A big and diverse public housing system is the only solution that makes holistic sense. It’a the only way we can be sure people can go to where jobs are without risking homelessness.
The solution to bad government housing policy is reversing policies set by bad actors in bad faith (E.g. nimbys). Disallow speculative investment into housing markets by putting heavy taxes on:
second+ homes,
all rentals that cost more than 30% average area take home (with the top 10% of incomes removed). Scale said taxes with the cost of living in that area. Double the tax on short term stays in 'rentable units'. (E.g. airbnb).
Everyone deserves a place to call home that is safe, insulated from the elements, has plumbing, electricity, and internet at a fair price. I simply don't care if that makes housing speculation, land ownership, and utilities, unprofitable. Making a profit off of necessities is obscene. Eg everyone should have access to a basic internet package that costs around $10-30/mo for ~25mbps. Same for everything else. Everyone should get the minimum, and if they want more they need to find a way to earn more in a way that isn't extracting value from the vulnerable. Extract from the rich instead, or don't. You shouldn't starve to death under a bridge if you can't compete in a society that needs less unskilled labor every day.
You seem to think housing can be just created from nothing. That is fatal mistake in your thinking as no value is created from nothing. There has to be incentive for somebody to build housing in order for it to be built.
Taxes will not discourage housing investment - they will be paid by renters as housing is driven by supply/demand. Why do we pretend we can regulate markets when all individuals (except unproductive government layer) benefit most if they are less regulated?
Deregulating house development will encourage many developers to build housing as there is huge demand for it. How come you offer looting other people before you offer removing obvious pillars for the developers?
> You seem to think housing can be just created from nothing. That is fatal mistake in your thinking as no value is created from nothing. There has to be incentive for somebody to build housing in order for it to be built.
That's not what I said.
>Taxes will not discourage housing investment - they will be paid by renters as housing is driven by supply/demand. Why do we pretend we can regulate markets when all individuals (except unproductive government layer) benefit most if they are less regulated?
Maybe tax is the wrong word. Fines might be better. These speculators consume wealth without doing work. When someone would rather leave units vacant than charge rational rates they hurt the market. When an entire industry does this they are extorting the most vulnerable. People without the means to move. People on fixed incomes. The disabled, the sick, minorities, etc. This is unconscionable behavior that should be illegal.
Are you in the business of home building?
The industry itself is rife with bad actors. Code gets ignored to save 20 minutes or 20 bucks. Want to report it? Snitches don't get work. Deregulation will only hurt people. Housing code is like osha. There are graves behind housing codes.
Perhaps you're talking about zoning regulations? Yeah. I'm fine with telling nimbys to get bent and building a 50 story apartment complex in their ocean view so that people have affordable places to live.
Seriously. Pin rent to minimum wage pinned to inflation, and build. There is no reason why the LA river doesn't look like the chicago river or something, lined with highrise housing from glendale to long beach atop public land, other than corruption and graft.
Seriously? The cost of used Toyota's (Avalon, Camry, Tacoma, tundra) and jeeps (wrangler/gladiators) are completely disconnected from reality.
Regardless, the industry is rife with bad actors exploiting an imbalance of information.
The advertising on vehicles is designed to make you feel bad for not owning the best. Get slammed with that enough and you won't even realize you just bought that $90k coupe that will cost $10k in maintenance/yr to keep running to show off how wealthy you are while you hunt for a mate. Then if you have kids you'll take a bath on it for the dealer to make a profit when they resell it.
Housing is only expensive in (big) cities but we all need to go there because of jobs. Good hobs are only created in (big) cities because that's where the talent is. Solution is to build more cities and provide seed / anchor jobs. Government could do that easily.
Rural land is cheap. Government could build a "starter pack" of 1000 homes and move one of their offices from a big city there to provide employment. Borrow / print money to do this instead of QE. Heck, with the current prices the whole thing could be financed by leasing or reselling gov owned buildings in "old city" cenres.
Add to that the infrastructure to commute between medium-sized cities easily (either by Carbon-neutral air travel or fast trains, which both need upfront support) and you are golden, I guess.
There's plenty of affordable housing in America where people do want to live as well:
"According to Bureau of Labor Statistics data, lightly-regulated Houston has seen its civilian labor force grow by 20 percent in the last decade, compared to the San Francisco metro area's 16 percent. Some 21 Fortune 500 companies have their headquarters in Houston. What's more, for every job the Houston metro area has added, it's also permitted another unit of housing. As a result, the average rent for a one-bedroom apartment is $841, and home prices are below the national average."
It's not rocket science. If you want affordable housing make it easy for people to build and increase supply. It's remarkable how Silicon Valley is all about solving big problems for the world but demonstrates with Bay Area housing that some problems don't need technology, they just need reasonable government and if you don't have that, well, things don't work.
To be fair, this problem is global. Many places that are doing well that haven't allowed enough construction like London, Sydney, Stockholm, Melbourne, Paris and other places demonstrate the same failure to enable enough housing construction.
Posted the same comment earlier this week.
The Economist's take on housing this week isn't up to their usual standard. They ignore the parts of the US where houses are still cheap and there is economic growth like Texas, Atlanta and other places. The special is worth reading though, there are interesting facts about how around the world supply has kept up with demand.
Home ownership is compatible with cheaper housing. It's just that rules need to be made to ensure that you can keep supply going. That means rezoning things on a regular basis to keep housing affordable. Also probably a land value tax would help.
It's also because those cities were complete dumpster fires a decade ago. Ever walked in downtown Atlanta? Every other street is a row of abandoned delapidated houses. It's easy to get local government to build new homes when half hour cityscape is homes that are falling apart. The bay area suffers from having 2/3 of their growing direction be water. It's not as simple as you make it out to be.
Have you ever looked at Houston on a map? I’m not trying to be sarcastic. It’s enormous and the sprawl is incredible. The metro area dwarfs the size of every major city in California, combined. People drive an hour to work each direction on one of many 12 lane highways.
The “special thing” that Houston has done is have virtually infinite land, a giant ocean port, and absolutely zero care or concern for the climate or the future.
The job market is also depressed in Houston.... companies are moving out as people are tired of getting hit by hurricanes and having the land periodically returned to swampland.
For the combined statistical area population / metro area, houston is actually even more dense than LA at 715 versus 553 people per square mile.
Not disagreeing with your main point though especially in regards to the bay area. There's just no land left to sprawl there and people don't want to build up so it'll forever remain unaffordable.
Greater LA includes a lot of stuff like Ventura/Oxnard/Riverside/San Bernadino that while on the fringes of the LA metro area, shouldn't fairly be considered LA proper. This skews the square milage of LA up, and the density down, where in reality if you take a more realistic view of "Los Angeles" it's definitely more dense and concentrated than Houston. I say this as a former resident of both places.
Stockholm, London, Paris and Bay Area literally have now way to expand. You can easily find examples for well-functioning libertarian housing markets, but just as easily find examples to the contrary. Economists usually also have a very narrow view of what constitutes good living. Letting the market decide in areas with low supply leads to ghettoization.
... Not rocket science ... You reduced a complex problem to a simple short term solution. Too many people act like we have infinite land, Earth isn't getting any bigger. There are also consequences to policies that assume you can always build out further and further. By building on more farm land, you might reduce the amount of grown food and produce more chemical food. This leads to obesity. Which means people need more room... etc. Living further from your job means your commute is longer, meaning we need to get more foreign oil.
If America has 2 Billion people in 100 years, building a little further away won't work, it doesn't scale. Cities need to build better cities that allow people to have the space they need and get to the jobs they have. Where they don't need to be commuting 2 hours each way.
The US, like most developing countries, will probably follow Japan with population decrease in the next 50-60 years. Fertility is below replacement in most developed countries and as other countries get richer immigration is likely to decline.
The earth's population is probably going to peak this century and start declining. In addition the increase depends on massive increases in Africa which may not happen due to technology like mobile phones and better education for women.
Personally I'd say they ignore the areas of the country I won't move to anyway. I'm already in a large liberal city with a good job. This company can't move locations unless 1+ million members decide to move to the same place as well.
If that was Georgia or Texas, the political landscape would change dramatically though I'd rather show up 10 years later than right now. Neither are appealing states.
at least here in europe, the real talent (as opposed to business-people) in my experience doesn't care a lot (why should you, if you're a workaholic) about where they work, except that I know a lot of people who don't want to move a lot. What's happening instead is Google importing a 1000 employees, paying them half of SoCal (but still double the rate of local companies in the past - thougbhthe profit/employee wage ratio is probably similar, so....) and the admin-people cheer because it's such a nice cheap city. Students and service workers are less convinced about that idea of "we need this good jobs".
I'm also courious who owns the land, if we are not doing private, individual ownership. What's the argument for having a (privately-owned) company own the land instead of just leasing it from the government for some dozen years and developing it? I agree that the current market-based, everyone own a home approach is really inefficient, but to reintroduce surveillance capitalistic serfdom (serve your masters, because they own everything) seems like the wrong way to go...
EDIT: well, spent the hungover morning researching Google comp and if glassdoor & linkedin are correct, they actually pay a quite normal salary for basic SWEs, which also explains why they like to import a lot of people and none of the locals I know work there...
Why should home owners give up their way of life just because a particular city is now hip and everyone pushes into the new hyper-dense zones? I demand space for living, a little bit of nature, and privacy. So go build some effing infrastructure instead of pushing everyone to live like a chicken in an egg factory, ffs.
What if some people prefer to live in nice "hip" cities (that for them means culturally interesting) even at the cost of living without a private garden in a detached house?
Then these people should explain how all the Starbucks employees, the janitors, and the delivery guys that make their "culturally interesting" living possible should live and travel to work. Just because you can effort a nice 2room apartment 20min from downtown does not mean that a single mom can afford a 3 room one for herself and her two childre. Instead these people are forced to either travel ever longer with ever worse public transport or live in ever worse conditions, usually both. Gentrification is the downside of densification.
And now the hip class wants to get rid of cars in their hip inner cities, because they don't need them. Again totally ignoring everyone that is both forced to live outside of the centre and work inside of it.
Actually, I think the minimum wage should be coupled to the typical rent around the working place. Good luck getting your new smartphone delivered then.
> Gentrification is the downside of densification.
You’re smoking some strong stuff if you think densifications causes gentrification. Reality has always been gentrification leads to investment leads to densification.
Yeah right, all these "culturally interesting" places just happen to be the dense run-down areas of cities by pure chance...
Gentrification starts with some Avantgarde subculture(s) rallying in parts of a city that are cheap and dense enough to find enough followers. Later, followers with many expulse the old residents and push the prices. This does never happen in some rural area.
> Then these people should explain how all the Starbucks employees, the janitors, and the delivery guys that make their "culturally interesting" living possible should live and travel to work.
They could simply argue, that these jobs would not exist without densification. Take the other extreme: I don't think Starbucks employees would earn more if everyone would live on firms miles apart from each other. Starbucks would be gone in this scenario. Everyone would be poorer, albeit equally poorer.
So I would argue, you need to invest in public transportation and housing of different price ranges, possibly even built by the city itself, so threre are less incentives to defend legislation hindering new buildings, the actual reason why those workers are getting squeezed out. If you additionally try to focus on education and upward mobility you get a fair society.
lol. You forget that more density can increase supply and drive the price down for everyone. In your ideal world you would move high paying jobs into uninteresting areas, force these people to live in big houses (that they don't need), make them have a car (that they don't need) so they can bring some money for other jobs like janitors needing a car and a detached house?
I think this is a fair preference. But if the tax structure weighted properly on by land, you would most likely pay as much as rent being a homeowner.
For example, in San Francisco, de city spends about 2000U$S per household. And if you adjusted that amount of the amount of space used, single family homes would end up paying 3~4k a month of taxes alone.
> But if the tax structure weighted properly on by land, you would most likely pay as much as rent being a homeowner.
Huh? So the rent covers the infrastructure cost? Last time I checked, both renters and owners pay infrastructure directly. That includes waste water, garbage disposal, and pretty much everything else. None of this scales with the space I use, at most it scales with the square root of space due to larger distances.
Renters pay twice, because they pay for the infrastructure that increases the homeowners property value. Its an uneven tax structure for a renter to pay for the bart station that increases the prop value and thus their own rent.
Agreed. Why did we stop building new cities? There's plenty of space and we have all the technology to build even in inhospitable areas and make them more liveable and accessible than current crowded cities.
We haven't stopped. We build new cities all the time, we just build them on the closest empty land next to a job, and named them "suburbs".
We don't build new cities way far away in the middle of nowhere, because building new cities is expensive and there's no jobs in the middle of nowhere.
> We don't build new cities way far away in the middle of nowhere, because building new cities is expensive
At some point it has to be cheaper than upgrading infrastructure for ever-growing cities and implementing all kinds of harmful artificial restrictions e.g. on traffic just to support increasing population numbers in exiting metro areas.
> there's no jobs in the middle of nowhere.
Many factories are in the middle of nowhere and I don't see why one couldn't build and fill office space when cheap attractive housing and well-planned infrastructure is available nearby.
The reason why don't do it is more likely because most western countries have become stagnant and inefficient at large projects.
IMO, apply a flat 1% property tax on the value of a property ignoring zoning restrictions and as long as you pay it feel free. However, understand that tax actually represents paying for physical infrastructure and actual costs people are paying so nobody gets a tax break on it.
Because what’s valuable is not the house but the infrastructure around it. Low density housing requires more infrastructure and higher transportation costs such as longer commutes.
However, I realize everyone loves a hand out, especially when they can pretend it’s not a handout. So, I don’t see this changing any time soon.
Bullshit. Infrastructure and transportation have generally always been paid by the owners. There may be cases where residents have successfully lobbied their community to build something for them, but that's not how things work where I live.
But even if there was such a support for honeowners, a property tax would be nothing else but theft. Charge the real cost of you want but then leave the people in peace.
> Charge the real cost of you want but then leave the people in peace.
And thats the problem. Infrastructure has not been priced correctly. A lot of towns are still paying the bond on initial construction. Leaving very little for maintenance and replacement. And then when the road/sewer/water system needs to be replaced voters don’t have the appetite to pay for it. You see this in older towns in the northeast. Water and sewer mains are corroding. taxes go up to cover it. And the residents flee for newer, cheaper developments. The town eventually becomes insolvent.
A distinction I think should be made is that the value of land before you build on it is entirely due to the community and natural characteristics.
So why not tax only on that value and not the value of any structure or improvements?
The wisest thing I every heard from a libertarian or conservative was "if you tax something you get less of it". It therefore follows, not that we should eliminate taxes, but that we should tax something which is immune to the effect and only that.
> Low density housing requires more infrastructure and higher transportation costs such as longer commutes.
This does not appear true in the real world. Low density housing requires more mileage of infrastructure, yes, but it's drastically cheaper miles. (You can wire 200 low density suburban houses with electricity across a dozen square miles, for less than the cost to wire up a single building in Manhattan)
Density makes infrastructure exponentially more expensive, because the largest costs of infrastructure is in labour and complexity, not the literal length of wire or piping or whatever.
> Because what’s valuable is not the house but the infrastructure around it. Low density housing requires more infrastructure and higher transportation costs such as longer commutes.
This seems to contradict your own point. If low density housing needed more infrastructure, and houses were valued by the amount of infrastructure they needed, then low density housing would be the most valuable housing.
But it's not. In the real world, low density houses are the cheapest housing, and have the cheapest infrastructure costs. High density housing has the highest construction cost, highest land cost, highest infrastructure costs (despite less per-mile infrastructure use), and the highest transportation costs per person (when including total personal+government spending)
The cost of electrical infrastructure is peanuts in comparison to roads or rail. Yes, the cost of a road in front of a 1,000 apartment skyscraper is more than that if in front of a suburban condo, but not 1,000x as much. Most importantly the commute past time even at walking speed is dramatically less.
On top of this the most valuable infrastructure is things like hospitals, restaurants, etc where proximity is a huge deal. NYC has 2,581,170 apartments picture replacing them with single family homes on one acre and the city dies as that’s over 3,900 square miles excluding roads. It’s a classic tragedy of the commons where everyone wants more space, but that does not result in a city.
Even that's not really the whole picture. Sure, a road, completely standalone, can cost similarly between a 1k skyscraper and a suburban house.
But the road in front of a 1k skyscraper alone will never be enough to transport those people, unless you bump it's price up (make it wide, tack on a parking garage, etc). To prevent that, you'll need something extra (Subway, LRT, a bus line), and that cost will immediately be way higher per-person than the suburban road ever would be.
This is something urbanists / StrongTowns types routinely misunderstand. Roads aren't cheap, but they are almost always the cheapest form of public transportation possible in nearly every situation. (Yes, even in total cost of ownership. Yes, even when including the public funding in their cost. And yes, even when including personal vehicle costs).
The minute you put even the lightest form of alternative public transit on that road, the cost spikes exponentially. Even the cost to run just a basic busline, with a driver on a timetable, costs more in one year than the entire construction + maintenance budget of that road will cost over 6+ years.
(This is not an argument against alt. public transit. I support alt public transit. We should have more trains, subways, and buses, everywhere. It just isn't cheap -- it would require us to spend way more per rider on transit than we are used to, which is why most places are built with public roads only -- it's the absolute cheapest TCO option in nearly every situation)
The most critical transportation infrastructure in NYC is sidewalks. They work really well because walking in a dense urban area is the rough equivalent of traveling hundreds of miles of hour in the suburbs. Manhattan‘s 1.5 million commuters very much depend on roads, busses, and rail to get to work, but the city can devote far less land to roads and build fewer and shorter due to the density. Subway + sidewalk = highway + local roads.
So try that comparison of a bus vs 100+x as much roads. Because, Manhattan has infrastructure for 1.6 million residents and 1.5 million commuters. That includes stuff like like office space and schools so your talking about a full state in under 23 square miles with 1.3 square miles of that being parks. Try doing that in the suburbs where most buildings have ground level parking lots and you need massive amounts of granted relatively inexpensive roads.
"Walking" is not transportation infrastructure, it is a lack of transportation infrastructure. That's doesn't mean walking is bad (walking is great!), but it doesn't count as transit infrastructure.
Claiming walking as "transportation infrastructure" is like saying a homeless man's sleeping bag is "housing infrastructure".
> Manhattan has infrastructure for 1.6 million residents and 1.5 million commuters.
(Again, I support alternative public transit and despite NYC's issues, we should still be building more subways and trains across the US. But the idea that they are some sort of panacea is a lie, the idea that "save money" is not true, and the idea that they are cheaper for individual persons to use is only true if they are subsidized to an exceptionally higher dollar amount, far above any that public car transport ever has been).
> Try doing that (housing 1.6 million residents in 23 square miles) in the suburbs
Wait, no one is arguing that density isn't dense -- obviously Manhattan is one of the densest places in the US, far denser than any suburb. I agree entirely.
But also, almost no one can afford to live in Manhattan, and most municipalities could never handle the cost nor the complexity of building/maintaining another Manhattan. (Arguably, NYC itself sometimes can't handle the cost/complexity of maintaining Manhattan).
Only 0.3% of Americans live in Manhattan. ~99% of the 1+ million residents of my hometown here in Michigan will never be able to afford to live in Manhattan or any place like it. Every single adult here would need a 200-400% raise before we could afford to live a dense urban lifestyle anything like how Manhattanites do.
No one is arguing that density isn't dense. The argument is that density is inherently more complicated, inherently more expensive, and requires massive amounts of extra money to pull off.
Manhattan's median annual household income is $66,739, that’s not far from the national average and below many countries in the US. It’s 1.6 million people their not all rich. A quick check found a studio at $1,325/month that’s considered affordable for one person on a 40k/year salary. Don’t forget many people don’t have cars which can be a massive savings.
And sidewalks etc, are very much infrastructure. Subway stations are generally 5 blocks apart rather than every block because people are expected to walk up to 2.5 blocks without issue. The absolute maximum distance from a residential address to a subway station is 0.8 miles that’s only a 10.5 minute walk + time waiting at crosswalks. The average is closer to 1/4 that distance. I have had longer walks from my parking garage to the office.
PS: I am saying low density makes things worse not that the largest city in the US will have short commute times. That’s never going to happen. Filling 50+ story office buildings from the surrounding area requires people moving increasing distances as the urban center gets larger. Optimally, a new office building is effectively filled by a new ring of people at the furthest edge of the city commuting in, though in practice it’s less efficient than that.
> A quick check found a studio at $1,325/month that’s considered affordable for one person on a 40k/year salary.
What? That's nowhere near affordable! There is no valid metric by which that cost is affordable to that income, that's a insane figure!
Using the standard federal housing guidelines, a single person making $40k/yr should spend about $810/month on rent. And a $40k/yr person spending at-or-above $1290/month is considered dangerously house-poor (by that same metric).
I wish people would stop trying to normalize housing crisis financials. No person should ever have to spend $1300/month+ on a studio apartment, and people should stop pretending that's OK.
I mean affordability as in people will do it and cover other expenses.
It’s clearly a huge cost, but you need consider it as part of a larger lifestyle. A 30 day unlimited subway ticket only costs 127$. By comparison it’s difficult to spend that much under 500$/ month on a car including taxes, insurance, financing, maintenance, fuel, maintenance, and depreciation (aka the actual cost of a car every n years).
Which makes it comparable to ~950$ a month rent + car which is still around 100$ over your suggestion, but not the insanity it may seem like. After graduation I was in a roughly similar situation at my first job with a 1050$/month apartment with a car in Fairfax VA on a 38,000$/year salary that included heath insurance for 150/month. This was 2003, but I also had student loans to pay back.
> By comparison it’s difficult to spend that much under 500$/ month on a car
This is not really accurate, the majority of the population spends approximately ~$250 per month or so on their car (full TCO -- including all taxes, insurance, financing, fuel, and maintenance). The average car on the road is ten years old, and the average person has never bought a new car in their entire life -- car costs are significantly cheaper than you claim.
This is yet another thing most Urbanists / StrongTowns types do -- just artificially invent an extra $200 to $400+/month in fake costs to "cars", to try to make crisis-level housing costs look artificially reasonable.
The used car market is limited by the new car market so the bottom 70% can’t get the cheapest used car as there is not enough of them. Frankly there are a lot of SUV’s etc on the road. Still let’s use a 10 year old Civic that’s kept for 10 years as a optimistic estimate. A 90k miles 2010 Honda Civic runs ~7,000$ over 10 years that’s 60$ a month excluding sales taxes, interest ect.
It get’s 26/34 mpg new which tends to be reduced over time, but let’s be optimistic and call it 30. At 2.70$/gallon and an average 13,500 miles per year driven that’s 100$ a month for gas.
Insurance is tricky as it varies by state, age, and driving record, but the average is clearly above the lowest possible price. Further, if you lack full coverage on average you add a new car or repair costs. I am going to call it 80$ a month though it can be a lot higher than that if you have say a DUI, but also a little lower.
Looking here: https://www.edmunds.com/honda/civic/2015/cost-to-own/ a 10 year old Civic is running ~180$ a month in repair and maintained costs with a general upward trend. But let’s stick with 180$ out to year 20.
Now that’s ~420$/month excluding interest (paid or opportunity cost), parking, taxes, tolls, tickets, etc. It’s clearly possible to pay less by driving less or doing your own repairs, but it’s also really common to pay far more.
I'm used to the value of the land vs. the structure being listed separately on a property tax bill.
The value that is attributable to the community is the value of the land before building. Obviously that's far higher in the middle of NYC or SF or something. So I'm not sure what you are saying about low density housing.
There is/was a political movement to finance everything with a tax on the unimproved value of land. The advantage is that with almost everything you can tax, you get less of it, which is usually bad, and besides leads to avoidance and lower revenue. But unimproved land cannot be "discouraged" by taxes, and owners cannot pass the taxes on - their incentive is then to not leave it vacant, which is a very good thing in a dense city.
I would like those city dwellers to fix their own problems before castigating my whole way of life. If you need more housing in the Bay area, cut your red tape and build it.
We're good out here in the rest of the country; in fact, if people could tolerate wotking remotely better, there are places where four-bedroom houses are selling for $80k.
And you enjoy a subsidized way of life with below value housing because the city workers fund it for you.
Your cheap house is cheap because city residents subsidize it. In New York the city residents pay 45% of the taxes but receive 40% of the expenditures. How about we balance it out and let you rural residents make up the shortfall. In NY that’s about $8 billion per year.
Good luck and have fun. Don’t bite the hand that feeds.
If you are a home owner paying depressed property taxes, that shortfall from what someone else potentially would have paid has to be made up somewhere, and frankly if you own a home in a major coastal California city, the people footing your bill are probably going to be less well off than you. Seems pretty scummy and greedy to me.
If you think being somewhere first gives you inalienable rights, I'm sure there are some native Americans that would like to talk to you about the deed to your house.
In the US the present order of economic policy mistakes is:
Federal spending[1] > Healthcare costs[2] > Energy investment[3] > University degrees[4] > Infrastructure investment[5] > Home ownership > New vehicles
[1] Economic output grows by 4%, spending grows by 12%. Entitlement costs go up, taxes go down. Military spending. $900b (3.x% of GDP equivalent) per year in debt interest costs projected for 2028 (CBO), most of which shouldn't exist and should be going to infrastructure, healthcare, Social Security, and so on.
[2] Not healthcare unto itself, healthcare costs. Spending $3.6 trillion on healthcare nationally when we should be spending $2.4 trillion or less (the UK equivalent ratio would be more like ~$1.5 trillion).
[3] Not building a lot more nuclear. Not phasing out coal fast enough. Not building an obnoxious amount of off-shore wind. Not upgrading our grid to widely distribute from large output centers better (the central wind corridor can probably eventually export vast wind power to the coasts). Not better preparing our grid for the all-electric consumer vehicle future that is inbound. Etc.
[4] Pushing the notion that you absolutely must get at least a four year degree is akin to the dogma that you must own a home. A subset to that is the notion that you should spend a particularly absurd amount of money when you could get a degree of similar outcome effectiveness at half the price from an in-state public school.
[5] Lack thereof. Including not building high-speed rail (even if only regionally) and not aggressively going after the vast urban deployment of electric buses. Maybe we can't build cheap subways or rail anymore, however we can buy relatively cheap electric buses and dedicate routes to a lot of them and we can do it damn easily.
About 37% of homeowners own their homes free and clear. The other 63% have mortgages that require regular monthly payments. The mortgage payments are in addition to regular payments of property taxes.
The result is that the burden of debt and property taxes motivates young adults to work hard and progress economically. This, along with the continual stream of purchases for the home, is the mainspring of the American economy.
Switzerland has a home ownership rate that’s half the US and does fine. One of the main benefits of this is that the Swiss have more of their wealth in liquid assets and are highly mobile as a nation of renters, so they can easily move to where the jobs are.
In fact, Switzerland will tax your home on the potential income you could get from it, further encouraging renting. I’m not advocating this, but home ownership is not anywhere near a prerequisite for affluence.
Funny, when I was there I didn’t notice that Switzerland is still run as a feudal lordship, but in hindsight the screams from the building labeled ‘Debtor’s prison” should have been a clue.
In all seriousness, what are you implying? That buying houses built by the rich and then being tied to it in a downturn or loss of employment is superior?
The period you’re hilariously referring to died out when the Lords could no longer afford to maintain their land as their incomes dried up and their workers moved on.
You're creating a false dichotomy here. Not all home owners are "rich" and not all renters are "poor". Property owners are just running a different business than you. You can easily be a renter that's wealthier than the person you happen to be renting living space from.
How is a mortgage payment different from a rent payment. In one you rent the money to spend on bricks, in the other you rent the bricks directly.
The only difference occurs if asset/land prices rise - which is nothing more than a transfer from the have nots to the haves and should be dissuaded by policy. In any functional economy houses would depreciate as they age - just like cars. And you lease depreciating assets.
It's harder to walk away from a mortgage than a rental home. It's more work to sell a house.
Since the mortgage-payer owns the house, has made improvements on the house, has an emotional investment in the house, there are strong biases such as sunk cost that make the buyer much more reluctant to get out from under it.
If someone is smart, they make a small mortgage on a small house and pay it off in 10-15 years minimizing their interest overhead.
Knowing you don't have to come up with hundreds or thousands of dollars every month in order to live is an amazing feeling. You can then set aside that same money every month and upgrade to a better house. Unfortunately, most people decide they can't wait and take out 30-year mortgages that wind up costing them almost twice the value of the house.
With proper maintenance, a house can last with continuous use for a hundred years. With average use, you would be hard-pressed to have a car for more than 15 years before the cost to maintain greatly outstrips the cost to replace.
Buying small is the wrong financial decision in a rising real estate market. By taking a giant mortgage and buying more that you could otherwise afford you’re essentially investing on margin. And interest rates are even lower than they seem if you take tax deductions into account. If you buy at the right time & place and property value increase a lot (which has been true in a lot of places the last decade), you get the gains. And as a bonus you get to live in a nicer house that whole time (unlike investing that money elsewhere).
A mortgage is financial leverage. You only have x dollars but you spend x * n dollars and repay x * n plus interest later. This works out for you if the value of the money you are spending now is more than the value (value is relative) of the money that you repay over the next 30 years. It does not go well of the opposite is true.
The mortgage can be good because it locks you into a fixed payment per month. Rents fluctuate, if rent goes up, you pay more money. Mortgage payment does not go up (other than taxes which can). The downside is if rent goes down, you don’t get to take advantage of it.
So, it’s two very different sorts of bet on the housing market. It’s like a long term bond vs a short term bond, somewhat.
Note well that houses do depreciate, but depending on the area, the land will not. The depreciation in your house takes the form of maintenance in some cases, or a lower sale value than a newly renovated home.
In a major metro, the majority of the value of a house is land value, not building value.
Cars depreciate extremely rapidly, it would be a problem if we had to rebuild houses every 15 years. (Although Japan’s housing market is actually kind of like that and is very interesting to read about, you should look into the issues there if you haven’t already).
Well if you have a mortgage and your towns economy takes a spill, you have to sell your house in a down market to move to another town. In a rental you just move.
> The result is that the burden of debt and property taxes motivates young adults to work hard and progress economically.
Then we should double the interest rates on that debt and raise taxes on the poor, to motivate them even more, and get even more economic progress! But leave the taxes on the rich low, since they've already economically progressed enough, and have done their part for the American economy.
Ah the economist. This week it's "we should all live in oligarch supplied bugman skyscrapers in rentier dystopian future." Next week it's going to be about how we all need to eat cheeseburgers made out of insects because ... reasons.
"You don't need to live in a house, citizen; that is a function more efficiently supplied to you by the Disneycorp housing as a service experts."
I have driven a couple of times between Phoenix and the East coast of the U.S. and the spaces between cities, particularly in the Southwest, are simply vast. You can drive for hours without seeing a human structure beyond perhaps a signpost or U.S. Geological Survey marking. There's room for the entire world's population to fit into Arizona, New Mexico, and West Texas. The only limitation is availability of water, and that's solvable with technology (desalination, atmospheric capture). When existing cities become too congested, sprawling, or unaffordable, the clear solution is to build new ones. You can drop a megalopolis or two into the badlands and house an additional 20 million people in comfortable, modern neighborhoods with home ownership as the norm. The Economist has a eurocentric perspective that there's little available land, but not so in North America.
You really do have to wonder about the sincerity of such an article, especially coming from such a prominent publication as the Economist. Why don't they just admit what they are instead of using subtle propaganda to influence people into their political ideology? Even more concerning is how half or more of the people in here seem to actually agree with it.
"Demoralization now reaches such areas that previously, not even comrade Andropov and all his experts would even dream of such a tremendous success. Most of it is done by Americans to Americans; thanks to a lack of moral standards. As I mentioned before, exposure to true information does not matter anymore. A person who is demoralized, he is unable to assess true information, the facts tell nothing to him. ... Only when a military boot crashes into his fat bottom, then he will understand."
The Western world has maybe 20-30 years left before serious political upheaval turns our way of life on its head. Call me a cook conspiracy theorist or make fun of my old quote from a kgb agent being pushed around in dubious circles today.
I think most informed Economist readers already are aware that they are, to some extent, being influenced by the “subtle propaganda” of the publication. I believe it’s part of their “thing”.
I would argue that failure to adequately address the power of the wealth-income feedback loop is the West's biggest economic mistake, and that this is at the root cause of rising housing costs. Housing is consuming a bigger and bigger share of median income because growth in housing is not keeping up with growth in income of the top tiers of the population, who can afford to pay disproportionately more than the median, and the trend is accelerating. While it's true that increasing supply would help relieve some of the pressure, it would have to skyrocket to keep up with the meteoric rise in income of the top 10% of the population. All the well-meaning housing policy in the world can never speed up supply fast enough to keep up with the rate at which the wealthy are giving themselves raises.
If large amounts of 1- and 2- bedroom condos or apartments are built in a fairly densely-populated city, how much are the very rich going to want to buy or rent these? They may want to own them and rent them out, but if they can’t make a profit, I don’t see why they’d want to do that.
Luxury condos attract investment from richer people all around the world, but imho, fairly standard 1 and 2 bedroom apartments likely wouldn’t, especially if they have to be rented.
Could that be a way to combat the inequality?
The biggest problem I can see: developers love building luxury condos since the profit is much higher than building non-luxury places.
What exactly is the difference between a luxury and non-luxury condo/apartment? I think it’s mainly a few cheap cosmetic features like countertops and stainless steel refrigerators. Of course developers label everything new luxury because why wouldn’t you spend an additional 1% of your investment on these types of things?
The cost of building a “non-luxury” building is almost identical. In either case, you need investors to put up the money to pay for construction and maintenance of the building until enough units have sold/rent to be self sustaining. So even if you build a slightly less cosmetically appealing building, you still need investor capital / “the rich” to do so.
It depends on who you consider "very rich" and where the condos are. In many cities, a modest 1- or 2-bedroom condo can go anywhere from $500K to over $1M. The people who buy them are not extravagantly wealthy, but are part of the executive class that has seen its wages rise rapidly over the past 30 years, while median incomes are comparatively flat.
> While it's true that increasing supply would help relieve some of the pressure, it would have to skyrocket to keep up with the meteoric rise in income of the top 10% of the population
How many % of available units do you think the top 10% of the population reside in? I’d be surprised if the average member of the 10% had more than two or at most three homes (e.g. city home, country home, vacation home). For reference, the 95th percentile household income in the USA is $250k a year, you will struggle to afford even two homes on that type of salary.
If you had, say, 600 million homes available in a country of 300 million people, you aren’t going to run out of homes... the rich may have a lot of money but they can only be in one place at once.
Between vacant homes and second homes, there is enough vacant space in USA to home all the homeless multiple times over. If Americans had no brains, this would be done.
>How many % of available units do you think the top 10% of the population reside in?
In urban areas, where the housing crisis is, a disproportionate share. Imagine a topographic map where housing prices are the relief. Thirty years ago, say the highest point in a given city was at $1M. Over time, as the top end income increases, that peak will steadily rise, pulling up all the prices around it. The problem is that to earn income (to be able to afford rising housing costs), people need to be close to the city center. So people with lower incomes "buy up" out of necessity, driving up the percentage of their income they spend on housing, because their income didn't rise as rapidly as the income of the next topographical "ring" in.
Basically, there is a mismatch: there's a growing disparity in wealth between classes, but the need for proximity to cities in order to make money has remained largely constant for lower incomes, particularly for service workers who cannot adapt to work remotely, like middle class tech workers can.
Over the past few decades there has been a period of re-urbanization and migration from rural to urban areas due to changes in the job market. For instance, Washington DC had 802,000 residents in 1950. Later the population dropped to 572,000 residents in 2000. The population has now increased to 705,000. However, over the last 70 years, living standards have changed and some dwellings have either been demolished or made illegal (e.g. in 1950 it’s likely many people lived in Single Room Occupancy boarding houses more like a college dorm, or crowded into what we’d now consider slums, or so on) As a result there’s a mismatch in supply and demand, and Econ 101 is occurring: price of housing goes up until the supply and demand curves match.
Solving inequality isn’t needed to solve this problem, any more than inequality was solved in 1950 when more people were living in poverty than today. We need to make more housing available and fix the supply/demand imbalance.
When there aren’t enough units available, it’s impossible to solve the problem and allow everyone to live where they want. Even if everyone had the same salary or rents were arbitrarily fixed at a low rate, then the system of distribution would just change to something else, e.g. a ticket lottery.
Solving inequality isn’t needed to solve this problem, any more than inequality was solved in 1950...
It may not have been 'solved', but inequality was much lower in the 1950s than it is today.
When there aren’t enough units available, it’s impossible to solve the problem and allow everyone to live where they want.
In an elastic market, it is possible. The problem is that housing is inelastic, because people have job and family ties that effectively keep them from simply moving away to where housing is cheaper. And in an inelastic market, inequality dramatically exacerbates the problem in high demand areas.
If by west, you are just referring to the west coast of the US, then yes, home prices are outgrowing inflation. If you mean the entire US, then no, it is not as "In 2017 the price per square foot of a new home was only 4% more (about $3) than in 1979" [0].
From the same article, "If you adjust for inflation, the median income of Americans has only increased by 33%. The median housing prices, however, have increased by 60%." The problem is not limited to the western US.
Larger houses are a symptom, not a cause. Wealthier buyers drive the market, and because of the inelasticities I pointed out earlier, the rest of the market is dragged along. If a builder makes more profit on luxury homes, that's going to affect downmarket buyers as well. It's tempting to imagine that every home purchase is a completely independent event, and buyers have complete freedom to buy per square foot, but in the real world, that is not the case. Your article acknowledges this as well, towards the end: "The good news is you can find some great deals in your area, if you are willing to buy a house the size of your grandparent’s home. The bad news is houses that size or hard to find."
So I see this article extolling the virtues of being a nation of skyscrapers and flats.
Then I smack into a paywall.
Looking around at my nice, rural century home that has a monthly mortgage payment still far lower than the cheapest local rent...I’m not going to bother trying to find the article elsewhere. Living in a skyscraper is just not for me. Even the apartments I’ve lived in previously were comfortable ranch-style ones out in Nevada that weren’t very densely packed.
I have no need or desire to move to Manhattan or Silicon Valley for the time being let alone Cleveland or Pittsburgh. That shouldn’t be problematic yet the current crop of economy optimizers might not leave me that choice. We shall see in due time.
That had to be one of the most half-baked articles Ive seen out of "The Economist," and Ive read their stuff on and off for years. They identify the symptoms correctly, and then spend 1000 words misleading you on the cause, so they can sell you "The Fix."
Here's the real problems:
1. Rent-seeking behavior by the land-owning generation, seeking to retire and live off rental income and a reverse mortgage, instead of building generational wealth.
2. Rent-seeking behavior by local councils and cities, all but demanding bribes and kickbacks; they hold up permitting for building anything beyond single-family dwelling.
3. Rent-seeking behavior by the majority holders of capital - the banks. Because a majority of properties are subject to mortgage, this has allowed for massive speculation, in funny money, on limited amounts of real property. This drives up prices.
4. Rent-seeking behavior by all levels of government. Property taxes are the most efficient means of destroying wealth.
To be brief, the rents are too damn high! Theres no law you can write that will fix these issues, either. It will bloat and overheat until it collapses like a cake in the oven.
The phrase "rent seeking" is a technical term with a meaning.
How can the government be accused of it? When private entities engage in rent seeking, they are manipulating the government for profit.
And when private entities do things that do not involve manipulating the government, then how can it be rent seeking?
Rent seeking does not mean literally, simply, "seeking rent". I know people like to say the meaning of words change, but you have to be talking about the same thing as other people using the same word.
As far as I understand it, rent seeking means increasing your share of existing wealth without creating any in the process. Raising rent generally on physical properties is one way of doing that, as is mucking about with government to get tax dollars and whatnot coming your way.
As I see it, governments themselves are often rent seeking operations. By increasing taxes, they increase their share of the wealth of the nation, and depending on how that money is used, it could very well be considered rent seeking. Usually the term is used for business sectors interacting with government to get those tax dollars, but I don't think that's the only valid use.
In order for a concept to be meaningful, it has to have things that fall within and outside of it.
If the normal functioning of the government is rent seeking, then everything is rent seeking. If everything is rent seeking, then the term doesn't distinguish anything in reality from anything else.
You can't have a discussion about rent seeking without the context that there is such a thing as legitimate government that functions in such a way as to provide public goods.
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[ 10.1 ms ] story [ 132 ms ] threadI like the model of forcing new construction projects to have some units setup for public housing while private owners buy or rent the rest.
It takes people from lower socioeconomic parts of society and pushes them to mix with folks who are on top.
Church used to do this before religion started to retreat from society.
Lack of mixing of classes is killing civil society in America.
second+ homes,
all rentals that cost more than 30% average area take home (with the top 10% of incomes removed). Scale said taxes with the cost of living in that area. Double the tax on short term stays in 'rentable units'. (E.g. airbnb).
Everyone deserves a place to call home that is safe, insulated from the elements, has plumbing, electricity, and internet at a fair price. I simply don't care if that makes housing speculation, land ownership, and utilities, unprofitable. Making a profit off of necessities is obscene. Eg everyone should have access to a basic internet package that costs around $10-30/mo for ~25mbps. Same for everything else. Everyone should get the minimum, and if they want more they need to find a way to earn more in a way that isn't extracting value from the vulnerable. Extract from the rich instead, or don't. You shouldn't starve to death under a bridge if you can't compete in a society that needs less unskilled labor every day.
Taxes will not discourage housing investment - they will be paid by renters as housing is driven by supply/demand. Why do we pretend we can regulate markets when all individuals (except unproductive government layer) benefit most if they are less regulated?
Deregulating house development will encourage many developers to build housing as there is huge demand for it. How come you offer looting other people before you offer removing obvious pillars for the developers?
That's not what I said.
>Taxes will not discourage housing investment - they will be paid by renters as housing is driven by supply/demand. Why do we pretend we can regulate markets when all individuals (except unproductive government layer) benefit most if they are less regulated?
Maybe tax is the wrong word. Fines might be better. These speculators consume wealth without doing work. When someone would rather leave units vacant than charge rational rates they hurt the market. When an entire industry does this they are extorting the most vulnerable. People without the means to move. People on fixed incomes. The disabled, the sick, minorities, etc. This is unconscionable behavior that should be illegal.
Are you in the business of home building?
The industry itself is rife with bad actors. Code gets ignored to save 20 minutes or 20 bucks. Want to report it? Snitches don't get work. Deregulation will only hurt people. Housing code is like osha. There are graves behind housing codes.
Perhaps you're talking about zoning regulations? Yeah. I'm fine with telling nimbys to get bent and building a 50 story apartment complex in their ocean view so that people have affordable places to live.
Regardless, the industry is rife with bad actors exploiting an imbalance of information.
The advertising on vehicles is designed to make you feel bad for not owning the best. Get slammed with that enough and you won't even realize you just bought that $90k coupe that will cost $10k in maintenance/yr to keep running to show off how wealthy you are while you hunt for a mate. Then if you have kids you'll take a bath on it for the dealer to make a profit when they resell it.
Rural land is cheap. Government could build a "starter pack" of 1000 homes and move one of their offices from a big city there to provide employment. Borrow / print money to do this instead of QE. Heck, with the current prices the whole thing could be financed by leasing or reselling gov owned buildings in "old city" cenres.
Maybe they could start it with a Space Force military base and a STEM focused college to serve the military’s needs.
Congress and lobbyists would go nuts for that $$$
"According to Bureau of Labor Statistics data, lightly-regulated Houston has seen its civilian labor force grow by 20 percent in the last decade, compared to the San Francisco metro area's 16 percent. Some 21 Fortune 500 companies have their headquarters in Houston. What's more, for every job the Houston metro area has added, it's also permitted another unit of housing. As a result, the average rent for a one-bedroom apartment is $841, and home prices are below the national average."
From here :
https://reason.com/2019/11/05/bernie-sanders-blames-apple-fo....
It's not rocket science. If you want affordable housing make it easy for people to build and increase supply. It's remarkable how Silicon Valley is all about solving big problems for the world but demonstrates with Bay Area housing that some problems don't need technology, they just need reasonable government and if you don't have that, well, things don't work.
To be fair, this problem is global. Many places that are doing well that haven't allowed enough construction like London, Sydney, Stockholm, Melbourne, Paris and other places demonstrate the same failure to enable enough housing construction.
Posted the same comment earlier this week.
The Economist's take on housing this week isn't up to their usual standard. They ignore the parts of the US where houses are still cheap and there is economic growth like Texas, Atlanta and other places. The special is worth reading though, there are interesting facts about how around the world supply has kept up with demand.
Home ownership is compatible with cheaper housing. It's just that rules need to be made to ensure that you can keep supply going. That means rezoning things on a regular basis to keep housing affordable. Also probably a land value tax would help.
The “special thing” that Houston has done is have virtually infinite land, a giant ocean port, and absolutely zero care or concern for the climate or the future.
https://markets.businessinsider.com/commodities/oil-price?ty... https://realestate.usnews.com/places/texas/houston/jobs
Greater Houston: 10,062 sq mi [1]
For the combined statistical area population / metro area, houston is actually even more dense than LA at 715 versus 553 people per square mile.
Not disagreeing with your main point though especially in regards to the bay area. There's just no land left to sprawl there and people don't want to build up so it'll forever remain unaffordable.
[0]: https://en.wikipedia.org/wiki/Greater_Los_Angeles
[1]: https://en.wikipedia.org/wiki/Greater_Houston
It's also worth noting, if you look at that article, that Tokyo has managed to build sufficiently. Up works as well as out.
But up vs out is a needless confrontation. Up and out should be allowed. Up in lots of places requires rezoning or relaxation of zoning rules.
13% of San Francisco commutes are an hour or more each way, versus 2% for Houston: https://www.geotab.com/time-to-commute/
The average public transit commute in NYC is 53 minutes one way (longer than Houston round trip).
If America has 2 Billion people in 100 years, building a little further away won't work, it doesn't scale. Cities need to build better cities that allow people to have the space they need and get to the jobs they have. Where they don't need to be commuting 2 hours each way.
The US, like most developing countries, will probably follow Japan with population decrease in the next 50-60 years. Fertility is below replacement in most developed countries and as other countries get richer immigration is likely to decline.
The earth's population is probably going to peak this century and start declining. In addition the increase depends on massive increases in Africa which may not happen due to technology like mobile phones and better education for women.
If that was Georgia or Texas, the political landscape would change dramatically though I'd rather show up 10 years later than right now. Neither are appealing states.
[1]culdesac.com
I'm also courious who owns the land, if we are not doing private, individual ownership. What's the argument for having a (privately-owned) company own the land instead of just leasing it from the government for some dozen years and developing it? I agree that the current market-based, everyone own a home approach is really inefficient, but to reintroduce surveillance capitalistic serfdom (serve your masters, because they own everything) seems like the wrong way to go...
EDIT: well, spent the hungover morning researching Google comp and if glassdoor & linkedin are correct, they actually pay a quite normal salary for basic SWEs, which also explains why they like to import a lot of people and none of the locals I know work there...
And now the hip class wants to get rid of cars in their hip inner cities, because they don't need them. Again totally ignoring everyone that is both forced to live outside of the centre and work inside of it.
Actually, I think the minimum wage should be coupled to the typical rent around the working place. Good luck getting your new smartphone delivered then.
You’re smoking some strong stuff if you think densifications causes gentrification. Reality has always been gentrification leads to investment leads to densification.
Gentrification starts with some Avantgarde subculture(s) rallying in parts of a city that are cheap and dense enough to find enough followers. Later, followers with many expulse the old residents and push the prices. This does never happen in some rural area.
They could simply argue, that these jobs would not exist without densification. Take the other extreme: I don't think Starbucks employees would earn more if everyone would live on firms miles apart from each other. Starbucks would be gone in this scenario. Everyone would be poorer, albeit equally poorer.
So I would argue, you need to invest in public transportation and housing of different price ranges, possibly even built by the city itself, so threre are less incentives to defend legislation hindering new buildings, the actual reason why those workers are getting squeezed out. If you additionally try to focus on education and upward mobility you get a fair society.
For example, in San Francisco, de city spends about 2000U$S per household. And if you adjusted that amount of the amount of space used, single family homes would end up paying 3~4k a month of taxes alone.
Huh? So the rent covers the infrastructure cost? Last time I checked, both renters and owners pay infrastructure directly. That includes waste water, garbage disposal, and pretty much everything else. None of this scales with the space I use, at most it scales with the square root of space due to larger distances.
We don't build new cities way far away in the middle of nowhere, because building new cities is expensive and there's no jobs in the middle of nowhere.
At some point it has to be cheaper than upgrading infrastructure for ever-growing cities and implementing all kinds of harmful artificial restrictions e.g. on traffic just to support increasing population numbers in exiting metro areas.
> there's no jobs in the middle of nowhere.
Many factories are in the middle of nowhere and I don't see why one couldn't build and fill office space when cheap attractive housing and well-planned infrastructure is available nearby.
The reason why don't do it is more likely because most western countries have become stagnant and inefficient at large projects.
Because what’s valuable is not the house but the infrastructure around it. Low density housing requires more infrastructure and higher transportation costs such as longer commutes.
However, I realize everyone loves a hand out, especially when they can pretend it’s not a handout. So, I don’t see this changing any time soon.
But even if there was such a support for honeowners, a property tax would be nothing else but theft. Charge the real cost of you want but then leave the people in peace.
And thats the problem. Infrastructure has not been priced correctly. A lot of towns are still paying the bond on initial construction. Leaving very little for maintenance and replacement. And then when the road/sewer/water system needs to be replaced voters don’t have the appetite to pay for it. You see this in older towns in the northeast. Water and sewer mains are corroding. taxes go up to cover it. And the residents flee for newer, cheaper developments. The town eventually becomes insolvent.
So why not tax only on that value and not the value of any structure or improvements?
The wisest thing I every heard from a libertarian or conservative was "if you tax something you get less of it". It therefore follows, not that we should eliminate taxes, but that we should tax something which is immune to the effect and only that.
This does not appear true in the real world. Low density housing requires more mileage of infrastructure, yes, but it's drastically cheaper miles. (You can wire 200 low density suburban houses with electricity across a dozen square miles, for less than the cost to wire up a single building in Manhattan)
Density makes infrastructure exponentially more expensive, because the largest costs of infrastructure is in labour and complexity, not the literal length of wire or piping or whatever.
> Because what’s valuable is not the house but the infrastructure around it. Low density housing requires more infrastructure and higher transportation costs such as longer commutes.
This seems to contradict your own point. If low density housing needed more infrastructure, and houses were valued by the amount of infrastructure they needed, then low density housing would be the most valuable housing.
But it's not. In the real world, low density houses are the cheapest housing, and have the cheapest infrastructure costs. High density housing has the highest construction cost, highest land cost, highest infrastructure costs (despite less per-mile infrastructure use), and the highest transportation costs per person (when including total personal+government spending)
On top of this the most valuable infrastructure is things like hospitals, restaurants, etc where proximity is a huge deal. NYC has 2,581,170 apartments picture replacing them with single family homes on one acre and the city dies as that’s over 3,900 square miles excluding roads. It’s a classic tragedy of the commons where everyone wants more space, but that does not result in a city.
But the road in front of a 1k skyscraper alone will never be enough to transport those people, unless you bump it's price up (make it wide, tack on a parking garage, etc). To prevent that, you'll need something extra (Subway, LRT, a bus line), and that cost will immediately be way higher per-person than the suburban road ever would be.
This is something urbanists / StrongTowns types routinely misunderstand. Roads aren't cheap, but they are almost always the cheapest form of public transportation possible in nearly every situation. (Yes, even in total cost of ownership. Yes, even when including the public funding in their cost. And yes, even when including personal vehicle costs).
The minute you put even the lightest form of alternative public transit on that road, the cost spikes exponentially. Even the cost to run just a basic busline, with a driver on a timetable, costs more in one year than the entire construction + maintenance budget of that road will cost over 6+ years.
(This is not an argument against alt. public transit. I support alt public transit. We should have more trains, subways, and buses, everywhere. It just isn't cheap -- it would require us to spend way more per rider on transit than we are used to, which is why most places are built with public roads only -- it's the absolute cheapest TCO option in nearly every situation)
So try that comparison of a bus vs 100+x as much roads. Because, Manhattan has infrastructure for 1.6 million residents and 1.5 million commuters. That includes stuff like like office space and schools so your talking about a full state in under 23 square miles with 1.3 square miles of that being parks. Try doing that in the suburbs where most buildings have ground level parking lots and you need massive amounts of granted relatively inexpensive roads.
Claiming walking as "transportation infrastructure" is like saying a homeless man's sleeping bag is "housing infrastructure".
> Manhattan has infrastructure for 1.6 million residents and 1.5 million commuters.
Except it doesn't quite, though, does it? Despite Manhattan being one of the wealthiest places in America, and despite it having the highest funded transit agency in the nation, Manhattan is critically short on transportation infrastructure for it's residents. It has the second-worst commute times in the nation (https://www.marketwatch.com/story/these-are-the-top-20-worst...) and its transit agency is notorious for delays and problems (https://en.wikipedia.org/wiki/2017_New_York_City_transit_cri...) . NYC transportation is so bad that chartering a private helicopter is a viable alternative - https://www.uber.com/blog/new-york-city/uber-copter/
(Again, I support alternative public transit and despite NYC's issues, we should still be building more subways and trains across the US. But the idea that they are some sort of panacea is a lie, the idea that "save money" is not true, and the idea that they are cheaper for individual persons to use is only true if they are subsidized to an exceptionally higher dollar amount, far above any that public car transport ever has been).
> Try doing that (housing 1.6 million residents in 23 square miles) in the suburbs
Wait, no one is arguing that density isn't dense -- obviously Manhattan is one of the densest places in the US, far denser than any suburb. I agree entirely.
But also, almost no one can afford to live in Manhattan, and most municipalities could never handle the cost nor the complexity of building/maintaining another Manhattan. (Arguably, NYC itself sometimes can't handle the cost/complexity of maintaining Manhattan).
Only 0.3% of Americans live in Manhattan. ~99% of the 1+ million residents of my hometown here in Michigan will never be able to afford to live in Manhattan or any place like it. Every single adult here would need a 200-400% raise before we could afford to live a dense urban lifestyle anything like how Manhattanites do.
No one is arguing that density isn't dense. The argument is that density is inherently more complicated, inherently more expensive, and requires massive amounts of extra money to pull off.
And sidewalks etc, are very much infrastructure. Subway stations are generally 5 blocks apart rather than every block because people are expected to walk up to 2.5 blocks without issue. The absolute maximum distance from a residential address to a subway station is 0.8 miles that’s only a 10.5 minute walk + time waiting at crosswalks. The average is closer to 1/4 that distance. I have had longer walks from my parking garage to the office.
PS: I am saying low density makes things worse not that the largest city in the US will have short commute times. That’s never going to happen. Filling 50+ story office buildings from the surrounding area requires people moving increasing distances as the urban center gets larger. Optimally, a new office building is effectively filled by a new ring of people at the furthest edge of the city commuting in, though in practice it’s less efficient than that.
What? That's nowhere near affordable! There is no valid metric by which that cost is affordable to that income, that's a insane figure!
Using the standard federal housing guidelines, a single person making $40k/yr should spend about $810/month on rent. And a $40k/yr person spending at-or-above $1290/month is considered dangerously house-poor (by that same metric).
I wish people would stop trying to normalize housing crisis financials. No person should ever have to spend $1300/month+ on a studio apartment, and people should stop pretending that's OK.
It’s clearly a huge cost, but you need consider it as part of a larger lifestyle. A 30 day unlimited subway ticket only costs 127$. By comparison it’s difficult to spend that much under 500$/ month on a car including taxes, insurance, financing, maintenance, fuel, maintenance, and depreciation (aka the actual cost of a car every n years).
Which makes it comparable to ~950$ a month rent + car which is still around 100$ over your suggestion, but not the insanity it may seem like. After graduation I was in a roughly similar situation at my first job with a 1050$/month apartment with a car in Fairfax VA on a 38,000$/year salary that included heath insurance for 150/month. This was 2003, but I also had student loans to pay back.
This is not really accurate, the majority of the population spends approximately ~$250 per month or so on their car (full TCO -- including all taxes, insurance, financing, fuel, and maintenance). The average car on the road is ten years old, and the average person has never bought a new car in their entire life -- car costs are significantly cheaper than you claim.
This is yet another thing most Urbanists / StrongTowns types do -- just artificially invent an extra $200 to $400+/month in fake costs to "cars", to try to make crisis-level housing costs look artificially reasonable.
It get’s 26/34 mpg new which tends to be reduced over time, but let’s be optimistic and call it 30. At 2.70$/gallon and an average 13,500 miles per year driven that’s 100$ a month for gas.
Insurance is tricky as it varies by state, age, and driving record, but the average is clearly above the lowest possible price. Further, if you lack full coverage on average you add a new car or repair costs. I am going to call it 80$ a month though it can be a lot higher than that if you have say a DUI, but also a little lower.
Looking here: https://www.edmunds.com/honda/civic/2015/cost-to-own/ a 10 year old Civic is running ~180$ a month in repair and maintained costs with a general upward trend. But let’s stick with 180$ out to year 20.
Now that’s ~420$/month excluding interest (paid or opportunity cost), parking, taxes, tolls, tickets, etc. It’s clearly possible to pay less by driving less or doing your own repairs, but it’s also really common to pay far more.
The value that is attributable to the community is the value of the land before building. Obviously that's far higher in the middle of NYC or SF or something. So I'm not sure what you are saying about low density housing.
There is/was a political movement to finance everything with a tax on the unimproved value of land. The advantage is that with almost everything you can tax, you get less of it, which is usually bad, and besides leads to avoidance and lower revenue. But unimproved land cannot be "discouraged" by taxes, and owners cannot pass the taxes on - their incentive is then to not leave it vacant, which is a very good thing in a dense city.
Or were you wanting city dwellers to fund it for you?
We're good out here in the rest of the country; in fact, if people could tolerate wotking remotely better, there are places where four-bedroom houses are selling for $80k.
Cities have their own problems but we aren’t looking for a handout from rural residents to solve those problems.
Your cheap house is cheap because city residents subsidize it. In New York the city residents pay 45% of the taxes but receive 40% of the expenditures. How about we balance it out and let you rural residents make up the shortfall. In NY that’s about $8 billion per year.
Good luck and have fun. Don’t bite the hand that feeds.
If you think being somewhere first gives you inalienable rights, I'm sure there are some native Americans that would like to talk to you about the deed to your house.
Federal spending[1] > Healthcare costs[2] > Energy investment[3] > University degrees[4] > Infrastructure investment[5] > Home ownership > New vehicles
[1] Economic output grows by 4%, spending grows by 12%. Entitlement costs go up, taxes go down. Military spending. $900b (3.x% of GDP equivalent) per year in debt interest costs projected for 2028 (CBO), most of which shouldn't exist and should be going to infrastructure, healthcare, Social Security, and so on.
[2] Not healthcare unto itself, healthcare costs. Spending $3.6 trillion on healthcare nationally when we should be spending $2.4 trillion or less (the UK equivalent ratio would be more like ~$1.5 trillion).
[3] Not building a lot more nuclear. Not phasing out coal fast enough. Not building an obnoxious amount of off-shore wind. Not upgrading our grid to widely distribute from large output centers better (the central wind corridor can probably eventually export vast wind power to the coasts). Not better preparing our grid for the all-electric consumer vehicle future that is inbound. Etc.
[4] Pushing the notion that you absolutely must get at least a four year degree is akin to the dogma that you must own a home. A subset to that is the notion that you should spend a particularly absurd amount of money when you could get a degree of similar outcome effectiveness at half the price from an in-state public school.
[5] Lack thereof. Including not building high-speed rail (even if only regionally) and not aggressively going after the vast urban deployment of electric buses. Maybe we can't build cheap subways or rail anymore, however we can buy relatively cheap electric buses and dedicate routes to a lot of them and we can do it damn easily.
The biggest economic policy mistake is that there is a policy. If governments didn't spend, there would be no mistakes.
Regarding this particular article, what the hell? Since when is it a matter of policy whether someone "should" own a home? Idiots.
The result is that the burden of debt and property taxes motivates young adults to work hard and progress economically. This, along with the continual stream of purchases for the home, is the mainspring of the American economy.
In fact, Switzerland will tax your home on the potential income you could get from it, further encouraging renting. I’m not advocating this, but home ownership is not anywhere near a prerequisite for affluence.
But then you lose some agency like being able to modify the rented home.
In all seriousness, what are you implying? That buying houses built by the rich and then being tied to it in a downturn or loss of employment is superior?
The period you’re hilariously referring to died out when the Lords could no longer afford to maintain their land as their incomes dried up and their workers moved on.
The only difference occurs if asset/land prices rise - which is nothing more than a transfer from the have nots to the haves and should be dissuaded by policy. In any functional economy houses would depreciate as they age - just like cars. And you lease depreciating assets.
Since the mortgage-payer owns the house, has made improvements on the house, has an emotional investment in the house, there are strong biases such as sunk cost that make the buyer much more reluctant to get out from under it.
Knowing you don't have to come up with hundreds or thousands of dollars every month in order to live is an amazing feeling. You can then set aside that same money every month and upgrade to a better house. Unfortunately, most people decide they can't wait and take out 30-year mortgages that wind up costing them almost twice the value of the house.
With proper maintenance, a house can last with continuous use for a hundred years. With average use, you would be hard-pressed to have a car for more than 15 years before the cost to maintain greatly outstrips the cost to replace.
A mortgage is financial leverage. You only have x dollars but you spend x * n dollars and repay x * n plus interest later. This works out for you if the value of the money you are spending now is more than the value (value is relative) of the money that you repay over the next 30 years. It does not go well of the opposite is true.
The mortgage can be good because it locks you into a fixed payment per month. Rents fluctuate, if rent goes up, you pay more money. Mortgage payment does not go up (other than taxes which can). The downside is if rent goes down, you don’t get to take advantage of it.
So, it’s two very different sorts of bet on the housing market. It’s like a long term bond vs a short term bond, somewhat.
Note well that houses do depreciate, but depending on the area, the land will not. The depreciation in your house takes the form of maintenance in some cases, or a lower sale value than a newly renovated home.
In a major metro, the majority of the value of a house is land value, not building value.
Cars depreciate extremely rapidly, it would be a problem if we had to rebuild houses every 15 years. (Although Japan’s housing market is actually kind of like that and is very interesting to read about, you should look into the issues there if you haven’t already).
Then we should double the interest rates on that debt and raise taxes on the poor, to motivate them even more, and get even more economic progress! But leave the taxes on the rich low, since they've already economically progressed enough, and have done their part for the American economy.
"You don't need to live in a house, citizen; that is a function more efficiently supplied to you by the Disneycorp housing as a service experts."
"Demoralization now reaches such areas that previously, not even comrade Andropov and all his experts would even dream of such a tremendous success. Most of it is done by Americans to Americans; thanks to a lack of moral standards. As I mentioned before, exposure to true information does not matter anymore. A person who is demoralized, he is unable to assess true information, the facts tell nothing to him. ... Only when a military boot crashes into his fat bottom, then he will understand."
The Western world has maybe 20-30 years left before serious political upheaval turns our way of life on its head. Call me a cook conspiracy theorist or make fun of my old quote from a kgb agent being pushed around in dubious circles today.
Luxury condos attract investment from richer people all around the world, but imho, fairly standard 1 and 2 bedroom apartments likely wouldn’t, especially if they have to be rented.
Could that be a way to combat the inequality?
The biggest problem I can see: developers love building luxury condos since the profit is much higher than building non-luxury places.
The cost of building a “non-luxury” building is almost identical. In either case, you need investors to put up the money to pay for construction and maintenance of the building until enough units have sold/rent to be self sustaining. So even if you build a slightly less cosmetically appealing building, you still need investor capital / “the rich” to do so.
How many % of available units do you think the top 10% of the population reside in? I’d be surprised if the average member of the 10% had more than two or at most three homes (e.g. city home, country home, vacation home). For reference, the 95th percentile household income in the USA is $250k a year, you will struggle to afford even two homes on that type of salary.
If you had, say, 600 million homes available in a country of 300 million people, you aren’t going to run out of homes... the rich may have a lot of money but they can only be in one place at once.
In urban areas, where the housing crisis is, a disproportionate share. Imagine a topographic map where housing prices are the relief. Thirty years ago, say the highest point in a given city was at $1M. Over time, as the top end income increases, that peak will steadily rise, pulling up all the prices around it. The problem is that to earn income (to be able to afford rising housing costs), people need to be close to the city center. So people with lower incomes "buy up" out of necessity, driving up the percentage of their income they spend on housing, because their income didn't rise as rapidly as the income of the next topographical "ring" in.
Basically, there is a mismatch: there's a growing disparity in wealth between classes, but the need for proximity to cities in order to make money has remained largely constant for lower incomes, particularly for service workers who cannot adapt to work remotely, like middle class tech workers can.
Solving inequality isn’t needed to solve this problem, any more than inequality was solved in 1950 when more people were living in poverty than today. We need to make more housing available and fix the supply/demand imbalance.
When there aren’t enough units available, it’s impossible to solve the problem and allow everyone to live where they want. Even if everyone had the same salary or rents were arbitrarily fixed at a low rate, then the system of distribution would just change to something else, e.g. a ticket lottery.
It may not have been 'solved', but inequality was much lower in the 1950s than it is today.
When there aren’t enough units available, it’s impossible to solve the problem and allow everyone to live where they want.
In an elastic market, it is possible. The problem is that housing is inelastic, because people have job and family ties that effectively keep them from simply moving away to where housing is cheaper. And in an inelastic market, inequality dramatically exacerbates the problem in high demand areas.
For a related article and discussion, see https://news.ycombinator.com/item?id=22088466.
[0]: https://www.supermoney.com/inflation-adjusted-home-prices/
Then I smack into a paywall.
Looking around at my nice, rural century home that has a monthly mortgage payment still far lower than the cheapest local rent...I’m not going to bother trying to find the article elsewhere. Living in a skyscraper is just not for me. Even the apartments I’ve lived in previously were comfortable ranch-style ones out in Nevada that weren’t very densely packed.
I have no need or desire to move to Manhattan or Silicon Valley for the time being let alone Cleveland or Pittsburgh. That shouldn’t be problematic yet the current crop of economy optimizers might not leave me that choice. We shall see in due time.
Here's the real problems:
1. Rent-seeking behavior by the land-owning generation, seeking to retire and live off rental income and a reverse mortgage, instead of building generational wealth.
2. Rent-seeking behavior by local councils and cities, all but demanding bribes and kickbacks; they hold up permitting for building anything beyond single-family dwelling.
3. Rent-seeking behavior by the majority holders of capital - the banks. Because a majority of properties are subject to mortgage, this has allowed for massive speculation, in funny money, on limited amounts of real property. This drives up prices.
4. Rent-seeking behavior by all levels of government. Property taxes are the most efficient means of destroying wealth.
To be brief, the rents are too damn high! Theres no law you can write that will fix these issues, either. It will bloat and overheat until it collapses like a cake in the oven.
How can the government be accused of it? When private entities engage in rent seeking, they are manipulating the government for profit.
And when private entities do things that do not involve manipulating the government, then how can it be rent seeking?
Rent seeking does not mean literally, simply, "seeking rent". I know people like to say the meaning of words change, but you have to be talking about the same thing as other people using the same word.
As I see it, governments themselves are often rent seeking operations. By increasing taxes, they increase their share of the wealth of the nation, and depending on how that money is used, it could very well be considered rent seeking. Usually the term is used for business sectors interacting with government to get those tax dollars, but I don't think that's the only valid use.
If the normal functioning of the government is rent seeking, then everything is rent seeking. If everything is rent seeking, then the term doesn't distinguish anything in reality from anything else.
You can't have a discussion about rent seeking without the context that there is such a thing as legitimate government that functions in such a way as to provide public goods.