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Comment by asdff | Hacker News Reader

A factor the author didn't really touch is housing. By 1973 many places in CA at least were starting to ban dingbat construction via ordinance against back out parking setups. We also see many cities in CA and elsewhere downzoned around that time. LA went from being zoned for over 10 million people in 1960 to being zoned for just 4.2 million and being built to almost 95% of its zoned capacity by the 2010s.

I'm not sure exactly the relationship between wage growth and restriction of housing growth but the fact that these phenomenon seemed to happen in lockstep merits some reflection. Prop 13 also came in 1973.

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The most hilarious thing about housing in california is they had a chance to use ADUs to lower housing prices but of course they totally rigged the game by outlawing splitting off ADUs as a seperate property, meaning all they did was making housing even more expensive because the value of a plot now includes the additional value of the potential to be a landlord but no way to split that value into an economical individual home.

They managed to find the one fucking way to make additional housing make being a new homeowner even more expensive, and I believe it was not by accident.

It is intended that all of the policies make land more expensive...

No politician wants more affordable housing in a place where >65% of voters are property owners...

It's good for land to become more valuable. We want land prices to go up, and housing prices to go down. All that means is density is increasing faster than land values.

Nothing against allowing lot splits, but this is the wrong reason to be for it. The reasoning in the previous to replies reaks of "homeownership is more virtuous than renting" which is not true. And besides, if you really want more homeownership, the most important path forward is condos, and thus condo defect liability reform.

On its own higher housing density should lower land prices. All else equal land prices are both cause and effect of housing access.

In the philosophical extreme, if zoning allowed infinite density you could stick a hong-kong style condo skyscraper for the entire population on 0.1 acres and the rest of the land would provide no additional housing utility pushing prices down to whatever the value it is as farmland/business/recreation. The housing value of surrounding land would plumet.

Low land prices are indicative of less restrictive zoning. In more restrictive zoning that punishes building houses on small plots, land becomes more valuable because the land is the license to build a house. i.e. where I live I had to buy more land than I needed because without it I could not build my house, which drives up land prices (increased demand).

The reason why california ADU increase parcel prices is because it prints an additional house license while being illegal to split it off. Otherwise you would be left with two cheaper parcels, although in sum they may be more expensive, but you would still pay less for enough land for license to print a house.

> On its own higher housing density should lower land prices. All else equal land prices are both cause and effect of housing access. > > In the philosophical extreme, if zoning allowed infinite density you could stick a hong-kong style condo skyscraper for the entire population on 0.1 acres and the rest of the land would provide no additional housing utility pushing prices down to whatever the value it is as farmland/business/recreation. The housing value of surrounding land would plumet.

No I mean the land value of where the density is / right next to it. In your example, the land with the crazy tower / right next to it would be incredibly valuable.

If other areas use land value, that's because the land value is being concentrated in/around the dense areas.

When we talk about upzoning, we want to not only do less sprawl, but also increase overall population (growth will attract population). The exurbs will loose land value, but the cities will gain immense land value, and the suburbs will gain some land value too.

At the time of creating the condo the 0.1 acres would be substantial cheaper. If I have thousands or millions of acres to choose from and I can pick whatever 0.1 acres I want my demand for housing is 0.1 acres and the supply is still all the available land. Pushed to the mathematical limit the housing value of the land approaches zero for the land you buy for your hong kong condo, since demand is now near zero and supply far outstrips it. That is, the cost of the 0.1 acres to the developer is about the same as all the worthless for housing land surrounding it.

Since a large portion housing is currently locked up in 30 year mortgages in a once in a lifetime COVID era near 0% loan that people will not give up for less than a king's ransom, we should be especially sensitive of price of land for new construction, and that will continue to be a dominant factor in rental costs and home prices.

You talking about the average price of all land. I'm talking about the price of built-up land. We're not talking about the same thing.

Land in Hong-Kong and Manhattan is more expensive. And arbitrarily tall tour makes its tiny neighborhood of land arbitrary valuable.

Your also assuming housing demand is exogenous to land use — e.g. that everyone that would live in SF but can't afford it lives in Tracy. That's not true. If you make SF contain 3.5 million people, at Manhattan density, you better believe we'll not suck all the people out of Palo Alto or Oakland, but also increase demand in those areas. Fremont would have more demand but less so, Pleasanton in not sure, and the central valley exurbs less demand.

Suppose Hong Kong and Manhattan rezoned and made it illegal for half the density there to exist. That is, for any given population, the demand for land would now be double.

Would you expect land prices to go up or down as some portion of the ejected people try to maintain a footprint there?

OK so under your though experiment we are chopping of too-tall buildings?

I would expect unit prices to go up, but land prices to go down. There are ugly bidding wars as people try to stay, but also much less revenue per building as the number of units shrinks. The increase in per-unit rents will not be as great as the decrease in per-building units, and thus per-land revenues will go down, and the land will be less valuable.

What actually happens depends a bit on the inequality makeup of society. In UWS / UES apartments are combined into a larger apartments more than people realize. That is somewhat similar to the zoning change, except it is market driven.

At the same time, the fact that rich UES/UWSers live in apartments at all is clear evidence that the rich can afford less land than they can in the suburbs, and they are OK with this.

There is a famous quote "a developed country is not one where the poor own cars, but the rich take public transportation". By the same token "a developed country is not one where the poor own houses, but the rich live in apartments".

Density is very egalitarian in that higher densities allow masses of less-rich people to compete with richer people for land. Arguably the inequality-driven apartment-merging-during-housing shortage is downstream of having a housing shortage, and if Manhattan didn't in fact have stupid zoning constraints too (yes, I know!) we would not be seeing these apartment merges / bigger units would be accompanied by taller buildings so not net fewer units.

Big correction: we want the value of land to go up. Under our current systems, this corresponds with the price of land going up, but that does not necessarily have to be the case. Taxation of land values causes the value of land to go up while keeping the price of land down, solving both problems at once.

Oh yes total agreement of course :)

But then we would actually be messing with homeowners capital gains, so I was going to bring this up separately.

I fear the only way to get rid of prop 13 is to buy out the incumbents, in effect. We will compensate for higher property/land taxes with much higher land values, so the lucky incumbents gains are not threatened, but for later generations, the LVT already started high, and the prices low, and capital gains should not be expected.

> No politician wants more affordable housing in a place where >65% of voters are property owners...

Despite the fact of living in Canada for 10+ years, where the same argument is repeated. I just don't understand it.

I'm originally from the country where >80% of population live in a owner occupied housing. At the same time everyone wants cheaper housing.

>They managed to find the one fucking way to make additional housing make being a new homeowner even more expensive, and I believe it was not by accident.

Who cares about "being a new homeowner" (ie. housing as an investment)? I think the far more important thing to care about is housing as a service, ie. being able to find an affordable place to live. Housing is not a great investment. It lags behind equities, isn't diversified, and is an unproductive asset. As such, I'm not going to care too much that people can't get in on the action.

> Who cares about ....

Secure shelter is a necessary pre-requisite to having and raising children. The low birth-rate is a direct result of disadvantaged capital formation, selection interference, and the chaotic and growingly insecure future economically.

Housing is a great and tax favored investment if you know what you are doing. Cash flow is king. That said, rent-seeking behavior is non-productive, and vile in a lot of ways, and equally regulation to address issues is so poorly written that it ends up destroying the market wholesale.

If you take a look at the demographics and trends, we may actually end up having a housing surplus within a decade.

>Secure shelter is a necessary pre-requisite to having and raising children. The low birth-rate is a direct result of disadvantaged capital formation, selection interference, and the chaotic and growingly insecure future economically.

Housing in Singapore is famously affordable, but it has the lowest birth rates. Same goes for Japan, or other European countries where house prices haven't skyrocketed but birthrates are still plummeting. There's just no good data backing your claim.

>Housing is a great and tax favored investment if you know what you are doing. Cash flow is king.

Explain. How does a house have better tax treatment and cash flow than buying a vanguard ETF? You might get to deduct your mortgage interest, but you can also deduct margin interest in a brokerage account. I can't see how signing up for a 30year commitment, 20% down payment, and 6% realtor fees is good for cash flow.

> Housing in Singapore is famously affordable ... There's just no good data backing your claim.

There is quite a bit of data backing the claim in countries whose culture includes the nuclear family. David Willetts published a book on this, he also runs a foundation called the Resolution Foundation.

I'll refer you to him. The book's name is called "The Pinch".

The problem with using Japan or Singapore as examples is that they are collectivist societies. The social milei is fundamentally different.

> How does a house have better tax treatment and cash flow than buying a vanguard ETF.

First, the risk in any stock market security today is unmanageable. Take your pick with price discovery (dark pools > 50% volume transactions), chaotic geopolitics, monetary instabilities, etc.

This isn't financial advice. You should take a look at the book Rich Dad Poor Dad, the stories are mostly BS, but the financial parts works, don't get conned into taking a seminar.

With real estate, you turn it into a business. Business expenses are fully deductible. You have cash flow from renters that pay mortgage after you reach a a certain point on your loan schedule. You can deduct the mortgage interest, choose when to use cash flow for a number of things including capital improvements, 1031-exchange, and the best part, you've bought it on leverage.

You pay 20% for 100% of the use.

Every year, 2% or more of what you owed in purchasing power evaporates, then there's depreciation and its recapture loopholes, and this is just the surface.

A competent CPA, will be able to advise in more depth. Obviously this isn't financial advice, just answering your question.

Many, many people care about the peace of mind of not worrying about a landlord telling them what they can do in their home or ending their lease.

Right but the inverse of this is that those are the same people who are making housing unaffordable over time.

Because when housing is an investment, that means more homes being built is threatening to your investment. Home prices going down is BAD, you want them to be as high as possible. And you can't just undo or ignore this bias, it's fundamental to the model.

There are even models of lot split in CA that they somehow ignore. So many homes all over the place in various municipalities in CA that have had the ~170ft+ deep lot clearly split into sometimes four discrete homes each with their own mailing address on a shared driveway. You can see this readily in some municipalities like Bellflower and others in LA county where a large fraction of the housing stock is already like this in split lots. Yet somehow the legislature has botched this and not made whatever goes on in Bellflower or Hawaiian Gardens or Gardena in terms of their own lot splits by right for elsewhere. I guess these cities don't have enough "clout" to be seen as good examples for lot splits for the state.

Housing prices did not outpace inflation in 1973 - 1993. The periods of significant house price inflation (early 2000's, last 15 years) seem to correlate better with periods of wage increase rather than the periods of wage stagnation.

It also correlates quite well to available flat land for greenfield development running dry in major metro areas like the non-antelope valley side of LA county. And what do you know, prices are much cheaper on the other side of the San Gabriels where there is room to develop more housing. Without room for greenfield, infill needs to be legalized, or prices rise such that the only winners are the high income people able to participate in the now buyer constrained housing market like we see today.

Proposition 13 was 1978 (99 years after the publication of Progress and Poverty).

Thanks for the correction

When I was young and renting we found the best landlord. She would buy properties and let them run down. Thus changing the neighbors from fighting against her construction permits to championing them. Because she wasn't looking for rental income but had lots of future development properties she rented to us because we were such easy renters to have. Lived in some amazing locations slated to be future exclusive properties around Santa Cruz county. So many weird games spring up around arbitrary rules/laws.

The author is fighting an uphill battle given that this subject has been covered many times in the past, each with their own interpretation, more often than not in contradictory opinion. I stopped reading after it became clear that they are just following the same carved path that's been covered before, with all the same mistakes, not original thought.

Monetary debasement (money-printing) explains the issues. The chaos is explained by Mises with regards to centralized systems as early as the 1930s.

There's really no point in discussion when the majority is noise.

At the same time cost of living has not risen so much in certain parts of the country. You are paying say $1.2m in CA for a modest home worth say $90k in Toledo, Ohio. Labor certainly isn't so depressed in Ohio vs CA, it is a little but not by a factor of over 10 fold like we see in comps in the housing market. This is why it is important to recognize the regional factors that lead to these differential outcomes IMO, and you can't consider that without considering the state of the housing market. Everywhere had the same Fed but we see dramatically different outcomes.

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