in 2019 sold for $550k in 2019, that house is now worth $780k.
I look forward to an article when housing prices retreat rather than increase.
- Properties in world-class cities are in demand globally
- NIMBYism means it's hard to build new housing or increase density
- Resource costs and wages are high in world-class cities
The first one is a demand-side driver, the last two are supply-side drivers. There aren't any palatable solutions to reduce the impact of these drivers, at least not ones that do not negatively impact other sectors of the economy.
My mortgage (not UK) are just fixed in various parts on various semi-short terms (3 months, 1year, 3 years etc). The shortest ones are basically the current interbank rate plus 1%. The 3 year one is the banks expectation of interest over 3 years, plus a small margin and so on. For 10 year or longer the current rates are 4%.
Why are interest rates so much higher for mortgages in the UK, despite often demanding longer fixed terms? Is the risk massively higher? (My loan uses the home as collateral but also future income, meaning if the home becomes worthless I'm still on the line for repaying the lone for as long as it takes, I can't just leave the keys and let the bank eat the risk).
The problem buying a house for me was always getting the deposit together while paying rent. Most people in the UK seem to rely on gifts from parents.
* very few -- there are some very specialised brokers
I'd also be completely unable to afford the deposit for the home I own now (£500k loans at 80% LTV or so). The key was of course buying a small flat, selling that, buying a larger flat with the profit from the first as deposit on the next, selling that. The "income" in terms of property value increase from these month over month for 20 years was almost constantly higher than what I made working each month. If I didn't have the past trades behind me, I'd be renting to my grave. There is zero chance I'd even begin saving for a £100k deposit. It would be 100% of my fun/vacation money for ten years at least.
"Here's a nickel, sonny."
Do you want to wait 20 years?
Vienna is an example: https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
The reason housing costs are so high is that there are too few homes and thus landlords and homeowners charge outlandish prices because people have little recourse but to pay since they are so few options.
Personally, I like the problems you end up with in market system that has sufficient supply (which we don't particularly have).
Local government through zoning codes act as cartel limit the supply of homes which work to increase prices.
The financialization of homes is a direct result of government programs.
Leftist dreams of a government funded social housing utopia in the United States and the UK are just that: dreams. Reforming zoning on the other hand will strongly encourage developers to quickly add higher density housing in job rich urban areas.
https://www.semafor.com/article/05/23/2024/is-congress-havin...
There is no solution that doesn't involve building lots more houses.
However, it's common for people to refinance down to a lower rate when they come available, so lots of American homeowners have rates in the 2-3% range.
I see it in my parents that they're pretty comfortable staying in the family house as long as possible, I'm happy with this. It is made a lot easier by the fact that prices keep going up so staying in a house that is oversized financially is rewarding.
I'd like to think it'll all come to and end one day as the spiral reverses, but I've been wrong for so long now I'm losing faith.
There is a saying: „The market can stay irrational longer than you can stay solvent.“
Variable rate mortgages have varying lengths, and we will see the entire unfold in roughly 3 years.
Which is probably a mix of stagnant house prices and severe salary increases (for the ordinary person).
We are in a wealth dispersion period now (I think) - The ordinary people will catch up with tech workers, and high-salary epople (as in: reducing the number of multiples in the salary)
Here in Munich, they indeed are... and wherever possible, they and their often beautiful gardens get torn down, and the entire plot gets "densified" by creating as much indoor space as possible. What was one house for one family is now at least 6-8 apartments for DINKs, often built in shoddy quality with corners cut everywhere but priced and sold at record amounts (that still get paid because all the tech and car bros massively distort the wage market).
On one side, it's positive because the lack of housing is absurd.
On the other side, none of the surrounding infrastructure was built with that density in mind. Parking overflows everywhere because you physically (slope angle vs lot size) can't create enough garage spaces, traffic itself is getting more and more dangerous as the small streets have been built as tiny veins but now have to carry 2-3x the traffic load, public transport can't handle it as well, doctors/kindergartens/schools are on the verge of collapse, the grid operator doesn't allow PV or EV installation because all the density increase would first require a complete overhaul of the last mile distribution grid. And on top of that, biodiversity has taken a visible hit as all the trees and bushes getting ripped out and replaced by steel eyesores and yards being replaced by gravel so that the hipsters don't have to bother with mowing a lawn don't support insect life, so the birds vanish as well. No free-roaming cats any more either thanks to traffic.
Seriously, screw urbanization and gentrification. We absolutely need to revitalize rural areas again.
Covid-19 was effectively a massive experiment to test whether people want that, and turns out they didn’t.
There's obviously gonna be a shortage of such housing arrangements, and therefore will come at hefty prices everywhere.
On positiver notes, you had stuff like urban gardening increase in popularity [2], or sales of (e-)bikes towards people who went and biked to the rural areas.
And finally, WFH made it possible for a lot of people to give up their expensive city housing and move out into the suburbs... but obviously nowhere near enough to make a serious dent in demand, and RTO policies are creeping up and destroying even that bit of progress.
[1] https://www.news.harvard.edu/gazette/story/2022/06/shadow-pa...
[2] https://caes.ucdavis.edu/news/people-turned-gardening-stress...
That is a luxury Americans and Asians have, simply because there is/has been just so much unsettled land available.
Here in Europe, our cities are quite literally millennia old, some such as Rome dating back to the earliest days of recorded human civilization. It is incredibly difficult to retrofit anything there, and that's before you take archaeological and landmark protection demands into account.
Cities are dense and cities are good for the environment. Your dream of everyone living in the middle of nowhere and driving everywhere in cars would be an ecological disaster, far worse than these shitty Kleingärten that should generally be got rid of anyway, since, there's nothing biodiverse about Kleingärten, they're just monocultures that are privately owned. If we careed about biodiversity then we would rewild them.
I live in Hamburg, it could certainly be denser.
[1] https://www.zeit.de/news/2021-03/25/leerstand-auf-dem-land-f...
[2] https://www.demografie-portal.de/DE/Service/Blog/191028-Wohn...
Either intentional or unintentional, this has the effect of increasing demand and with interest rates high supply is constrained.
For specific USA numbers:
There are 18.7 million 65-69 year olds.
There are 21.1 million 60-64 year olds.
There are 22.3 million 55-59 year olds.
Etc... You can't have one demographic retire/die off and everything is cheap again -- because there is always another demographic moving right into their place all the time.
You are right, but I think in the 10 years lots of the 55-59 people die off so wont be larger. Then the pyramid shrinks.
Same with startups, anymore many of them are setup as attractive financial products, not attractive businesses.
The reason Home Ownership is desirable is that the pricing of houses go up faster then both inflation and depreciation caused by wear decreases the utility value of a dwelling, and the reason that houses are expensive is that the state actors are invested enough in this cycle to make sure it never really breaks.
In a real functional market there would be no real benefit to house ownership over long term leases. but were dealing with a market thats been deliberately broken by policies promoting home ownership for reasons that's fundamentally religious/dogmatic in nature.
Rights come from your contract with whoever hold power not "property ownership"
There is yes some cases where owning is giving you a better deal then leasing in terms of rights and obligations but this is not an universal truth and not the reason house prices consistently rises faster then inflation and average disposable incomes that have nothing to do with the utility value of property as an dwelling.
Ie if we were to go back to an scenario where home properties lost value as the loans were paid off and things got old and worn there would be no crisis, the issue is that the way that currency and banking intersect makes prices keep rising.
Rights of property ownership is always a superset of the rights of renting property. It is not a false argument.
In the same vain the government(and some wery much do) can set pretty strict rules on what restrictions a private landlord can put in rental agreements and that's before you remember that the government itself have historically been the largest owner of rental properties.
In the old days before the idea that owning a house was a ticket into a higher strata in the class system a lot of the problems now caused by unreasonable housing prices was solved by the government acting as the reasonable landlord, essentially curtailing the amount of shenanigans some wannabe aristocrat could get away with before going bankrupt from people not putting up with the abuse.
In a pure "realty don't matter" libertarian mindset your of cause right that property rights are always supreme but in the real world it's always a balance of power and negotiations especially once we deal with urban communities(which is the only ones where property prices are a problem).
More precisely, there would be no net financial benefit to home ownership over long term leases, so people would use the free market as a tool to naturally sort themselves according to their non-financial preferences: people who valued the non-financial benefits of home ownership over the non-financial benefits of renting would own homes, those whose preferences were the reverse would rent. That would not mean nobody would own the homes they live in.
No.
No.
The reason it's desirable it that I've lived in three flats in three years because subsequent landlords wanted to sell their property. I don't want to buy because it's a good investment, I want to buy so I can actually settle down in an area, and not be constantly moving.
I hear people who are already in the top 1-2% in income are told their borrowing power is only A$1M (~U$660K) while houses at all worth raising a family in cost A$3-6M. Banks don't seem to want to lend to them because they could instead lend to yet another property investor that already has a portfolio full of equity and collateral. The houses will sell and the mortgages will close, the banks can afford to be picky.
If you work in tech non-remotely, you're looking at the high end of that because you're competing with everyone else working tech, heavily weighted towards Sydney, and the rest of the country's housing supply is largely irrelevant. The cities certainly aren't designed for car commuting, so the supply of locations is further narrowed to places that are either so close they're walkable or have good public transport.
To my US readers I cannot emphasize enough how much this limits people's options both ways. When you have a non-remote job it limits your housing options, and if you're lucky enough to lock in a house, now it's limited your employment options in return. This isn't great for housing or employment markets. I'd like to think remote work has helped some people, but the most career-focused people I know are sticking to in-person connections, competing with everyone else doing the same.
Meanwhile cashed-up investors can buy up several houses and neither live in them nor rent them out. They're taking supply away from both the buying and renting markets, which is their legal right and a smart move on their part, but totally dysfunctional for the market as a whole. Anyone who does buy a house to rent it out is doing their small part to make buying less affordable but make renting more affordable, making it just that little bit less likely that the next person out there is a buyer of any kind.
Of course there's been doomsaying about a housing bubble pop for decades, especially during the world-famous pandemic lockdowns. Nothing popped and the exponential runaway pricing continues. Surely it's getting untenable enough to pop somehow, if my successful friends can't buy houses then I don't know who's left in the market except the real estate investors themselves.
I honestly don't see how I can un-expat now, and I'm just counting myself lucky to own property in the USA. If I want to keep this sweet deal, my options for moving are more limited than they've ever been, but it looks like a lot of people would gladly sacrifice flexibility to have anywhere near a tenable deal on housing.
Our biggest software employers are banks and real estate companies. Everyone I've worked with in my career has worked for REA or a bank at some point. There's no innovation, just property investing.
As long as every newspaper in the country keeps running stories about some dipshit 20 year old magically buying 6 houses with a paper route, it's impossible for it to ever change.
It’s very sad. Australia used to have a somewhat egalitarian mindset, but this is creating such a massive generational wealth and class divide that gets wider and wider every year. No one seems to understand the damage their quest for parasitic income is doing to society.
Our population is currently increasing by over 1 million people each year and it is 98% immigration.
I think an odd effect of very very high immigration is that everyone who arrives is presumably of working age and needs to be housed outside of a family unit. This puts immense pressure on a housing supply that is already decades behind where it should be and as a result prices are exploding.
Canada as a country has a population of about ~40 million people. The main country we are getting our immigration from is India with a population of nearly 2 billion. There is no possible world in which Canada can construct enough housing for the nearly infinite supply of people that it seems to be importing
A recent study showed it currently takes on average 10 years to go from acquiring a piece of land to building an apartment. This is clearly problematic but there is a physical limitation on how fast housing can be constructed.
Fixing senior living options will create inventory in the market and give seniors better choices with an active community.
One option could be if you’re going into a government run senior living center you need to pass that money down to whoever was going to inherit it/receive it through donation. And that has to be a taxable event to cover the cost of the subsidy on senior living.
People would hate that option because no one likes taxes but the private market is not getting us where we need to be. If people don’t like the option, no subsidy for them and they are free to figure out their own senior care. That money goes surprisingly fast.
For "fun", most states publish nursing home reports. In the county I work in EMS, there are probably only two that have only either minor or no infractions. Every single other one has major / patient/resident risk infractions. Often around minimum staffing levels. Perhaps pay your CNAs above minimum wage, your LPNs above $20/hr, and so...
Seniors can pay for that, especially after selling a house.
Oftentimes those same Boomers in business own retirement/senior living/nursing homes. And while generalizing, the fuck you, got mine attitude means that nursing staff get paid a pittance, and oftentimes they're abusing the 911 system (multiple homes around here have a "policy" to call 911 for anything worse than requiring a bandaid - they won't let their nursing staff evaluate or treat patients for ... reasons ... - so we (paramedics) get called multiple times a day for little more than first aid, if that. Meanwhile, out front of the nursing home is a big billboard, "Round the clock nursing care!" and they're sending bills to the residents/families that reflect that, while you have CNAs and an LPN or two barely meeting staffing mandates, if they even are, who are unable to do anything).
It is probably exceptionally challenging to manage the economic fallout from such a correction, but I believe it has to happen. I would also support draconian measures which would forcibly and retroactively destroy accrued home value to ensure we haven't extracted wealth from the younger generations. I realize this is unprecedented and probably unconstitutional, but that's my emotional response to the problem. It is plain as day: Boomers extracted the wealth out of the country and now they're extracting the wealth out of their kids. It has to be stopped.
But it's the right idea -- move it up the chain so that it's not a hyper-local issue. IOW, at the state level rather than city/county. This has seen some success in California: https://cayimby.org/legislation/
This is the way for the west, if we're being serious. Once we've taken a few breaths and accepted that we don't want to be authoritative, we can see that incentivizing provinces is the right move.
In my opinion, the federal government should be designing simplified building and zoning guidelines and offering unprecedented grants (on the order of tens of billions) to provinces in a first come first serve manner. Have provinces compete on urgency to receive the most funds, tapering off the offer the longer provinces hold out.
The Ontario Housing Affordability Task Force released a list of 55 things to do to reduce housing prices. BC has implemented a far larger share of that 55 than Ontario has.
> In my opinion, the federal government should be designing simplified building and zoning guidelines and offering unprecedented grants (on the order of tens of billions) to provinces in a first come first serve manner. Have provinces compete on urgency to receive the most funds, tapering off the offer the longer provinces hold out.
That's basically what they're doing. They can't change zoning without changing the constitution, but they are giving out tens of billions of dollars conditional on appropriate zoning changes. BC has received lots of money that way, Toronto has bypassed the province to get theirs and Alberta has made it illegal for Calgary & Edmonton to access theirs.
Without demonstrating success at the much more achievable State level, there is no way it will work at the Federal level, even ignoring the obvious Constitutional issue.
It’s supply and demand, with other things being small factors. We either need to vastly increase supply across the entire country somehow, or cut down on demand. The latter is a hell of a lot easier than the former. For some reason it’s ok to talk about this in the context of Canada and how their mass immigration has increased home prices, but that applies to almost everywhere. Japan literally has homes they’re trying to give away.
Zoning laws reduce available supply by making it illegal or impossible (due to e.g. parking minimums) to build densely in most of the bigger cities in North America
> For some reason it’s ok to talk about this in the context of Canada and how their mass immigration has increased home prices
1. It's not okay to scapegoat immigrants 2. Canada hasn't built enough housing to keep up with a growing population, largely due to exclusionary zoning policies. The vast majority of land in Vancouver is reserved for SFHs, even within walksheds of skytrain stations representing billions of dollars in Provincial investment.
First off, they can’t make enough housing anywhere. There are only so many home builders, and at least in the US up until the last year they’ve all been absolutely swamped. It takes time for more people to learn trades.
When housing is cheap enough outside of cities people move there instead. We see it happen all the time, and it’d happen even more if rural home prices also weren’t going up like they have been - especially now that working from home is here to stay for plenty of companies.
Guess what - there’s basically no zoning here. There’s land. If I wanted to put up a 30 story apartment building I could, though I suppose what few neighbors I have might make a stink about it, and it probably wouldn’t make sense when everyone here lives on at least 5 acres.
Yet - somehow, amazingly, prices are still going up. We have a severe supply/demand mismatch in the country that drives prices up across the board.
Yes, it is supply and demand. And zoning is the largest component of the supply function. If you fix zoning, you fix supply, approximately. Outdated fire code, etc. are also important factors.
> or cut down on demand
This is called degrowth and it's how you destroy an economy.
> Japan literally has homes they’re trying to give away.
I'm not sure what point you were trying to make by invoking Japan -- Japan notoriously solved their housing crisis by abolishing the regressive zoning practices at the time and made basically everything one big mixed use zone. The reason why Japan is giving away houses these days is because everyone moved to the cities because that's where the economic opportunity is. And that's where people who contribute to the economy want to be -- where the economic opportunity is.
I said cut down in demand, not go into full depopulation. That said, at some point we’re going to need to deal with that. We can’t just keep on importing people from the third world forever to offset people making less babies. Just aim for, say - an increase of population of 1% a year. Right now it’s completely uncontrolled and people are somehow shocked that housing prices are out of control.
Even in Tokyo home prices aren’t bad, and that’s with their culture of tearing down and rebuilding every 30 years. My real point though was that the same is true here - most economic opportunities are in cities. Yet our rural housing isn’t getting cheaper, and it’s increasing in cost almost as much as (most) urban centers.
It has been extremely effective. Of course you can never determine the actual effect of a policy like this in such a noisy environment, but everyone agrees it has contributed towards increased supply and falling prices, especially in Auckland. In the city I live in townhouses were almost unheard of, and now they're popping up everywhere.
Maybe that was not in the public's interest.
On top of the weird collective delusion, most ignore the huge financial/time burden that is owning a home. It is not cheap, and anyone that tells you otherwise is *literally lying*.
There’s the never-ending maintenance that costs thousands per year in both money and time, small problems can cost thousands of dollars to fix, variable property taxes, variable insurance rates, having an asset worth being sued over, shitty neighbors that you can’t easily move away from, bad school districts, etc etc etc.
Is home ownership right for _some_ people? Sure. Is it right for the majority of people? Probably not. Should corporations be allowed to own housing? Hell no.
The game is rigged. But that should be no surprise. People who enter a game of Monopoly after a few rounds have been played know that they will be swimming against a strong current. Our financial systems are unfair and broken.
We're born in a year we didn't choose to parents we didn't pick with talent we didn't earn with intelligence we don't deserve with environmental influences we can't control.
The game is Texas Hold em. Play your cards. Bluff if you must. Press if you can. Go all in when you can leverage.
I recently got to know a gentleman quite like myself. His parents and upbringing are quite the same. His father took risks. Mine did not. He's got a million dollar business that he took over. With respect, I don't think he would be any better than me without his father's risk and resources.
I was briefly jealous. Then I realized I was exactly in his father's position. I'm taking risks and building something for my kids. He's one generation ahead of me.
You can get upset about the game or play it.
I took a risk a week ago. Turned $500 into $11,000 with a little effort. My skills let me analyze stuff quickly. I discovered a pump and dump bot network. It turns out I correctly matched the entry and exit signals to the bots chatter.
If i can validate this next week, I will pay off my house in a few weeks.
You've got to think outside the box.
Do we want a society that rewards gambling behavior, or do we want to reward honest hard working? Apparently we cannot have both, because we are now observing that increasingly money (and bricks) makes more money than honest work. You can keep playing the game until there are only survivors and losers but ultimately we need people who do real work.
Unless of course you want to turn those hardworking people into the slaves of the surviving gamblers.
I "slave" away 50% of my life so that my family can thrive. This sacrifice brings me much happiness.
...there is nothing better than that a man should rejoice in his work, for that is his lot....
The man on the street wants less immigration and more housebuilding so that they can start a family.
The political class seem to want to just import a ton of low skilled foreigners because they'll take lower living standards.
It's ass backwards. The solutions are obvious.
It's a complete mystery why inflation has run amuck.
The CPI inflation rate is 3.4%, and it's been under 4% for a year.
House price inflation is at almost 6%, and it's been above 4% for more than 10 years. The lowest house price inflation rate during Trump's presidency was 4.4%. Excluding the financial crisis, you have to go back to the mid-90s to find house price inflation under 3%. Pandemic-era fiscal policy and college loan debt cancellation is not helpful as an explanation for the explosion of house prices.
Young families also get discounts if they are poor, and have a much higher earning potential.
The man used to be an upper-ish class dude (p96+), but due to how horribly slow and uneducated governments are at making data-driven decisions, the man is now a working or middle class dude.
As a result, you will see property prices skyrocket in your area while the government takes 50%+ of your 5% pay raise, leaving you only some pocket change richer than before. But the property owners in your area will be richer every year because their great grandad hunted a bunch of whales or some shit, and so called progressive policy makers are clueless about wealth distribution.
The only solution, of course, is to build more houses! Build until prices fall! (And don't bail out people who are now underwater because prices fell.)
To be honest I don’t think capitalism is able to fix this problem, the only solution I see if government takes over and subsidizes housing enough from taxes to make it more affordable for salaried employees (needs to come with strings attached so the free market does not turn a quick buck reselling)
Note US GDP looks great until you realise that it is in dollars whose nominal purchasing power is diminishing. There is no better was of seeing this than in the price of housing.
Here is mine. The Boomers, the generation born 1945 - 1965, benefited from affordable housing, and when it grew up, set about making housing an investment.
'Affordable ' and 'investment' are mutually exclusive. That is why supply is not keeping up with demand, and why there are so many unoccupied houses.
So let me explain somethign that is often misconstrued about leftist sentiment, be in socialism or whatever: leftists generally make the distinction between personal property and private property.
Private property is what we have now. We have wealthy landlords buying up houses to drive up prices. We have single homeowners who think their home value is going up so that's good for them so they vote for these policies. A leftist position is that you're entitled to own your personal residence but there's next to no landlording. Housing is a basic human need. The only way to provide it in a sustainable way is with social housing. For example, the majority of housing in Vienna is social housing.
The UK came really close last century to ending landlording [1] (ie councils simply bought houses from landlords who wanted out).
But if you think about it: there's no way your $200k turns into a $600k house without that money coming from somewhere. You're taking it from the next generation.
Capitalism loves this because a) a bunch of capital owners become even wealthier and b) debt-laden workers and workers who will take any jobs they can get (ie it suppresses wages).
In the 1990s, the average house price in London was ~70k pounds. Now it's over 700k.
Pretty much everything bad about modern society can be traced back to private property, be it intellectual property, housing or whatever.
People need to realize that if your house triples in value, you haven't really gained anything. If you sell it, what now? You still have to live somewhere. That means higher rents or buying an equivalently priced home. Or downsizing or moving overseas. This is why housing is unlike other assets.
we, as a society, have decided to prioritize generational wealth from landlording by literally killing people by denying them housing.
[1]: https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-...
The discussion on housing should start with one fact: the supply of housing has been growing faster than the size of the population, decade after decade, for a very long time.
This is why the number of people per home, has been dropping decade after decade. That is a measure of luxury. We can afford homes with fewer people. People can afford to be single and live alone. We can afford not to take in a roommate. Couples can afford to each have their own home. That's not an indication of a housing crisis or being priced out.
Then there is home size, it has been increasing also, decade after decade. We can afford to live in bigger homes. Again, a measure of luxury.
Anecdotes about 'my (grand)parents lived in XYZ home that's way bigger than mine' are just that, anecdotes. The data shows we live in bigger homes with fewer people, in fact we have double the housing that we had a few decades ago. In other words, the average person's lifestyle with respect to housing has greatly, greatly improved compared to previous generations.
What is often also not mentioned is that affordability is not a function of prices only, but of prices x the cost of money (i.e. interest rates). In the 1980s interest rates were as high as 18%, now it's 1/3rd of that at around 6%. That's the true cost of housing. Taking $1000 and paying off $1000 in debt has no impact on your equity, you're as rich as you were before the transaction. Paying interest however is money you'll never see again. That cost was 3x as high a few decades ago. Prices haven't tripled when adjusted for inflation and salaries, not even close. That's why affordability of housing isn't the disaster that many people think it is.
Here is an old source (2016), which you may think is outdated. But it shows a multi-decade trend that cuts across the same price increases we've seen in recent years:
https://www.aei.org/carpe-diem/new-us-homes-today-are-1000-s...
For another source that runs to 2020: https://humanprogress.org/u-s-housing-became-much-more-affor...
I'm not even going into how the function of housing has changed. With today's connectivity (netflix, spotify, internet, food delivery, teams/slack, amazon etc), it has become more than ever: an workplace/office, a cinema, a library, a music studio, a game hall, a restaurant, a shopping mall. Its value has increased.
No, I'm not saying finding housing is super easy for anyone and everyone. I recognise many find challenges. But what is simply not true, is that it is any more difficult than the past. In fact it has never been easier. What appears true however is that our lifestyle expectations keep increasing faster than our lifestyles are improving.
Low interest rates raise house prices. This has to be a 'duh' thing, really, but, governments don't really appear to 'get it', or, play dumb for political reasons. If, after adjusting for inflation and the like, the exact same house costs €500,000 in 1980 but costs €1,000,000 in 2024, BUT, interest rates in 1980 are double what they are in 2024, your mortgage cost to buy that house is __pretty much identical__.
It's oversimplified to say that this means 'real house price has not changed'. It still takes more money to actually buy that house. But, of the money you pay every month for your house, more of it is a weird, not very liquid investment portfolio, and less of it a weird form of rent. It's got all sorts of problems: Not everybody qualifies for a mortgage in the first place, for starters. But _in the end the amount of money you have to burn just to live in a house is identical in this hypothetical scenario_.
One lesson you could learn from it is that everybody is whining and houses are just as affordable as they've always been, but that's not my point, and isn't really true. The point is more: With low interest rates, house prices skyrocket.
This explains _some_ high house prices, but certainly not all.
For example, China's is an utterly different explanation. Due to the way their government is set up, the usual benefits of a free market, namely that the population 'intelligence of the masses' their way to efficient allocation of resources isn't a thing china 'does', in essence. Government decides what happens. And so far, they've decided to build more houses than there will ever be chinese people to live in them. Ever. This is a bit of a problem today and will be far more of a problem tomorrow. But that's it. That's the simple, sufficient, and therefore only required explanation. It has NOTHING to do with how hard to it is to build in China (it is not), nor with population growth (it doesn't, or rather, a sheer and severe drop in house prices looming, that'll be explained by China's population glut). It's just that: They built way too many, and their market system cannot respond in kind to stop that runaway process.
In europe, yes, in large part runaway NIMBYism and being at the forefront of ecological change, putting limits on how much nitrogen/co2 can be 'used up', and building does take quite a bit of that - has put the breaks on building. Especially combined with extremely low unemployment which hurts the building sector. "Too few houses being built" is a factor.
But not the only one. And I think, not even the largest one.
Yet another explanation is lack of efficiency: Fewer people partner up, so, more people live alone. They tend to use space inefficiently: They all want their own kitchen, their own shower, their own living room, their own bed room, their own hallway, and so on. A really cheap and ludicrously efficient solution to _that_ is dorm-style living together. Instead of having a small crappy single-tenant kitchen, why not have a giant luxurious very well stocked kitchen you share with 9 other solo tenants? Yes, there are all sorts of downsides to this (which lout has made a mess of the kitchen?!? - and nobody wants to deal with a cleaning schedule), but in the end it is vastly more efficient, and better for social cohesion.
Society in e.g. europe and the US has not, yet, adapted to it. I hope it will. It'll solve the unaffordability of housing crisis all on its own if society wants to invest in it.
check the timestamps :p
(I thought there was some dupe protection for exact urls in such a close time period?)
Discussion: https://news.ycombinator.com/item?id=40489250
In places like Toronto, huge influx of people where the city doubled in size in a few short years not only putting strain on housing and rentals but everything (hospitals, roads, schools, you name it).
In places like Texas the huge influx of out state people drove up prices where housing in DFW basically doubled in price since 2019. Very much like what Toronto went through. Migration from high tax states to low tax states has now made low tax states high tax states and Texas is becoming very unaffordable quickly.
Don't know what the end game is. In Ontario, Canada what use to cost 200k 10 years ago now is 1 million. What use to cost 1 million is 5 plus million and there is no end to the madness. You have foreigners from Arab countries, China, India paying cash for 2-3 million dollar homes.