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Workaccount2

There is a housing shortage.

That's it.

Fix it by building more housing.

Nothing else is gonna do anything.

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Building more housing is not going to do anything. It is at most a temporary salve. Once people have housing they reproduce, creating more demand for housing. Building more housing is like building more roads: not a solution to anything, in fact, only encouraging the problem to get worse.

Building more housing now may in fact cause people to reproduce more, which will create more demand for housing... in 20 or 30 years. Well, in 20 or 30 years, we can build some more housing.

And even if we don't... solving the problem for 20 or 30 years is not nothing. It's worth doing.

Developers are choosy about what they build to maximize profit.

That, and people who were born this century have no idea about the immensity of housing inflation.

In 2007, a 1-BR apartment in Hanover, NH was USD 750. With official inflation at 3 % that would be now something like USD 1325. Good luck finding anything below USD 2250 these days. That's 7 %, more than double headline inflation.

It's a complete policy failure, also because housing is about the most unproductive kind of investment there is.

Even if you fix all the zoning and land supply problems, you still need to qualify this as building the right kind of housing. Building more large, expensive homes that are gobbled up by investors or people 'parking' money isn't going to help people that need cheap dwellings to actually live in.

I'm not saying you're not aware of this or that your statement doesn't include the possibility, but (housing) developers will follow the money, and that doesn't mean making small affordable homes when the profit margins on other types of dwelling are higher.

It's been demonstrated over and over again that building high end housing does have an impact on the prices of lower end stuff.

It is of course likely to have a greater impact to build lower cost stuff, but blocking a development because you don't like the sort of houses they want to build is more or less stupid (it's not like a developer is going to do a project there is no demand for, and that demand is probably already looking elsewhere near the proposed development...).

> Building more large, expensive homes that are gobbled up by investors or people 'parking' money isn't going to help people that need cheap dwellings to actually live in.

Investors that gobbled up properties are renting them to renters (assuming it isn't on airbnb) to pay their holding costs (mortgage, tax, maintenance), since they are by definition investors. They actually increase the pool of property for renters, keeping rent price lower, which fights rental inflation. This does drive up purchase price for the home itself, but that's a separate topic.

Same with people parking money, why would they be leaving the homes empty when they could rent it out for additional cash flow?

That's the theory, and the practice is that there's a serious undersupply of entry-level housing. There's simply not enough housing of type 3 BR, up to 1500 sqft being built, and the existing stock is deteriorating.

People will say, yabbut, airplane hangar houses out on the bajada, but you cannot subdivide those monstrosities into apartments.

If zoning was fixed as GP was saying, then more housing people want would get built rather than what pencils out best for developers.

Zoning issues like low height limits, and high parking requirements etc. contribute to the shortage by making it infeasible build a lot of 3BR/1500sqft units because returns are better by building 2 smaller units in the same footprint, and because there's a shortage of housing, they'll be able to sell less than optimal units to people that need them.

Can there be enough entry-level housing? Parcels of land near me are like $200k and I'm not in a swanky suburb... ? Every new house built out in the hinterlands (1hr+ from MPLS) is like $600k. I'm in MN which is considered affordable.

This is because of zoning. When it takes a year+ to get approval there's no reason to ever build anything but luxury. If we allowed more to be built and but red tape lower cost buildings would make sense.

Maybe there should be an occupancy credit, like a clean energy credit. Empty property holders can buy it from occupied property holders to compensate for the higher property tax burden.

That’s not how it works. New housing, even if luxury, provides options for wealthier people to buy who otherwise are forced to bid up the price of older homes and remodel it to their liking. New housing starts an immediate chain reaction where wealthier people vacate older housing in less desired areas for the new homes, thus putting downward price pressure on older homes. Our current problem is that for the last thirty years we have banned most new construction, resulting in a shortage of new homes.

We saw this dynamic play out during the pandemic when news cars were delayed due to supply chain constraints, and the price of used cars shot up.

I should have prefixed my comment by saying I'm not in America. In the country I live in, population growth effectively occurs by immigration of not-poor migrants, and that growth continues to outstrip supply. Sure, if you build more high-end houses than you need, you would see the effect you describe, but it's like emptying a swimming pool with a straw.

I can’t speak to your unspecified country, but in America the effect on lower income housing occurs within three years:

https://www.sciencedirect.com/science/article/abs/pii/S00941...

The only reason we don’t see more of this effect is because zoning restricts most new construction. The straw in your analogy is zoning.

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