These are the macro effects of housing. I buy all of them. I'm a housing activist involved in local politics in Oak Park, IL (one of Chicago's two equivalents of Berkeley or Brooklyn, the suburb of Evanston being the other). Some micro/local impacts of housing restriction:
* 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.
I live in a very similar neighborhood with exactly the same problems (DC railroad suburb) and completely agree with your assessment.
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.
It is a very typical problem in the US, but it's not really the only issue. Go look at Spain, a country that has, historically, had little issue building housing: Very dense housing too by most standards.
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.
It sounds like both Spain and the US have tax systems that cause it to be expensive to sell a house and buy a less expensive house.
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.
That is false in the case of a house. a house you live n can lose value relative to inflation and still be a good investment. remember you have to live someplace and so that rent cost needs to be subtracted from you total investment costs as you would pay it anyway. After you pay the house off (if you do) you continue to sbtract those costs from your investment.
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.
> Housing can be affordable or it can be a good investment. Not both. Not for long.
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.
Housing as an investment here references the idea of owning the home you live in being a great source of capital gains. This depends wholely on appreciating value, which is orthogonal to affordability.
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.
> Housing as an investment here references the idea of owning the home you live in being a great source of capital gains.
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.
People who are trying to buy a house may or may not want it, but people who currently own who are beneficiaries of this stand to lose a lot if their house lost its value, which they have undoubtedly financially planned around.
It doesn’t help that the move to 401ks from pensions was generally not good for beneficiaries and Social Security is facing a shortfall even before you consider current shenanigans.
> People who are trying to buy a house may or may not want it, but people who currently own who are beneficiaries of this stand to lose a lot if their house lost its value, which they have undoubtedly financially planned around.
So you've given the actual reason here, but now the original description is wrong.
It's not that people want housing to be an investment, it's that people want the housing they already own to remain expensive instead of becoming affordable.
That is, of course, directly in opposition to housing being affordable. But the problem isn't that you need the number to go up, it's that people don't want it to go down. Which isn't a problem if it starts off low and stays there, but is currently a problem because the price is already unsustainably high and needs to go down.
That problem only has one solution and the existing homeowners aren't going to love it.
> It doesn’t help that the move to 401ks from pensions was generally not good for beneficiaries and Social Security is facing a shortfall even before you consider current shenanigans.
People have not been better off for having invested in real estate rather than e.g. stocks:
The Social Security "shortfall" is also entirely fictional in the sense that it has already happened. The Social Security Administration, today, is already paying out more in benefits than it collects in social security taxes. It used to do the opposite, so it gave the extra money to Congress to immediately spend. As a result the government has government bonds on its own books, which is a no-op. Today Social Security sells those bonds to cover the existing shortfall, which is equivalent to deficit spending. Social Security started out by paying benefits to people who never paid in, which is why it will "run out" but is also why the "trust fund" is a sham and nothing magic happens when the bonds run out except that Congress has to pass a law that says "no that's not any good" and change how the accounting works to not be so ridiculous. What they should do is eliminate both the "trust fund" and the social security tax and just fold the program into the general budget with a corresponding adjustment to the general income tax.
"Housing is a good investment" means that the total returns from investing in housing are competitive with the risk-adjusted returns of the overall market.
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.
The sale value won't stay flat unless you tax land (or use leasehold like Singapore), because typically incomes rise, and in most places the rate of building new housing has an equilibrium lower than the rate of demand, because profit is needed for private developments to go ahead.
This results in a) higher incomes, and b) higher rents, because landlords can extract some of the increase in income, because tenants don't have enough alternatives to keep the rents low.
Capital value of property is a function of rents, so increases in rents result in increases in sale value of the property.
> The sale value won't stay flat unless you tax land (or use leasehold like Singapore), because typically incomes rise, and in most places the rate of building new housing has an equilibrium lower than the rate of demand, because profit is needed for private developments to go ahead.
Developments can be profitable without the price per unit significantly increasing.
Suppose that an existing unit is $50,000 and it costs $150,000 in construction costs including profit to replace one unit with four. Then you have a stable equilibrium; a construction company could buy one unit for $50,000, convert it into four, sell them for $50,000 each and net $150,000 which covers their costs and profit. They'll stop doing this if the price per unit falls to $45,000. They'll start doing it again if the price per unit rises to $60,000 and keep doing it until it gets back down below $50,000. Therefore, the price per unit remains stable at ~$50,000, even if demand increases, because that just triggers more construction as the price temporarily gets slightly above the breakeven point.
This is why zoning restrictions cause housing costs to increase. If you declare that 95% of the land is zoned exclusively for single-family homes, you can't replace one unit with four or even two in any of those areas. Then the remaining 5% of the land already has a 20-unit complex on it and in order to add units, you have to replace it with a 30-unit complex. Taller buildings require more expensive materials, you've had to demolish 20 units instead of one and only increased the number of units by 50% instead of 300% and land on which you can even do this at all is now more scarce so you're paying even more per unit for the ones you're going to demolish. Now the breakeven price for new construction is $500,000/unit and if growth continues it has to rise to the level that can cover the cost of demolishing a 30-unit building to build a 40-unit one, even though 95% of the local land is still single family homes.
I have tried to explain the sense of "good investment" that is meant by policymakers and voters and the cliche above. You have tried to explain that there is another sensible definition available. I don't disagree, but I think it is beside the point.
I feel like it is the point. The claim being made is incorrect.
If you have to invest a significant amount of capital to own housing and it isn't a good investment then people won't want to do it. But there are reasons we want to encourage home ownership, so if it actually wasn't a good investment then that would be bad. People would stop doing it. So it's important that the claim actually is incorrect; it can still be a good investment even if the value never goes up, because it avoids you needing to pay rent. If keeping the values flat would result in lower home ownership then doing that might actually be a problem, but it isn't.
The real problem -- the thing people actually care about -- isn't that the value has to go up. It's that they don't want the value to go down. If they paid $500,000 for something which is only worth $100,000 they're going to be pissed. But that's also what needs to happen, hence the impasse.
Why do we want people to buy houses? It incurs transaction costs and makes it difficult for people to relocate to be near their jobs and such. It seems like we should optimize solely for the cost of meeting people's needs - either by paying rent or by owning - compared to the sale value of their labor.
Housing services aren't the problem, capital gains are. You know this. You are nitpicking. But if you ever find a portal to the alternate dimension you describe, please give me a ping, I'd love to live there.
> Housing services aren't the problem, capital gains are. You know this. You are nitpicking.
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.
Your example is nonsensical. This is not how the real world works, living in hypotheticals doesn’t help anybody.
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.
> 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.
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.
Your growth rate of 560k to 627k is 11.9% (r - the rate of return on capital). This outpaces wage growth - let's assume generous non-inflation corrected 5 % (g - a proxy for the growth rate of the economy)
Your assets after 50 years: 267x
Your wages after 50 years: 11.4x
Your new ratio of assets to wages: 23.4
This calc works with any number where r > g (source: capital in the 21st century by piketty). The end result of asset growth outpacing wages is complete divergence and the end game of Monopoly where 1 guy owns everything. Usually by then the system has cracked and the society has burned down.
These are hypothetical numbers. The point is that you can receive a return without any capital gain, not what the exact percentage is.
> This outpaces wage growth
So does the S&P 500. The big problem here is that real wage growth has stagnated, of which a major contributor is... high real estate costs.
> The end result of asset growth outpacing wages is complete divergence and the end game of Monopoly where 1 guy owns everything.
This is obviously untrue. Example: Jeff Bezos and Elon Musk get into a bidding war over real estate on Mars. The Martian real estate market is now worth a hundred trillion dollars, even though nobody lives there. The owners of Martian real estate now have a net worth of trillions, but it's all locked up in Martian real estate. The rest of the economy is unaffected.
Asset price inflation only affects ordinary people if the inflated assets are something they have to buy.
Which gets us back to real estate, which is such a thing. Suppose Bezos wants to buy Earth real estate in order to rent it out and turn a profit. He buys units that cost $25,000, makes not just 12% but 25% annual returns, uses all the money to buy more units.
If construction is constrained, housing costs are going up with higher demand, which is the problem in the existing market. But suppose we're not doing that; it still costs $25,000 to add a new unit of housing and anyone proposing regulations to make construction more expensive shall hang from the neck until dead in the gallows on main street.
If Bezos wants to use his profits to buy more housing and he tries to buy the existing housing, demand increases, so the price goes up to $26,000/unit, so construction companies build more units until it falls back below $25,000/unit again. Then Bezos goes to rent out his new units and finds that rents have gone down because there are now more units on the market. But a 21% return still great so he keeps at it and then goes to buy more units with the profits again, which causes more to be built, which further lowers rents/returns by increasing supply.
The ultimate result of this, then, is that r falls below g. Unless you constrain construction.
I think you present an idealized version of market economies that is not in line with my experience (I live in Sydney Australia our housing system has collapsed). Our disagreement seems predicated on our beliefs around r > g. Have you read Piketty?
I'm familiar with it. The obvious question to ask in response is, why is r > g? What can be done about it?
Piketty's answer is more or less "do socialism", but that's not obviously correct. For example, a lot of government spending programs tend to funnel money into well-connected industries, which are the things already accumulating capital. Likewise, transfer payments to individuals can be absorbed by monopolists if the monopolies are allowed to persist.
And that, really, is the true cause of it. Market consolidation. Regulatory capture. If there is more competition, the competition lowers margins, and then more of the surplus goes to the consumer instead of the investor. If the incumbents capture the government (or the government is careless about creating market barriers to entry) then competition is reduced, margins increase and more returns go to capital. The latter is clearly what's happening in the housing market.
The difference you’re not accounting for is that when someone buys a house, in practice they value it as an asset that must increase in value, not simply as a way to offset rent costs, which is effectively what you’re saying.
Thats the real problem. People believe their 500K house must go up in value and not fluctuate in value like any other marketplace of goods would see, and therefore are in opposition to anything that reduces the value of the home in which they live.
That’s why homeowners routinely bend over backwards to maintain home values. The general consensus society has is it’s one of the primary nest egg assets, and for many it’s their biggest one and they act in that self interest.
Real estate lacks the functioning market dynamics you see in every other area of economic activity, in part because we have collectively as a society decided long ago to adopt policies that would enshrine protecting home values above other concerns.
Edit: This also captures capital in an unproductive manner because real estate doesn’t have functioning market dynamics.
Imagine instead of having ever increasing real estate costs (the reality of todays world) which benefit only a finite fraction of economic investment but make up a huge total of the average persons expenses, that productivity gains could instead be captured by other investments like stocks. You’d have more people able to invest in companies, meaning there well could be more companies to invest in, increasing the health of other markets in turn. People will put their money somewhere and naturally a productive business is one such place afterall
Instead, one of life’s biggest overall expenses not only increases over time in aggregate but the value is captured by an fraction of the population of that increase, which is really a net loss to economic activity more broadly
Putting aside rent (which should be illegal IMO outside of rent to own—it just makes no sense as a social construct if you want to fight poverty instead of create it) 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.
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.
> Putting aside rent (which should be illegal IMO outside of rent to own—it just makes no sense as a social construct if you want to fight poverty instead of create it)
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.
> 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.
That's not necessarily a bad thing. You can leverage whatever you're mortgagibg as an asset (or in this case, whatever portion of the property you now own). You can't leverage your rental property despite almost certainly paying more than the equivalent mortgage.
As you point out, rent makes sense for transitional or temporary living. I just think you should get ownership over some portion of the assets you are de-facto paying for.
> Developers want to build
Well, stalled developments are a problem across basically every metro market in the country. They don't make their money by building, they make their money by waiting for the labor & materials market to make an eventual sale profitable. In some metro areas with labor-this may be sufficient for some markets, but others (like the bay area) it's clearly not going to provide the housing people expect yimby zoning policy to deliver. Like yes zoning is a major issue in the city, but it's only one of many, and it's not sufficient to explain dysfunction where development was already zoned and approved years ago.
One really great way to encourage developers to perform the role they're allegedly already serving is by having public-sector competition (zero- or negative-margin development/property management) to give them an incentive to be realistic about costs and timeframe. Or just straight fine them for wasting city property on zero-or-arguably-negative-value use.
> That's not necessarily a bad thing. You can leverage whatever you're mortgagibg as an asset (or in this case, whatever portion of the property you now own).
"Not necessarily a bad thing" is the argument that it could have benefits under some circumstances. It's the argument that it should be allowed, not that its alternative should be prohibited.
The obvious cost is that you're paying more per month. Essentially, if you want a place to live, you're required to pay more in order to invest in real estate, even if you don't have any surplus to invest or you would rather invest in something else.
> I just think you should get ownership over some portion of the assets you are de-facto paying for.
When you rent, the landlord is covering the interest on the mortgage loan, property tax, maintenance, etc. The rent covers their costs and some profit to make it worth their trouble, which they often use to start paying off the mortgage. If there is no profit, there is no landlord to pay to build the building and either you can afford to buy it outright or you're homeless. So if you want to build capital, the money that goes to that capital is additional money on top of the rent, i.e. you'd be paying more per month because you'd be getting something you don't get when you rent. You're basically saying you think poor people should have higher expenses so the extra money can be used to force them to invest in real estate.
> Well, stalled developments are a problem across basically every metro market in the country. They don't make their money by building, they make their money by waiting for the labor market to make an eventual sale profitable.
They still make their money by building, you've just passed regulations that make building so expensive that it isn't profitable until rents are unreasonably high, e.g. by requiring them to knock down an existing multi-story building in order to add housing because most of the land is zoned exclusively for single family homes.
> you've just passed regulations that make building so expensive that it isn't profitable until rents are unreasonably high
This is just demonstrably false, though. Regulation does cause large overhead especially crossing municipal boundaries, but developers aren't building even where they've been approved to build. Either they accepted the work they knew they couldn't deliver under the current regulatory burden (essentially, committing fraud) or the bottleneck isn't regulations at all, but the other costs that dominate building.
Anyway, you can either pay off your investment or you can turn a profit. Doing both is just antisocial (ie malicious and harmful) behavior. If you're turning a profit, I better also get an equitable return. That would actually make sense.
Of course the world doesn't work like that, but nothing you're explaining helps me understand why this behavior is legal and people don't murder more landlords. This is simply not a reasonable way to divvy up resources in a community.
> developers aren't building even where they've been approved to build.
Suppose it costs $100,000 to add each additional housing unit if you could build them in areas that are currently zoned exclusively for single family homes, but they can't because the zoning doesn't allow it. By contrast, in the areas "where they've been approved to build", it would cost $800,000 for each additional unit, and the current market price is $750,000.
They're going to sit there and do nothing until the market price gets above $800,000 because otherwise they'd be losing money. If you want to change it you need to make it cost less to add housing units.
> Anyway, you can either pay off your investment or you can turn a profit.
These are not alternatives to each other. If there is any net profit, it would eventually cause the mortgage to be paid off. If there isn't any, why would anyone pay to build an apartment building?
If renting is illegal, moving without a buyer should be illegal. Wanna go land that cool new job in SV? Before you give them a start date you better find a buyer for your flat. Otherwise you're stuck. It's illegal to make someone else foot the bill when you decide to go somewhere else.
I believe the model is just like renting but the rent is a percentage of the value of the home. When you leave the landlord has to return part of the "rent".
> Putting aside rent (which should be illegal IMO outside of rent to own—it just makes no sense as a social construct
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
Why wouldn't you? The only reason I don't want to own a home is that it's very expensive. I own a lot of other things, because they are not too expensive. And there's an argument that if everyone had to own their home, it would bring prices down, until they'd still be expensive, but no so expensive they couldn't be afforded.
Hell, I don't want to own property right now as I'm in a transitional form in my life. I pay too much for what I get out of my current apartment and I'm looking to downsize/chuck amenities away. Trust me, I'm happy to not have to maintain my plumbing or HVAC and while the ikea-quality hardware is ugly and cheap feeling, it's not my problem. It hurts, but I know that I'm not up to the task of maintaining a house and it would cost me more than rent to hire someone else to do it for me + property taxes + mortgage + actual material costs of maintenance.
But if you want to solve homelessness, like actually try to remove it as a necessary reality of modern life (as many other capitalist AND socialist countries have successfully achieved), we fundamentally can't get there through mortgages and rents. I'm happy that people are more literate about housing policy than ever, but I think we can aim for more than marginally more affordable housing—we can completely defeat homelessness if we have the will to do so and don't have a dogmatic fear of subsidized housing destroying the value of the asset you'll leverage to retire on (if you're lucky).
Sadly, I suspect we'll see a lot more homelessness before people who legitimately have any of their interests at heart enter power.
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.
GDP / inflation / labor hours all loosely correlated though, so we aren't too far off.
Really I think of things in two main buckets-
Stuff that's going up faster than income and therefore the sooner you buy it and lock in a level, the better. This is also something that you can invest in, because it means when you sell in 10-40 years at retirement, it will have appreciated.
Stuff that's going up slower than income, and I'll buy it as needed.
For example on the face of it - cars and houses should both depreciate.
They cost money to maintain, that maintenance cost goes up over time (it is labor), and newer ones get nicer and nicer. However it is only cars that depreciate. And I don't just mean a used car. A 2000 Honda Civic started at $13k new. A 2025 Honda Civic starts at $24k new, and you now have good reliable Hyundai Elantra at $22k, which weren't as prevalent and reliable 25 years ago.
The fact that we underbuild is why houses refuse to depreciate though.
Perhaps, but at vastly different time scales. For most normal people a car degrades to beater status in just a couple decades.
Houses last more than a lifetime in most cases, barring natural disasters. Many centuries in some cases.
> The fact that we underbuild is why houses refuse to depreciate though.
Given that a house is seemingly good forever (no, not forever, but longer than a human lifespan) its value must go up at least as much as inflation. This is easy to prove by contradiction. Assume it didn't: it would mean two identical houses right next to each other would have vastly different prices depending on when they were built. But we know they don't, since comparables in any given neighborhood have about the same price (the value is assessed based on the comparables, after all).
If a house was built 30 years ago for $100K in labor and materials and an identical house across the street cost $400K in labor and materials to build today, the older house can't help but be worth at least as much because it is a comparable property.
Sometimes the argument is made that we'll just build so much that values are pushed below this, for both the old and new comparables. It is not clear to me who that "we" can be though, since no builder is going to afford to sell houses below cost of construction.
Cars and houses have different useful lives, but neither is forever.. and neither can get by without significant maintenance cost after a certain point.
I think we will see more baby boomer houses go on the market which are near full teardown as the remaining value is the land only.
Not sure if you've lived in wood framed SFH, but stuff built in the 40s-70s really shows its age now.
Lots of $10k-50k costs that start to creep in as you need to replace roof every 10-20 years, wooden siding/shingles (10-20 years), all the windows (20 years?), boiler/furnace (20 years), central air (20 years maybe), etc. If you need to replace hardwood flooring could be $20k.
My parents have well water and even though it's treated, after 50 years if you were doing a gut renovation you'd probably replace all the pipes. Could switch to city water but thats about $50k.
The masonry on their chimney just cracked and a baseball sized chunk fell on the deck, I dunno $5k. Speaking of the deck, it needs to be torn down and replaced.. $10-20k.
Did I mention their home is worth like $300k on Zillow? These things don't go all at once, but they start to hit more and more often past a certain point.
And this is before the era of particleboard pre-fab construction which I'd imagine will breakdown faster.
Everything you say is so profoundly alien to my house experience that I'm not sure how to relate.
If you are replacing major structures of the house every 10-20 years, something is wrong. That is not normal.
The house I grew up in is turning a century in a few years, and nothing about it suggests it isn't good to go another century at least. Original windows, who replaces windows every 20 years? Why?
Multiple friends live in houses their grandparents or great-grandparents built, those are well over a century. Perfectly comparable (in valuation) to new ones built a block away. And that's why houses won't depreciate in the timescale of a human lifetime.
> If something goes up more than inflation - it is a good investment
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.
Sure but if you make the tax incentives TOO good for landlords, owner occupied housing % goes down as those with capital amass larger portfolios to lease out.
Further if you made building housing easier there would be more available, with less price pressure from excess demand pushing prices and rents up.
I’m more interested in enticing developers to build than I am encouraging more landlords.
Okay but I think we’ve lost the thread of the argument.
I am arguing against the claim
"Housing can be affordable or it can be a good investment. Not both."
You support this claim with the argument that “If something goes up more than inflation - it is a good investment” and therefore it can’t be affordable.
I am saying real estate can be a good investment even if it doesn’t go up more than inflation. Do you disagree?
Further, for landlords to make homes available to rent, housing must be a good investment. Do you disagree?
Note that a Georgist tax on 100% of land rental value does not stop the landlord from earning a return on their improvement values. The land tax of a property with a 100% land tax will decrease the land price down to $0, and thus instead of for instance putting $500k into buying land and $500k buying apartments, they could instead buy 2 $500k apartments for the same capital cost. The end result of this will be more apartments, which will bring down rents, but this will yield a higher ROI than they currently achieve, since they have to pay less rents to the banks.
> I am saying real estate can be a good investment even if it doesn’t go up more than inflation. Do you disagree?
Yes I think so. You need rents to escalate faster than maintenance costs (which are tied to inflation closely) for this to be a good trade. So again - for rent to become relatively less affordable over time.
It sounds like you are not considering rental income (the argument I made in my original comment). You only need growth of rental income to exceed growth of cost for it to be profitable to be a landlord. Am I incorrect?
See also China, which has seen massive overbuilding (50M empty units and 20M paid for but unbuilt), many empty buildings, and now the beginnings of a crash. Why? Because everything was financialized. Houses became an investment rather than a place to live. "If you move in, it loses value!"
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.
Note: I’m summarizing a very complex topic as best I can. There is a lot of nuance and thought that goes into a properly implemented land value tax (LVT) that I’m not covering here.
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 (which are very good, yet seen as unfair by owners, so they stay low)
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 observations about effects of tax seem fair enough, but perhaps miss the point of taxes. The local government presumably needs to balance the budget somehow. The income has to come from somewhere, and that's presumably going to be a tax of some sort. Whatever is taxed, there are going to be drawbacks and market distortions as a result.
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.
> Whatever is taxed, there are going to be drawbacks and market distortions as a result.
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.
Property tax are mostly taxes on the land. If you want to build housing, you get the necessary land cheaper, thanks to the property tax. I agree that the sales tax is bad though.
Land value tax would be on the land. Property tax includes the buildings, which is naturally the issue. If you want to replace a single family home with a 6-unit structure that each provide as much housing as the original unit, your property tax is going up, providing a corresponding deterrent to anybody doing that until the rent or market price of the building has gone up by the same amount.
Like all these things even in a market like Spain thn solution for one area can create issues in others. Barcelona suffers very different problems to Santander.
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.
Spain (since it's in Europe, though you could say the same about ME countries) is an example that housing does not drive growth. Growth can drive housing and housing shortages can hamper growth but housing on its own does not drive growth.
If taxes at sales time (capital gains on real estate) are keeping people from selling houses, why not eliminate those taxes to free up the frozen housing market?
> After you liberalize housing, you still run into the trouble of economic forces trying to turn housing into a sensible investment.
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.
I don't think slapping a Georgist LVT will magically solve everything, but it will point market forces towards a desirable path, which is already a huge huge help compared to the state of things now.
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.
Louis Rossmann has a video series of his rants about commercial real estate and the refusal of landlords to rent spaces to him which have been vacant for multiple years.
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:
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:
> This is empty speculation. And it can be trivially refuted by noticing that vacancy rates are at record lows.
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.
Bookstores and things are desirable to local residents but are less profitable than other prospective tenants once the area has high traffic. The bookstore can't afford the higher rent but a Starbucks or something can. The landlord is willing to take a short-term vacancy for a long-term higher paying tenant.
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.
Whether it's a franchise or not isn't really the issue.
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.
I have heard it said that landlords are willing to take losses on some properties (leaving them vacant) if it means they can continue to justify their other property valuations. If they drop rents, that lowers the valuation of that property - and others like it - which can have a cascading effect of their entire portfolio. Would love to be corrected here if someone has a more detailed understanding.
This one has legs because it plays into the "landlords are evil" vibe, but it makes zero sense. There are thousands of landlords in any given city, if not millions. It's not uncommon for a local landlord to only own a single building, and even the ones that own multiple properties will almost never exceed a single digit percentage of local real estate. The exceptions are things like company towns which is just not what anybody is talking about here. But if you own 0.3% of the units in a city, withdrawing some of your units from the market is not going to materially affect the city-wide rental price for the other units.
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.
I actually think this one is pretty accurate for commercial real estate in particular. I’m in Metro Detroit and either a building is a totally dilapidated wreck in an area that has theft problems, or it’s going for $1~3 per square foot per month on triple net terms (leasee must do all upkeep, pay utilities, etc), which comes out to $100000/year in rent before utilities and such for an empty concrete shell. Worse than that, none of the places anyone lives are anywhere near anything available, so I can’t rent something for a nice big woodshop. At the same time, I can’t build a decent thing as a “garage” on my 2.1 acres due to zoning in my municipality from 25 years after my house was built. At the same time, there’s a bunch of buildings sitting empty with no rent paid. This means that landlord cost structure for light industrial is completely different than you seem to suppose or there would be competition and prices would come down…
I'm not entirely sure what you're even arguing here:
> I’m in Metro Detroit and either a building is a totally dilapidated wreck in an area that has theft problems, or it’s going for $1~3 per square foot per month on triple net terms
That makes a certain amount of sense. If a building is completely wrecked then the landlord would have to spend a lot of money to improve it, but isn't going to do that if it's in a bad area that couldn't command higher rents even if it was in better condition.
> Worse than that, none of the places anyone lives are anywhere near anything available
Again what you would expect to happen if they weren't purposely withholding units; units in higher demand areas are all rented out and the vacant units are vacant because nobody wants to be there.
> At the same time, I can’t build a decent thing as a “garage” on my 2.1 acres due to zoning in my municipality from 25 years after my house was built
Again consistent with the evil thing landlords do being to lobby the government to prevent competition, rather than not renting out units they could profitably rent out.
> At the same time, there’s a bunch of buildings sitting empty with no rent paid.
But you have yet to establish why. Are they units nobody wants for some reason? Are they "empty" but actually rented out, because some company signed a long-term lease before COVID and now they're WFH so nobody is there, but the lease doesn't allow subletting?
The inverse of the latter could also explain a lot of it for commercial real estate. Companies typically use long-term leases with defined terms because if they move in they're going to have significant expenses to install office furniture, wire up all their computers and cameras and things, put up walls where they want them etc. They're not going to do that in a place that could jack up their rent a year after they move in, so they demand a long-term lease with a defined rent.
Now the landlord has a problem. WFH is still a thing and it's harder to find commercial tenants, but they don't want to provide a new tenant with a huge discount in a long-term lease if they're predicting WFH will go away and they'll be able to demand higher rents in a year or two. And maybe that's cope, but it could still be why they're doing it, at least until they've sacrificed enough income to realize that WFH isn't going away.
Or it could be something else, but "landlord with twenty buildings thinks they can significantly increase city-wide rent by not renting out some of their units" is still nonsense. If it's happening at all it's only because those landlords are the proverbial fool and their money, not because they've devised an evil plan to profit from screwing people, because that evil plan screws the landlord doing it more than it screws the tenants.
Again, their actual evil plan is to prevent other people from putting more units on the market, by lobbying for zoning restrictions that inhibit new construction. Not by foregoing their own profits on their existing units.
There could be honest but non-obvious reasons. Maybe they need multiple renovations before they can get a certificate of occupancy but the local permitting office is Kafkaesque, or the site needs environmental remediation before it could be rented but the owner doesn't want to deal with it so they're trying to find a buyer instead of a tenant, or they have to finish suing the previous tenant who messed up the unit before they have the money to fix it, or the landlord took out an adjustable-rate mortgage right before interest rates went up and WFH started and is now bleeding cash and waiting to see if rates come back down to decide whether they want to invest new money in finding tenants or just file for bankruptcy.
One of the serious possibilities is that they're dumb. Lots of idiots exist, some of them buy real estate. They're asking for more because they erroneously think they can get it and then they're wrong so the unit is empty. They eventually either figure this out and lower the price or they run out of money to pay the mortgage and the bank comes for them, but either of those could take an arbitrarily long period of time.
If rents go down, commercial mortgage providers re-value the building, and then call in the entire mortgage at once because it's now greater than the new value.
A theory that I've seen is that as an area increases in value redevelopment will offer the highest ROI for a strip mall owner, but local zoning and town council approvals are a huge barrier. Empty stores are inefficient short term but the blight can help to push through rezoning or council approvals for redevelopmemts that will pay off in the long term.
Business stagnation and crime are particularly bad for Oak Park and Evanston. For the walkable areas increased density seems worse for local businesses. It prices out the mom and pop shops. I suspect there's a happy median.
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.
There's another housing problem which maybe sounds ironic but I would argue that due to land costs, and tastes.. new housing in general is "too nice" compared to old housing. That is - the size, materials, appliances and finishes of housing have all got dramatically better in my 40~ year lifetime. No one builds utility housing anymore, its all aspirational.
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.
Everything but size is an extremely marginal cost compared to construction labor, and size is determined by what local zoning will allow. That is, more often than not, nothing but single detached homes on large lots, which makes it pointless for a builder to not maximize size while they've already got labor on site.
This is an interesting point that I’ve seen play out as you described. It was the parents of an acquaintance of mine, and they did choose the downsize option because they were getting too old for the upkeep of a whole house and niceties it brings such as having the hotel like amenities of a doorman. Then there’s the point of choosing new vs. old stock, agreed there is a higher demand, thus it demands higher cost.
Further - because it’s easy & cheap to stay in a paid off SFH indefinitely, a lot of retirees do so.
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 …
I mean, if there's restricted supply/excess demand then the ones at the margin moving the point where supply and demand cross will the ones willing to pay high prices.
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.
Yes, as long as there’s a shortage of housing no one is going to build “utility” (read low-profit) housing when you could build high-profit “luxury” housing.
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.
Even worse, our housing policy is corrosive to the fundamental social contract. When I was young, I was taught that if you worked hard and kept your head down, you could have a comfortable life. You may not be Bill Gates, but you could have a successful middle class existence.
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 think YIMBYs really like to cast NIMBYs as their evil adversaries, but the problem is systemic. Any policy change, be it "what can be built on this lot", or "what social services do we fund", or, in particular for my muni, "how do we deal with leaf collection in Autumn" will generate three cohorts of people:
(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.
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?
I don’t know what YIMBYs like to cast people who oppose housing. I am pointing out an effect of the lack of new housing.
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.
The difference here is whether or not folks are actually pro-social.
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.
>> I was taught that if you worked hard and kept your head down, you could have a comfortable life
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.
Speak for yourself. I am 38, live in one of the top fastest growing cities in America for like 5 years running now (with a booming housing market), and own my own house outright as a result of my hard work.
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.
The housing equivalent of "works on my machine!". Glad it worked for you but it's not working for millions of others. Your experience does not invalidate other's experiences.
"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"
No, your post was an emotional reaction based on some who-knows-what chip on your shoulder that propelled you to launch a strawman attacking an anonymous commentator. You know nothing of my personal situation. Nor, it seems, do you know much about the personal situations of younger people of modest backgrounds and modest means who simply want to live in the high priced city they were raised.
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.
Henry George wrote about this a hundred years ago in Progress and Poverty! His solution: a tax on land (not buildings) to encourage building up. Economists say it's one of the most efficient taxes possible.
Thought experiment: if all habitable land on the planet is surveyed and transferred to private ownership, all subsequent generations that are born from that point on, will be doomed to rent-based servitude. Forgetting all political theory, it seems that planet-bound species with a positive population growth rate must not rely on socioeconomic systems that exclusively (or heavily) favour private ownership of land.
What I appreciate about Georgism is that it can neatly avoid the difficult issue of justifying exclusive use of land without resorting to ideas like 'First Occupation' or vindicating violent acquisition.
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.
If the land is taxed then you must find a renter willing to pay more than your tax, otherwise you would sell. Meanwhile renters will search for the lowest rent, which is naturally found in high density areas. So cities would still form, and the vast tracts of unoccupied land would be money-losing assets that must be abandoned, at least until population growth makes some of those plots profitable. The market would fluctuate with supply and demand, just as it does today.
> Give me the private ownership of all the land, and will I move the earth? No; but I will do more. I will undertake to make slaves of all the human beings on the face of it.
Abolish land "ownership", and limit leases to 99 years. Existing ownership relations can be grandfathered in, but they will of course eventually disappear, in much the same way as how scientific revolutions eventually succeed: via the biological demise of the preceding hegemony.
I don't think we're projected to have positive population growth for much longer. Also what does rent based servitude even mean? I own a house but still have to pay taxes and upkeep. It's really not much different from rent. The tax supposedly goes to pay for services that the govt provides back to the people. If I were to pay rent instead, at least the service I receive in return is provided back to me specifically, and the cost of switching if I don't like the deal being offered is much lower.
Rent, healthcare, and the price of eggs are very popular things to complain about for some reason...
It’s called land use taxes. It’s probably one of the best ways to change the most negative behaviors that brought about this situation (if combined with less regulated zoning)
Correct. Zoning code prevents building density and building codes force building crappy multi-family housing with tons of parking everywhere. Sprawl and car-dependency are bankrupting America.
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.
Developers want to build because building will increase the value of property.
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?
> 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?
>What dense city with a thriving commercial and business/industrial base is cheaper to live in than a less-developed rural small town?
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.
If you aren’t buying something frequently, you drive to the big city when you need it, or you order it. Most specialist goods just aren’t available in a small town same day at any price.
Plumbers and other non niche service providers are also generally cheaper in small towns because cost of living is higher for the plumber too, all potential customers have less disposable income, and because the market isn’t perfectly efficient.
Housing and basic necessities like groceries are so much more expensive in thriving dense cities than in rural small towns, that they swamp out any costs for the vast majority of people.
I don't have a great sense as to how this works across the world, but where I'm at (Seattle) your property tax is a factor of both the improved and unimproved aspects of your parcel. The improved ones being the value of the buildings and the unimproved being the value of the land itself.
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.
I don't think you disagree here... Zoning changes and land value tax are both beneficial. In some cases like the example you gave where you can only build one dwelling per 5 acres, zoning would be a more significant problem. That's an extreme hypothetical though. In other cases, taxation incentives are more significant.
We absolutely need to push for BOTH zoning reform and taxation reform. They will work really well together :)
I thought of a slightly milder version of the tax, which I call a land wealth tax. Fix a certain maximum value of land owned by a single person which would not be taxed. In theory this might be some quantile, like the 80th percentile of land value owned per person. (I'm pretty sure you would still be taxing the majority of land using this threshold! At least at first.) Then everything owned above that is taxed by value. This avoids a rebellion of the most vulnerable and sympathetic homeowners. Of course land owned through opaque ownership structures must be assumed to be above the limit. Corporations with transparent ownership structures might see their land divided up (a likely intractable math problem if you included publicly traded companies) or some approximation applied, or the land simply taxed.
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.
I like your creativity here but there have been actual calculations done around this and carving out provisions for tax exemptions is not necessary.
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.
What you described ("minimum value that is not taxed...") is the definition of a step function. But yes, binned income brackets is also a form of means testing, and a poor way to design taxes.
Agricultural land is far from large population centers, so the value is relatively constrained. The real losers on an LVT is not those owning rural land, but the operators of a surface lot near a stadium, or people living in mansions in the innermost suburb ring.
what about privately owned parks or nature centers? i lived in an urban area with a privately held non-profit nature center nearby and it was an important component in my quality of life.
They get taxed less, because instead of taxing their produce and income, their land is taxed, and agro land is very cheap. On a quick google, I can find a 140 acre alfalfa farm in Idaho for $1.4MM ($100k/acre), and a 0.07 acre empty residential dirt lot in NY for $4MM ($54MM/acre).
Land that is far away from developed land will tend to have lower land values, so farmland would not be so highly taxed under LVT. It's mostly land that benefits from being close to development that would be taxed higher.
Australia values every single lot of land for rates (aka council tax). So it is possible with some good stats nerds to figure it out.
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.
Those holding the homes have an interest in making the problem worse. Those buying homes make the assumption of the problem getting worse. Those who complain about the cost will reverse their position when they buy.
The issue is that everyone involved wants the problem to get worse.
Too cynical. There exist homeowners who don't want the problem to get worse, because, like, we live in a society. Rampant homelessness and nosediving birth rates are not to my benefit. My friends and kids will need to be able to afford housing.
It doesn't really matter if a few of the homeowners want things to be better. It's a tiny percentage of the homeowners who want prices to continue going up who push all of the policy effectively.
At least in my country I've seen so many young people move to cities to get a better education, only to end up unemployed or working a dead-end job, as they're competing with all other young grads who did the same in a stagnating economic environment.
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.
This works if you can work the jobs available in the countryside. Im moving away because ive found a good job in a city after so many boring azure / php jobs in my village. Its depressing
It seems paradoxical to me that the only "solution" to housing shortages, which exist because the area is too attractive in large part because of the availability of jobs, is to build more houses and thus make the area more attractive to businesses because of the increased availability of workers. It looks like a battle against windmills that is bound to get out of hand. Efforts to alleviate the problem only exacerbate it.
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.
Your assumption seems to be that the only reason for dense housing is to help businesses, but businesses are bad, so you want to artificially limit them, which doesn't make sense.
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.
No, that's not what I'm saying. At the moment, cities are too attractive, and this is largely due to the availability of jobs. What I am suggesting is incentives, in whatever form, to encourage companies to move to less populated areas.
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.
I do think there's truth to this. It's a big problem in the UK and a good illustration particularly as London has been the real source of economic growth for the country as a whole thereby resulting in that concentration you mention.
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
Yes, there are a variety of methods that could work. It should be seriously studied to see what works best.
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.
"Nobody drives in New York because there's too much traffic."
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!
You could also do things like have a government murder squad regularly kill people in the area. Or give away drugs. Maybe cut down all the trees and put in a pile of garbage.
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.
That first scenario you portray is economic growth. Any city in the country would be thrilled to have to deal with the "problem" of being too attractive to both businesses and people.
Yes. The city is thrilled. Jobs! Tax dollars! Wooo!
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.
Dallas is less expensive than LA. LA with amazing weather, little allergens, and beautiful geography. Dallas with heat and cold enough to be lethal, brutal allergens, and limited natural beauty. No one who knows better wants to live in Dallas- they have to live in Dallas because they can’t afford it elsewhere. Which works out, because Dallas has infinite land to build single family homes. When people move to Dallas they aren’t moving to Dallas; they’re moving 30 miles from the urban core. Dallas’s urban core is decaying from lack of housing - with no affordable housing for young people near the city center - downtown has become a ghost town as jobs follow the housing to the out rings. The smattering of housing that exists near downtown are apartments, very expensive town homes for the wealthy, or the original stock of single family homes from the 50s.
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.
Cities are composed of people. Obviously, it doesn't make any sense to say that a city wants something that its people do not want.
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
> Obviously, it doesn't make any sense to say that a city wants something that its people do not want.
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.
The businesses wouldn't go away. They would just move to less densely populated areas.
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.
In fact, remote work is very likely a better solution than increased building... Mass transit is also a solution, and there are certainly others.
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.
I think remote work will continue to grow because it is so attractive to employees. It will just take time to be fully normalised and it is not available for every job.
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.
My thought was that it doesn't matter what houses cost. It is merely an exchange of money for bricks. Neither party needs to lose money in the transaction. Houses require maintenance which is partially unpredictable but can be smoothened out by insurance. The party holding the bricks will have to pay for that.
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.
There is no shortage of land, there is a shortage of efficient transportation. All this talk of building up and creative ideas around housing is great but the ultimate problem is transportation. To solve the problem of housing in LA, a person should be able to live in Reno,Nevada and work somewhere in Santa Monica, CA. I'm not saying I have a solution, I'm just pointing out the problem domain.
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.
It would be much more efficient to legalize apartments in LA than to run high speed trains to bedroom communities. Digging tunnels would blow out the cost by itself.
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.
Buses aren’t that sexy but they are probably a good compromise for cities like LA. They don’t require a ton of infrastructure and can still remove lots of cars from the road. Make them convenient (better bus stop UX, wait time no more than 10 minutes, GPS track them, modernize them) and people will consider buses.
Send surveys to all the biggest companies in the city to figure out specifically the routes that need to be created.
This is exactly what LA is doing btw. LA has a few light rail networks but by far most of its network is buses and most of its riders use its buses. The problems that the LA Metro Bus network echo the problems with fixing housing costs in general:
* 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.
Buses are usually the cheaper inferior option. While bus service doesn't inherently suck, buses are usually chosen because of cost not because they want to run a good service. This results in cost cutting of every portion of a bus network until the experience suffers. Dedicated lanes are not provided so buses get stuck in traffic. Bus stops without rain shelters or even a bench (versus full stations). Operating budgets get cut and then the interval between buses goes to 30 min. Service after 10 p.m. gets cut. The bus networks that don't suck are usually called "shuttles" and are underwritten by tourism districts, airports, and theme park operators.
Buses are terrible because they get stuck in the traffic they're competing with. If the bus is the same speed as the cars, people are more likely to take a car.
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.
Los Angeles has been doing this and the BRT lines are a great way to get started since they’re so much cheaper to build. The last time I was visiting family they looked busy and outpaced the car traffic handily.
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.
But who wants to live in apartments? It's better than being homeless but it's hardly a solution. People want single-family housing, and it is possible to build tens of millions of houses within practical commute distances of big cities. Also, we can build new cities!
What a weird argument. There are many, many apartments in New York that people want to live in so badly that they'll pay millions upon millions of dollars to do so.
and they want to live there because they don't like near-by houses? I'd imagine single family housing in manhattan would cost 10x what an apartment costs. Even brown stone housing in new york is more expensive than similarly sized/located apartments (if you call brown stones proper housing even).
> There is no shortage of land, there is a shortage of efficient transportation. All this talk of building up and creative ideas around housing is great but the ultimate problem is transportation. To solve the problem of housing in LA, a person should be able to live in Reno,Nevada and work somewhere in Santa Monica, CA.
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.
People don't like to live in dense environments. Apartments and condos suck, people want their back yard.
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.
Just because you don’t yet understand why people are prioritizing walkable communities over anything else, doesn’t mean reality reflects that. The opposite is true; walkable neighborhoods are expensive because they are in demand. People live in single family housing in the suburbs because they can’t afford to live like Ted lasso.
who said I don't like walkable areas? Single family does not equal "typical american suburb" walkable SFH housing with subways/trains/buses are practical.
Some people don’t, but many people do - for example, older people don’t want to do yard work - and everyone has to choose between a number of different related things. If you want to live somewhere with culture, interesting local businesses, a healthy walkable lifestyle, etc. the suburban model isn’t economically sustainable. If you want a detached single family house and a large yard, you might trade those amenities for the house you want but it’s definitely a choice with significant costs. The fact that America’s walkable neighborhoods have such price competition suggests that there is a significant underserved market for that even if the preference isn’t universal.
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!).
Are you saying they love living in apartments? I think most of them live there because of proximity to economic activity, not out of love for apartment living. If manhattan allowed for single-family housing for 1.6M people, how many do you think will refuse that?
I'm sure there are such people, but doubt they are many. Most people don't like dealing with upstair-neighbor noises, waiting for elevators or walking up long flights of stairs, not being able to make music/tv noise whenever you want, not having space (indoor or outdoor),etc... Not once have I ever heard of a person complain how they wish they could live in an apartment instead of a house. I'm sure it happens, but seeing the topic is about housing strategies for the masses, the views of the majority should be taken into account.
You are in a bubble. People self sort according to their housing preferences in this country due to onerous zoning. People who like to walk around their neighborhood go to apartments, people that dont mind driving everywhere get SFH. Just because there isnt much overlap doesnt mean the other group doesnt exist. I know many people that have happily sold their SFH to move into a downtown condo.
I agree, so let's make it cheaper. Other countries build subways cheaper over longer distances. It isn't a practical limitation but one of politics and policy.
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.
Even a rail line such as RER A only has a capacity of at most 40k people/h/direction. It cannot solve all, or even most, transportation problems of a large city. For that, you'd need tens of lines, as in China or Madrid.
Absolutely. Or put another way, if you can imagine a map of a metro area distorted in terms of commute times between places rather than physical distance, the goal is to maximize the density of the city, putting as many people as possible within reasonable commute times.
This is possible via either dense housing or efficient transportation or both.
A solution is to build transportation first and build housing afterwards. In Japan, rail companies are also real estate developers who buy the land around the stations and capture the increased land value. US rail companies used to do the same.
Good coverage, but it’s absolutely abysmal in terms of reliability, convenience, speed and cleanliness. I tried to survive a week without Uber/driving in LA, and gave up after 3rd day.
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.
The thing I hate the most about not being able to afford a home is that rent is sky high and it makes it basically impossible to have another kid. Not without significant problems and risks at least.
By necessity, perhaps. But really, cars enabled communities to more cost-effectively express preferences that would have been too expensive without them; cars are an indirect driver of this problem.
I think you could replace 'cars' here with a lot of technological innovations that have made certain aspects of our lifestyles attainable at a potentially greater externalised cost. Much of it is simply making things more convenient - not necessarily better.
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.
While I agree with the general anti-car sentiment, we have expensive housing in less car-dependent areas as well (case in point: various cities in Europe), leading to a broad range of social issues. Hence, I have to disagree with this point in particular.
Tokyo of today. During the Japanese asset bubble that wasn't the case.
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.
Are you suggesting that railway megaprojects are being done to service communities with no people? I have a hard time finding dense communities with good rail systems.
The NIMBY people know what they're doing. They know that restricting the supply of housing is bad for society. They don't care because it is good for their own personal financial position.
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.
This is exactly it. Notice for instance how homeowners will vote to allow ADUs but not to allow splitting off the ADU as a separate deed that would allow someone else a piece of competing ownership. They want all the upside of additional landlord opportunities but not the filthy peasant to own the Adu they live in.
Yes. The answer is not to "convince" individuals of things en masse. It's to identify the policy change that would take away their power to do this, and then identify approaches to law that could cause that policy change. Then, build theories of change to get there. Many theories of change do not require broad public support.
China built so much housing they actually have an oversupply problem and housing prices finally went down, which is good for the people at the bottom end that want to buy housing. The people who bought as investments pushed back and now China is correcting back the other direction.
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.
Condos in the US are broken and it’s largely due to how fees go up over time. Condo associations have been known to squeeze condo owners with increasing fees in the US. It’s why condominiums often have a bad reputation here.
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
From my experience with my own condo's board and looking at the numbers, it's more like a lot of condos are only now adjusting fees to what's actually needed for proper maintenance, after events like the Surfside collapse finally scared managers out of pushing the problem down the road.
If you're talking Bay Area, the only thing that will ever make progress there is to fire the Board of Supervisors into the bay and make the entire permitting process 'shall issue' with no objections allowed from neighbors.
I tend to think that housing shortages are more a result of inequality than a cause of it. The large disparities in wealth result in a situation where a disproportionate amount of land is controlled by a relatively small number of people. Those landowners may be fine with owning "trophy" properties that do not produce any income stream but take up a lot of land that could be used for housing a lot more people. Also in some areas an increasing amount of "housing" is not used as housing but rented out as AirBnBs.
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.
My favourite example of this in my neighborhood is an apartment block of only studios, which would be illegal to build today, as the law was updated to prevent ridiculously small apartments (18m2) from being built.
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.
You could only create a land value tax for land that is already owned outright if there’s a mortgage for that land, then the owner will default and society will colander.
Trades licensing, tightening codes, inspections,zoning, inspection, planning, environmental regulation, and water/well shenanigans are the reason for unaffordable housing. Plenty of cheap land near jobs, land not a meaningful constraint.
By bypassing most all these and DIYing a house I was able to build a house for well under 100/sqft.
Where I live, land is a very meaningful constraint, there’s no cheap land near anything meaningful. We’re about at our limit in terms of transportation infrastructure, too, so additional housing has to be apartments right in town or our horrible traffic will become even worse. Unfortunately, everything they are building is tight single family homes.
Many of our immigrant families crossed the Darien Gap by foot for new opportunities. Fortunately there are roads to flyover country. If you have a thumb, escape is possible. Much of my family did it with far less resources and as many familial responsibilities as you probably have
I live on an overloaded island thousands of miles from anywhere else metropolitan, so no I cannot just hook my thumb and hitch a ride with a trucker across the vastness of some flyover states to get to new opportunities.
Sure. I get that. Last year, a group of activists bussed about 100 Venezuelan migrants into Oak Park, and we allocated a bunch of money towards housing and services for them. The math worked out such that we could have instead bought most of the families a free-and-clear house in a neighborhood like Dolton.
The problem as I see it is intensely localized to the inner-ring suburbs, which exist pretty much entirely to siphon money out of the Chicago school systems. Those suburbs are engines of middle-class opportunity, and they're deliberately designed to lock out the kind of people who would consider buying affordable houses in Chicago proper.
My only point in this is that, to the extent it exists, the housing affordability problem in Chicagoland is not primarily driven by availability of land. If it was we’d just do what we did in the past and make more.
It’s driven far more by history and public policy and the ugly confluence of those 2 things.
I’m wondering the same; I have friends who build houses in areas with virtually no zoning and the cost per square foot is $190. (They sell for $200, so on a modest 2,00 sq ft house, he’s putting up $400,000 in capital to build it and earns a $20,000 profit after the 3-6 months it takes to build).
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.
I bypassed codes under an owner/builder exception. No inspections no building plans basically no regulatory costs. I found ultra cheap land with an unproven poorly documented but already drilled well share that turned out to be good (high risk but high reward) so nearly zero for water connection and well. I took some high risks proving electric and water and septic but after almost a year of footwork I proved them -- massively increasing land value for basically free.
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.
A big issue with all this housing wealth is that it's fake. If a good business goes up 10x in value, it accomplishes that by providing more valuable goods and services to people. If a house goes up 10x in value, that could only be achieved by ensuring supply grows slower than demand. The house didn't produce any net positive for society, actually the opposite. The owner is being rewarded for figuring out how to increase demand for their house while providing nothing in exchange to the broader world. It's a serious bug in capitalism that we call this "building wealth" it should be called "building scarcity". Might as well hoard bitcoins.
I'd posit that it's the inverse belief: anything that benefits other people indirectly hurts you. This zero-sum worldview is becoming popular in national politics as well.
Another factor everyone is missing because it's politically incorrect to talk about:
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.
Why do you assume only poor people are annoying neighbors? Rich people can afford bigger speakers, more booze, and to not have a job so they can stay up all night. I think wealth is positively correlated with the problems you describe.
Some of us have actually lived in both cheap and expensive areas. Cheap areas tend to have unemployed people on them who decide to play loud music at all hours of the day and night.
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.
Of course there are exceptions, but on average, wealthy people are way way better when it comes to these kinds of things. Especially wealthy people who get that way by keeping themselves busy with productive labor. The upstairs neighbor doesn't need a $5000 stereo system to make your life a living hell, they can do that perfectly efficiently with a $30 subwoofer.
See, this is why the housing problem is so difficult to solve. You think you're being virtuous or something by sticking up for the poor oppressed. Why don't you be even more virtuous and move yourself to Skid Row since all those poor people are really so mild and quiet and misunderstood. All you're really doing is ensuring that this problem continues indefinitely. You're the same kind of person who insisted men should be allowed to use womens bathrooms and thus ushered in Trump 2.0, hope the good-boy-points you got for that were worth it.
Somehow I doubt social justice warriors are the key thing holding up housing reform. That grants a few wokescolds more power than a huge number of other economic forces.
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.
Reinforced concrete walls don’t keep out noise on courtyards and also don’t work as the decibels get higher and higher. Another major nuisance is the constant sound of sirens (often at night), or domestic disturbances spilling into hallways - the front door isn’t a reinforced concrete door.
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.
Right, so that sort of thing needs to be part of whatever proposed solution to the housing problem. This will of course raise building costs etc., and the regulations will need to have teeth so people can't just build apartments out of cardboard and paint them concrete-color. Also, that concrete will need to be really thick to ward out subwoofer noises. Maybe you could get around this by banning subwoofers.
The key is to not focus on the money. The money flows in one direction, but the economy (things that people choose to do; where they spend their time, how they get around, etc) flows in the other direction. In some sense, money is a symbol which represents real economic activity.
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.
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.
Yes, very bad strategy because not only it is worsening the housing crisis, and thus accelerating the fertility crisis, triggering a vicious cycle.
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.
The population age has very little to do with it. Demographic density is what matters. Old and immigrants have to be housed, as long as population is increasing, the problem will worsen.
I was like that, then as I learned more about modern monetary theory I realized not even the taxation matters, we can print all the money we want, we just do it for things that don't help the bottom.
Quite a good article, I like the ‘hyper local democracy’ suggestion.
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.
I have been saying this since before even the Housing Bubble which leads to 2008. And every time some insane Silicon Valley UBI or some other utopia theory come up and none of them fix or even mentioned anything about housing. And it is a problem everywhere, even in some areas of Japan. So I am now 20 years of watching the sad state of things.
No politicians wants to tackle it, no establishment wants to change. And people talk about wages stagnation, when it is property pricing becoming unreachable.
Anyone else frustrated that this discussion always goes 'housing cost → effect' and not at all 'interesting new effects → housing'?
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.
> 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?
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.
The pricing behavior of a modern economy is entirely dictated by the component prices of four things: Energy, Real Estate, Food, and Water. There's some interplay in how the pricing of one of these impacts the other (e.g. expensive energy makes transporting food more expensive, but expensive food makes harvesting energy more expensive). But there's nothing more "atomic" than these four things; the price of everything else is overwhelmed by price movements of Energy, Real Estate, Food, and Water.
(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.
Housing destroys the environment, uglifies the world, and a generation later, housing is just as expensive as it was before. Why? Because humans breed and overrun their habitats. Housing costs keep neighborhoods livable and the population from exploding. Say no to traffic, say no to killing the earth. Say no to housing expansion.
`I.i` the San Francisco Bay Area – probably the most productive place in the Western world
That is absurd. Beyond absurd -- insulting. Every day I only feel more shame for being associated with Silicon Valley, because of how arrogant the culture has become...
`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.
This is such a common fallacious belief the author doesn't even think to cite it. That's very relatable, but regardless it should be called out: home ownership was rarer in 1965[1].
`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.
I'm sure we can all agree that streamlining housing bureaucracy should've been a priority in the US, but this super-simple picture is misleading, IMO. Regulations are the first layer of friction, but they cover up real conflicts/costs/externalities; simply removing all regulations on housing production would destroy San Francisco's famous skyline and unique architecture, for one.
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.
Housing is considered a service by the Fed (I guess because it requires construction workers?), so this is less surprising than it's framed here; services have all gotten more expensive as goods have gotten cheaper. See Section 3/Chart 4 here: https://www.newyorkfed.org/medialibrary/media/research/epr/0...
`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.
Very true -- as I said, the underlying impetus is very relatable! This is exactly why we were in such desperate need for reliable, cheap mass transit outside of NYC and DC. Luckily, WFH is something of a hack here.
`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).
...because Germany is richer, not because they're nerdier. I really want to like this article, but it almost seems to be intentionally ignoring the inequalities created by capitalism + nationalism.
`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.
Again: c'mon. The fact that the word "automobile" doesn't appear in this paragraph isn't an omission, it's a fatal flaw to the entire point. We've known the effect of cars on urban density since 1939[2].
`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]
That is a very questionable hypothesis; AFAIU, they're saying that doubling the population of San Jose would double the GDP generated by the city. IMO That's a fundamental misunderstanding of what makes rich cities rich.
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.
If anything, I think this understates the problem.
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.
These problems stem from private property. That is, we allow the hoarding of a basic necessity (ie shelter) and we treat housing as an investment vehicle. This incentivizes every aspect of society and government to do what they can to increase property prices. Homeowners think it's good for them. Investors love it. How do we do that? By limiting supply.
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.
I couldn't have less bandwidth for people who want to villainize landlords. Want to reduce the influence of landlords? Let more people build multifamily housing. Who's keeping that from happening? It's not the landlords. It's the people who live in freestanding single-family housing.
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.
If they own an apartment building, how can they be lower middle class? Even if it's not fully paid off, unless they are upside down on the mortgage, they have wealth. And even getting a bank to approve a mortgage means you're probably not lower middle class.
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?
I’ve seen 8 unit apartment buildings where each unit rents for $400 a month. A few of the units are chronically behind on rent. The building is in bad need of repairs, and the owner does as much of it as he can himself. The property taxes consume about half of the rents.
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.
> Want to reduce the influence of landlords? Let more people build multifamily housing. Who's keeping that from happening? It's not the landlords. It's the people who live in freestanding single-family housing.
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.
> Every landlord I've ever met is a lower-middle class Black person who owns an apartment building
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.
These are the macro effects of housing. I buy all of them. I'm a housing activist involved in local politics in Oak Park, IL (one of Chicago's two equivalents of Berkeley or Brooklyn, the suburb of Evanston being the other). Some micro/local impacts of housing restriction:
* 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.
I live in a very similar neighborhood with exactly the same problems (DC railroad suburb) and completely agree with your assessment.
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.
It is a very typical problem in the US, but it's not really the only issue. Go look at Spain, a country that has, historically, had little issue building housing: Very dense housing too by most standards.
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.
It sounds like both Spain and the US have tax systems that cause it to be expensive to sell a house and buy a less expensive house.
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.
Yep. Housing can be affordable or it can be a good investment. Not both. Not for long.
Home owners are heavily incentivized to "not understand" this, so the cycle of abuse continues.
That is false in the case of a house. a house you live n can lose value relative to inflation and still be a good investment. remember you have to live someplace and so that rent cost needs to be subtracted from you total investment costs as you would pay it anyway. After you pay the house off (if you do) you continue to sbtract those costs from your investment.
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.
> Housing can be affordable or it can be a good investment. Not both. Not for long.
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.
Housing as an investment here references the idea of owning the home you live in being a great source of capital gains. This depends wholely on appreciating value, which is orthogonal to affordability.
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.
It's not orthogonal to affordability, it's in opposition to it.
> Housing as an investment here references the idea of owning the home you live in being a great source of capital gains.
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.
People who are trying to buy a house may or may not want it, but people who currently own who are beneficiaries of this stand to lose a lot if their house lost its value, which they have undoubtedly financially planned around.
It doesn’t help that the move to 401ks from pensions was generally not good for beneficiaries and Social Security is facing a shortfall even before you consider current shenanigans.
> People who are trying to buy a house may or may not want it, but people who currently own who are beneficiaries of this stand to lose a lot if their house lost its value, which they have undoubtedly financially planned around.
So you've given the actual reason here, but now the original description is wrong.
It's not that people want housing to be an investment, it's that people want the housing they already own to remain expensive instead of becoming affordable.
That is, of course, directly in opposition to housing being affordable. But the problem isn't that you need the number to go up, it's that people don't want it to go down. Which isn't a problem if it starts off low and stays there, but is currently a problem because the price is already unsustainably high and needs to go down.
That problem only has one solution and the existing homeowners aren't going to love it.
> It doesn’t help that the move to 401ks from pensions was generally not good for beneficiaries and Social Security is facing a shortfall even before you consider current shenanigans.
People have not been better off for having invested in real estate rather than e.g. stocks:
https://www.investopedia.com/ask/answers/052015/which-has-pe...
The Social Security "shortfall" is also entirely fictional in the sense that it has already happened. The Social Security Administration, today, is already paying out more in benefits than it collects in social security taxes. It used to do the opposite, so it gave the extra money to Congress to immediately spend. As a result the government has government bonds on its own books, which is a no-op. Today Social Security sells those bonds to cover the existing shortfall, which is equivalent to deficit spending. Social Security started out by paying benefits to people who never paid in, which is why it will "run out" but is also why the "trust fund" is a sham and nothing magic happens when the bonds run out except that Congress has to pass a law that says "no that's not any good" and change how the accounting works to not be so ridiculous. What they should do is eliminate both the "trust fund" and the social security tax and just fold the program into the general budget with a corresponding adjustment to the general income tax.
"Housing is a good investment" means the price of the land and house increases over time compared to SPX or treasuries or whatever.
"Housing is a good investment" means that the total returns from investing in housing are competitive with the risk-adjusted returns of the overall market.
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.
The sale value won't stay flat unless you tax land (or use leasehold like Singapore), because typically incomes rise, and in most places the rate of building new housing has an equilibrium lower than the rate of demand, because profit is needed for private developments to go ahead.
This results in a) higher incomes, and b) higher rents, because landlords can extract some of the increase in income, because tenants don't have enough alternatives to keep the rents low.
Capital value of property is a function of rents, so increases in rents result in increases in sale value of the property.
> The sale value won't stay flat unless you tax land (or use leasehold like Singapore), because typically incomes rise, and in most places the rate of building new housing has an equilibrium lower than the rate of demand, because profit is needed for private developments to go ahead.
Developments can be profitable without the price per unit significantly increasing.
Suppose that an existing unit is $50,000 and it costs $150,000 in construction costs including profit to replace one unit with four. Then you have a stable equilibrium; a construction company could buy one unit for $50,000, convert it into four, sell them for $50,000 each and net $150,000 which covers their costs and profit. They'll stop doing this if the price per unit falls to $45,000. They'll start doing it again if the price per unit rises to $60,000 and keep doing it until it gets back down below $50,000. Therefore, the price per unit remains stable at ~$50,000, even if demand increases, because that just triggers more construction as the price temporarily gets slightly above the breakeven point.
This is why zoning restrictions cause housing costs to increase. If you declare that 95% of the land is zoned exclusively for single-family homes, you can't replace one unit with four or even two in any of those areas. Then the remaining 5% of the land already has a 20-unit complex on it and in order to add units, you have to replace it with a 30-unit complex. Taller buildings require more expensive materials, you've had to demolish 20 units instead of one and only increased the number of units by 50% instead of 300% and land on which you can even do this at all is now more scarce so you're paying even more per unit for the ones you're going to demolish. Now the breakeven price for new construction is $500,000/unit and if growth continues it has to rise to the level that can cover the cost of demolishing a 30-unit building to build a 40-unit one, even though 95% of the local land is still single family homes.
I have tried to explain the sense of "good investment" that is meant by policymakers and voters and the cliche above. You have tried to explain that there is another sensible definition available. I don't disagree, but I think it is beside the point.
I feel like it is the point. The claim being made is incorrect.
If you have to invest a significant amount of capital to own housing and it isn't a good investment then people won't want to do it. But there are reasons we want to encourage home ownership, so if it actually wasn't a good investment then that would be bad. People would stop doing it. So it's important that the claim actually is incorrect; it can still be a good investment even if the value never goes up, because it avoids you needing to pay rent. If keeping the values flat would result in lower home ownership then doing that might actually be a problem, but it isn't.
The real problem -- the thing people actually care about -- isn't that the value has to go up. It's that they don't want the value to go down. If they paid $500,000 for something which is only worth $100,000 they're going to be pissed. But that's also what needs to happen, hence the impasse.
Why do we want people to buy houses? It incurs transaction costs and makes it difficult for people to relocate to be near their jobs and such. It seems like we should optimize solely for the cost of meeting people's needs - either by paying rent or by owning - compared to the sale value of their labor.
Housing services aren't the problem, capital gains are. You know this. You are nitpicking. But if you ever find a portal to the alternate dimension you describe, please give me a ping, I'd love to live there.
> Housing services aren't the problem, capital gains are. You know this. You are nitpicking.
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.
Your example is nonsensical. This is not how the real world works, living in hypotheticals doesn’t help anybody.
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.
> 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.
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.
Your growth rate of 560k to 627k is 11.9% (r - the rate of return on capital). This outpaces wage growth - let's assume generous non-inflation corrected 5 % (g - a proxy for the growth rate of the economy)
Your assets after 50 years: 267x Your wages after 50 years: 11.4x Your new ratio of assets to wages: 23.4
This calc works with any number where r > g (source: capital in the 21st century by piketty). The end result of asset growth outpacing wages is complete divergence and the end game of Monopoly where 1 guy owns everything. Usually by then the system has cracked and the society has burned down.
> Your growth rate of 560k to 627k is 11.9%
These are hypothetical numbers. The point is that you can receive a return without any capital gain, not what the exact percentage is.
> This outpaces wage growth
So does the S&P 500. The big problem here is that real wage growth has stagnated, of which a major contributor is... high real estate costs.
> The end result of asset growth outpacing wages is complete divergence and the end game of Monopoly where 1 guy owns everything.
This is obviously untrue. Example: Jeff Bezos and Elon Musk get into a bidding war over real estate on Mars. The Martian real estate market is now worth a hundred trillion dollars, even though nobody lives there. The owners of Martian real estate now have a net worth of trillions, but it's all locked up in Martian real estate. The rest of the economy is unaffected.
Asset price inflation only affects ordinary people if the inflated assets are something they have to buy.
Which gets us back to real estate, which is such a thing. Suppose Bezos wants to buy Earth real estate in order to rent it out and turn a profit. He buys units that cost $25,000, makes not just 12% but 25% annual returns, uses all the money to buy more units.
If construction is constrained, housing costs are going up with higher demand, which is the problem in the existing market. But suppose we're not doing that; it still costs $25,000 to add a new unit of housing and anyone proposing regulations to make construction more expensive shall hang from the neck until dead in the gallows on main street.
If Bezos wants to use his profits to buy more housing and he tries to buy the existing housing, demand increases, so the price goes up to $26,000/unit, so construction companies build more units until it falls back below $25,000/unit again. Then Bezos goes to rent out his new units and finds that rents have gone down because there are now more units on the market. But a 21% return still great so he keeps at it and then goes to buy more units with the profits again, which causes more to be built, which further lowers rents/returns by increasing supply.
The ultimate result of this, then, is that r falls below g. Unless you constrain construction.
I think you present an idealized version of market economies that is not in line with my experience (I live in Sydney Australia our housing system has collapsed). Our disagreement seems predicated on our beliefs around r > g. Have you read Piketty?
I'm familiar with it. The obvious question to ask in response is, why is r > g? What can be done about it?
Piketty's answer is more or less "do socialism", but that's not obviously correct. For example, a lot of government spending programs tend to funnel money into well-connected industries, which are the things already accumulating capital. Likewise, transfer payments to individuals can be absorbed by monopolists if the monopolies are allowed to persist.
And that, really, is the true cause of it. Market consolidation. Regulatory capture. If there is more competition, the competition lowers margins, and then more of the surplus goes to the consumer instead of the investor. If the incumbents capture the government (or the government is careless about creating market barriers to entry) then competition is reduced, margins increase and more returns go to capital. The latter is clearly what's happening in the housing market.
The difference you’re not accounting for is that when someone buys a house, in practice they value it as an asset that must increase in value, not simply as a way to offset rent costs, which is effectively what you’re saying.
Thats the real problem. People believe their 500K house must go up in value and not fluctuate in value like any other marketplace of goods would see, and therefore are in opposition to anything that reduces the value of the home in which they live.
That’s why homeowners routinely bend over backwards to maintain home values. The general consensus society has is it’s one of the primary nest egg assets, and for many it’s their biggest one and they act in that self interest.
Real estate lacks the functioning market dynamics you see in every other area of economic activity, in part because we have collectively as a society decided long ago to adopt policies that would enshrine protecting home values above other concerns.
Edit: This also captures capital in an unproductive manner because real estate doesn’t have functioning market dynamics.
Imagine instead of having ever increasing real estate costs (the reality of todays world) which benefit only a finite fraction of economic investment but make up a huge total of the average persons expenses, that productivity gains could instead be captured by other investments like stocks. You’d have more people able to invest in companies, meaning there well could be more companies to invest in, increasing the health of other markets in turn. People will put their money somewhere and naturally a productive business is one such place afterall
Instead, one of life’s biggest overall expenses not only increases over time in aggregate but the value is captured by an fraction of the population of that increase, which is really a net loss to economic activity more broadly
I vaguely remember some research that suggested the [old] media is deeply enough into real estate investment to make it a political no fly zone.
Putting aside rent (which should be illegal IMO outside of rent to own—it just makes no sense as a social construct if you want to fight poverty instead of create it) 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.
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.
> Putting aside rent (which should be illegal IMO outside of rent to own—it just makes no sense as a social construct if you want to fight poverty instead of create it)
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.
> 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.
That's not necessarily a bad thing. You can leverage whatever you're mortgagibg as an asset (or in this case, whatever portion of the property you now own). You can't leverage your rental property despite almost certainly paying more than the equivalent mortgage.
As you point out, rent makes sense for transitional or temporary living. I just think you should get ownership over some portion of the assets you are de-facto paying for.
> Developers want to build
Well, stalled developments are a problem across basically every metro market in the country. They don't make their money by building, they make their money by waiting for the labor & materials market to make an eventual sale profitable. In some metro areas with labor-this may be sufficient for some markets, but others (like the bay area) it's clearly not going to provide the housing people expect yimby zoning policy to deliver. Like yes zoning is a major issue in the city, but it's only one of many, and it's not sufficient to explain dysfunction where development was already zoned and approved years ago.
One really great way to encourage developers to perform the role they're allegedly already serving is by having public-sector competition (zero- or negative-margin development/property management) to give them an incentive to be realistic about costs and timeframe. Or just straight fine them for wasting city property on zero-or-arguably-negative-value use.
> That's not necessarily a bad thing. You can leverage whatever you're mortgagibg as an asset (or in this case, whatever portion of the property you now own).
"Not necessarily a bad thing" is the argument that it could have benefits under some circumstances. It's the argument that it should be allowed, not that its alternative should be prohibited.
The obvious cost is that you're paying more per month. Essentially, if you want a place to live, you're required to pay more in order to invest in real estate, even if you don't have any surplus to invest or you would rather invest in something else.
> I just think you should get ownership over some portion of the assets you are de-facto paying for.
When you rent, the landlord is covering the interest on the mortgage loan, property tax, maintenance, etc. The rent covers their costs and some profit to make it worth their trouble, which they often use to start paying off the mortgage. If there is no profit, there is no landlord to pay to build the building and either you can afford to buy it outright or you're homeless. So if you want to build capital, the money that goes to that capital is additional money on top of the rent, i.e. you'd be paying more per month because you'd be getting something you don't get when you rent. You're basically saying you think poor people should have higher expenses so the extra money can be used to force them to invest in real estate.
> Well, stalled developments are a problem across basically every metro market in the country. They don't make their money by building, they make their money by waiting for the labor market to make an eventual sale profitable.
They still make their money by building, you've just passed regulations that make building so expensive that it isn't profitable until rents are unreasonably high, e.g. by requiring them to knock down an existing multi-story building in order to add housing because most of the land is zoned exclusively for single family homes.
> you've just passed regulations that make building so expensive that it isn't profitable until rents are unreasonably high
This is just demonstrably false, though. Regulation does cause large overhead especially crossing municipal boundaries, but developers aren't building even where they've been approved to build. Either they accepted the work they knew they couldn't deliver under the current regulatory burden (essentially, committing fraud) or the bottleneck isn't regulations at all, but the other costs that dominate building.
Anyway, you can either pay off your investment or you can turn a profit. Doing both is just antisocial (ie malicious and harmful) behavior. If you're turning a profit, I better also get an equitable return. That would actually make sense.
Of course the world doesn't work like that, but nothing you're explaining helps me understand why this behavior is legal and people don't murder more landlords. This is simply not a reasonable way to divvy up resources in a community.
> developers aren't building even where they've been approved to build.
Suppose it costs $100,000 to add each additional housing unit if you could build them in areas that are currently zoned exclusively for single family homes, but they can't because the zoning doesn't allow it. By contrast, in the areas "where they've been approved to build", it would cost $800,000 for each additional unit, and the current market price is $750,000.
They're going to sit there and do nothing until the market price gets above $800,000 because otherwise they'd be losing money. If you want to change it you need to make it cost less to add housing units.
> Anyway, you can either pay off your investment or you can turn a profit.
These are not alternatives to each other. If there is any net profit, it would eventually cause the mortgage to be paid off. If there isn't any, why would anyone pay to build an apartment building?
If renting is illegal, moving without a buyer should be illegal. Wanna go land that cool new job in SV? Before you give them a start date you better find a buyer for your flat. Otherwise you're stuck. It's illegal to make someone else foot the bill when you decide to go somewhere else.
I believe the model is just like renting but the rent is a percentage of the value of the home. When you leave the landlord has to return part of the "rent".
> Putting aside rent (which should be illegal IMO outside of rent to own—it just makes no sense as a social construct
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
Why wouldn't you? The only reason I don't want to own a home is that it's very expensive. I own a lot of other things, because they are not too expensive. And there's an argument that if everyone had to own their home, it would bring prices down, until they'd still be expensive, but no so expensive they couldn't be afforded.
Hell, I don't want to own property right now as I'm in a transitional form in my life. I pay too much for what I get out of my current apartment and I'm looking to downsize/chuck amenities away. Trust me, I'm happy to not have to maintain my plumbing or HVAC and while the ikea-quality hardware is ugly and cheap feeling, it's not my problem. It hurts, but I know that I'm not up to the task of maintaining a house and it would cost me more than rent to hire someone else to do it for me + property taxes + mortgage + actual material costs of maintenance.
But if you want to solve homelessness, like actually try to remove it as a necessary reality of modern life (as many other capitalist AND socialist countries have successfully achieved), we fundamentally can't get there through mortgages and rents. I'm happy that people are more literate about housing policy than ever, but I think we can aim for more than marginally more affordable housing—we can completely defeat homelessness if we have the will to do so and don't have a dogmatic fear of subsidized housing destroying the value of the asset you'll leverage to retire on (if you're lucky).
Sadly, I suspect we'll see a lot more homelessness before people who legitimately have any of their interests at heart enter power.
We cannot solve homelessness with market mechanisms, I believe
We are in agreement, I think.
> Hell, I don't want to own property right now
You need some place to live where the organisation of the capital is somebody else's problem.
You need to rent.
That does not mean you need to be exploited to the limits of your vulnerabilities. Which is the market model
"Housing can be affordable or it can be a good investment. Not both."
This is a cut&paste response predictably in every housing thread.
Can we dig deeper and do some analysis?
It is a simple mathematical fact of nature.
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.
I find inflation is a bit of a red herring. I like to think in inflation adjusted dollars with price relative to GDP.
If something goes up faster than GDP, it's a good investment, but less affordable over time, etc.
GDP / inflation / labor hours all loosely correlated though, so we aren't too far off.
Really I think of things in two main buckets-
Stuff that's going up faster than income and therefore the sooner you buy it and lock in a level, the better. This is also something that you can invest in, because it means when you sell in 10-40 years at retirement, it will have appreciated.
Stuff that's going up slower than income, and I'll buy it as needed.
For example on the face of it - cars and houses should both depreciate. They cost money to maintain, that maintenance cost goes up over time (it is labor), and newer ones get nicer and nicer. However it is only cars that depreciate. And I don't just mean a used car. A 2000 Honda Civic started at $13k new. A 2025 Honda Civic starts at $24k new, and you now have good reliable Hyundai Elantra at $22k, which weren't as prevalent and reliable 25 years ago.
The fact that we underbuild is why houses refuse to depreciate though.
> cars and houses should both depreciate
Perhaps, but at vastly different time scales. For most normal people a car degrades to beater status in just a couple decades.
Houses last more than a lifetime in most cases, barring natural disasters. Many centuries in some cases.
> The fact that we underbuild is why houses refuse to depreciate though.
Given that a house is seemingly good forever (no, not forever, but longer than a human lifespan) its value must go up at least as much as inflation. This is easy to prove by contradiction. Assume it didn't: it would mean two identical houses right next to each other would have vastly different prices depending on when they were built. But we know they don't, since comparables in any given neighborhood have about the same price (the value is assessed based on the comparables, after all).
If a house was built 30 years ago for $100K in labor and materials and an identical house across the street cost $400K in labor and materials to build today, the older house can't help but be worth at least as much because it is a comparable property.
Sometimes the argument is made that we'll just build so much that values are pushed below this, for both the old and new comparables. It is not clear to me who that "we" can be though, since no builder is going to afford to sell houses below cost of construction.
Cars and houses have different useful lives, but neither is forever.. and neither can get by without significant maintenance cost after a certain point.
I think we will see more baby boomer houses go on the market which are near full teardown as the remaining value is the land only.
Not sure if you've lived in wood framed SFH, but stuff built in the 40s-70s really shows its age now.
Lots of $10k-50k costs that start to creep in as you need to replace roof every 10-20 years, wooden siding/shingles (10-20 years), all the windows (20 years?), boiler/furnace (20 years), central air (20 years maybe), etc. If you need to replace hardwood flooring could be $20k.
My parents have well water and even though it's treated, after 50 years if you were doing a gut renovation you'd probably replace all the pipes. Could switch to city water but thats about $50k.
The masonry on their chimney just cracked and a baseball sized chunk fell on the deck, I dunno $5k. Speaking of the deck, it needs to be torn down and replaced.. $10-20k.
Did I mention their home is worth like $300k on Zillow? These things don't go all at once, but they start to hit more and more often past a certain point.
And this is before the era of particleboard pre-fab construction which I'd imagine will breakdown faster.
Everything you say is so profoundly alien to my house experience that I'm not sure how to relate.
If you are replacing major structures of the house every 10-20 years, something is wrong. That is not normal.
The house I grew up in is turning a century in a few years, and nothing about it suggests it isn't good to go another century at least. Original windows, who replaces windows every 20 years? Why?
Multiple friends live in houses their grandparents or great-grandparents built, those are well over a century. Perfectly comparable (in valuation) to new ones built a block away. And that's why houses won't depreciate in the timescale of a human lifetime.
> If something goes up more than inflation - it is a good investment
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.
Sure but if you make the tax incentives TOO good for landlords, owner occupied housing % goes down as those with capital amass larger portfolios to lease out.
Further if you made building housing easier there would be more available, with less price pressure from excess demand pushing prices and rents up.
I’m more interested in enticing developers to build than I am encouraging more landlords.
Okay but I think we’ve lost the thread of the argument.
I am arguing against the claim "Housing can be affordable or it can be a good investment. Not both."
You support this claim with the argument that “If something goes up more than inflation - it is a good investment” and therefore it can’t be affordable.
I am saying real estate can be a good investment even if it doesn’t go up more than inflation. Do you disagree?
Further, for landlords to make homes available to rent, housing must be a good investment. Do you disagree?
Note that a Georgist tax on 100% of land rental value does not stop the landlord from earning a return on their improvement values. The land tax of a property with a 100% land tax will decrease the land price down to $0, and thus instead of for instance putting $500k into buying land and $500k buying apartments, they could instead buy 2 $500k apartments for the same capital cost. The end result of this will be more apartments, which will bring down rents, but this will yield a higher ROI than they currently achieve, since they have to pay less rents to the banks.
> I am saying real estate can be a good investment even if it doesn’t go up more than inflation. Do you disagree?
Yes I think so. You need rents to escalate faster than maintenance costs (which are tied to inflation closely) for this to be a good trade. So again - for rent to become relatively less affordable over time.
It sounds like you are not considering rental income (the argument I made in my original comment). You only need growth of rental income to exceed growth of cost for it to be profitable to be a landlord. Am I incorrect?
It's also true that people are also economically illiterate.
I don't think I am economically literate. I have only taken one semester of macroeconomic in high school.
See also China, which has seen massive overbuilding (50M empty units and 20M paid for but unbuilt), many empty buildings, and now the beginnings of a crash. Why? Because everything was financialized. Houses became an investment rather than a place to live. "If you move in, it loses value!"
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.
Note: I’m summarizing a very complex topic as best I can. There is a lot of nuance and thought that goes into a properly implemented land value tax (LVT) that I’m not covering here.
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 (which are very good, yet seen as unfair by owners, so they stay low)
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 observations about effects of tax seem fair enough, but perhaps miss the point of taxes. The local government presumably needs to balance the budget somehow. The income has to come from somewhere, and that's presumably going to be a tax of some sort. Whatever is taxed, there are going to be drawbacks and market distortions as a result.
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.
> Whatever is taxed, there are going to be drawbacks and market distortions as a result.
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.
Property tax are mostly taxes on the land. If you want to build housing, you get the necessary land cheaper, thanks to the property tax. I agree that the sales tax is bad though.
Land value tax would be on the land. Property tax includes the buildings, which is naturally the issue. If you want to replace a single family home with a 6-unit structure that each provide as much housing as the original unit, your property tax is going up, providing a corresponding deterrent to anybody doing that until the rent or market price of the building has gone up by the same amount.
Like all these things even in a market like Spain thn solution for one area can create issues in others. Barcelona suffers very different problems to Santander.
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.
Spain (since it's in Europe, though you could say the same about ME countries) is an example that housing does not drive growth. Growth can drive housing and housing shortages can hamper growth but housing on its own does not drive growth.
I think that's a bit debatable.
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.
If taxes at sales time (capital gains on real estate) are keeping people from selling houses, why not eliminate those taxes to free up the frozen housing market?
> After you liberalize housing, you still run into the trouble of economic forces trying to turn housing into a sensible investment.
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.
I don't think slapping a Georgist LVT will magically solve everything, but it will point market forces towards a desirable path, which is already a huge huge help compared to the state of things now.
> Retail business stagnation
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.
Raising rents so high that tenants leave seems counterproductive. Now you have no income from the property. So why do landlords do it?
Louis Rossmann has a video series of his rants about commercial real estate and the refusal of landlords to rent spaces to him which have been vacant for multiple years.
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:
https://www.youtube.com/watch?v=NdfmMB1E_qk
This is empty speculation. And it can be trivially refuted by noticing that vacancy rates are at record lows.
> This is empty speculation. And it can be trivially refuted by noticing that vacancy rates are at record lows.
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.
Bro you don’t have any statistics.
record low vacancy is a statement about the country not any individual situation which might be different from the national situation.
Bookstores and things are desirable to local residents but are less profitable than other prospective tenants once the area has high traffic. The bookstore can't afford the higher rent but a Starbucks or something can. The landlord is willing to take a short-term vacancy for a long-term higher paying tenant.
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.
Or you need to ban or penalize chain businesses.
Whether it's a franchise or not isn't really the issue.
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.
I have heard it said that landlords are willing to take losses on some properties (leaving them vacant) if it means they can continue to justify their other property valuations. If they drop rents, that lowers the valuation of that property - and others like it - which can have a cascading effect of their entire portfolio. Would love to be corrected here if someone has a more detailed understanding.
This one has legs because it plays into the "landlords are evil" vibe, but it makes zero sense. There are thousands of landlords in any given city, if not millions. It's not uncommon for a local landlord to only own a single building, and even the ones that own multiple properties will almost never exceed a single digit percentage of local real estate. The exceptions are things like company towns which is just not what anybody is talking about here. But if you own 0.3% of the units in a city, withdrawing some of your units from the market is not going to materially affect the city-wide rental price for the other units.
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.
I actually think this one is pretty accurate for commercial real estate in particular. I’m in Metro Detroit and either a building is a totally dilapidated wreck in an area that has theft problems, or it’s going for $1~3 per square foot per month on triple net terms (leasee must do all upkeep, pay utilities, etc), which comes out to $100000/year in rent before utilities and such for an empty concrete shell. Worse than that, none of the places anyone lives are anywhere near anything available, so I can’t rent something for a nice big woodshop. At the same time, I can’t build a decent thing as a “garage” on my 2.1 acres due to zoning in my municipality from 25 years after my house was built. At the same time, there’s a bunch of buildings sitting empty with no rent paid. This means that landlord cost structure for light industrial is completely different than you seem to suppose or there would be competition and prices would come down…
I'm not entirely sure what you're even arguing here:
> I’m in Metro Detroit and either a building is a totally dilapidated wreck in an area that has theft problems, or it’s going for $1~3 per square foot per month on triple net terms
That makes a certain amount of sense. If a building is completely wrecked then the landlord would have to spend a lot of money to improve it, but isn't going to do that if it's in a bad area that couldn't command higher rents even if it was in better condition.
> Worse than that, none of the places anyone lives are anywhere near anything available
Again what you would expect to happen if they weren't purposely withholding units; units in higher demand areas are all rented out and the vacant units are vacant because nobody wants to be there.
> At the same time, I can’t build a decent thing as a “garage” on my 2.1 acres due to zoning in my municipality from 25 years after my house was built
Again consistent with the evil thing landlords do being to lobby the government to prevent competition, rather than not renting out units they could profitably rent out.
> At the same time, there’s a bunch of buildings sitting empty with no rent paid.
But you have yet to establish why. Are they units nobody wants for some reason? Are they "empty" but actually rented out, because some company signed a long-term lease before COVID and now they're WFH so nobody is there, but the lease doesn't allow subletting?
The inverse of the latter could also explain a lot of it for commercial real estate. Companies typically use long-term leases with defined terms because if they move in they're going to have significant expenses to install office furniture, wire up all their computers and cameras and things, put up walls where they want them etc. They're not going to do that in a place that could jack up their rent a year after they move in, so they demand a long-term lease with a defined rent.
Now the landlord has a problem. WFH is still a thing and it's harder to find commercial tenants, but they don't want to provide a new tenant with a huge discount in a long-term lease if they're predicting WFH will go away and they'll be able to demand higher rents in a year or two. And maybe that's cope, but it could still be why they're doing it, at least until they've sacrificed enough income to realize that WFH isn't going away.
Or it could be something else, but "landlord with twenty buildings thinks they can significantly increase city-wide rent by not renting out some of their units" is still nonsense. If it's happening at all it's only because those landlords are the proverbial fool and their money, not because they've devised an evil plan to profit from screwing people, because that evil plan screws the landlord doing it more than it screws the tenants.
Again, their actual evil plan is to prevent other people from putting more units on the market, by lobbying for zoning restrictions that inhibit new construction. Not by foregoing their own profits on their existing units.
I’m not calling them evil. I’m just trying to come up with a rationale answer for why storefronts would be left vacant for extended periods of time.
There could be honest but non-obvious reasons. Maybe they need multiple renovations before they can get a certificate of occupancy but the local permitting office is Kafkaesque, or the site needs environmental remediation before it could be rented but the owner doesn't want to deal with it so they're trying to find a buyer instead of a tenant, or they have to finish suing the previous tenant who messed up the unit before they have the money to fix it, or the landlord took out an adjustable-rate mortgage right before interest rates went up and WFH started and is now bleeding cash and waiting to see if rates come back down to decide whether they want to invest new money in finding tenants or just file for bankruptcy.
One of the serious possibilities is that they're dumb. Lots of idiots exist, some of them buy real estate. They're asking for more because they erroneously think they can get it and then they're wrong so the unit is empty. They eventually either figure this out and lower the price or they run out of money to pay the mortgage and the bank comes for them, but either of those could take an arbitrarily long period of time.
If rents go down, commercial mortgage providers re-value the building, and then call in the entire mortgage at once because it's now greater than the new value.
A theory that I've seen is that as an area increases in value redevelopment will offer the highest ROI for a strip mall owner, but local zoning and town council approvals are a huge barrier. Empty stores are inefficient short term but the blight can help to push through rezoning or council approvals for redevelopmemts that will pay off in the long term.
It's a good question. I suspect that some of these will remain empty for several months, at least.
line must go up forever or infinite free money scam stops working
> I'm a housing activist
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.
Good luck!
What does SFZ mean?
Single family zoning. A residential lot can only be used for a single, freestanding house; not a 2-flat.
Probably single family housing zone
Business stagnation and crime are particularly bad for Oak Park and Evanston. For the walkable areas increased density seems worse for local businesses. It prices out the mom and pop shops. I suspect there's a happy median.
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.
There's another housing problem which maybe sounds ironic but I would argue that due to land costs, and tastes.. new housing in general is "too nice" compared to old housing. That is - the size, materials, appliances and finishes of housing have all got dramatically better in my 40~ year lifetime. No one builds utility housing anymore, its all aspirational.
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.
Everything but size is an extremely marginal cost compared to construction labor, and size is determined by what local zoning will allow. That is, more often than not, nothing but single detached homes on large lots, which makes it pointless for a builder to not maximize size while they've already got labor on site.
This is an interesting point that I’ve seen play out as you described. It was the parents of an acquaintance of mine, and they did choose the downsize option because they were getting too old for the upkeep of a whole house and niceties it brings such as having the hotel like amenities of a doorman. Then there’s the point of choosing new vs. old stock, agreed there is a higher demand, thus it demands higher cost.
Further - because it’s easy & cheap to stay in a paid off SFH indefinitely, a lot of retirees do so.
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 …
I mean, if there's restricted supply/excess demand then the ones at the margin moving the point where supply and demand cross will the ones willing to pay high prices.
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.
Fair point
Yes, as long as there’s a shortage of housing no one is going to build “utility” (read low-profit) housing when you could build high-profit “luxury” housing.
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.
Right so the core of the problem is not enough new development, a lot of which is nimbyism.
Even worse, our housing policy is corrosive to the fundamental social contract. When I was young, I was taught that if you worked hard and kept your head down, you could have a comfortable life. You may not be Bill Gates, but you could have a successful middle class existence.
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.
[1] https://news.ycombinator.com/item?id=43213546
I think YIMBYs really like to cast NIMBYs as their evil adversaries, but the problem is systemic. Any policy change, be it "what can be built on this lot", or "what social services do we fund", or, in particular for my muni, "how do we deal with leaf collection in Autumn" will generate three cohorts of people:
(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.
Insightful!
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?
Sounds like loss aversion to me. https://en.wikipedia.org/wiki/Loss_aversion
I don’t know what YIMBYs like to cast people who oppose housing. I am pointing out an effect of the lack of new housing.
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.
The difference here is whether or not folks are actually pro-social.
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.
No! This is more about economies of attention, and about cognitive availability, than it is about deontology --- ethics are a trap here.
Both can be true at the same time.
>> I was taught that if you worked hard and kept your head down, you could have a comfortable life
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.
Speak for yourself. I am 38, live in one of the top fastest growing cities in America for like 5 years running now (with a booming housing market), and own my own house outright as a result of my hard work.
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.
The housing equivalent of "works on my machine!". Glad it worked for you but it's not working for millions of others. Your experience does not invalidate other's experiences.
I've read this a couple times and still don't see what it has to do with the comment that it responds to.
It's a counterpoint to :
"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"
No, your post was an emotional reaction based on some who-knows-what chip on your shoulder that propelled you to launch a strawman attacking an anonymous commentator. You know nothing of my personal situation. Nor, it seems, do you know much about the personal situations of younger people of modest backgrounds and modest means who simply want to live in the high priced city they were raised.
I suggest more emotional reflection.
It wasn't a strawman, it's a direct reply and I'm zero percent emotional. What are you talking about?
Condos built and decorated in the 1970s are approaching a million dollars in our neighborhood. New ones are two million. Do tell.
Your neighborhood isn't a starter neighborhood and there are thousands of others in the country.
Why'd you bother typing this?
Tangential question: Is housing activist your occupation? And if so how did you get into that line of work?
I work at Fly.io as our Chief Housing Activist.
> Public safety issues
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.
Maybe my data doesn't generalize, but it's true for my muni.
Henry George wrote about this a hundred years ago in Progress and Poverty! His solution: a tax on land (not buildings) to encourage building up. Economists say it's one of the most efficient taxes possible.
Thought experiment: if all habitable land on the planet is surveyed and transferred to private ownership, all subsequent generations that are born from that point on, will be doomed to rent-based servitude. Forgetting all political theory, it seems that planet-bound species with a positive population growth rate must not rely on socioeconomic systems that exclusively (or heavily) favour private ownership of land.
Georgism stipulates that it doesn't matter who owns the land so long as they pay a tax on it that goes back to the people.
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.
What I appreciate about Georgism is that it can neatly avoid the difficult issue of justifying exclusive use of land without resorting to ideas like 'First Occupation' or vindicating violent acquisition.
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.
If the land is taxed then you must find a renter willing to pay more than your tax, otherwise you would sell. Meanwhile renters will search for the lowest rent, which is naturally found in high density areas. So cities would still form, and the vast tracts of unoccupied land would be money-losing assets that must be abandoned, at least until population growth makes some of those plots profitable. The market would fluctuate with supply and demand, just as it does today.
> Give me the private ownership of all the land, and will I move the earth? No; but I will do more. I will undertake to make slaves of all the human beings on the face of it.
From "Archimedes", by Mark Twain, 1889
Abolish land "ownership", and limit leases to 99 years. Existing ownership relations can be grandfathered in, but they will of course eventually disappear, in much the same way as how scientific revolutions eventually succeed: via the biological demise of the preceding hegemony.
I don't think we're projected to have positive population growth for much longer. Also what does rent based servitude even mean? I own a house but still have to pay taxes and upkeep. It's really not much different from rent. The tax supposedly goes to pay for services that the govt provides back to the people. If I were to pay rent instead, at least the service I receive in return is provided back to me specifically, and the cost of switching if I don't like the deal being offered is much lower.
Rent, healthcare, and the price of eggs are very popular things to complain about for some reason...
Property is Theft!
It’s called land use taxes. It’s probably one of the best ways to change the most negative behaviors that brought about this situation (if combined with less regulated zoning)
Developers already want to build. The problem is the law.
Correct. Zoning code prevents building density and building codes force building crappy multi-family housing with tons of parking everywhere. Sprawl and car-dependency are bankrupting America.
The Georgists agree!
Indeed, my state's constitution severely restricts how cities can tax themselves.
Nope.
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.
Developers want to build because building will increase the value of property.
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?
> 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?
>What dense city with a thriving commercial and business/industrial base is cheaper to live in than a less-developed rural small town?
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.
If you aren’t buying something frequently, you drive to the big city when you need it, or you order it. Most specialist goods just aren’t available in a small town same day at any price.
Plumbers and other non niche service providers are also generally cheaper in small towns because cost of living is higher for the plumber too, all potential customers have less disposable income, and because the market isn’t perfectly efficient.
Housing and basic necessities like groceries are so much more expensive in thriving dense cities than in rural small towns, that they swamp out any costs for the vast majority of people.
I don't have a great sense as to how this works across the world, but where I'm at (Seattle) your property tax is a factor of both the improved and unimproved aspects of your parcel. The improved ones being the value of the buildings and the unimproved being the value of the land itself.
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.
I don't think you disagree here... Zoning changes and land value tax are both beneficial. In some cases like the example you gave where you can only build one dwelling per 5 acres, zoning would be a more significant problem. That's an extreme hypothetical though. In other cases, taxation incentives are more significant.
We absolutely need to push for BOTH zoning reform and taxation reform. They will work really well together :)
I thought of a slightly milder version of the tax, which I call a land wealth tax. Fix a certain maximum value of land owned by a single person which would not be taxed. In theory this might be some quantile, like the 80th percentile of land value owned per person. (I'm pretty sure you would still be taxing the majority of land using this threshold! At least at first.) Then everything owned above that is taxed by value. This avoids a rebellion of the most vulnerable and sympathetic homeowners. Of course land owned through opaque ownership structures must be assumed to be above the limit. Corporations with transparent ownership structures might see their land divided up (a likely intractable math problem if you included publicly traded companies) or some approximation applied, or the land simply taxed.
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.
I like your creativity here but there have been actual calculations done around this and carving out provisions for tax exemptions is not necessary.
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.
This is called means testing, and it's a poor way to design policy because it creates step functions and breakpoints, distorting the market.
The tax I described is not a step function. It is a ramp function. By your definition, the progressive income tax would also be "means testing".
What you described ("minimum value that is not taxed...") is the definition of a step function. But yes, binned income brackets is also a form of means testing, and a poor way to design taxes.
You seem to be getting downvoted but I agree that this is a good idea.
how does that work with agriculture or other land uses that don't build? do those people get taxed higher because they don't build?
Agricultural land is far from large population centers, so the value is relatively constrained. The real losers on an LVT is not those owning rural land, but the operators of a surface lot near a stadium, or people living in mansions in the innermost suburb ring.
i.e., people for whom my violin is very tiny.
what about urban agriculture and public parks etc? buildings are not thing only valuable land use in an urban center.
I don't imagine the government is going to collect taxes from itself for public parks. There is the opportunity cost of lost revenue of course.
what about privately owned parks or nature centers? i lived in an urban area with a privately held non-profit nature center nearby and it was an important component in my quality of life.
They get taxed less, because instead of taxing their produce and income, their land is taxed, and agro land is very cheap. On a quick google, I can find a 140 acre alfalfa farm in Idaho for $1.4MM ($100k/acre), and a 0.07 acre empty residential dirt lot in NY for $4MM ($54MM/acre).
That Idaho farmland ($10,000/acre!!!) is still quite expensive... for farmland.
Family just bought 20+ acres, forested, for about $15,000/acre... within 15 minutes of a MSA500k+population's downtown area.
Land that is far away from developed land will tend to have lower land values, so farmland would not be so highly taxed under LVT. It's mostly land that benefits from being close to development that would be taxed higher.
Australia values every single lot of land for rates (aka council tax). So it is possible with some good stats nerds to figure it out.
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.
> 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)
No, but they're also not punished if they do build
Those holding the homes have an interest in making the problem worse. Those buying homes make the assumption of the problem getting worse. Those who complain about the cost will reverse their position when they buy.
The issue is that everyone involved wants the problem to get worse.
Too cynical. There exist homeowners who don't want the problem to get worse, because, like, we live in a society. Rampant homelessness and nosediving birth rates are not to my benefit. My friends and kids will need to be able to afford housing.
> There exist homeowners who don't want the problem to get worse, because, like, we live in a society.
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.
> The vast majority of home owners want the "problem" to get worse
No; I am rejecting that claim.
We can rely on voting evidence instead of claims.
It doesn't really matter if a few of the homeowners want things to be better. It's a tiny percentage of the homeowners who want prices to continue going up who push all of the policy effectively.
That’s only the incentive if they’re recluses living in their last house. Many such cases.
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.
This is why historically land reform occurred via revolution, not policy.
Turns out the housing theory of everything applies to youth support for trump in 2024.
This is definitely true. Young people viewed the establishment as unsympathetic to their need for housing.
I guess it wouldn't be a good theory of everything if it left this one out.
That's not ironic, by the way.
The solution to most of our problems is even bigger problems.
At least in my country I've seen so many young people move to cities to get a better education, only to end up unemployed or working a dead-end job, as they're competing with all other young grads who did the same in a stagnating economic environment.
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.
This works if you can work the jobs available in the countryside. Im moving away because ive found a good job in a city after so many boring azure / php jobs in my village. Its depressing
It seems paradoxical to me that the only "solution" to housing shortages, which exist because the area is too attractive in large part because of the availability of jobs, is to build more houses and thus make the area more attractive to businesses because of the increased availability of workers. It looks like a battle against windmills that is bound to get out of hand. Efforts to alleviate the problem only exacerbate it.
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.
Your assumption seems to be that the only reason for dense housing is to help businesses, but businesses are bad, so you want to artificially limit them, which doesn't make sense.
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.
No, that's not what I'm saying. At the moment, cities are too attractive, and this is largely due to the availability of jobs. What I am suggesting is incentives, in whatever form, to encourage companies to move to less populated areas.
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.
I do think there's truth to this. It's a big problem in the UK and a good illustration particularly as London has been the real source of economic growth for the country as a whole thereby resulting in that concentration you mention.
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
Yes, there are a variety of methods that could work. It should be seriously studied to see what works best.
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.
"Nobody drives in New York because there's too much traffic."
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!
You could also do things like have a government murder squad regularly kill people in the area. Or give away drugs. Maybe cut down all the trees and put in a pile of garbage.
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.
Didn’t SF try all those things?
On purpose, no. In practice, yes.
That first scenario you portray is economic growth. Any city in the country would be thrilled to have to deal with the "problem" of being too attractive to both businesses and people.
Yes. The city is thrilled. Jobs! Tax dollars! Wooo!
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.
Dallas is less expensive than LA. LA with amazing weather, little allergens, and beautiful geography. Dallas with heat and cold enough to be lethal, brutal allergens, and limited natural beauty. No one who knows better wants to live in Dallas- they have to live in Dallas because they can’t afford it elsewhere. Which works out, because Dallas has infinite land to build single family homes. When people move to Dallas they aren’t moving to Dallas; they’re moving 30 miles from the urban core. Dallas’s urban core is decaying from lack of housing - with no affordable housing for young people near the city center - downtown has become a ghost town as jobs follow the housing to the out rings. The smattering of housing that exists near downtown are apartments, very expensive town homes for the wealthy, or the original stock of single family homes from the 50s.
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.
Cities are composed of people. Obviously, it doesn't make any sense to say that a city wants something that its people do not want.
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
> Obviously, it doesn't make any sense to say that a city wants something that its people do not want.
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.
Exactly, all the dense places that are desirable are the most expensive on the planet.
The businesses wouldn't go away. They would just move to less densely populated areas.
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.
In fact, remote work is very likely a better solution than increased building... Mass transit is also a solution, and there are certainly others.
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.
I think remote work will continue to grow because it is so attractive to employees. It will just take time to be fully normalised and it is not available for every job.
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.
If a city could grow economically by simply building more housing that would be quite the discovery. A perpetual motion machine!
Derek Guy once wrote about why Japan has so many artisans thanks to the lower rent and higher density.
https://web-cdn.bsky.app/profile/did:plc:ks3gpa6ftoyaq7hmf6c...
My thought was that it doesn't matter what houses cost. It is merely an exchange of money for bricks. Neither party needs to lose money in the transaction. Houses require maintenance which is partially unpredictable but can be smoothened out by insurance. The party holding the bricks will have to pay for that.
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.
There is no shortage of land, there is a shortage of efficient transportation. All this talk of building up and creative ideas around housing is great but the ultimate problem is transportation. To solve the problem of housing in LA, a person should be able to live in Reno,Nevada and work somewhere in Santa Monica, CA. I'm not saying I have a solution, I'm just pointing out the problem domain.
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.
It would be much more efficient to legalize apartments in LA than to run high speed trains to bedroom communities. Digging tunnels would blow out the cost by itself.
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.
Buses aren’t that sexy but they are probably a good compromise for cities like LA. They don’t require a ton of infrastructure and can still remove lots of cars from the road. Make them convenient (better bus stop UX, wait time no more than 10 minutes, GPS track them, modernize them) and people will consider buses.
Send surveys to all the biggest companies in the city to figure out specifically the routes that need to be created.
This is exactly what LA is doing btw. LA has a few light rail networks but by far most of its network is buses and most of its riders use its buses. The problems that the LA Metro Bus network echo the problems with fixing housing costs in general:
* 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.
Buses are usually the cheaper inferior option. While bus service doesn't inherently suck, buses are usually chosen because of cost not because they want to run a good service. This results in cost cutting of every portion of a bus network until the experience suffers. Dedicated lanes are not provided so buses get stuck in traffic. Bus stops without rain shelters or even a bench (versus full stations). Operating budgets get cut and then the interval between buses goes to 30 min. Service after 10 p.m. gets cut. The bus networks that don't suck are usually called "shuttles" and are underwritten by tourism districts, airports, and theme park operators.
Yes, and every LA arterial should have a dedicated lane for bikes and buses.
Buses are terrible because they get stuck in the traffic they're competing with. If the bus is the same speed as the cars, people are more likely to take a car.
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.
Los Angeles has been doing this and the BRT lines are a great way to get started since they’re so much cheaper to build. The last time I was visiting family they looked busy and outpaced the car traffic handily.
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.
Communities only stay "bedroom communities" for long if you force their hand in some way.
But who wants to live in apartments? It's better than being homeless but it's hardly a solution. People want single-family housing, and it is possible to build tens of millions of houses within practical commute distances of big cities. Also, we can build new cities!
What a weird argument. There are many, many apartments in New York that people want to live in so badly that they'll pay millions upon millions of dollars to do so.
and they want to live there because they don't like near-by houses? I'd imagine single family housing in manhattan would cost 10x what an apartment costs. Even brown stone housing in new york is more expensive than similarly sized/located apartments (if you call brown stones proper housing even).
It's more expensive because the tax treatment is better. You really have no idea what you're talking about.
> There is no shortage of land, there is a shortage of efficient transportation. All this talk of building up and creative ideas around housing is great but the ultimate problem is transportation. To solve the problem of housing in LA, a person should be able to live in Reno,Nevada and work somewhere in Santa Monica, CA.
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.
People don't like to live in dense environments. Apartments and condos suck, people want their back yard.
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.
Just because you don’t yet understand why people are prioritizing walkable communities over anything else, doesn’t mean reality reflects that. The opposite is true; walkable neighborhoods are expensive because they are in demand. People live in single family housing in the suburbs because they can’t afford to live like Ted lasso.
who said I don't like walkable areas? Single family does not equal "typical american suburb" walkable SFH housing with subways/trains/buses are practical.
Some people don’t, but many people do - for example, older people don’t want to do yard work - and everyone has to choose between a number of different related things. If you want to live somewhere with culture, interesting local businesses, a healthy walkable lifestyle, etc. the suburban model isn’t economically sustainable. If you want a detached single family house and a large yard, you might trade those amenities for the house you want but it’s definitely a choice with significant costs. The fact that America’s walkable neighborhoods have such price competition suggests that there is a significant underserved market for that even if the preference isn’t universal.
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!).
> People don't like to live in dense environments
The 1.6 million people in Manhattan would disagree with you.
Are you saying they love living in apartments? I think most of them live there because of proximity to economic activity, not out of love for apartment living. If manhattan allowed for single-family housing for 1.6M people, how many do you think will refuse that?
Can you imagine that some people feel differently than you? There are in fact many people who enjoy living in apartments.
I'm sure there are such people, but doubt they are many. Most people don't like dealing with upstair-neighbor noises, waiting for elevators or walking up long flights of stairs, not being able to make music/tv noise whenever you want, not having space (indoor or outdoor),etc... Not once have I ever heard of a person complain how they wish they could live in an apartment instead of a house. I'm sure it happens, but seeing the topic is about housing strategies for the masses, the views of the majority should be taken into account.
You are in a bubble. People self sort according to their housing preferences in this country due to onerous zoning. People who like to walk around their neighborhood go to apartments, people that dont mind driving everywhere get SFH. Just because there isnt much overlap doesnt mean the other group doesnt exist. I know many people that have happily sold their SFH to move into a downtown condo.
Subways are too expensive per mile for a lot of cities. Density makes transit cheaper
I agree, so let's make it cheaper. Other countries build subways cheaper over longer distances. It isn't a practical limitation but one of politics and policy.
If the https://en.wikipedia.org/wiki/California_High-Speed_Rail is completed, it would be reasonably convenient to live in the Central Valley and commute to San Francisco (https://en.wikipedia.org/wiki/The_Portal_(San_Francisco)).
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.
Even a rail line such as RER A only has a capacity of at most 40k people/h/direction. It cannot solve all, or even most, transportation problems of a large city. For that, you'd need tens of lines, as in China or Madrid.
Absolutely. Or put another way, if you can imagine a map of a metro area distorted in terms of commute times between places rather than physical distance, the goal is to maximize the density of the city, putting as many people as possible within reasonable commute times.
This is possible via either dense housing or efficient transportation or both.
A solution is to build transportation first and build housing afterwards. In Japan, rail companies are also real estate developers who buy the land around the stations and capture the increased land value. US rail companies used to do the same.
Or allow building higher than one story? Like most cities around the world
LA has good public transport but then builds low density around it
Good coverage, but it’s absolutely abysmal in terms of reliability, convenience, speed and cleanliness. I tried to survive a week without Uber/driving in LA, and gave up after 3rd day.
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.
The thing I hate the most about not being able to afford a home is that rent is sky high and it makes it basically impossible to have another kid. Not without significant problems and risks at least.
I would tell the same story, but the root issue is cars. Housing density would have remained high if not for car dominance.
By necessity, perhaps. But really, cars enabled communities to more cost-effectively express preferences that would have been too expensive without them; cars are an indirect driver of this problem.
I think you could replace 'cars' here with a lot of technological innovations that have made certain aspects of our lifestyles attainable at a potentially greater externalised cost. Much of it is simply making things more convenient - not necessarily better.
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.
While I agree with the general anti-car sentiment, we have expensive housing in less car-dependent areas as well (case in point: various cities in Europe), leading to a broad range of social issues. Hence, I have to disagree with this point in particular.
Tokyo proves that dense cities can maintain access to reasonably priced housing.
Tokyo of today. During the Japanese asset bubble that wasn't the case.
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.
This is also the case in Seattle or San Francisco - it is not significantly predictive.
Are you suggesting that railway megaprojects are being done to service communities with no people? I have a hard time finding dense communities with good rail systems.
where have you looked? I could name almost every European city as an example...
I do think this is a uniquely US problem. I know many places in Europe and Asia don't have this issue, yet nearly every city in the US faces it.
Discussed at the time:
The Housing Theory of Everything - https://news.ycombinator.com/item?id=28531025 - Sept 2021 (80 comments)
The NIMBY people know what they're doing. They know that restricting the supply of housing is bad for society. They don't care because it is good for their own personal financial position.
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.
This is exactly it. Notice for instance how homeowners will vote to allow ADUs but not to allow splitting off the ADU as a separate deed that would allow someone else a piece of competing ownership. They want all the upside of additional landlord opportunities but not the filthy peasant to own the Adu they live in.
Yes. The answer is not to "convince" individuals of things en masse. It's to identify the policy change that would take away their power to do this, and then identify approaches to law that could cause that policy change. Then, build theories of change to get there. Many theories of change do not require broad public support.
Maybe? There are also just a ton of really stupid, or not especially conscientious people.
But that would mean that west coast liberals aren’t actually liberal! Inconceivable!
China built so much housing they actually have an oversupply problem and housing prices finally went down, which is good for the people at the bottom end that want to buy housing. The people who bought as investments pushed back and now China is correcting back the other direction.
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.
Condos in the US are broken and it’s largely due to how fees go up over time. Condo associations have been known to squeeze condo owners with increasing fees in the US. It’s why condominiums often have a bad reputation here.
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
From my experience with my own condo's board and looking at the numbers, it's more like a lot of condos are only now adjusting fees to what's actually needed for proper maintenance, after events like the Surfside collapse finally scared managers out of pushing the problem down the road.
I know that not every condo association is like this but it didn’t take much looking for find horror stories[0].
[0]: https://coralspringstalk.com/coral-springs-police-investigat...
https://www.palmbeachpost.com/story/opinion/columns/2024/04/...
If you're talking Bay Area, the only thing that will ever make progress there is to fire the Board of Supervisors into the bay and make the entire permitting process 'shall issue' with no objections allowed from neighbors.
I tend to think that housing shortages are more a result of inequality than a cause of it. The large disparities in wealth result in a situation where a disproportionate amount of land is controlled by a relatively small number of people. Those landowners may be fine with owning "trophy" properties that do not produce any income stream but take up a lot of land that could be used for housing a lot more people. Also in some areas an increasing amount of "housing" is not used as housing but rented out as AirBnBs.
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.
My favourite example of this in my neighborhood is an apartment block of only studios, which would be illegal to build today, as the law was updated to prevent ridiculously small apartments (18m2) from being built.
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.
Make cities for people, not cars!
https://www.youtube.com/watch?v=OObwqreAJ48
You could only create a land value tax for land that is already owned outright if there’s a mortgage for that land, then the owner will default and society will colander.
Why wouldn't the owner sell?
Keep in mind that land that is owned outright is almost exclusively very low value land.
Trades licensing, tightening codes, inspections,zoning, inspection, planning, environmental regulation, and water/well shenanigans are the reason for unaffordable housing. Plenty of cheap land near jobs, land not a meaningful constraint.
By bypassing most all these and DIYing a house I was able to build a house for well under 100/sqft.
Where I live, land is a very meaningful constraint, there’s no cheap land near anything meaningful. We’re about at our limit in terms of transportation infrastructure, too, so additional housing has to be apartments right in town or our horrible traffic will become even worse. Unfortunately, everything they are building is tight single family homes.
Many of our immigrant families crossed the Darien Gap by foot for new opportunities. Fortunately there are roads to flyover country. If you have a thumb, escape is possible. Much of my family did it with far less resources and as many familial responsibilities as you probably have
I live on an overloaded island thousands of miles from anywhere else metropolitan, so no I cannot just hook my thumb and hitch a ride with a trucker across the vastness of some flyover states to get to new opportunities.
Go to the docks, eventually someone might need a hand on a yacht/sailboat, even if it takes awhile.
I might as well just lift my own boot straps and fly away to Utopia.
Not sure how that's utopic. I escaped an overpriced west coast hell hole by working on a fishing boat. Hard work but it works.
There is not in fact plenty of cheap land near jobs in major urban centers.
I can show you a fair bit in Chicago if you want.
Say more (here, or next time I see you).
https://chiblockbuilder.com/city-owned-lots/?
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.
It's generally cheaper to buy land in someplace with shit schools then pay for a nice private school, especially somewhere like Chicago.
Sure. I get that. Last year, a group of activists bussed about 100 Venezuelan migrants into Oak Park, and we allocated a bunch of money towards housing and services for them. The math worked out such that we could have instead bought most of the families a free-and-clear house in a neighborhood like Dolton.
The problem as I see it is intensely localized to the inner-ring suburbs, which exist pretty much entirely to siphon money out of the Chicago school systems. Those suburbs are engines of middle-class opportunity, and they're deliberately designed to lock out the kind of people who would consider buying affordable houses in Chicago proper.
My only point in this is that, to the extent it exists, the housing affordability problem in Chicagoland is not primarily driven by availability of land. If it was we’d just do what we did in the past and make more.
It’s driven far more by history and public policy and the ugly confluence of those 2 things.
I'm knee-jerk about this because "the availability of land" is really the kernel of the housing affordability problem in Oak Park.
There's plenty of inexpensive, buildable land in Chicago. It just might not be in the neighborhoods where there's housing demand.
How many of those can you realistically bypass by DIYing? I understand it saves a bit on taxes and you don't need a license yourself, but the rest?
I’m wondering the same; I have friends who build houses in areas with virtually no zoning and the cost per square foot is $190. (They sell for $200, so on a modest 2,00 sq ft house, he’s putting up $400,000 in capital to build it and earns a $20,000 profit after the 3-6 months it takes to build).
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.
I bypassed codes under an owner/builder exception. No inspections no building plans basically no regulatory costs. I found ultra cheap land with an unproven poorly documented but already drilled well share that turned out to be good (high risk but high reward) so nearly zero for water connection and well. I took some high risks proving electric and water and septic but after almost a year of footwork I proved them -- massively increasing land value for basically free.
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.
What specific owner/builder exception did you use?
A big issue with all this housing wealth is that it's fake. If a good business goes up 10x in value, it accomplishes that by providing more valuable goods and services to people. If a house goes up 10x in value, that could only be achieved by ensuring supply grows slower than demand. The house didn't produce any net positive for society, actually the opposite. The owner is being rewarded for figuring out how to increase demand for their house while providing nothing in exchange to the broader world. It's a serious bug in capitalism that we call this "building wealth" it should be called "building scarcity". Might as well hoard bitcoins.
The “screw you, I got mine” culture is killing us.
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.
I think it's more projection - assuming anything that benefits you benefits society as a whole.
House owners assume everyone else is also a house owner, so increasing values will benefit everyone.
I'd posit that it's the inverse belief: anything that benefits other people indirectly hurts you. This zero-sum worldview is becoming popular in national politics as well.
This.
Another factor everyone is missing because it's politically incorrect to talk about:
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.
Why do you assume only poor people are annoying neighbors? Rich people can afford bigger speakers, more booze, and to not have a job so they can stay up all night. I think wealth is positively correlated with the problems you describe.
Some of us have actually lived in both cheap and expensive areas. Cheap areas tend to have unemployed people on them who decide to play loud music at all hours of the day and night.
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.
Of course there are exceptions, but on average, wealthy people are way way better when it comes to these kinds of things. Especially wealthy people who get that way by keeping themselves busy with productive labor. The upstairs neighbor doesn't need a $5000 stereo system to make your life a living hell, they can do that perfectly efficiently with a $30 subwoofer.
Why are most criminals men under 40? Some things just are, uncomfortable as they may feel.
Well that's an easily verifiable fact, wheres "poor people are louder" is more of a belief
It seems like a hypothesis that is also verifiable ("... on average").
See, this is why the housing problem is so difficult to solve. You think you're being virtuous or something by sticking up for the poor oppressed. Why don't you be even more virtuous and move yourself to Skid Row since all those poor people are really so mild and quiet and misunderstood. All you're really doing is ensuring that this problem continues indefinitely. You're the same kind of person who insisted men should be allowed to use womens bathrooms and thus ushered in Trump 2.0, hope the good-boy-points you got for that were worth it.
I'm not the one with a strong conviction based on little experience
Somehow I doubt social justice warriors are the key thing holding up housing reform. That grants a few wokescolds more power than a huge number of other economic forces.
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.
The solution is reinforced concrete walls and not any particular zoning law
Reinforced concrete walls don’t keep out noise on courtyards and also don’t work as the decibels get higher and higher. Another major nuisance is the constant sound of sirens (often at night), or domestic disturbances spilling into hallways - the front door isn’t a reinforced concrete door.
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.
Something I learned is that some cities just don’t use sirens. It’s not really necessary for low speed areas.
Right, so that sort of thing needs to be part of whatever proposed solution to the housing problem. This will of course raise building costs etc., and the regulations will need to have teeth so people can't just build apartments out of cardboard and paint them concrete-color. Also, that concrete will need to be really thick to ward out subwoofer noises. Maybe you could get around this by banning subwoofers.
The key is to not focus on the money. The money flows in one direction, but the economy (things that people choose to do; where they spend their time, how they get around, etc) flows in the other direction. In some sense, money is a symbol which represents real economic activity.
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 is one thing missing from this article.
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.
What about the (increasingly unpopular) strategy of population growth via immigration? Won’t this just keep the demand for housing high?
Yes, very bad strategy because not only it is worsening the housing crisis, and thus accelerating the fertility crisis, triggering a vicious cycle.
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.
europe has an aging population for decades, yet the inflated housing costs are even higher than america
The population age has very little to do with it. Demographic density is what matters. Old and immigrants have to be housed, as long as population is increasing, the problem will worsen.
This and insufficient taxation of higher income brackets is basically my entire politics these days.
I was like that, then as I learned more about modern monetary theory I realized not even the taxation matters, we can print all the money we want, we just do it for things that don't help the bottom.
And how long will that last when Trump messes with dollar as reserve currency?
Quite a good article, I like the ‘hyper local democracy’ suggestion.
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.
I have been saying this since before even the Housing Bubble which leads to 2008. And every time some insane Silicon Valley UBI or some other utopia theory come up and none of them fix or even mentioned anything about housing. And it is a problem everywhere, even in some areas of Japan. So I am now 20 years of watching the sad state of things.
No politicians wants to tackle it, no establishment wants to change. And people talk about wages stagnation, when it is property pricing becoming unreachable.
Anyone else frustrated that this discussion always goes 'housing cost → effect' and not at all 'interesting new effects → housing'?
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.
> 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?
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.
The pricing behavior of a modern economy is entirely dictated by the component prices of four things: Energy, Real Estate, Food, and Water. There's some interplay in how the pricing of one of these impacts the other (e.g. expensive energy makes transporting food more expensive, but expensive food makes harvesting energy more expensive). But there's nothing more "atomic" than these four things; the price of everything else is overwhelmed by price movements of Energy, Real Estate, Food, and Water.
(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.
Housing destroys the environment, uglifies the world, and a generation later, housing is just as expensive as it was before. Why? Because humans breed and overrun their habitats. Housing costs keep neighborhoods livable and the population from exploding. Say no to traffic, say no to killing the earth. Say no to housing expansion.
[2021]
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.
Housing is considered a service by the Fed (I guess because it requires construction workers?), so this is less surprising than it's framed here; services have all gotten more expensive as goods have gotten cheaper. See Section 3/Chart 4 here: https://www.newyorkfed.org/medialibrary/media/research/epr/0... Very true -- as I said, the underlying impetus is very relatable! This is exactly why we were in such desperate need for reliable, cheap mass transit outside of NYC and DC. Luckily, WFH is something of a hack here. ...because Germany is richer, not because they're nerdier. I really want to like this article, but it almost seems to be intentionally ignoring the inequalities created by capitalism + nationalism. Again: c'mon. The fact that the word "automobile" doesn't appear in this paragraph isn't an omission, it's a fatal flaw to the entire point. We've known the effect of cars on urban density since 1939[2]. That is a very questionable hypothesis; AFAIU, they're saying that doubling the population of San Jose would double the GDP generated by the city. IMO That's a fundamental misunderstanding of what makes rich cities rich.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
If anything, I think this understates the problem.
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.
These problems stem from private property. That is, we allow the hoarding of a basic necessity (ie shelter) and we treat housing as an investment vehicle. This incentivizes every aspect of society and government to do what they can to increase property prices. Homeowners think it's good for them. Investors love it. How do we do that? By limiting supply.
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.
I couldn't have less bandwidth for people who want to villainize landlords. Want to reduce the influence of landlords? Let more people build multifamily housing. Who's keeping that from happening? It's not the landlords. It's the people who live in freestanding single-family housing.
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.
If they own an apartment building, how can they be lower middle class? Even if it's not fully paid off, unless they are upside down on the mortgage, they have wealth. And even getting a bank to approve a mortgage means you're probably not lower middle class.
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?
I’ve seen 8 unit apartment buildings where each unit rents for $400 a month. A few of the units are chronically behind on rent. The building is in bad need of repairs, and the owner does as much of it as he can himself. The property taxes consume about half of the rents.
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.
That depends on how much equity they have and the economics of the building. My dad bought an apartment building and lost his shirt.
> Want to reduce the influence of landlords? Let more people build multifamily housing. Who's keeping that from happening? It's not the landlords. It's the people who live in freestanding single-family housing.
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.
> Every landlord I've ever met is a lower-middle class Black person who owns an apartment building
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.
“Social housing” already exists; it just isn’t very desirable and it seems many people who live in it aspire to get out of it.
Typical misogynistic and biased opinions, and not to reference the struggles of neurodiverse women is also another totem of the male agenda.