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.
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:
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.
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…
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.
> 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.
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.
No, 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.
"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.
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 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, you have a return in terms of imputed rent regardless of whether the value of the house goes up.
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.
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.
> 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?
> 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.
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.
> 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.
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.
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?
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.
> 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.
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.
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.
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.
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.
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.
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 :)
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.
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.
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.
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...
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.
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.
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)
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.
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.
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.
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.
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.
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.
> 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.
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!).
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.
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!
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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!
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.
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
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.
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.
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.
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.
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.
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’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.
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.
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.
`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.
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.
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.
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.
> 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.
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.
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…
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
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.
> 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.
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.
No, 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.
"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.
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 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, you have a return in terms of imputed rent regardless of whether the value of the house goes up.
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.
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.
"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.
> 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?
> 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.
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.
> 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.
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.
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?
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.
> 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'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.
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.
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
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.
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
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.
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.
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.
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.
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 :)
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.
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.
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
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...
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.
Indeed, my state's constitution severely restricts how cities can tax themselves.
The Georgists agree!
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.
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)
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.
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.
> 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
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.
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.
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.
This is why historically land reform occurred via revolution, not policy.
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.
> 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.
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!).
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.
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!
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.
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.
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.
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.
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.
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.
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.
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...
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.
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.
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.
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?
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!
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.
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
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.
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.
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.
Maybe? There are also just a ton of really stupid, or not especially conscientious people.
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.
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.
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
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.
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.
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?
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.
[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.
> 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.
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.
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.
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.