The housing theory of everything (2021)
worksinprogress.co
worksinprogress.co
* Retail business stagnation; retail is dependent on foot traffic, and SFZ residents do not understand what it takes to support the kinds of businesses (yoga studies, coffee shops, art galleries, bookshops) that they actually want to see sited near them. The result is that city plans for commercial corridors create near-blighted streets with gas stations, vacant lots, and the occasional nail salon or Domino's Pizza.
* Public safety issues; those same underutilized commercial drags are dead once the sun goes down; without people walking on the streets, nobody's watching, and you can see on a map clearly where crime gravitates.
* Escalating property taxes; lots of people want to retire in the same community they spent their adult lives in, but in an overwhelmingly SFZ muni with good schools, the top bidder on any residential lot is a family with school-aged children. Schools make up over half (in our case, 2/3) of the property tax burden, and it gets worse as the demographics shift more and more to school-aged families who move out when their kids graduate high school; housing diversity could give retirees an economically rational place to move (and remain in the tax base), but we outlaw it.
The problem with all this stuff is you start to sound like a crank, because almost every problem a typical urban muni faces will probably stem from many generations of outlawing housing.
Your observation that you start to sound like a crank really rings true, and it’s exacerbated by the stark generational gap where every interaction is painted as an attack on long-time residents, especially ones who don’t want to recognize that, say, taxes need to go up because infrastructure costs more to maintain or that traffic is worse because they, a retiree sitting on a $2M house, haven’t been able to downsize into an apartment and so the people who actually need to commute to work have to drive from a further out suburb and transit isn’t an option because guess who reliably votes against it? We had a positively surreal debate when the “preservationists” demanded that an apartment building literally next to a metro station have a huge parking garage even though the developer thought it was overkill. That made fewer, more expensive units and then they ended up renting out unused parking spaces as storage units because the people who choose to live next to transit are often trying not to pay for a car. Actuarially, most of the people who showed up at those meetings are probably dead by now but their decisions will still be visible in 2050.
After you liberalize housing, you still run into the trouble of economic forces trying to turn housing into a sensible investment: Buy an apartment, pay your mortgage for 20 years, and then you have a pile of leveraged money on top of the basic savings! But then you run into current housing in Spain: Said primary housing has huge tax savings over anything else. Taxes at sale time overwhelm property taxes (which are very good, yet seen as unfair by owners, so they stay low), so it's also better to keep the housing underused. So ultimately you end up with a situation where the building that before had an average of 5 or 6 occupants per flat in the 1980s, is now sitting at one and a half. So you end up having to massively overbuild, as to make sure nobody that bought in a good location does anything but make money on their "investment"
The US could build more, thanks to so many inner suburbs that should really be filled to the brim and 8 stories tall, but ultimately it's just kicking the can down the road until residential investment is not so important, and the price of housing lines up with its utility, not the ever-growing value of the land it sits on top of.
The Georgists that want to just LVT as the one tax in the world are going too far, but I don't see long term solutions to all the problems downstream from housing if, along of making it easy to build, we don't make sure that speculating on the value of the land is actually risky.
In the US, this takes the form of a nonsensical capital gains tax system: personal residences are not eligible for 1031 exchanges, so taxes on gains are due immediately, those taxes are not indexed to inflation, the exemption is too small to make much difference in any high-property-value area, and the basis step-up at death strongly incentivizes children to encourage their parents to keep their house until they die. California puts icing on the cake with Prop 13, so you can trade for a cheaper house and your property taxes increase. At least some recent changes in CA take baby steps toward improving this.
Home owners are heavily incentivized to "not understand" this, so the cycle of abuse continues.
a stock or bond might have a better return but a house also diversifies risk and so is a good investment for that.
the above doesn't mean a house is good for everyone. Just that the analisys everyone else is doing is missing critical details.
This isn't really true.
Suppose that housing is extremely affordable. Cost is only the construction cost, no scarcity component, and construction costs haven't been bureaucratically inflated. You get a house for $25,000. Then local rents are low, but they're not zero, because they'd still have to yield a return consistent with a $25,000 investment.
Rents in that case are a lot lower than they would be if they had to yield a return consistent with a $500,000 investment, but the ROI is the same. It's just that if you invest $500,000 in housing you'd get 20 units and then e.g. rent them each for $250 (so $5000 in total) instead of paying the same amount for one unit and renting the one unit out for $5000.
And it's not different if you live in it because living in it is an opportunity cost. In fact, the higher price is worse for you if you live in it, because then you're losing the much higher value of the imputed rent. Suppose you can get a loan for $500,000 and you want to invest that in housing. If that's the price of one unit and you live in it, you have to pay the whole mortgage out of your pocket and get $0 in rental income. If that's the price of 20 units, you live in one (which costs you $250/mo in opportunity cost) and then rent out the other 19 and get $4750 in rent every month you get to stick in your pocket.
The reason people care about this type of 'housing as an investment' is that it helps sell people on high mortgages, so more people can own rather than rent. It doesn't quite work out well, except for the banks and pre-existing home owners. And it's a plausible enough story. They might believe it themselves.
But why would you even want that?
Possibility 1: You want to invest $500k in housing, and live in one unit. You get one unit, pay the entire $500k plus interest yourself, receive no rent other than imputed rent, and then can't sell at the end because even if your property is now with $1M if you sell you get a huge capital gains tax bill while still needing somewhere to live, so your "investment" has left you stuck in a place where you can't afford to move because the capital gains tax would prevent you from selling your house and buying an equivalent one, or even selling it for a smaller one at a profit because the difference in their values is lost to tax.
Possibility 2: You invest $500k in housing, get multiple units for that price, live in one of them, receive rents from other tenants that compensate for a lack of capital gains while holding an asset with a stable value, can easily move out of your own unit because you're not trapped by capital gains tax.
Possibility 3: You have $500k to invest, put $25k into a house for yourself and receive the small imputed rent, put the other $475k into an ordinary investment fund because you don't actually like investing all your assets solely in real estate. You now have a more diversified investment portfolio that isn't heavily exposed to volatility in the local housing market, are still getting the market rate of return, are getting actual returns from the ordinary market instead of paying a huge amount in imputed rent and once again aren't trapped by capital gains tax if you ever want to move house.
The first one is clearly the worst one.
> The reason people care about this type of 'housing as an investment' is that it helps sell people on high mortgages, so more people can own rather than rent.
High mortgages are the counterargument. If you were taking out a $25,000 mortgage, that could be a good investment even if the value never goes up, because you get a place to live, and are insulated from (and indeed benefit from) potential increases in local real estate if there were any. If you're taking out a $500,000 mortgage for one unit, the imputed rent could be the same percentage of the investment if local rents are high, but now the potential upside is blunted and replaced with risk of value loss because you're buying high instead of buying low. That's a bad investment -- you're getting the same percentage ROI in terms of imputed rent while exposing yourself to the risk of a housing crash with a disproportionate share of your net worth in an undiversified investment, and further increases in value are long-term unsupportable by local wages.
And if you're talking about a matter of policy (we want to encourage home ownership) then there are obviously more people who would qualify for a $25,000 or $100,000 mortgage than a $500,000 one. Even for the smaller number of people who could make the payments on $500k, you don't have to convince them to take out a huge mortgage if you can supply them with the same house with a smaller mortgage.
The returns from an investment include both capital gains and dividends. For example, there are stocks that never pay dividends, but might still be a good investment if the stock price increases. There are other stocks that only hold their value, but pay higher dividends, and those could have the exact same total returns.
In the case of housing, rent or imputed rent is a dividend. If you get $250/mo in [imputed] rent on a $25,000 investment, or $5000/mo on a $500,000 investment, that's 12% annually. That's a good investment even if the sale value of the property remains flat.
Rents and imputed rents are definitely part of investment returns, and you can have a "good investment" where the returns are entirely in the form of [imputed] rents/dividends and not at all in the form of capital gains.
Also quite literally the meaning of a good investment is “it goes up and to the right” and anything that goes up and to the right in perpetuity is bound to become unaffordable if the wages or wealth of the buyers doesn’t increase at the same rate as the asset.
The housing market is a Ponzi scheme propped up by governments. But that’s a topic for another conversation.
I feel like you're just not understanding the math.
Suppose you want to invest in real estate, but property values are low and stable, zero capital gains. You invest $500,000 in twenty $25,000 units, rent them out and receive $250/mo each in net profit, $3000/year in gains/unit, 20 units, $60,000/year in total gains. Then you invest the $60,000 back into real estate, so now you have $560,000 in housing and next year you collect $67,200/year in gains from renting them, which you invest back into real estate, so then you have $627k in assets.
Number chart goes up and to the right, even though the price per unit hasn't moved.
It's not different for homeowners. If you buy a house -- it doesn't matter if it's $25,000 or $500,000 -- you no longer have to pay rent to somebody else. Whatever you used to be paying in rent, now you get to keep. You can invest that in more real estate or in stocks or whatever you want, but by buying a house to live in, you have a return in terms of imputed rent regardless of whether the value of the house goes up.
We also can't force developers to build. This is a major problem in cities: they budget for housing that's supposed to come online but there's no (general, broad, accepted) way to penalize developers for failing to follow through.
Public housing or bust, IMO. The housing market has failed this country for too many decades to trust it to suddenly start irrationally acting in our best collective interests with older generations selflessly sacrificing their retirements to not fuck over their grandchildren.
Suppose housing is less than it is now, but a house is still e.g. $100,000. There will obviously be people who can't get a $100,000 loan, so where are they supposed to live? "Rent to own" is just another name for a mortgage, except that you have to pay more for the right to give back the property at any time instead of needing to find another buyer yourself.
Suppose you take a two year contract job in a city where you're only going to live for the term of the contract. Should you be required to buy a house there? Why?
> the idea of an affordable investment is just bonkers. Any investment market necessarily precludes the idea of affordable entry or they wouldn't make good investments—the longer term you look at, the more this is true.
You can go to a brokerage right now and buy a share of stock for $10. This is clearly affordable, so now explain why it is inherently a bad investment.
> We also can't force developers to build.
Developers want to build. It's how they make money. The problem is we keep prohibiting them from building through single family zoning etc.
I understand the sentiment.
But many people at many stages of their lives do not want to be owning g property, so some rental properties make plenty of sense as a social construct
But. The current situation where the poorest third give most of their income to the richest third of the population is manifestly unjust and is a blight on our society
It is enough to give capitalism a bad name
One thing there, though is that even though a 100m2 in Beijing/Shanghai/Shenzhen may cost $1M (30x urban educated middleclass income), the monthly rent will be under $1k (<30% income). That's still horribly expensive, but nothing compared to Spain or US. Maintenance suffers and there's even less reason for owners to fill "pristine" apartments, but it's a less bad form of malinvestment.
I don't think I am economically literate. I have only taken one semester of macroeconomic in high school.
This is a cut&paste response predictably in every housing thread.
Can we dig deeper and do some analysis?
If something goes up more than inflation - it is a good investment, but also less affordable over time (it costs you more labor hours to purchase over time). Think - tech stocks, housing, etc.
If something goes up same/less than inflation - it remains affordable. Think - basic consumer goods we mostly import like laptops, t-shirts, etc.
It’s not that simple. First, risk is a also factor. But a real estate investor is not just looking for capital gains. They are looking at rent yields against costs (taxes, insurance, maintenance, interest).
Real estate can be a good investment even without appreciation in real terms. And that is a good thing.
Real estate investors play an important role in society. Without landlords, it would be impossible to rent a home. So anyone without the ability to purchase a home would have to rely on friends and family or charity, or sleep in the street.
If something goes up faster than GDP, it's a good investment, but less affordable over time, etc.
The reason for the LVT is because land doesn’t otherwise follow market dynamics.
In a functioning market you have pressures to sell things. If you can sell something at a reasonably high enough profit margin there is every incentive to do so. There is no benefit to waiting or holding if the price is right. This also encourages competitors who may try to sell a superior version of a widget at the same price or lower, and thus we have basic functioning market dynamics that help achieve relative price stability. It also achieves maximal utility for said market
Real estate however doesn’t work this way. Once someone owns a plot of land there is no incentive to sell. We can’t simply make more, and the things that make said land more or less valuable aren’t inherent to the land but rather where it is located and/or what’s on top of said land.
An LVT is a way to introduce a functioning market dynamic on land. It puts pressure either selling the land or utilizing it maximally. It becomes more expensive over time to hold land that is under utilized. This forces land owners into a set of choices: hold as is but pay an inevitably increasing tax on the holdings, sell part of the land to reduce the holdings, or further develop the land to offset the cost.
Without this function, there is no functioning marketplace for land. Once you own it you can largely hold it forever, without any regard to the actualized value of the land. So for example, a 4 acre lot sitting on “prime” (lack of a better term) real estate with only 1 suburban style house has zero incentive to become maximally utilized even though its value has increased exponentially relative to its utilization.
A LVT is one (and full disclosure I’m a big fan of the land value tax) such proposal to that problem
Property taxes aren't actually good. Consider the economics of new construction: If the net present cost of building new housing is less than its net present value, it gets built.
Net present value is the value of future rents (or rents avoided if you live in it yourself) minus future costs, each discounted by the time value of money. Property tax is a future cost, so it reduces net present value, so you get less construction until rents increase to cover the cost of the property tax.
If you don't like high rents, you don't like property tax.
> Taxes at sale time
This too is a problem if you want people to downsize once they no longer need a piece of property, but e.g. raising the exemption amount so that approximately nobody is paying this tax would then not cost a lot in terms of revenue because as it is the problem is that people are already avoiding the tax by not selling.
If you tax something you get less of it. It's not different when you tax housing.
The issue shouldn't be "property tax raises rent" but rather "is the current structure the least bad option". Assessing the latter is going to include a lot more than just real estate.
That still leaves the question of what you want to do. Moreover, that doesn't mean that all of the distortions are equal. Land value tax has fewer distortions than property tax[1], and property tax is differently distorting than various other taxes.
Meanwhile a lot of the taxes are going to social assistance programs, but if you're using taxes that tax the people who are the recipients of those benefits, that's entirely counterproductive. You'd be better off removing those taxes and not having those programs than setting up a huge bureaucracy that just takes money from the same people it gives it back to with strings and paperwork attached.
Property tax is one of the more regressive taxes because everyone needs a place to live.
[1] The proponents like to claim that it doesn't distort at all, but you still need the government to accurately value the land, which it can't do perfectly, and if it doesn't then you'll have e.g. land being abandoned because the tax is set too high and exceeds its value. This also creates a perverse government incentive if "abandoned" land goes to the government. Of course, property tax has a different perverse incentive: The local government wants to make housing more expensive so they get more property tax revenue.
They also paid a similar amount "on the black", meaning that they had to pay the sellers in cash so the sellers would only pay tax on the official amount.
This was 15 years ago. It seems hard to imagine something like this happening in the US with the Know Your Customer and Anti-Money Laundering laws but maybe it does. And it might not happen in Spain anymore.
In Barcelona there's a shortage of housing and more would grow growth.
In a random town building more houses does promote construction led economic growth even if not other growth.
I think it would actually make it easier if I could just pay 100K tax to have permission to erect any new 2 bed house anywhere in the country. There can even be a price list linked to local salleries or something.
Karl Marx made this crystal clear 150 years ago. You have to socialize housing, not "liberalize" it, whatever that means. And the Georgist solution will face a similar problem - the political one. The rich will always undermine mere tax law. You have to get rid of the rich, plain and simple.
Our housing policies have broken this social contract. Many younger people cannot afford to live in high opportunity but high priced cities. Those that can, often only do so because of help from family. [1]
NIMBYs dominate both sides of the political spectrum, especially among older people. It will take younger people getting involved in the YIMBY movement to effect change.
(i) People who don't like the change
(ii) People who don't care about the change (most people)
(iii) People who do like the change
People who don't like the change (i), regardless of the amplitude of their dislike, will turn out and give public comment and put up yard signs.
People who like the change (iii) will turn out and give public comment only if they are weirdos like me, with off-the-charts amplitude for their feelings.
The net result is that the only public opinion that is legible to staff and electeds is opposite. Again: regardless of what the change is.
I reccommend you read, if you haven’t already, Katherine Einstein’s book ‘Neighborhood Defenders.’ It accurately describes the housing politics in Massachusetts.
Any housing analysis is incomplete without taking into the geographical effect: The only people who care strongly one way or the other about new homes are the people who live near the proposed construction. Almost invariably, people who live nearby are against the change. Those who live far away are actually fine with new construction, at least in the abstract. The very same people who show up to protest nearby construction are also typically fine with housing on other side of the city. People just don’t want new housing in their neighborhood.
This has a practical lesson: control of housing policy, particularly, density, must be ripped from local city councils, where it now rests. Local city councils are beholden to their NIMBY homeowners, as homeowners are the only one who typically vote in city elections. The states thus need to reclaim their legal right to set housing a policy, a right they have ceded to municipalities.
Do you care about other people’s wellbeing or not?
Most folks who are “against” things are against them because they perceive change as “bad for them”, and perhaps “good for people I dislike for historical and tribal reasons”
Civilization is a an endless series of Tradeoffs. Compromises. Loss of something in the short term in exchange for something better in the long term. If you aren’t willing to suffer in any meaningful way for your fellow human, eventually the entire bargain falls apart.
Makes me think a bit about how negative content engages more people. Is this the same with people who don't like change? Not liking change activates people more than people who do like change?
Just because someone taught you something doesn't make it so. And even then, it might be true but your own choices (and failures) may be the reason you have not met your goals - rather than "housing policy".
Try on some personal accountability for size - it'll probably help you achieve those unachievable milestones you are yearning for, also.
"Our housing policies have broken this social contract. Many younger people cannot afford to live in high opportunity but high priced cities. Those that can, often only do so because of help from family"
I suggest more emotional reflection.
I didn't even work that hard and I have a comfortable life. I learned to code, and that was it.
Your mileage may vary.
If you move to one of the most expensive cities in the world, one of the things you can do is complain that it is really expensive to live in one of the most expensive cities in the world.
You can do that. I don't recommend it, but it is one of the things that you can do.
The number of YIMBYs who own property is approximately zero. "Yes, I would prefer that you make my life worse", said no property owner ever.
I am a bad person. I want my life to be better, not worse.
This is maybe a bit tangential, but I live in a very walkable neighborhood (by US standards, anyway). But as commercial rents are rising (even faster than rent for housing) it's driven several small businesses out of our walkable core - a bookstore faced a 30% rent increase and couldn't make it work, a donut shop shut down for similar reasons, several other small businesses facing this. It kind of seems like commercial landlords saw that it was becoming more walkable because many high-density housing projects have come in over the last 7 years and they decided to gouge their tenants. Their tenants (small businesses) can no longer make the numbers pencil out with the high rent and shut down leaving empty storefronts - or large chains move in destroying the local character. And then there's less to walk to.
One of his videos speculates that real estate is being used to store money and the building owners don't want to rent out anything:
https://www.youtube.com/watch?v=Yavgfk0IjdM
Another video speculates that the owners of some buildings have made claims to banks and investors that their buildings are worth more than these buildings are actually worth. In this situation, if the buildings' owners lowered rents they would be admitting that the building is not worth as much as they claim. This could trigger contractual obligations they have with their mortgages and investors:
His rants were prompted by his failed attempts to rent out specific vacant storefronts in NYC and that those exact storefronts have sat vacant for more than 10 years at the time he made his videos.
This is similar to my experience living in a smaller city where there are similar vacant and rundown properties a short walk away from where I live. Notably, these vacant properties are owned by commercial landlords who have a reputation for refusing to sign leases, or quoting "fuck off" prices, with small businesses.
Therefore, if you want local bookstores you need enough supply of commercial real estate to keep the rents at a level the bookstore can afford, or they'll get replaced by chains.
It's that something like a coffee shop can do a ton of business in a high traffic area, and so can pay a higher rent than a local bookstore. So if you only have enough rental units for one of them, the coffee shop is going to bid higher. Which means if you want to have both, you need enough units to exist for both.
Also, you're not actually trying to lose the coffee shop. You want to have both.
It isn't a secret. It is well understood by anyone with experience in commercial real estate.
The evil thing the landlords do is go to the planning and zoning boards and lobby to prevent anyone else from increasing the supply of local rental units.
Having seen you here ... well, forever basically, that's kind of awesome to see you describe yourself that way. High fives!
Myself, I'm off to Salem, Oregon on Monday to testify in favor of Governor Kotek's big housing bill this year, HB 2138.
https://bsky.app/profile/tinakotek.bsky.social/post/3lkea36k... - that's me on the left.
I too am in a western Chicago burb. All this tearing down of $400k houses and replacing them with hideous cookie cutter $1.8M new builds drives me crazy. They're 5-6 bed 5-6 bath. One in particular is a $500k to $2.5M flip. That's criminal.
So for example, my parents & in-laws live in SFHs worth like 300k built in 1970-1990 era. The problem is that anything of comparable size built in the same town or neighborhood since is now going for 800k (literally across the street even). There is no cash-out downgrade for them to move to a townhouse and put there underused homes on the market. They weren't building said townhouses 30-50 years ago, so all available ones are newer and thus .. too nice. Why would you move to a smaller place for same/more money which also has some monthly HOA/condo fees?
My first NYC apartment didn't even have a dishwasher or full sized fridge. I didn't have an in-unit washer/dryer until I was 35, and it was small/bad. Meanwhile it's interesting seeing the expectations of GenZ moving into apartments with their first job that are finished like the nicest apartment I ever lived in. Then they complain about cost? I can still find my old crappy apartment on street easy, and its rent is only up 50% in 20 years which given wages seems fine. Kids are moving to shiny finishes new rentals in Bed-Stuy for more money rather than enduring the indignity of living north of 96th street in a 2nd floor walk up.
Part of it is inertia and part of it is stuff like “where will the grandkids stay if I moved to a condo”.
Which sure if your monthly costs are near $0 then having 2-3 spare bedrooms sit empty 360 days per year seems sensible.
If they could cash out 50% of their homes value and have same/lower monthlies, then losing some spare bedrooms wouldn’t matter.
Downgrading has to be both easy and cost saving for retirees to do it.
Between my dad and his 3 siblings only 1 has done the downgrade-after-70 thing. And even then that aunt only did so as a gift to her son selling them the family home below market …
It shouldn't surprise anyone who took econ 101 that new builds are appealing to the ones at the margin of buying or not buying, and that those people are way above the median income right now.
Imagine you have a development company that is restricted to building one building a year instead of five—what would you build? The kind that makes you money. People forget each project is risky for the builder.
Even mid-profit is selected against in an intense shortage.
Everyone believes in the myth of "dark, dangerous alleways", but when you look at the crime distribution of almost any city, it's usually actually concentrated in the city centre. Which makes sense. Imagine you want to mug someone - would you stand in a place where you're alone and wait entire night for someone to pass by, or would you go in front of a bar, and wait ten minutes for someone who's too drunk to resist. I absolutely love walking around at night and I strongly prefer dark places without any people around me, and I feel much safer than when surrounded by people. Can't get robbed if there are no robbers around. Simple as that.
So far, I have had only one dangerous situation when being out in the city alone at night. There's a place I pass by where groups of people hang out - drinking, talking, listening to the music. Seemed like a lovely spot that lightened up the neighborhood, until one evening they decided to start shooting each other right when I was passing by.
BTW I really wish my city ran out of money for street lamps, because the fact that we need to keep everything lit 24/7 like a carnival is driving me crazy, and I can't wait to move to the countryside for this reason alone.
You could say that the people really own the land and call it "land rent" instead of "land tax" but mathematically its the same thing.
Essentially, you could say that all land starts out as - and remains - common property (because nobody created it) but a land value tax allows an individual to 'purchase' the exclusive rights to a natural resource by compensating the owners (i.e. everyone else) for their exclusion.
In George's terminology 'land' effectively includes all natural resources. This gives us a good analogy that most people might not consider when thinking about private ownership of land. The radio spectrum. We generally do not allow private ownership of a portion of the radio spectrum but instead ask for payment for exclusive use of the resource for a determined amount of time. To allow ownership in perpetuity based on a one-off payment seems simply wrong in this case. Land, water, etc are similar.
From "Archimedes", by Mark Twain, 1889
Rent, healthcare, and the price of eggs are very popular things to complain about for some reason...
One advantage of taxing land wealth versus wealth in general (a la Piketty) is that land — "real" property — is much harder to hide in offshore corporate holdings than general wealth. It is all documented by necessity.
I have no expectation, unlike George, that taxes on land could fully satisfy the general fund. But they could certainly play a significant part. A significant difficulty with land value taxes in general is the assessment of land value, which is a difficult problem and has caused controversy in the past due to fluctuations and apparent inconsistencies. My preferred approach in the United States would be a Constitutional Amendment, which would allow centralizing the necessary expertise with the resources of the federal government.
Pragmatically speaking, a land value tax would be rolled out first by replacing property taxes with land value taxes, and the majority of people come out far ahead at this stage because people live on lots that have been developed. It is underdeveloped lots that are losers in this phase.
A true georgist would not stop here though, and they would slowly continue to ramp up land value taxes, but rather than replacing property taxes, they would start lowering other taxes on productive activities such as sales taxes or income taxes. But this would be a slow transition.
Additionally, you would include provisions during this phase where tax payments could be deferred until the sale of the property in order to protect individuals who happened to purchase a home that has dramatically increased in value. This prevents situations where an older person might be forced out of their home due to higher taxes. The goal here would be to transition over the long term and protect people who invested significant amounts into their property. The rates would stay relatively low for quite some time. Having lower rates also solves issues that you mention around accuracy of assessments. If you only tax up to 33% of the rental potential of a property, then you can be off by literally a factor of 3 in an assessment and the land will still be profitable to utilize.
If the value of property is constantly increasing through development, how are you solving the affordability problem? The development is attracting and facilitating activity that drives more demand.
What dense city with a thriving commercial and business/industrial base is cheaper to live in than a less-developed rural small town?
Wrong question; dense cities with thriving economies are more valuable, so they should be more expensive. The question is who collects the rent? Land title holders, or builders and value creators?
Um, any city whose residents want services? Does your rural small town need a plumber? That plumber can offer lower costs if there's a wider, more predictable userbase for him than in the small town.
This applies to any store selling specialist goods, too - if the small town only has a single store, which stocks something that's only bought once a decade, then the buyer pays the cost of the good plus an entire decade's worth of interest. If the city can have a specialist good that sells that stuff one a month, then it'll be cheaper.
The law is sometimes a large barrier, but there are plenty of places in the world with high housing costs which have minimal regulations.
The problem is the cost of land.
Developers are severely capital constrained. They take massive loans from Banks. Most of those loans go to paying for the land.
Additionally, a large portion of their profits come from the increase in land value that they create from building. Land prices per unit area are higher in a new subdivision than they are in an undeveloped lot(Obviously the majority of the property price increase comes from the building, but the land also increases is my point). It doesn't cost anything to squat on the empty lots while building, so developers purchase multiple undeveloped lots near each other to capture this increase and minimize their purchase cost. Unfortunately, a side effect to this is that the developer basically becomes a monopoly on that area and no other developers or builders can compete with them. This lack of competition is one of the reasons that quality of new build construction has been on decline.
In a world with a land value tax, the acquisition cost of land is significantly lower, but holding it is significantly more expensive. This means that a builder is incentivized to purchase smaller tranches, and hold each lot for less time before starting construction. They will be able to invest more into larger teams because they did not need to loan as much to pay for the land. This will speed up development and also improve efficiency by allowing for more competition.
If you had a massive plot in an urban area, undeveloped, presumably the unimproved portion of your property tax would be quite high! But, the issue is that restrictive zoning means that typically the unimproved value of your tax assessment are pretty low.
For example, if you live on 2 acres, but zoning says that you can only put 1 dwelling unit per 5 acres, then you can't really do much with the remaining acres. As a result, the remaining land has little value, and the tax on it is low. This is especially true in areas of little industry, where the same zoning regulations might also prohibit industrial or agriculture uses on that same plot of land!
This is all to say that the structure you're looking for may already exist, but the issue is still in zoning.
We absolutely need to push for BOTH zoning reform and taxation reform. They will work really well together :)
Family just bought 20+ acres, forested, for about $15,000/acre... within 15 minutes of a MSA500k+population's downtown area.
But these values take into consideration zoning. So if you are ona residential block it is valued as such. But it would not be hard to figure out what it would be worth as high density. So the valuation problem is easily doable.
Also in Australia each state does it independently.
In the US this is typically done at the county level (3000+ individual counties, all doing it independently)
The issue is that everyone involved wants the problem to get worse.
There's hundreds of millions of homeowners.
Obviously some exist that support basically every opinion imaginable.
The vast majority of home owners want the "problem" to get worse, because it isn't really a "problem" for them - at least immediately and obviously.
No; I am rejecting that claim.
Counterclaim: I reject.
But if they own a $500,000 house and want to sell it to buy a $750,000 house, then a 10% increase in house prices costs them $25,000 net.
Limited supply limits their options. They’re less likely to find a perfect fit and more likely to have to compromise.
That's not ironic, by the way.
It would be interesting to see if the shortage could be reduced by taking a different approach and making the area less attractive. For example, you could tax businesses much more if they are located in very dense areas, or even just limit the total revenue of all businesses in a certain area. Such things would have their own problems and challenges, of course, but there are few economic problems as bad as the housing crisis, and there is more than enough land to go around.
People want to be in close proximity both to their jobs and to the businesses they want to patronize. Your suggestion would reduce or push away those businesses but retain the dense housing stock, but whose value would dramatically drop because those businesses are restricted or moved. You've created slums.
It is not necessary to obliterate the local business environment, only to limit it to the extent that the available jobs roughly match the available workers. Yes, it is true that house prices would fall to be more in line with construction costs, but that is the point, if you want cheaper housing, the housing must actually be cheap.
This talks about it a little without fully committing to the actual problem https://blog.lgim.com/categories/investment-strategy/why-lon...
Seems to me remote working and the improvement of "cheaper" areas, organically (as more people spend money in these areas and increase demand for services there) is the most viable solution but something governments can't seem to grasp or choose not to grasp
I hadn't thought about remote work and you're right. It's an excellent solution, at least for the jobs that don't require presence. I don't think politicians necessarily need to do much for remote work to be successful, as long as they don't block it. It is very attractive to employees, because commuting is terrible, and I have seen a lot of pressure in companies to allow remote working. Hopefully it will be more widely adopted in the future.
Building more housing does alleviate the problem. It both alleviates (for the newly housed) and exacerbates (makes more people want to move in). Even if the queue length stayed the same, the fact that the number of housed people goes up means that proportionally, more people are happy.
But, let's be realistic here: Tokyo has more affordable rent than LA, despite having ~4x the population. And Japan invented the concept of the intergenerational mortgage!
More seriously, if you are concerned the problem is the network effects of population density, the goal should probably be to replicate elsewhere rather than to disrupt.
The people who live there? Maybe not so much.
Is infinite growth desirable? Should we make policy decisions to distribute things more instead?
Compare Dallas with LA. The denser one is much more expensive. Maybe get denser, like Manhattan? Oops, still expensive. Manhattan just needed to build that much more and get even denser? Where exactly is it believed it would stop? That the growth machine would say 'ok, that's enough, now we will just start lowering prices!'?
Yet Dallas-the-city wants to get those businesses - and will crow for days about being more "business friendly" or brag about this or that company moving to Dallas - but Dallas-the-incumbent-residents don't like the influx of people who can out-spend them for housing.
There are a few places that understand the less-direct effect of feeding the infinite-economic-growth-business-machine, that zone for overall stability, to prevent big industrial/corporate development, not just to prevent housing. But for that to work they generally need to have something well-established to rest their hat on instead, to avoid drying up and drying out.
The people in a city want businesses because they want good jobs and services to be available to them. Homeowners (the majority of the residents in most American cities) especially want that influx because the newcomers drive up their property values.
So yes, the people of Dallas, on average, really do want those businesses and newcomers
Is it really so obvious? So many policies are implemented by government that people as a majority do not want like wars and tax cuts for the wealthy or not implemented by government that people as a majority do want like healthcare or rational immigration policy. The idea that the representatives of the people are acting in the people’s interest is quite naïve to be honest.
When I lived in downtown Dallas, I would have loved more housing. Part of the reason we left was because it was a ghost town. Very little to walk and see. At night it was desolate and unsafe.
LA has been maxed out for housing for decades. They’re constrained by geography. They can only build up, but they haven’t… only recently started loosening housing restrictions to allow for density at the state level, but even that is a half measure. They need to just swallow the pill and let density be built anywhere. Yeah, change sucks, but at least we’ll stop forcing people to move to Dallas.
Businesses would perhaps take a small efficiency hit because of the reduced availability of labour in the region, but even this would probably be compensated for by better worker mobility, because businesses would be less crowded in the cities and there would be more labour available in the low-density areas.
Businesses would probably also be able to pay a little less as less income is tied up in housing costs. A restructuring of business and population distribution would probably not have that much impact on overall productivity, but it could shift the available money between income levels significantly. If less money goes to rich property owners, then more money stays with the average person.
Except that we are not really applying ourselves into either, are we? One would naively think we need to work on all viable ones, but of course, society does the exact opposite.
As for mass transit, well, some countries just like 26-lane highways right through their cities. It is an ideological issue. Here in Europe I've seen a shift towards better public transport and cycling infrastructure, but that whole change will take time and won't be cheap.
The winning play, at least over here, is to move to a city just for the education, and then moving back to the countryside / smaller city with cheaper housing and less competing job applicants. The salary difference isn't that bad, for some professions (doctors, psychologists etc) working in rural areas actually pays more, as employers are raising salaries to find applicants.
People who bought houses enabled by zoning changes refuse to allow zoning changes that will increase the price of their own home because why?
Racism and a fundamental failure to understand economics.
House owners assume everyone else is also a house owner, so increasing values will benefit everyone.
The US does not have modern transportation infrastructure like similarly sized countries like China. Generally speaking, housing is built near bodies of water or alongside transportation towards bodies of water. Even issues like NIMBYism can be resolved by constructing underground bullet trains that won't affect appearances. This is a hard problem, but not an unsolvable problem. It isn't just economies of scale, government investment, clever economic strategies,etc.. that are needed but actual revolutions in construction technology and transportation. Timelines for construction that are only few years not decades. But alas, I fear the politics of these days would not allow for this.
Dropping infinite resources into stretching commutes across vast distances is not realistic. Taken to its logical extreme everyone should commute by private jet. The larger the transportion network, the more it costs, or at the same cost the less convenient it becomes because intervals between vehicles increases.
The most efficient form of transportation is avoiding the trip in the first place through telecommuting. Then walking or biking. Then mass transit which works best with areas with lots of riders (dense cities). https://humantransit.org/basics/the-transit-ridership-recipe.
Think of train service like a pancake. For a given amount of batter you can make a normal pancake, or you can spread it thinly over a large area, or you could make a small and thick pancake. If you want great service over a huge area you must massively increase resource expenditure.
Send surveys to all the biggest companies in the city to figure out specifically the routes that need to be created.
* Lack of political will to create separate lanes. City council members are drivers and empathize with their auto driving constituents and would rather have driving lanes available to auto drivers than exclusive to buses
* Better bus stops require better funding which requires raising taxes. Nicer bus stops also tend to attract the homeless. The US has been funding auto driver amenities for almost a century via taxes but only started funding transit in a consistent way federally from the BBB act, and even then only at a fraction of auto improvements.
* A bus route that serves many stops is slow. A bus route that serves few stops is inconvenient for anyone not near those stops. You can run multiple buses along a route with differing levels of service to service both modes, but that requires running more buses, which requires purchasing more buses and hiring more drivers which costs more money.
Most of this comes down to a lack of political will and funding. Most politicians still see driving as the main way to move around and are loathe to fund transit as anything more than an equity initiative to help with the sad folks who cannot drive a car. Until this changes, progress is going to be slow. Likewise most politicians benefit from high housing costs because they themselves live in more expensive, exclusive areas with exclusionary zoning and are more sympathetic to that viewpoint and view housing accessibility as largely an equity initiative.
This can be fixed - dedicated bus lanes mitigate this nicely - but doing so is politically unpopular. And frankly, if you have the political will then you should just build trains. They're more reliable, cheaper in the long run, and have higher capacity.
The main advantage of buses is that they're a great stopgap, and are good for niche/dynamic routes.
One game-changing technology is the way cameras are cheap now. You can put them on every bus and change drivers’ calculation of the risks of suffering consequences from blocking bus lanes or stops from “less likely than being struck by lightning” to “every time”. That requires political will but the technology makes the cost not only low but self-funding.
Trying to present this in such absolute terms makes it wrong. There’s no feasible way that a 600 mile one-way commute is going to be desirable short of magic teleportation booths. Even if you have a personal jet and priority air traffic control that commute sucks and people want to be enjoy the areas where they live, not spend all of their time traveling somewhere else.
Transportation really is a big problem, but it works the other way around: we need transit and enough density so people don’t need to use cars on a daily basis, freeing up close to half of the land usage in American cities and making housing cheaper. What would help would be if there was a way to live in Burbank or Chatsworth and not need to spend an hour driving to go to Santa Monica, or paying many thousands of dollars per year for the privilege of doing so.
I presented it in absolute terms because we're talking high-level here. The possibility to commute from reno to santa monica and having lots of people actually doing that are different things. My point was, if that was a 1-2 hour commute, then housing along side that commute would make economic sense, as will many other economic activities. If it is a train, I personally won't mind a 2-3 hour total daily commute, since I can catch up with books,entertainment,etc.. but if it is a drive, that would be too much, and that in essence is one of the critical issues on how this is being thought about. Cars (EV or not) are one of the root causes of the housing problem.
As for that scenario, 1-2 hour commutes are still misery class. Doing it on a train is better, but countless studies have found that a shorter commute increases happiness more than a big house (the amenities don’t matter, you don’t have time to use them!).
The 1.6 million people in Manhattan would disagree with you.
I'm saying that the people there like the benefits of living in a high-density area more than they dislike the downsides of apartments.
> If manhattan allowed for single-family housing
If Manhattan allowed for single-family housing for 1.6M people, it wouldn't be Manhattan. It would be Austin or Los Angeles, and the people living in Manhattan clearly don't want that because they haven't moved to those places.
This is possible via either dense housing or efficient transportation or both.
Unfortunately, the High-Speed Rail has become exorbitantly expensive, all publicly funded a.f.a.i.k. On the other hand, housing in general and the existing 19th-century railroad network were built with private money. As an aside, this is why the internet backbones from coast-to-coast are privately owned; these are on railroad land.
If your public transport is mostly used by low income residents, you’ve already failed. It just shows that it’s not good enough for anyone else and alternative methods are superior if you have money.
https://web-cdn.bsky.app/profile/did:plc:ks3gpa6ftoyaq7hmf6c...
There are two things that I am becoming more and more willing to believe:
1. We live in an age of entitlement (I can afford it, it is possible, it is legal, I want it, therefore I will do it). There is a good chance that this is how we will be remembered.
2. Convenience is killing us and robbing us of the activities that actually provide satisfaction. We fall for this because we think we desire happiness and that hedonism will provide it, when in reality satisfaction/contentment is what we truly desire.
Also properties in Japan generally depreciate like cars because it's a seismic area and newer buildings are typically better equipped to deal with that, so it makes sense to tear it all down every 30 years or so.
I'm sick of these posts thinking that these people are stupid and if we could just explain to them the consequences of their actions this would all be fixed. No. They KNOW. It is intentional.
The Housing Theory of Everything - https://news.ycombinator.com/item?id=28531025 - Sept 2021 (80 comments)
Government can do a credit rating that partially depends on the economic value you bring to the region. This should sufficiently pump up the credit possibly making it cheaper than the construction cost.
You can also arrange a place to retire in advance and make it part of the contact.
The houses closest to the factory ideally have employees living there. A 10 min walk is economically preferable over a two hour drive. The extra time can be spend doing valuable things at home but it should also make working overtime less of an issue. Sending people home for a few hours in the middle of the shift at reduced rates shouldn't anger people as much.
I recall how no one I knew was able to afford a home. People got really careless from it. They didn't give a fuck about anything. One guy managed to buy a crappy one but couldn't afford the maintenance. He exited with 150 k profit which was 400-500 months salary. He spend it on booze and drugs.
Simply allowing landowners to build more housing on their existing land, and thus increase the value of that land even more, will exacerbate this inequality. Again and again I see unaffordable housing built because the developers complain that they cannot make a profit otherwise. I am suspicious of "solutions" to housing that amount to "remove regulations to allow rich people to build in a way that increases their wealth". Instead of allowing greater density, we need to require greater density, i.e., go to people who currently own a lot of land saying "Either you build a lot of housing on this land, even if it causes you to lose money, or you forfeit the land."
The housing shortage should be reduced by taking from those who already have a lot, not giving more to them.
It is, of course, half empty, but it doesn't matter. Those who bought those units never intended to live there anyway. To them it's just digital currency where proof of work is a physical object.
People advocating for "just" building more housing have no idea who buys most of the properties.
We all know about interest rates, credit access, and supply—but what we don't hear enough about is the structure and dynamics of 'bad areas.'
If you could suddenly flip a switch and make 'bad people' turn into nice, agreeable, conscientious neighbors, wouldn't that instantly solve the housing crisis?
Of course, this gets political, but that's exactly why I crave a publication that treads the line and engages a broad range of meat blobs.
Perhaps this is a problem more in Europe and not the US. I'm not sure how many areas in the US would be good locations if they were not so crummy. In the UK, it feels like one faces trading off paying for "nice" vs dealing with crummy and trying to predict which areas will become nicer in the next five years.
I don't see how, the core issue is supply of housing close to work and amenities not niceness of neighbourhood.
However maybe you are thinking further along, because indeed playing nice with your neighbours is important for increased density. But the US may never bump into that problem if it never lets citizens build densely in the first place.
By bypassing most all these and DIYing a house I was able to build a house for well under 100/sqft.
We also have liberal zoning around multi flat residential and it’s trending more liberal.
Chicagos housing price problem, if there is one, is mostly a school and safety disparity problem.
If I did all the work myself, I might be able to cut the price down to $150 a square foot, because materials alone are expensive, and it would take me at least a year of working on it do so. Now I’m “only” spending $300,000, and effectively paid myself $100,000 to build the house.
None of this includes the cost of land.
Only graded the footing, no excavation under footprint of house, so one day rental backhoe, under $1k for entire dirt work. Poured concrete (300 bags) by hand one bag at a time without concrete truck. Transported blocks and built block crawlspace wall then ran dimensional lumber across, no engineered lumber or piers.
Frame light wood structure to minimum code following irc so no engineering nor architect. Plumbing almost all on single wall with only toilet/tub/sink/sink. All electric appliances, I diy connected to power grid running my own secondary mains.
These last year's prices I think if you exclude utilities I'm at about 70/sqft, you could probably do 50 with reclaimed material and a flatter roof. I double timed after work a couple years but took off maybe 3 months so well under 100k lost wages.
Interesting to see that play out and think about what kinds of housing we need to build to make it happen. Bay Area cities building a few 'below market rate' 6 story apartment buildings isn't going to cut it.
One other big factor to mention is that many places seem to ONLY sell what the US calls condos, ie each apartment is sold to an individual. I think this is a much better system.
There’s little regulation on condo fees and what the associations can do with said fees too. There’s a lot of horror stories about mismanagement and you’re only a vote away from an association being good to being bad too.
If condominium fees were predictable and the money spent required to be more transparent and disclosed I think it would go a long way
[0]: https://coralspringstalk.com/coral-springs-police-investigat...
https://www.palmbeachpost.com/story/opinion/columns/2024/04/...
From there. Looking at just the real life things that are happening and deliberately leaving out any mention of money:
- there aren't enough places for people to live near jobs. Employers have a hard time finding workers, because workers can't afford to live nearby. Productivity suffers.
- people have to spend a long time commuting to their job, which means they spend a lot of time in their cars. Big waste of time!
- the housing that is out there, is very old and not suitable for many people. People who should be living alone in a small studio take roommates and live in a single family home, because there is no inventory of studios for them. People's lives are worse because of this, their built environment isn't what they want it to be.
- people who want to start a family and live in a small house on their own, can't. the only houses they build are too large for what new families need. So people delay starting a family, because the housing that should be there isn't there for them. Fewer kids.
- because it's hard to find places to live, people are less mobile. when they find a place, they hold onto it longer, even if it's suboptimal for their situation. So people stick around even if it sucks, because there's nothing better out there.
- places that have prestige jobs see the bottom % pushed out because there's only room for top % employees. Those places get "hollowed out" with the bottom % taking long commutes or living in suboptimal conditions to be near the top %. Social segregation, which leads to cultural disconnects.
- parents don't have a place to go once their children are grown up and have moved out. Our built infrastructure doesn't suit them. So they stay put and get lonely.
- because everyone has to drive to work and can't walk, small businesses that depend on foot traffic don't work any more. Big businesses with office parks and the money to build parking lots in suburbs have the commercial advantage, so they prevail.
etc etc.
Completely removing the whole concept of "money" from the conversation, makes it abundantly clear that we are making bad choices about our built infrastructure, over and over again, to all society's detriment.
There needs to be a way to avoid loud inconsiderate neighbors. Currently, this is done in practice by choosing an area where loud inconsiderate people are priced out. Until there's another way to do it, there will always be a demand for such areas.
Increasing supply of housing is great on paper. But imagine you're a productive citizen who gets up early, works hard, and goes to bed early. Housing prices get reduced to where anyone can afford to live anywhere? By definition, suddenly ANYONE can become your neighbor, including folks who will play loud music at all hours of the night, keep loud dogs, etc. And sure, that might violate noise laws. Good luck getting those enforced, if the laws aren't changed to have teeth!!
When dreaming up solutions to housing problems, ask yourself: "Would this solution allow a bum to move near to Bill Gates?" If the answer is yes, then your idea will not work. "Would this solution allow a bunch of high school dropouts to live alongside highly-paid software engineers doing work crucial for the economy?" If the answer is yes, your idea will have unforeseen bad consequences.
Expensive areas have people who are busy working jobs to pay for their expensive housing and go to sleep at night.
Ergo, people who value peace and quiet gravitate towards expensive areas.
This is kind of like blaming environmentalists when NIMBYs use environmental reviews to prevent new construction. They don't give a shit about the environment, really, but they know how to misuse the system to get what they want.
People who value peace and quiet will select places to live where the neighbours don’t engage in domestic violence or otherwise do things that result in the police coming out with sirens going.
Keep in mind that land that is owned outright is almost exclusively very low value land.
But it’s weird how every discussion of housing seems to jump to increase supply and density.
Never a mention of: - immigration driven demand - historically low interest rates inflating all asset prices - occupancy per home
The macro trends that have driven these for the last 50 years are now reversing, at least in places like the SF Bay Area which will have a huge impact.
Also the population pyramid of the US will (sadly) drive down demand in the next couple of decades.
Also I’ve read studies that suggest that dense housing is less likely to promote family formation e.g. Japan’s high density and laissez-faire zoning hasn’t helped with their fertility crisis.
Yes housing cost has many secondary effects, including the fertility crisis, it is in fact by far the main driving factor, all other are either downstream cultural adjustments (cope) or correlations (highly educated are attracted to large cities, where the housing cost is the highest)
But having said that, and looked at the financial and regulatory effects, the main driving factor is simply supply and demand, that is demographic density.
For most goods, when demand increases, supply will follow, but housing is a peculiar kind of good because value is following a power law around a few hundreds attractive centers, meaning that supply is highly constrained, at least given current transport technology and cities structures.
The solution is obvious: let the fertility crisis unfold, that will self correct the housing cost and the fertility crisis at the same time. But we'll have to build a different social redistribution system, we can't expect a pyramid scheme to work forever.
And immigration is also a source of other problems, especially when it is fast and massive.
Governments should accept the demographic transition and adapt instead of trying to import a lumpen proletariat from elsewhere. This is the worst political mistake of Europe.
(in a competitive market, is the asterisk on this. If a market is not competitive, then Greed can be thought of as a 5th atomic economic input).
The biggest challenge of the 21st century is: we aren't discovering much more of any of these things. The second derivative of "how many of these things are available on the market" is basically 0. Rights have been sold to everything in the ground; farmers know exactly how many cattle they'll have three years out; there's no surprises left. Companies need to show revenue growth, and Jerome wants 2% inflation, not 0%, not 6%. So, the price of these things can only go up; nothing is forcing them back down.
The situation for Energy, Food, and Water isn't great, but they all have a pretty constant cost to their production; there's some sources of energy that are harder to get at, I've always heard fracking is one of these, but by-and-large they still have economics of scale on their side, once you adjust for inflation gas was $3.14 in 1975 and its $3.21 now, 50 years later. Its a similar story with food. Water has probably gotten cheaper, actually, but that's a rounding error.
Real Estate is the opposite. We're making more people. We aren't discovering more land. Critically: We can increase our effective utilization of each square mile of land, but doing so raises the cost of each unit. Its cheap to just throw a homestead on a plot in the middle of nowhere, but once you put 200 people into an apartment building the same size you need to start thinking about parking, transportation, plumbing, electricity, crime, internet, it gets more and more expensive per-person as density goes up. This is part of the fallacy of thinking that the whole solution is density: Replacing a single family home with a 50 unit apartment complex usually results in an increase in cost per square foot, not a decrease.
The other part is highlighted in Harris' plan to give first time homebuyers $10,000 toward a down payment. The reason why housing is expensive is not strictly density (read: supply); its also in demand. Demand does not decrease because you built more units. Due to induced demand, it oftentimes will increase, because those units might be mixed use, foot-traffic draws cool businesses, people want to live there, and thus your big plan to reduce the cost of housing by building more units actually just increased it.
If you were the commissioner of some county with a growing population who wanted to reduce the cost of housing in the county, and you were also God and knew exactly how many people were going to move to the county in the next year, and you added precisely that number of units: The cost of housing will still go up. If you add more than exactly the needed number of units, the cost of housing might stagnate or go down, but its likely the vacancy rates will cause some level of financial strain on the property developers, and it might be hard to sustain such development; and in N years the cost will continue to rise.
Developed Urban areas cannot escape this curse. Housing costs will always want to rise at a rate higher than inflation, over a long enough period of time. This shouldn't stop cities from increasing density, because what other option do they have, and it might be the difference between 4% and 8%. Underdeveloped cities (e.g. Austin TX), suburban, and rural areas in the United States can still underrun inflation, however, but shouldn't rush to significantly increase density more than demand on the area can support.
The idea that any given county with a growing population can meaningfully and durably reduce the cost of housing within their borders is, mostly, a fallacy in the United States. The only way this can happen is in an environment with deflationary monetary policy, and the United States is extremely allergic to this.
No politicians wants to tackle it, no establishment wants to change. And people talk about wages stagnation, when it is property pricing becoming unreachable.
I've thought for years that in much of the developed world housing is the economic problem. The economic problem, singular. This is particularly true for the young, who are the future of the economy. The inability of young people to build wealth and find stability is almost entirely attributable to housing. If you look at cost and wages minus housing young people are doing as well or even better than their parents.
If you are talking about young peoples' struggles with the economy and housing prices are not the very first thing you mention, you are wrong. If you're talking about declining birth rates and family formation and you're not at least mentioning housing prices, you are wrong.
Health care and college tuition are problems too, but housing is the most ubiquitous, unavoidable, and directly disruptive to peoples' lives. It prevents people from "launching."
Edit: you know... if Donald Trump wanted to go down in history as the greatest president in the last 50 years, he could use all the power he has to reform zoning and open development and smash housing prices. Use the same funds withholding tactics against states and localities to pressure them to sideline NIMBYs and streamline permitting. Tax corporate and private equity purchases of residences, tax foreign purchases, and tax unoccupied properties. He'd be a hero even if his record was complete garbage on literally everything else, because he would have solved the economic problem.
Of course he'd never do that. He's a real estate mogul for f's sake.
`I.i` the San Francisco Bay Area – probably the most productive place in the Western world
`I.ii` In the 1960s, it was commonplace that a middle class single-earner American or British family would be able to afford a comfortable home.
`I.iii` These prices range from about twice to four times the cost of building new homes of equivalent specification. This wedge, between build costs and house prices, is a rough proxy for how much extra cost is being driven by restrictions on new building.
Ultimately this quote represents the core of my problem with this (well written, relatable!) piece: it's discussing capitalism without mentioning capitalists. A huge part of housing costs are tied to corporate monopolization and rent-seeking, not just red tape.
`I.iv` By contrast, almost every other household product has become better and less expensive since then.
`II.i` This means that many people are working in less productive jobs than they could if it was easier for them to move to more productive places.
`II.ii` Sheer size is not all that matters, because complementarity between workers matters even more – a skilled software engineer will likely increase her income more by moving to Berlin (population: 4.4 million) than to Mexico City (population: 21 million).
`II.iii` By historical and global standards, today’s most successful cities in America and other Western countries are astonishingly sparsely populated and sprawling... The main cause of this is regulations that ban buildings that make better use of the land.
`II.iv` According to one study[3]... [if productivity of labor is vastly different across cities, output can in principle be increased by expanding employment in high productivity cities at the expense of low productivity cities]
I'll cut my rant here -- the inequality section is interesting (love a Henry George reference!), even if I don't buy the final "...because of regulations" point. And he does get around to mentioning cars in the obesity & climate change sections! And this is downright fascinating: "radically localized democracy that allows individual streets to opt in to greater density by voting for it"
Sorry for clogging the thread a bit, I hope someone finds my rants a bit helpful. John (and Ben and Sam and Kade!!), if you're here: I love the writing, I share your goals, but I think you need to be a bit more careful when everything seems to be fitting together so neatly. If regulation is the core of inequality, I don't think this article will prove it to many people.
[1] https://fred.stlouisfed.org/series/RHORUSQ156N
[2] Lewis Mumford's The City, 1939 -- start around 16:00 for the ~4min section on cars. https://youtu.be/7nuvcpnysjU?si=WJWmIGWxZ1fwIsi5&t=960
[3] https://pubs.aeaweb.org/doi/pdfplus/10.1257/mac.20170388
In most of the US it's illegal to build anything other than single-family houses. We build our cities around cars. We make it impossible to build any form of public transit because that might let undesirables into our nice clean neighborhoods.
The single biggest factor in homelessness is being priced out of housing.
Expensive housing is an input into everything. It means wages need to be higher. It makes everything you buy from a business more expensive. It's why that $2 coffee 30 years ago is $8 now.
What's the alternatie? Personal property and social housing. Personal property (as distinct from private property) is that you can still own property you personally use. You simply can't hoard housing. Social housing means the government provides affordable quality housing to anyone who wants it. The poster child for this is Vienna, where over 60% of the housing is soial housing.
If you buy a house for $300k and it goes up to $800k. You haven't made $500k. You think you have but you haven't. Why? Because what would you do if you sold it? You'd still have to live somewhere. And if every other house is also $800k, you still only have one housing unit of wealth.
Expensive housing is simply stealing from the next generation. It's also a way to keep you in debt, to coerce you into working with the threat of violence (eviction is violence) hanging over you.
Landlords are parasites.
Social housing is what people who own houses say they want, because they know it's never going to happen. It's a safe way to genuflect to a totalizing class conflict without staking anything on it.
Every landlord I've ever met is a lower-middle class Black person who owns an apartment building, that they also live in, in Lawndale or Austin. Miss me with this stuff.
Any black American that you know with wealth over $350K is in the top 5% of black Americans. Any black Americans that own a three-flat in Chicago are well into the black 1%, which to white people still looks poor.
Black people pay landlords far more than they are paid as landlords, because rent is a reward for already being wealthy.
Do you mean they look and act like lower middle class, because that's how they grew up?
Or do you mean the margins are very bad so they have to do all the maintenance themselves and the profit is actually very low? Why is that?
In that example, the building was paid off, so the owner could use the rest of the rents on repairs and maintenance.
Another 6 unit example recently sold around here for $40,000. If I recall correctly every tenant was delinquent, so the buyer was going to have to deal with that.
A lot of landlords live in freestanding single-family housing. Your description of every landlord you've ever met is quite at odds with my own. I know very few landlords who live in their properties. They have a nice big house for themselves and rent out apartments or additional houses.