Income determines house prices because there is not enough supply.
Without enough supply, what stock is available gets bid up to the maximum people can pay (largely decided by banks).
This is like a basic cornerstone of economics!
Without enough supply, what stock is available gets bid up to the maximum people can pay (largely decided by banks).
This is like a basic cornerstone of economics!
What would impact pricing is if people left an area (look at the 1 euro houses in Italy in towns where everyone has left). The mass migration to the US coasts and south doesn't seem like it's stopping anytime soon which will continue to put pressure on the local housing supplies.
Migration in response to price differentials, voting with your feet, spatial arbitrage, spatial equilibrium, geographic mobility of labor, the Tiebout model...the phenomenon goes by many names.
A related theory that I find intriguing is that the benefits of productivity gains have largely been claimed by the financial industry. As productivity improves, more credit is made available, people take on more debt to purchase a home because if they don't someone else whose can also service a larger debt will. This ultimately just drives up the price for everyone, leaving people no better off than they were before. The winners are those collecting the loan repayments.
However, it was also pointed out that this paper isn't really about supply, it's about supply regulation and supply constraints:
"... We also use the measures of the Wharton Residential Land Use Regulatory Index (WRLURI) by Gyourko et al. (2008), generated at the MSA-level by Saiz (2010), which capture variation in the regulatory environment across MSAs. We multiply this index by minus one so that increases in the value indicate a less restrictive regulatory environment and so, ostensibly, a more elastic housing supply function."
You could eliminate housing supply regulations and still have poor housing supply for other reasons.
For the median and low end? There's enough when people have a _real_ choice of moving to a unit house or apartment a mile away and leaving a bad option UN-SOLD on the market.
Sufficient means there's slack in the market, so the free market works.
The incentives under an LVT system run in the opposite direction of what they do now.
Whether it's possible to set it at a level strong enough to produce the right "nudge" without creating a bunch of unintended consequences, harder to say. Probably worth trying in a few city-regions though to see what happens.
Biking distance is, what, five miles? Ten?
Economics & geometry mean it's challenging to provide enough of this that the median family can afford it. It's quite practical to do at the scale of a small city (250k population ish), but such places tend to be relatively poor unless they have some premium offering, a top university or a high-margin specialist industry.
Big business seems to prefer bigger cities (they want a large talent pool, and peoples' willingness to relocate can be limited), and at that point for the average citizen, you have a choice between higher-density apartment living with biking distance, or the family home but a longer commute.
The relocation thing is a bit of a vicious cycle tbh, high property prices make it harder to move, but also make people more invested in what they've bought, which in turn makes them less keen to relocate, which forces companies to locate where talent is, which pushes prices in those areas up further.
The key is just to avoid restrictive zoning that prevents people from opening a barber shop or a corner store in their residential neighbourhood.
Not sure how the US handles that, but in my country (UK) there are various factors that mean people don't move as much as common sense might suggest. High sales tax on houses, very variable quality of schools meaning the good ones are oversubscribed and if you move your kids may end up at a worse school some distance away, and so on.
It can, at the same time, be true that there is manipulation and exploitation going on at the other end of the market.
You can reduce demand by limiting speculative investors and that doesn't involve increasing supply.
(I do completely agree we should get speculation out of the housing market - housing as a memecoin, buying because line-go-up is not healthy)
[1] https://www.washingtontimes.com/news/2024/mar/15/in-shift-44...
Those small time landlords have been the worst landlords I have ever had. Give me a large corporate landlord which knows that laws exist and at least tries to follow them over the greedy, ignorant, and desperate small-time landlord any day.
Investors and Housing Affordability FEDERAL RESERVE BANK OF ST. LOUIS (2020) https://s3.amazonaws.com/real.stlouisfed.org/wp/2020/2020-04...
Relationship between rents in NYC and ownership concentration https://www.cesifo.org/DocDL/cesifo1_wp8864.pdf
Consolidation of rental market bt private investment firms https://journals.sagepub.com/doi/10.1177/0308518X221135612
The Impact of Institutional Investors on Homeownership and Neighborhood Access https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4554831
Algorithmic collusion in the housing market https://apnews.com/article/algorithm-corporate-rent-housing-...
But even that doesn't matter. Because PE is just investors, and guess what, the regular people buying the other 85% are investors too.
I live in an area where there is almost zero PE owned homes, and guess what, home prices are still exploding. There are still bidding wars and still crunchy moms chaining themselves to dilapidated warehouses to stop new builds from going up.
The fact that the housing crisis is global evidences the impact of private equity - especially purchase to rent and purchase to hold. Regardless of the demographics of a given country we have simultaneous house price explosions transnationally, which are detached from wage increases.
[1] https://www.businesspost.ie/news/revealed-how-many-apartment...
Personally I think what has been happening globally is that members of governments have been learning collectively how to manipulate the housing market. It seems like a win-win situation that makes (almost) everyone happy. Except of course for renters. They will push on whatever levers they have until it breaks again.
“We operate in markets with strong demand drivers, high barriers to entry, and high rent growth potential, primarily in the Western United States, Florida, and the Southeast United States.” [0] (emphasis mine)
"The continuing development of apartment buildings and condominium units in many of our target markets increases the supply of housing and exacerbates competition for tenants." [1]
You have the power to wallop the private equity housing buyup strategy by building more houses! Building fewer in order to spite them is literally giving them exactly what they want.
[0]: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001687229/a154763...
[1]: https://www.sec.gov/Archives/edgar/data/1562401/000119312513...