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Expensive real estate is a deliberate policy of the government. Local government zoning laws keep the supply tight. And low interest rates and easy credit enable people to take out huge loans to bid up the prices of real estate.

To get cheap housing, the government would just need to repeal zoning laws and limit all the size of all home mortgages from any government subsidized institution (FDIC insured banks, etc.) to a maximum of 3X median income with a 25% down payment. That would get housing prices down very fast.

The government keeps housing expensive, because older home owners are one of the most powerful voting blocks. Your average 60 year old homeowner is much more likely to vote than your 25 year old apartment dweller. Furthermore, the homeowner is going to be irate and vote against any politician who enacts policies that make their home price go down, while the 25 year old is not really paying attention.

You're committing the "deus ex machina" fallacy where by you seem to assume that the government has the incentives and institutional ability to effectively manage public housing and keep the cost of housing down. The actual experienced history of government housing in the U.S. has been positively atrocious. And in terms of cost, government housing generally costs about twice as much to build as the equivalent private sector housing.

The really hard problems are: how do you wrest political power away from middle-aged home owners? How in general do you make government work for the general interest as a whole rather than work for powerful factional interests (such as homeowners, construction unions, etc.)

Add to that the home mortgage tax deduction which doubled the price of a new home.

Wry reply: one thing that might help is the fact that not many Generation X (and Millennial) people are going to be cozy homeowners in their 50s and 60s...

What you say is so right that it's painful. Expensive real estate is a classic generational ripoff. These people had it easy but didn't save money, so they made up for it by rigging house prices with the post-1965 crowd paying a monstrous bill.

Let's not use FDIC as a crowbar to micromanage consumer banking, please. There are so many better dials for the government to turn than resorting to that.

"Let [us] not use FDIC as a crowbar"

Who's "us"? I don't work for or have any power over the government or FDIC.

You're making an argument. He's saying that your argument has the unfortunate consequence of using the FDIC as a tool to micromanage consumer banking.

You're not a citizen?

I am a U.S. citizen. But that does not mean I use the words "us" or "we" when discussing the actions of a government bureaucracy. I'm sure I have a few shares of Microsoft in some mutual fund, but that does not mean I use the word "we" when discussing the actions of Microsoft.

Instead of parsing my imprecise usage of the word "let's", can you address my actual point?

I find that most people who use the word "we" or "us" when talking about government actions are not being imprecise. Rather they have internalized the civics class myth that ordinary citizens have a large amount of agency over government. I like to poke at this delusion when I can.

I'm not exactly sure why you think the FDIC should not micromanage the mortgage market. My guess is because the FDIC is government bureaucracy, and our government is so dysfunctional these days, that you think any attempt to manage mortgage markets would just make things more screwed up. And you are probably correct. Although I would say the cat's a little out of the bag with regards to preventing government bureaucracies from messing around with mortgage markets.... But my main point was not to make an "ought" argument, but to demonstrate to michaelchurch that if he wanted a particular "ought" outcome (lower housing prices) there are easier ways than to have the government buy 60% of all real estate. If you have even easier ways, that require even less government micromanagement, I'd be intrigued to hear them.

In any scenario in which Michael or I actually have enough power to direct the FDIC or government to carry out our madcap plans, the political situation would be so different that many current arguments against FDIC intervention would be obsolete. There might be new arguments against FDIC intervention, that would depend on the specifics of the changed political situation.

When I say "let's not do X", I don't mean it literally, it's just a way of saying "X is a bad idea". Let's just set aside that entire digression.

> I'm not exactly sure why you think the FDIC should not micromanage the mortgage market. My guess is because the FDIC is government bureaucracy, and our government is so dysfunctional these days, that you think any attempt to manage mortgage markets would just make things more screwed up. And you are probably correct.

Two points:

1. If you want to regulate the mortgage market, that's one way to go. But that should be a totally separate concern from FDIC and should be implemented in a separate way. Removing depositors' insurance because their bank didn't follow mortgaging regulations is a very poor way to regulate the banking industry.

2. The federal government subsidizes mortgages in many ways. Instead of legally regulating mortgages it might be sufficient for the government to just stop doing this. For instance, there are tax incentives for having a mortgage. The government also intervenes directly in the mortgage industry in the form of Freddie Mac and Fannie Mae. When I said "there are so many better dials for the government[1] to turn than resorting to that", those are some of the things I was talking about.

[1] Note my use of the third person--are you happy with that or did "let's" derail you from reading the second sentence of my comment?

I agree that if you were trying to lower housing prices you would start by eliminating all the subsidies.

There is some chance that eliminating all subsidies would not meet whatever price goal is desired. Housing near employment is going to inevitably be scarce in some cities, and people will inevitably get in bidding wars. If people can take out the maximum mortgage that a high-earning, two income family can afford, then everyone will need two-high earning incomes to keep up (see the book The Two Income Trap).

If you want to regulate the mortgage market, that's one way to go. But that should be a totally separate concern from FDIC and should be implemented in a separate way. Removing depositors' insurance because their bank didn't follow mortgaging regulations is a very poor way to regulate the banking industry.

I think it is most reasonable to have the insurance company be the regulator. This is common in almost all other industries. If you are a landlord, the apartment insurance company will tell you to not allow smoking in the apartment or else it will not insure you or will jack up your rates. If I was czar, I would consolidate the bank regulating functionality which is now spread across a half dozen agencies all into the FDIC. If a bank refused to abide by FDIC regulations it would either face higher premiums or be expelled. If a bank was expelled, all customers would have an opportunity to transfer their deposits to another bank. The executives of the FDIC would be given a comp-plan designed to make them balance the need for expanding credit and the need for overall stability. For instance they could be comped based on overall premiums, but with clawbacks of the last decade of bonuses if the FDIC faces systemic failure and needs a bailout.

A real estate market separated into 60% government-owned cheap housing and 40% privately owned expensive housing strangely reminds me of NYC with its rent control/stabilization policies. Most of the current problems will not go away with government owning buildings instead of landlords. If the prevailing rate is low enough, a black rental market will soon form for government-owned units in desirable locations.

What I agree with is that somebody must build new housing. If private developers cannot/would not do it, then its a market failure and government should step in.

In many areas (including the Bay Area) the government won't allow private developers to build new housing (via zoning laws etc.)

There is no abstract "government" doing it. It is the work of people who do not want new housing to be built for some reasons. They probably have lots of influence in local governments.

Local governments are small and arguably inefficient, it is easy for special interests such as homeowners to influence them. But there is a long tradition of local government in US and they have real power. The solution here would be for higher-level (state) government to intervene, keeping in mind interests of all state residents and not only homeowners.

Building a house is cheap, having the local infrastructure to support houses is expensive. Letting people build unlimited housing without restriction is a terrible idea.

What we need is a tax on new houses that covers local infrastructure needs. We don't do this because developers have long fed on subsidies of there external costs by local governments.

We call those taxes property taxes, but thanks to prop 30 in California the situation there is totally messed up too.

Property taxes are a poor approximation of external costs even excluding prop 30. Most obviously there paid after the fact and the county needs infrastructure up front.

Consider you add a new subway stop in an area and suddenly people want to replace single family dwellings near it with apartment buildings. The region paid for that subway expansion, but a few well connected developers stand to make a killing. When you get down to it Zoning is really an ideal way for local politicians to shift the benefits of public infrastructure into well connected private hands.

It depends on how the project is funded. Some improvements (such as bringing city water/sewer to an area on the outskirts of town or paving a dirt road) are typically funded via special assessments on the affected property. The local government can then sell bonds secured by the future revenue stream and pass along the financing cost to those who see the benefit.

Subway extensions typically distribute costs over a wider population (the regional/state/federal government paying for large chunks of it). On some level this makes sense. A special assessment on the areas within X feet of a subway station would likely be prohibitively costly for property owners, and the entire region benefits from better transportation infrastructure with more benefits. On the other hand, the person who owns the property across the street from the new subway station is benefiting much more than someone who lives on the other side of town. Perhaps a combination of special assessments and general revenue funding is more appropriate for this scenario? You're certainly correct that the current system transfers a lot of public value into private hands. The Central Subway in SF is going to make some property owners in Chinatown very wealthy.

The implicit conclusion from both of your points is that the government should be able to select fucking great people like you over others to offer affordable housing to. Sounds like a recipe to dystopia.

The problem, or the balance that must be struck, is that it's hard to innovate without being surrounded by other innovative people. You need a city with a critical mass of innovative, talented people and a low cost-of-living.

I agree. Come to Austin, TX!

Except the critical mass is something like 3 people. So, yes people help but having 1,000 or 1,000,000 innovators around you makes little difference.

For a proof-of-concept early-stage lean startup, no, number of trained people you may hire around you is not a key issue. As soon as you want to move fast and hire people to help you industrialize the business model you found, having trained people of key specialties around you is going to be necessary. I think the jury's still out on whether remote work can replace this.

It's a lot easier to just have the government implement a land-value tax and repeal zoning laws than to actually administrate 60% of the "dwellable" land.