The first chart[1] in the article shows a stark contrast between the "price to income ratios" of even countries that share a border. That suggests that government policy plays an important role.
Spain, France, Portugal, and Germany seem to be where we could learn a lot of valuable lessons.
All EU countries, all next to each other - Germany is bar far the biggest success - also the most densely populated - and yet hasn't seen home prices run away like in France and Spain. On the other side - Portugal hasn't either.
Like Spain, it hasn't exactly had an amazing economic boom...
From what I hear from family in Germany it's got pretty bad lately. Young people don't even dream of owning a home anymore or even moving out from parents' home.
I am not talking about the German Empire turning into the Federal Republic, I am talking about the Federal Republic absorbing Eastern Germany (with state-owned property and very little income per person).
It's "percentage change", not the "house price to income ratio". Without knowing the baseline, the numbers are not really comparable.
It's also strange that South Korea is at -40% when the article states:
>In South Korea, President Moon Jae-in’s party took a drubbing in mayoral elections this year after failing to tackle a 90% rise in the average price of an apartment in Seoul since he took office in May 2017
That chart suggests it isn't a huge deal in the US, but many people here would disagree. Must be vary regional. I do know that I've seen many areas where prices have been declining (I like to browse houses once in a while just to fantasize a bit about my next move).
Because nothing in life is allowed to be simple, "vacant" in this context can actually mean a lot of things. Here's a break down of the 2020 figure of 34k +/- 1.6k:
> - 6,694 of those vacancies were units currently listed for rent that hadn’t yet found tenants. Another 1,031 were homes for sale that didn’t yet have buyers.
> - 6,294 were homes with either current owners or renters that were just not living there. This can happen for any number of reasons: hospital stays, long trips out of town, delayed move-ins, even cases of homeowners who have died but are still technically counted as the resident.
> - 8,523 were “occasional use” homes—i.e., these were second homes, vacation homes, some types of short-term rentals, or just any unit that was accounted for but not lived in most of the year. (The Mercury-News references these but classifies them separately from vacant homes, whereas the census considers these vacancies in themselves.)
> - Finally, the census designated 11,760 homes in the catch-all category of “other vacant.”
"Other vacant." Is a hodge-podge of condemned units, units in foreclosure, units in renovation or seismic retrofitting, a plethora of other corner cases and odds and ends, and homes actually just sitting empty doing not much.
It just seems crazy to me that we have a home for every homeless person but because of book keeping we can't do it. We seem to have an excuse for everything.
This rebuttal would be easier to accept if it was paired with a population & vacancy density map to back it up. There surely exist rural vacancies, but am I to understand that you believe most vacancies are rural?
Thank you. My search yielded similar results[1]. I'm a bit stuck on exactly how to parse this. Vacancy rates, while a fine metric for answering some questions, don't seem to be well suited to this one. Vacancies per capita might be more along the lines of what I'm interested in.
Many of those houses are simply between owners, in need of repairs, in abandoned towns nobody wants to live in etc
I'd prefer if we focus on simply increasing the supply. Ban single family house zoning. Encourage more high density apartment buildings. Build more cities.
If I understand correctly, you're proposing to add a cost to owning the property, which will either raise the total expense or shift the value of the property from the owner to a government.
How is this supposed to un-break the housing market?
Not OP, and I doubt it will work, but the idea is to eliminate property investment and return homes exclusively to people who own them to live in them.
Maybe tax investment properties at an elevated rate? I'm all for home ownership, but the proposed policy doesn't seem compatible with owner-occupied home ownership.
Not sure if it’s the same in the states (but I suspect it is), but in Canada, if your primary residence doubles in value and you sell it, you don’t have to pay tax on that investment income. However you would pay tax on all other investment income (real estate or stocks etc.).
This is an exception to the tax rule and it’s a significant factor behind house prices (artificially low interest rates, and supply being other causes). It actually became a “smart” investment to over leverage for a primary residence because it’s a tax free investment that outperformed interest rates and other taxed investments.
It's not compatible wih the strange religious belief that homeowners should be handed free money from the government at the expense of everyone else, including their own children, for not doing anything socially useful.
That's the root problem, but it'll take a while to fix, because people like getting free money at the expense of other people as long as there's enough hoops to jump through that they feel like they deserve it, even when they don't, and enough hoops for them to not click that they are everybody else's "other people" and probably losing on the deal overall.
In expensive areas (ie, cities that are popular), it does not encourage single family construction. Rather, it includes packing as many units onto property as feasible.
That doesn't preclude ownership - condos and co-ops work as well as apartments.
Out in the boonies a land value tax wouldn't discourage single family, because the land is not valuable (in comparison to a city).
Sure there's an argument to tax real property, but the argument doesn't seem to attach to the policy goals of making housing available for ownership by prospective occupants.
Land value taxes make it much more expensive to have lots of land with relatively small amounts of building improvements (e.g. a single family home on an acre lot).
They lead to increases in density (i.e. more housing) because there is stronger incentive to build more living units on smaller pieces of land.
This at least makes some sense. There are, for example, a large number of properties owned by foreign investors and domestic owners who own multiple homes. Bernie Sanders, for example, famously owns three homes. If these homes were more expensive for investors, specifically, that would dis-incentivize investment by non-occupants.
The idea is that we need to shift to a model where you lose money on the house. Where everyone loses money on their houses. After mortgage payments, insurance, property taxes, and repairs. This would make houses like every other good, like clothes and furniture, which are consumed for their inherent utility rather than to earn a financial return on investment.
I can't speak to GP, but fixing property taxes is critical to solving some of the land price issues in Kentucky.
Currently, in kentucky, if you own a certain acreage (it's something low like 10) your property is taxed on it's agricultural value instead of it's real value. So you build a 2.5 million mcmansion on a 10 acre lot and you pay taxes on 10k in agricultural value instead of taxes on that 2.5 million.
All the huge property speculators own large lots in the big cities and they won't subdivide and sell to individuals because if they subdivided they would have to pay taxes on what it's worth instead of some ridiculous "agricultural" value. One of the big builders here owns a 300 acre plot in the heart of the city. They pay taxes on like 50k agricultural value instead of the millions it's worth and drive up the prices of other lots because of it. They can speculate at no cost.
Mind you, they sell the lots in .2 acre plots when they develop them and the new homeowner pays taxes on the full value of the plot + house.
Land near city centres is more expensive. Thus tax of such land would be higher than let's say much farther away. This would put pressure to torn down a plot where there is single family and replace it with building with let's say 3-10 families. Now those new residents would pay one third or one tenth to live in same location.
If you can make 10k revenue and 1k profit building a single luxury home or 100k revenue and 500 profit building a larger housing unit for many families, you’re incentivized to do the former. If you’re taxed on income you’re incentivized to do the former. If you’re taxed on the max possible value of the land, then your tax rate is based on the 100k revenue, which isn’t so bad if you actually make 100k but is really bad if you only made 10k.
Shifting land to large housing use cases is one of the main ideas.
That's pretty hostile against conservationists that own property to save habitats rather than churn a profit. This will inevitably lead to this land winding up in the hands of a capitalist that will destroy it in order to make money on it.
Let the people through governments declare property as parks or preserves.
This "conversationalist" approach is what NIMBYs hide behind. We can't build in Las Vegas because of a tortoise species. We can't go beyond N levels due to "conserving" the history of a district.
Let the public (ideally across a broad area like a state or country) decide what areas need to be conserved for habitats. Don't let private land trusts / conservationlists be the mask that NIMBYs hide behind.
If something is truly valuable to protect it should be done by the government (who can simply nope out of LVT for the plot) rather than some random jerk (or who's kids) that might change their mind.
Your argument doesn’t hold up. A government can change its mind and priorities too. The diversity of right holders (private, government etc) over land ensures some good prevails through various political, social or economic circumstances.
Well, it's held up for ~150 years in the form of our national parks just fine.
That aside, the point here is that if something is being held for the common good, it should be held in common. "The Government" isn't a perfect check or steward, but there's actual accountably there, something which does not exist at all in the case of private ownership.
The same government that undoes protections so resources on the land can be mined? You must have a very utopian vision of government that doesn't align with reality.
Hard to say how it would all shake out. I believe one of the benefits of a land value tax is that it incentivizes maximizing utility:space and denser living as a result. Put a skyscraper in the place of a McMansion and you've got a whole lot of people sharing that land tax burden. So, fundamentally it should result in more wild spaces.
Of course, it would be a change from the existing setup, resulting in a different layout, so some ecosystems might be damaged and "replaced" by worse ones.
One would hope that, if a big change like this were to occur, it would be paired with some support to protect existing habitats.
Turning the chief asset for retirement for the retiring crowd into a liability is a non-starter. Excluding them would be an enormous wealth transfer in their favor.
It already is a massive wealth transfer to them. The question is what's the political will to put a stop to increasing it further before it collapses society.
It's basically "inflation that affects you less the more property you own" and people seem aware that inflation can collapse societies if not tamed.
A counter-balancing wealth transfer like a UBI or some kind of pension scheme for people not yet retired that ties into the tax raised from land would work. But we'll bumble into it step by step as usual, no point rushing to create a better world when we can keep making it worse for a few decades.
> Excluding them would be an enormous wealth transfer in their favor.
A temporary one. Ensure only people over a certain age who own land are excluded, and only while they are alive. Once they die (or sell), the inheritors/new owners are not excluded. And ensure you can't make it perpetual by placing it into a trust.
Build enough housing for everyone. Build more than necessary so that there's slack and flexibility to move. There's no similar monopoly dynamic with cars or phones or thousands of other goods. We just make a lot of them.
Oversupply will take care of the downstream issues. They will cease to be good investments and become commodities. Rents will have to come down in a competitive market.
Oversupply will have to be on a regional level. A vacant house in a small town doesn't compensate for an occupied house in a city 100km away.
Zoning laws prevent this in the US/Canada in many places. Existing homeowners don't want to change. More houses means more crowding, higher traffic, construction noise, obstructed skylines, more pressure on schools, police etc. We can't accept that argument when weighed against homelessness or poverty anymore. Fuck their skylines, shelter is a basic necessity and it often has to be close to work, shopping, school etc. Living in the middle of nowhere is not an option.
Land needs to be legally switched from an asset into a liability before the market will build housing supply with the same enthusiasm it builds phones.
Land redistribution (which is structurally similar) only really tends to happen after a revolution and that tends to be bloody. Landowners throw resources at violent and politically extreme reactionaries to send off the threat of their rent entitlements being democratically revoked.
So, it's unlikely to happen soon and if it does happen it'll probably get pretty ugly first. The path of least resistance will be a gradual slide into a kind of neofeudalism.
People are OK with leaders making decisions that result in them living in accommodations that people in the US and other western countries would deem unacceptable, mainly relating to quantity of livi by space and storage and usage of personal cars.
Japan has a completely different view on housing. Houses in Japan are made with the expectation of being torn down [1]. This causes all sorts of secondary and tertiary effects different from the European model of buildings lasting for centuries.
This is the real answer. Japanese tax law heavily incentivizes building and discourages sitting on land forever and doing nothing with it for one’s own investments (paging California).
Helps that the whole country is on a fault line; nothing is going to stand up for a while anyways so you may as well establish a culture of rebuilding.
Buildings always depreciate, and North America has its fair share of homes not intended to last generations. In Vancouver it's become common for wealthy homebuyers to knock down houses that are less than 20 years old to put up something fresh, but that didn't stop property values from appreciating.
And in China it's perhaps even more the case that homes aren't built to last, and they even have an oversupply issue if anything, as well as a much more advanced population decline than Japan did circa 1990. And yet real estate in China has still attracted so much investment speculation that it's even less affordable, and my guess is it's following the same trajectory that Japan did. Property speculation is a powerful force.
I think a much better explanation is that the Japanese RE bubble taught Japanese speculators a lasting lesson, and the subsequent demographic decline, universal zoning, and widespread availability of mass transit kept it cheap.
China's house market is also affected by different cultural forces. It is almost impossible to marry without owning a house/condo. This forces a ton of young people to buy property who may otherwise rent. Also you are seeing the break up of multigenerational living situations into individual family units as you move from rural to urban living scenarios.
Land and real estate are also a huge income shelters for Chinese elites. They cannot appear too wealthy, so they buy real estate to hide their wealth. Only recently, last 5 years, has China instituted a national real estate registry. I wonder how much of the market disruption of the last few years is due to large players trying to divest themselves.
> This forces a ton of young people to buy property who may otherwise rent.
It's not clear that tilting the rent/own preference toward ownership results in a net increase of housing prices, because for every unit of homeowner demand it adds to the market, it also removes one unit of landlord demand.
What I wanna know is how does Tokyo do this semi-successfully?
People point out the demographic declines of Japan as a whole, but the Tokyo metroplex hasn't been quite hit by that.
I know there was stuff like proposing to pay people to move away, but I don't know if that's a real thing?
I'd suggest the way Tokyo does it wouldn't be acceptable to most people in vastly smaller and less dense cities (i.e. basically every other city in the world), where we have a very high expectation of how much space/land a house should be able to take up.
If you reward people for conserving a scarce resource, they'll use less of it.
If you reward people for wasting a scarce resource, they'll use more of it.
There's some natural human value attached to space, but in the current system people are incentivized to own more than they need, because to do anything else would be giving up free money, but the fact that everyone else is doing the same, ruins things for everyone.
Not sure I agree - it's cultural too. If you grow up with the expectation that you'll never own a spacious 3-BR house with a dedicated yard, then you wouldn't think spending your life living in small apartments or townhouses was so terrible. But I admit I'd find it very hard to adjust to even if the reward/incentive for doing so was super high. And the dog would almost certainly agree!
In the 50s to 70s when the population was growing a ton and new housing was needed the government funded a ton of public housing (Danchi) to offset the growth in demand.
Things have changed a lot since then but it seemed to have been very successful at fixing the housing crisis of the time.
All we need is a few people in power to sacrifice short term political gains with regards to homeowners opposition.
Building housing is expensive but we manage to fund the military today. We were able to build a massive countrywide network of roads and highways and train tracks a 100 years ago. So fuck capital too. Of course they don't want to build it, and this is a _necessary_ consequence of making housing not be an investment. It will not be profitable to build. But it will be good for humanity anyways. So it has to be atleast partially funded by taxpayers. That might even mean we all collectively get screwed by high rents and high taxes for a decade while we do that. As long as it actually does benefit future generations, so be it. There's plenty of room for efficiency in building as well so that's not necessarily the only way. Subways cost 10-50x more to build today than they used to and there are hundreds of companies that live off leeching public funds.
>All we need is a few people in power to sacrifice short term political gains with regards to homeowners opposition.
The wealth of most of our political class is also tied to their real estate holdings. 1/5 of our politicians are landlords in Canada; our housing minister has multiple properties. Make it make sense.
Any solution that begins with "All we need is X people to ..." is an almost guaranteed failure.
> We were able to build a massive countrywide network of roads and highways and train tracks a 100 years ago.
Building the first road/train track connecting A to B pays for itself (probably many-fold) in increased revenue from taxes you can collect because such a connection significantly increases the economy.[1] It's not clear that more housing will have that impact.
And for all the people complaining about zoning and NIMBYISM: That's a very local phenomenon in a few cities. Where I live we have neither of these problems, and housing is still a major issue. I'd wager that's true in most US cities that have housing problems. Preaching about zoning and NIMBYism is merely showing a disconnect with the rest of the country and is a red herring.
Solve the incentive problem - at current building prices builders cannot afford to make housing for lower income folks. Either make the cost to build cheaper or, as the parent says, get the government to subsidize building it so they can make a profit.
[1] Fixing up existing roads doesn't, which is why if budget isn't properly allocated for maintenance, you'll get poor infrastructure.
The main thing that impedes is is regulatory/zoning limitations
And while I'm mostly in favour of code limits (so, minimum size, insulation requirements, fire-proof requirements, etc) most of the impeding regulations are things like maximum height size, blocking developments based on the "character of the area" (read: NIMBYS complaining) etc
Capital demands a return. If you build to oversupply, where is the return? Government must do this because it is likely unprofitable, but what do you do when there is no will to do it? That’s the problem I believe.
The market never knows when will it oversupply. Especially for something that takes time like housing
That's one of the reasons of past housing bubbles
"Oversupply" is also dependent on the actual target market. Several places lack cheaper housing but have an oversupply of more expensive ones (more bdrs, fancier areas, etc)
Targeted taxes. Higher income taxes on rent deriving from residential property, higher capital gains taxes on residential property and higher inheritance taxes on secondary homes. This would of course require political will. What it would do is make residential property a much less attractive financial investment.
The other recent phenomenon/issue is loose monetary policy. When interest rates are too low, asset values increase. We have just had a period of very low rates for an extended period of time. As interest rates rise, prices should level out or drop off.
> What it would do is make residential property a much less attractive financial investment.
While I agree with this, bear in mind that for some people, housing is the only "investment"/inflation hedge available to them. Without public pensions, lower to middle class people need something to fund retirement and we should be careful that " make residential property a much less attractive financial investment" doesn't just hurt those people vs the REIC, Berkshire Hathaways, etc.
This seems to be a textbook answer, but in reality we live in a world where people(renters and homeowners) have imperfect information. There is no renter out there that knows exactly how much they can get to the dollar. They have to compare with market prices and make a reasonable guess.
Potentially in the short term, if government were to introduce such tax policies as changes to the status quo. These types of short term changes/issues can perhaps be remedied via short term tax credits or similar for those renters impacted.
In the longer term and at the macro level, renting ultimately competes with cost of mortgaging. If the cost of home ownership goes down, so should rents. Again, government backed loans could help those renters who can afford the monthly repayments but lack the upfront deposit/capital to purchase.
What is needed is lower residential house purchases prices which will flow into rental costs (eventually). In the long run, rents are always based on the underlying asset value.
The other thing that could help lower residential property prices is obviously on the supply side, which I have deliberately avoided.
Letting "developers build almost any kind of housing almost anywhere they want"
leads to Belgium, famous for its ugly houses, and high on the list in the article. It creates horrible infrastructure problems, and is terrible if you also value nature.
Well, I live in a city that has designated many buildings as historic for one reason or another, and seems kinda slow to approve new buildings. There is some interest in building affordable housing, and making new developments include affordable housing. That's all great, but I think we really just need more units, and maybe not every building that's 100 years old needs to be preserved for eternity.
As someone who lives in an area with similar problems, I agree. We need to quit designating buildings as historical based on their age. Unless something actually notable happened there, it should not be considered historic. Bulldoze it and build something more efficient. Society moves forward.
At least where I live it's the historic houses that are worth more than the newer ones, partly because there's a limited supply of them, but partly because the desirability of a house often has little to do with what's "efficent". Further limiting the supply by reducing the number of them is only going drive such house prices up.
I'd also note there are plenty of cities with massive housing affordability problems but little in the way of historic buildings (Hong Kong, San Jose & much of SV etc.). Even in my own city (which often rates as one of the least affordable for housing), historic buildings make up a small percentage of total housing.
I think we will see a reckoning of this in USA in the next few decades. "Classic" houses like colonial or victorian style houses are venerated and preserved, but live on mostly due to survivorship biases. These were the houses of the elite, and they could afford better building materials or adornments deemed historically valuable.
Most houses built since 1920 don't have the same value. But the meme of "old=worth preserving" still lingers on. In San Francisco there are old row homes built as temporary housing after the 1906 Earthquake. They are preserved only due to their age, not any intrinsic value. Houses built in first half and mid century are developing major structural issues. Their foundations may be cracking beyond repair. Their plumbing and electrical are several generations beyond current standard. They may have been built in a more temperate climate and lack central heating/cooling. Their layout may not make sense for a modern lifestyle.
These houses should be torn down, and new ones built in their place. But this is really difficult to do in some areas due to preservation committees holding on to every scrap of history. Instead you get completely insane practices like gutting a house except for 4 posts and rebuilding a new house within it. Or building a new houses around an old one.
The lot next to my apartment was like that. Instead of razing the structure and building a new one, they had to engineer a way to build a new house around what was a literal rotting shack. The new structure retains almost 0 of the original framing, and definitely retains none of its architectural features. So the project cost probably hundred of thousands more, and took months longer, just to satisfy some petty council's need to never tear down an old building.
As the oldest generation dies off, I would hope to see these attitudes change, and the USA open to more rebuilding. But unfortunately these rules will remain on the books. The capital class has no incentive to change it, because it would disrupt their control over the housing supply.
Nobody is in a huge hurry to pass legislation that could actually reduce the value of real estate by building like a million more units. So yeah, idk if it's ever going to really change.
Deport all illegal immigrants across the West, and increase standards for legal immigration. Aim for steady-state population levels, and immigration exchange only with similarly-developed nations.
Right now we are trading housing (and food, water, government services) for cheap labor in many countries.
Because most western economies face an age related economic time bomb. The “locals” are all getting older. The immigrants are usually young, productive and bear more children.
More capital per productive worker isn't really a bad thing for the individual worker, IMO. Most of the 'time bomb' is the liablities time bomb for social security / medicare and other entitlements to the elderly. They expect the young to pick themselves up by their bootstraps and voted for policies to destroy the young, so you could say it would be fair play to vote to cut off social security and medicare to the elderly and let them pick themselves up by their own bootstraps so we can avoid the liabilities time bomb.
Ban commercial ownership of residential properties. That's the headline, but more complex to implement than the headline. To be able to fund and build large residential apartment or condo complexes, you need cities to be able to charter projects and hand them off to tenant ownership or renters associations.
Build a lot. And I mean a lot. We should go back to post war levels in Europe. Also make a system that forces replacement of low density housing near cities where there is suitable public transit available.
China has been building a lot, and I mean a lot. But their housing market is perhaps the most broken of all, and it hasn't done wonders for affordability.
Or not yet anyway; if we see the bubble pop it perhaps will, but that's far from a clean solution. The crux is how do you incentivize building a lot, and I mean a lot, without expectations of appreciating property values? And yet if you have expectations of appreciating property values, how do you prevent speculators from driving up prices and making things unaffordable?
How are people going to find someone to mow their lawn at 40$ a month or raise their children with under-the-table tax free payments without immigration? How do we drive down tech salaries without immigration? How do we subsidize fast food and farmers without immigration?
Historically you just do debt reliefs every few hundred years and start fresh. Worked out pretty well so far (I would rather live now than any time before).
Pretty sure this is going to solve itself due to a lack of population (workers) in the near future, unless your country is mass immigrating to keep up with the decline.
There aren’t enough future kids for this scenario.
Land value tax and a basic understanding in society that if house prices go up its a transfer of wealth from non-owners to owners, but not actually making the country richer, quite the opposite, it's just a type of inflation.
Turn the rental market on its head and cap enforceable rent at 20% of the renters household income at the time of signing the lease. Landlords would compete for higher-income renters, but there are only so many of those to go around. They would also probably offer under-the-table deals to renters who want to live in a more desirable area and don't have the income, but that's ok, they wouldn't be able to evict someone if their circumstances changed and they were unable to pay the extra.
That's a great way of generating tremendous numbers of utter slums.
Landlords would subdivide houses into individual rooms and rent them out.
> they wouldn't be able to evict someone if their circumstances changed and they were unable to pay the extra.
Maybe not via the courts, but they would just shot off the water, and the heat, and then invite unwanted guests to live in the "unoccupied" apartment, until the non-paying tenant left.
>Landlords would subdivide houses into individual rooms and rent them out.
Isn't our current crisis primarily a shortage of low income housing? Is all low income housing a "slum"? Landlords would be competing for good renters, so they would be incentivized to offer good living environments.
>Maybe not via the courts, but they would just shot off the water, and the heat, and then invite unwanted guests to live in the "unoccupied" apartment, until the non-paying tenant left.
They couldn't do so legally as long as the tenant continued to pay the official rent amount, any more than any landlord can currently shut off utilities to a tenant who is paid up on their rent.
Ban renting. You buy a house to live in it. If you don't want to live in it then sell it. Renting houses is literally rent-seeking.
Additionally, remove all zoning laws. The free market will handle zoning.
In the West in the 20th century governments implemented some common sense policies to keep socialism at bay. Countries that didn't, like Russia, were engulfed by socialists.
Look at how many young people openly admit to being communists. If this rent-seeking is sustained we'll eventually get the Khmer Rouge.
> Additionally, remove all zoning laws. The free market will handle zoning.
Woah there, let's not throw the baby out with the bath water!
Zoning laws in the US seem very broken, but they are much more sensible in much of the world.
A free-for-all seems like a bad idea - would you really want to live next door to a knackers yard, an abattoir, a tannery, a coal power plant, a chemical plant, a fish processing factory etc, a rubbish dump, a night club?
> would you really want to live next door to a knackers yard, an abattoir, a tannery, a coal power plant, a chemical plant, a fish processing factory etc, a rubbish dump, a night club?
I'm not sure about all of that, but I think having bars, restaurants, stores, etc. intermingled within short walking distance of houses in suburbs would certainly be great.
This is the rule of the game for anything involving Capitol. If you didn't get there first/pioneer/inherit wealth then you are usually fucked in comparison to well-off parts of the population.
All non-violent means of addressing this problem have been kicked down the road for decades precisely because it's too hard a pill to swallow. Consequently, the pill that everyone is going to swallow will be much worse. If you frame history through the lens of kicking problems down the road until enough people have nothing left to lose, history makes perfect sense.
Remember when everyone was ragging on China for building "ghost cities" and "subways to nowhere"? You look at those locations today and they are bustling metropolises, engines of innovation and prosperity, a huge boon for the urbanizing middle class of China.
The places where housing is becoming more affordable to this chart are also places that don't have a lot of immigration, maybe large scale population movements have negative externalities.
higher wages and lower property prices are beneficial only for the unwashed plebeian masses. the ruling class, with their wealth and income tied to properties and businesses, needs the exact opposite.
What happened is the financialization of houses. They didnt use to be thought of as securities. But an investor can go borrow a billion dollars at a 3% interest rate, buy a ton of homes, and become rich. All he needs is the credentials to do that. As long as interest rates stay below inflation rates, there is profit to be made for investors. We cant see them, but they are on yachts, essentially enslaving americans via an abstract financial interface. This is not capitalism, its money being too cheap from central bankers.
One thing I wish was brought up more is the missing middle [1]. Having denser neighbourhoods is good for a ton of reasons, and having more available housing units would be super helpful for this. Of course, zoning laws restrict this heavily, and car dependent infrastructure also encourages single-family homes with space for multiple vehicles easily accessible in a driveway/garage.
Obviously this wouldn't be a silver bullet, but I really wish North American urban planning would allow for more freedom in housing structures, and put more emphasis on public transportation. Hard to have faith though.
We have this here in Canada. What happens is that investors buy up the entire unit/condominium/apartment-tower and rent it out.
Many of them don't even care if they have 50% vacancy because the investment of the property/land is worth more to them than anything.
Lastly, many of these investors are foreign or even money laundering and just want to dump their massive cash flow into some kind of a physical investment (in this case, Canadian land/property).
We have whole malls that are just ghost towns sitting in the Northern part of my city that aren't even properly built (incorrect piping/HVAC) to function solely for the purpose of legitimizing money laundering and foreign ownership of Canadian land.
Building more housing is good, I won't argue that, but the players in this market are so rich they will just buy ALL of it the moment it appears on the market and our local builders are all so corrupt they would love nothing more than to sign a deal to build 20,000 apartment units and immediately sell them all over to these crooked investors. There are literal video recordings of our 3 major builders bragging to one another about how "they own this city" and "we can keep selling these empty properties forever, the city can't do anything about it" and "if anyone opposes us, we'll show them who owns whose ass".
This is becoming so obvious it's ridiculous here. We have had a 15-30% vacancy rate for both business and residential near our downtown sector for the last 3 years during COVID, yet we have a record high of buildings being built. The foreign investment is so huge that they just keep building even when there is no market for the space. They don't care, it's all about moving money out of foreign assets into concrete assets here in Canada.
Canadian here who is in favour of truly punitive vacancy taxes. Our housing crisis has been ignored for decades and now drastic action is required on a number of fronts, including combating vacancy (I'd also like to see zoning laws and development objections in urban areas die in a fire). The issue is now so acute I'd be in favour of vacancy taxing any address in major metros that isn't someone's filing address with CRA. At the very least the owner should need to demonstrate there is a long term, legal tenant at any address CRA didn't get a filing from.
Vancouver tried, but I don't think they aimed high enough; many speculators just view the tax as the cost of doing business and subtracted it from their gains. At least it's up to 3% now; the 1% initial was way too small.
Added bonus if we measure vacancy right it will kill the short term air bnb market at the same time. I have no issue with people renting their home out a few weeks a year while they are on vacation for some extra cash, but it's heinous there are apartments owned solely for short term rental when tons of people can't afford homes.
I don't buy that Americans on average actually want to live in the "missing middle". They want a small detached house. Lower income folks were able to afford small detached houses for nearly half of the 20th century. The recent push for "missing middle" housing is a coping mechanism for the fact that most of our population just can't live as well as it did only a generation ago.
The solution is to spread out from concentrated megacities. Overcrowding happens in cycles historically, and every time it happens it's bad for human health and the health of human society.
Everyone wants the space of a single family home and the slew of "modern amenities" a city offers, while lamenting they can't afford it. Our parents and their parents lived in far out areas that were cheap / semirural at time of purchase and matured to very nice places to live over decades of hard work put in by the local community. Of course those well-built-up areas are expensive, and of course the people that created those communities don't want to see them completely changed by density. We just need to build more opportunities like these, and people need to be willing to sacrifice on location at the start to see the area build up around them over time.
As with the vast majority of consumer preferences it is a combination of:
1. Not being introduced to the breadth of options that are available
2. Being told, or else insinuated to, that certain options represent higher status or achievement than others
Americans want small detached houses because the ubiquity of the social construct known as "the American dream" drilled it into everyone's heads from the postwar period onward. Sitcoms through the television era both represented and reinforced this ideal. But choices can be unmade as easily as they are made.
>But choices can be unmade as easily as they are made.
...Do...do you even program? Or build?
Because that right there tells me that you've never, ever been realistically engaged with a long term decision with long tails (read: other people that aren't you as stakeholders, or strings of dependent decisions).
There is nothing more permanent than a temporary stopgap, and bells that can be unrung are exceedingly rare, and never ever trivial to implement.
I wanted one because having to deal with other people that I share walls with freaking sucks.
You constantly stress that your neighbors are going to come down and yell at you because your kid is throwing a tantrum, you have to deal with your idiot neighbors downstairs screaming and yelling at each other till 2 in the morning. If you have a newborn baby you are plauged by the constant fear that your neighbors are going to be too loud and wake the baby up.
So no it isn't just a status or American dream option it's a significant change in quality of life.
It seems like too many of these discussions on HN consider only young single people and they just ignore that many people have families and children they need to keep around all the time.
I don't think anyone is advocating for only apartments and condos. If you have a family, can afford a car, and are willing to make compromises to be in a single-family home, that should absolutely be an option.
Adding multi-family homes just adds a new, cheaper option that increases density. There are lots of benefits to it, and its really reductive to say "The 'missing middle' is bad because I wouldn't want to live like that".
No, it's not. Lights are often on timers and cars are often tied to houses for those with second homes in different locations, so as to make them appear occupied so squatters and thieves are discouraged from entering while the owners are elsewhere.
These are obvious considerations and I am surprised they did not cross your mind.
I see, so there is some kind of service that drives a car to and from a house and/or keeps the car parked but washes it regularly or every investor DIY this? How often does it happen you recon?
I am not construing anything, I am inquiring about the process that results in properties "often" uninhabited but having cars and lights to appear occupied. You are saying this is some well known and often happening phenomenon, if so I'd like more information. If such service exist I'd like to use it myself when going on vacation, why do yo become all defensive?
If it wasn't illegal to build multi-family homes in 90% of urban land in America, people would figure out where to put them pretty quickly. People figured out where to put the single family homes when the land was occupied by farms and forests.
People are willing to drive hours away to not live in apartments and condos. They already vote with their wallets. That said, California no longer has single home zoning, so we'll see in a decade how much it helps here.
They vote among the choices that exist and are legal to build.
I have my doubts about the CA change. Zoning is one of many tools that local governments use to restrict housing. Water rights, parking minimums, setbacks, impact fees, environmental review, permitting, historic preservation, architectural review, etc, etc, etc.
And in California, Prop 13 means its structurally unprofitable to allow construction of housing because over time the taxes on a home won't cover the cost to the school district for any children that live there. So its fiscally irresponsible for local govs to allow housing, regardless of any preferences the residents have.
I understand what you’re saying about schools, but it just isn’t reflected in reality. New homes are built throughout the state still. Property taxes are readjusted on building renovations and sales so eventually these buildings will get reassessed. Another way schools are funded is through the state income taxes. It’s already the case that a majority of funding comes from the state. If anything a city would want to have old buildings torn down, converted or sold to developers because that would immediately increase current and future property tax revenue.
>> You constantly stress that your neighbors are going to come down and yell at you because your kid is throwing a tantrum, you have to deal with your idiot neighbors downstairs screaming and yelling at each other till 2 in the morning.
It seems you don't mind your kid making noise but you don't like neighbours yelling either. Living with neighbours may be difficult but most likely you are making their life difficult too. You don't need a detached house. Good acoustic isolation solves this issue but comes with a price.
So it sounds like you don't have a house problem, you have a neighbor problem. Or rather, you have a community problem where you and your neighbors have not assembled into a good-faith community. If you don't feel comfortable knocking on neighbors' doors and asking them to be quieter, you have three options: make friends, move out, or deal with your emotional reaction.
But perhaps more importantly, the problem of nosy or overbearing neighbors doesn't go away when you move into a single family home, it gets strengthened and bureaucratized into what's commonly known as an HOA.
I personally would rather have close neighbors that I have the opportunity to make personal relationships with, versus the dispersed set of homeowners over a much larger area who get to fine me if they don't agree with how I decorate "my" house.
In my experience the tyranny of HOAs vastly outstrips any conflicts that may arise between apartment neighbors, but then again I try my best to treat the people with whom I share my space with respect instead of contempt.
Most homes aren't in an HOA. Turns out you can have the best of both worlds. Not hearing a neighbor walk around on the floor above you, and you can invite your single family home neighbors over to the bbq pool party. Bonus, you can actually have a pool and bbq if you have a backyard. Sounds pretty good to me.
It may depend on the area but SFH is not necessarily associated with a HOA for one. Also, I am confused as to how HOA can interfere with one's life to a higher degree than sharing walls. In my understanding HOAs deal with exterior and common areas, they don't have to do with anything inside. In an apartment you have the same with regards of common areas and the exterior, except you don't have any say at all and you have noises and smells coming from the neighbors. So even if you have a HOA that is as restrictive as a landlord, you are still ahead as you can do whatever you want inside, unlike in an apartment.
>1. Not being introduced to the breadth of options that are available
Pretty sure most americans have experience living in apartments before they buy. I am just too old now to live below a toddler who decides 3 am is a good time to burn some calories running around.
It has nothing to do with 'status' , i just want peace and a good night of sleep.
I don't agree with your analysis that people don't want to live in dense house because of they are brainwashed with "american dream"
Single family homes are objectively nicer in many ways. Some, like mine, are even in very walkable neighborhoods. I've lived in apartments and houses, and I'd take the house every single time. That's not because I grew up in a house, either. I hated housework as a kid and the family thought I'd be a downtown condo dweller until I actually wanted to buy a house.
The vast majority of people do not care about walkability. Maybe that's because they grew up without it--even given that, you can't seriously tell me the vast majority of people would pick the "missing middle" over a small house in a walkable area given the choice.
If I was forced to pick between walkable + apartment or house + long commute to anything, I'd do the commute every single time.
There are lots of comments here talking about how living in a single-family home is nicer than a condo, and while I generally agree, it doesn't mean we shouldn't build apartments and condos. A variety of options is good and people look for different things in a living space.
If I was forced to pick between walkable + apartment or house + long commute to anything, I'd do the apartment every single time. Especially since it would likely be cheaper.
> The vast majority of people do not care about walkability.
Wow, such authority. Sources for this strong factual claim? More likely, the vast majority of people have never experienced living in a walkable neighborhood, and can't imagine the benefits it confers, and so do not (literally cannot) consider that option. This reinforces the point I made above -- people's desires are shaped by the level of exposure to various ideas and experiences.
> a small house in a walkable area
You mean all those that are already owned, and for which there is no more space available in cities? This is an imaginary alternative that has no basis in contemporary reality, unless you wish to build an entirely new metro area.
Not to belabor the point too much, but obviously this is the wrong direction re: walkability. The geometry of the situation simply doesn't make sense when you can only fit an average of 3-4 people on lots each of minimum 10k sq ft. Walkability and density are highly correlated.
> house + long commute to anything, I'd do the commute every single time
Everyone I know who grew up in these kinds of living situations (especially ones with such domineering parents who impose their own preferences for housing instead of considering the factors important for early-life development) have pretty severe social deficits now. Your kids would spend all their time in front of screens while at home because there's literally nothing else to do when your parents are busy.
If you don't have kids and you live in a single-family home, you're, objectively speaking, wasting space, unless you regularly open your home to others for events.
Immigrants then should have been overjoyed with Americans goaded into undesirable SFH, leaving the prime apartments for them to grab on the cheap? As an immigrant myself I don't find apartment living appealing, neither do any my immigrant friends.
People leave bad apartments before they leave good ones. If someone likes living in their apartment why would they leave it? If they don't leave good apartments, why would you assume there are more available?
Oh, you mean Americans move to SFHs because of prestige and peer pressure but keep living secretly in their old apartment, setting timers and "tied up" cars in their empty detached homes? Sneaky!
I don't know why you're getting downvoted unless it doesn't fit what some posters want to hear. People don't like sharing walls, they don't like sharing sewer systems, they don't like having to negotiate paint colors and maintenance of common areas. The people who own condos, IME, are using it as a stopgap - often families waiting for a point where a SAH spouse gets a job or a parent finishes post-grad schooling. All of them see owning a detached house as their end-goal.
There is a very zealous nature to pro-density advocates online. I appreciate the passion of these people, but I admit I very much find solace that all people people I know in the physical world don’t feel the same way.
Which, I suppose, is why single family zoning continues to live on. It’s the nicest way to live for many people.
This is true, but then you'll also have to deal with the negative externalities such as traffic, car costs (I think I read here that the median car cost was like $48,000 now?) high gas prices, traffic fatalities, road maintenance (higher taxes), and political unrest since people won't be able to afford to live in homes.
But going back to the pro-density thing. I think what is misunderstood is that most people arguing for more density aren't arguing for everyone to live in Manhattan - that's a big problem too. They're advocating for mixed-use, medium density walkable neighborhoods. These neighborhoods would include single family homes with yards and sidewalks, but also cafes, elementary schools, gyms, grocery stores, bars, and office space too. You wouldn't have to drive a car everywhere but obviously you could own as many as you'd like. This would also help the local economy because you can pay a barista that lives in your neighborhood (maybe in a townhouse or a condo while they attend college) instead of a rubber manufacturer 4 states away.
> This is true, but then you'll also have to deal with the negative externalities such as traffic, car costs (I think I read here that the median car cost was like $48,000 now?) high gas prices, traffic fatalities, road maintenance (higher taxes)
Society has already decided that these costs are well worth it for the value of living in suburbia
> and political unrest since people won't be able to afford to live in homes.
It's debatable whether it's the need for a detached house that makes housing unaffordable outside of city cores. Again, the solution is to decentralize.
> They're advocating for mixed-use, medium density walkable neighborhoods.
Great, but they love to select their desired area then try to force changes on existing residents that purchased a home in the area for a suburban feel. That's the concern people have. Nobody would mind if density advocates founded a new jurisdiction to build a place like this.
> Society has already decided that these costs are well worth it for the value of living in suburbia
Maybe - I mean I'm not sure that society is really making a choice since there doesn't seem to be any sort of market mechanic to decide what to build. But also you'll notice that houses in dense areas are more expensive than suburban homes so the market has decided that the suburban homes are less valuable. It's also not necessarily a good argument in terms of what we should or should not do.
> It's debatable whether it's the need for a detached house that makes housing unaffordable outside of city cores. Again, the solution is to decentralize.
We are decentralized.
> Great, but they love to select their desired area then try to force changes on existing residents that purchased a home in the area for a suburban feel. That's the concern people have. Nobody would mind if density advocates founded a new jurisdiction to build a place like this.
See point #1. Alternatively if the people who move there "decide as a society" that it should be different then that's an equivalent argument from your perspective.
Right, but the point there is that you have some of these inconveniences until you "move up" in socioeconomic status and you can afford a detached home. People may not like sharing walls, but they probably like that more than just not having a house. Personally I went from the barracks, to a rental house for college with roommates, to my own apartment near where I worked, to a condo, and then to a SFH. Had I not gotten married I'd probably still be in the condo. Even in this "traditional" path you can see the variety of living arrangements.
One problem is that these (as you call them) stopgap options are mostly non-existent or if they exist they exist in good neighborhoods that were built properly and are economically out of reach. Another problem is that it probably doesn't make economic sense for everyone to be a family in a single-family detached house. Plenty of young people or widowers or whatever may not want to live in a single-family detached home with all of the associated maintenance and work that goes into it. We need options, and a variety of living arrangements available for different lifestyles and different economic factors. Frankly, nobody is going to build cheap SFH. It's a contradiction. Focusing on that just means you build houses for the extremely wealthy or the extremely poor.
If you are wondering why, it's because home builders like any business chase ROI so they're going to build homes with $350,000 in materials and labor that they sell for $600,000 and then the poor don't have housing but the government has the political capital to build low-income housing, so nobody in between has great options. Home builders unfortunately aren't going to buy land and then build $175,000 3br/2ba homes and turn around and sell them for $250,000. It just doesn't make economic sense for them to do so. They can build condos, townhomes, and other mixed modality living arrangements and make enough money on them, but that's about it. And naturally they're not going to build in the middle of nowhere because they have to find workers and also because people still need to live near jobs.
They also don't like longer commutes or more expensive housing either. My end goal is a private island and helicopter that take me to and from, but I'm using living on the mainland as a stopgap. But I'm also realistic about what I'm likely to achieve and I make tradeoffs, just as many people do when they buy condos.
While overwhelming numbers of people want a detached house, revealed preferences in the housing market show that people are more than willing to live in a townhouse or condo at the right price. Most people are choosing between a more affordable attached unit closer to where they want to live, or a detached unit farther away.
But the factual situation is pretty clear:
(1) Dense, walkable neighborhoods feature very high home prices, indicating a large amount of unmet demand for high-density living.
(2) Surveys show clearly that a majority of Americans prefer to live in auto-oriented suburbs and do not want to live in dense, walkable neighborhoods.
The way to resolve this apparent paradox is to note:
(3) Currently only a tiny minority of Americans live in dense, walkable neighborhoods.
Great news for Californians. All single family homes are now zoned for up to 4 dwellings. I doubt it'll change much, but we'll see if the missing middle proponents are on to something.
I’ve become convinced there’s no solution. It takes a lot of money and time to build. If you make it easy to build then there’s less money to be made and therefore less will be built.
Make it hard to be build and there will be immense pressure to build but it won’t happen.
The two ends are constantly trying to find an equilibrium. The only way to make housing affordable is to overbuild, but private money won’t do it for obvious reasons.
The government could subsidize building but in essence that’s just making rich people richer. Perhaps that’s the only way short of forcing people to build (like prison labor or something horrible like that).
—-
I used to believe that eliminating zoning and increasing density is the solution (still think so), but induced demand is a thing. When I studied this I found no evidence denser areas are cheaper. In fact the denser areas tend to be more expensive from my own research.
Another issue I see is that many "regular" people have a lot of their money tied in their house, via mortgages. If housing suddenly becomes cheaper for whatever reason, so will their properties. I can see why the owners wouldn't want that.
Construction is cheap, most “property” value comes from land — not the building itself. Hence you’ll find sprawling mega-mansions that are under a million dollars in the middle of nowhere, whereas a few hundred square feet can cost millions in New York.
Denser areas are more expensive because that’s where people want to live, and land is at a premium.
Construction is not cheap. If what you were saying were true renovations would be cheap, which they are not.
And the land becoming more expensive is the point. If an area becomes more popular then it will be denser meaning the land is more expensive meaning the housing is more expensive.
Building denser does not necessarily result in cheaper housing in the net.
IDK, where I live land is cheap (think $10k) but even the shittiest land with a house on it is expensive (you would easily pay $250k+ for a house that would cost $125k in labor and materials build). Zoning and Building codes mean houses are artificially constrained in a way land is not.
There's an insane premium on zoning and permitting the land to build, as well as having the irreplaceable liberty to be covered by a grandfathered structure that is no longer legally buildable.
I think the Baby Boomers slowly downsizing and dying is going to be an earthquake on house prices. I know lots of young families in apartments and small houses while their baby boomer parents have big suburban houses. Why not hang on to your big house if you're healthy enough and it keeps going up in value every year. Once people start selling it'll become a tidal wave of selling - once house prices go down every year for 5-10 years in a row no one will want to own.
The thing to remember about boomers is there are even more millennials than there were boomers. The hoped-for expiration of the former will only partially satisfy the appetites of the latter, and much later in their lives than they would have liked.
Is this really a housing problem, or an income problem? I suppose a little of both, but I doubt we can build our way out of stagnating incomes over the past few decades. They have to be in equilibrium.
In my anecdotal experience in NYC+NYS the vast majority of buyers are investors, not homeowners. Properties are bought up to be flipped, added to the short term rental market, and/or bought as secondary/tertiary homes. I can think of a few things that would work toward resolving this that would not destroy existing homeowners.
1. Statewide bans on short term rentals
2. Huge increase in short term rental taxes to the point where it's barely profitable
3. Adjustable property taxes based on vacancy. Something like a 5x property tax multiple for 50% vacancy and scaling down to 1x for 5% vacancy.
These proceeds should go toward a public/private partnership to build more housing.
It's going to be a very interesting cross-generational political battle. The sheer number of "normal people" who own investment properties and AirBNBs now is extraordinary. I know people scraping by working average jobs that own multiple units. Meanwhile, the younger generation can't buy a home.
We've normalized the idea that real estate can't lose and everyone should own multiple properties, and we can't come back from that without one side suffering a ton of pain.
At the very least we can kick out Chinese and Russian "investors" that only want a way to keep their cash safe from their dictatorship governments. That should drive down our prices and put some pressure on the elites to push for better governments at home.
Of course, a major answer to this problem is to simply ban non-americans from buying american property, but that will implode real estate and hurt a lot of homeowners.
That is the voting middle-upper class. The majority are voters. And they won't want any of that.
> but that will implode real estate and hurt a lot of homeowners
You can’t have your cake and eat it too. Homeowners need to get hurt in order for housing to be more affordable. Housing taking up huge chunks of earnings is a terrible state of affairs for citizens and the economy.
Assuming we could build more, in theory economies of scale would result from more development happening regardless of who the buyer is. And it would in theory result in overbuilding capacity for that many residents and then being left with spare capacity, the cost of which would be allocated in equal part ideally to the investor properties as well.
It unfortunately is "the very least" we can do, though.
> That should drive down our prices
No, in Canada, foreign owned properties make up a tiny percentage of the total, so banning it doesn't actually have any impact. Works as future protection for sure, but that's all.
The "foreign investors" are a convenient strawman that hides bigger underlying problems.
In the US there are numerous incentives for buying a home. Your interest on your mortgage is tax free, the government offers cash back, etc. Renting gives most of these incentives to the landlord instead and they aren’t necessarily passed onto the renter. Most importantly, this means that if you have cash to invest, real estate has favorable tax treatment compared to other options so you suddenly have turned housing into a market that must rise decade over decade or the economy will collapse.
The way to fix this is painful but it is to revoke all incentives and to make people put down 25-50% as down payments. It will cool the market to near absolute zero short term but it will help long term in keeping housing to actually be housing.
Maybe revoke the incentives for those who currently already own multiple properties. No sense in putting an additional financial barrier to people attempting to purchase a home to live in. Investors will be slightly affected by this but it seems like the type of measure that would deter first-time homeowners altogether- therefore exacervating the problem of so many properties being taken by people whose primary interest is profiteering, and leaving those who just want to own the place they live in the dust.
Many incentives are for first time buyers, or single home buyers. Taxes depend on region, but everywhere I see treats primary homes, secondary homes, and rentals as different classes of real estate.
Now that doesn't mean the incentives aren't skewed. But I don't think landlords buying their 20th house are getting the same benefits as a first time buyer.
>Your interest on your mortgage is tax free, the government offers cash back, etc.
I have no idea what "the governments offers cash back" means; but certainly the mortgage interest tax deduction is only available for homes in which you actually live for at least part of the year - it's not available for rental properties.
You can deduct mortgage interest as an expenses if you're renting a property, but that's exactly the same as any other loan used for a business activity and not specific to real-estate.
If you rent out the property the interest is a tax deduction as a business expense. The taxes and insurance are also a tax deduction. You can still take the standard deduction at the personal level.
There are a variety of state, local and sometimes federal tax credits or down payment assistance for new home buyers.
Mortgage interest is only deductible for your primary residence and one other home.
Additionally, if you take out a second mortgage/HELOC, it’s only deductible if you use the money to improve the property.
There may be additional tax benefits that accrue to a business that is paying interest, but that’s separate from personal deductions.
You don't have to take the benefits away. Just tax ad 50% of land value per year for every residence over 1.1th that anyone owns a stake in. Also treat anyone who doesn't live in the region as if they already have 1 house.
You’re mixing up cause and effect. The investors are reacting to the supply shortage in cities like NYC, not causing it. They’re also jumping in because rising interest rates will shift the demand from buying to renting.
Investors made up 20% of buyers in the last quarter across major metro areas: https://therealdeal.com/2022/06/15/investors-seize-record-sh.... Historically they’ve made up much less than that. Housing prices are skyrocketing where I live in exurban Maryland, and in Eugene Oregon where my wife is from, but there’s no investors to be seen in those places. I’m not certain what the cause is, but I’d suspect it’s two decades of central bank policies dumping cash into the economy.
> The role of institutional investors is still being studied, but the popularity of the narrative strikes at something dangerous: People want a convenient boogeyman and when they get it, they often ignore the structural problems that are harder to combat. Housing undersupply is the result of decades of locals opposing new home building. It’s not something that can be blamed on Wall Street greed and the nefarious tinkering of a private equity firm. And that’s a much harder truth to stomach.
Yes, Wall Street is clearly not to blame. And Vox has no conflict of interest here to say this. It's not like they're 34% owned by Comcast, have had more than 6 large institutional investment firms invest in ownership, and more than a dozen well known angel investors as well. I am sure there is no undue influence to have this story written by someone who is sympathetic to Wall Street, Jerusalem Demsas, who is also anti-rent control, wrote an entire article and recorded a half hour podcast defending Zillow buying up entire neighborhoods, criticizes public housing as unsafe and that it could be fixed by privatizing it, and is extremely anti-zoning.
Also one of the largest investors, Accel, totally didn't own Trulia, which was totally not bought by Zillow. And Zillow totally isn't a major advertiser on Vox[0].
I believe the public housing we've implemented in the past has been a dehumanizing debacle, that housing was dramatically improved by the Section 8 program that largely privatized it (I live on a block with several Section 8 houses), don't have any problem with Zillow's iBuying program (they were trying to build a kind of market-maker for residential real estate, which is a real problem that impacts real homeowners and badly needs solving), believe rent control is counterproductive, and believe one of the biggest problems in all of housing is restrictive SFZ zoning rules.
Where's my check? Should I contact Accel? If I'm owed money pro-rata vs. Vox's readership, I should be able to buy a new car with the money.
As someone involved in a local pro-housing organization, what I see, day in, and day out, is my own neighbors trying to stop housing. Following that... maybe short term rentals. Somewhere way down the list are institutional investors.
Just off the top of my head, in a town of 100K, I can pretty easily think of 100's of homes that were not built because of NIMBYs.
Also, did you miss the bit where Zillow got their asses handed to them because they screwed up and lost a lot of money?
Surprising nobody, I will chime in and say the same thing. In particular, I've seen "we should be investing in new public housing" repeatedly deployed to oppose dense housing developments where I live; it's a deeply cynical thing to say, because not only does it demand that prospective residents be locked out of the area until we boil the ocean with some revolutionary new top-down housing policy, but the only reason the NIMBYs say it is because they know it won't happen --- if it did happen here, they'd be up in arms against it.
It's 100% the combination of low interest rates and restrictive housing policy.
But I don't think we should blame the central bank for the low interest rates anymore than we should blame a thermostat for running the heater all the time during an unprecedented cold spell. The central bank if anything was probably not keeping interest rates low enough for the last two decades considering how low the employment to prime age population ratio and inflation were. Interest rates are just especially low compared to historical standards because of the sovereign wealth funds, growing inequality, reduced population growth, and Asia becoming much richer with crazy savings rates.
The places where there are a lot of short term rentals are the same places where there is a lot of tourism. In effect your first two points is just killing the states own tourism industry, no?
A vacancy tax can be trivially avoided. Would there be an exception for renovation? Again, easy to game.
Why solve a problem when you can just nuke it, right?
I hang out with AirBnB investor folks. There's a simple solution that works: Require the owner live on the property. Every AirBnB investor will skip the city/county if that is the rule, but still leaves room for legitimate residents to make some money (e.g. rent out the basement, etc). The latter isn't taking housing away from anyone - for most owners it's not economical to convert the basement to make it a long term rental.
One unfortunate side effect of this is that this behavior ultimately gets priced into the market. When a house with an ADU will reliably fetch 20% more than one without, then eventually all houses on the market will have ADUs, with the consequence that people buying will need to depend on short term rental income in order to make their mortgage. I’ve seen this happening where I live (West LA) over the last ten years, and it feels like a net decrease in quality of life for everyone at this point.
If every house has an ADU, then the effective number of housing units in that area has been doubled, putting downwards pressure on housing prices.
If people bought their houses anticipating high rental income to make ends meet, that's a separate problem, and less bad than "people are becoming homeless because there are too few housing units".
ADUs are not sold separately from the homes on the same lots, so the number of homes for sale has not doubled. The value of a lot with an ADU increases because the ADU offers rental income and/or extra living space to potential purchasers.
Could those ADUs not be used for long term rentals? If so, than I think that was the point being made - the effective number of units available goes up.
Right, the effective number of rental units increases, which can help make rent more affordable, but this does not lower housing prices for purchasers.
It's not like the inventory of lots for sale doubles -- it stays exactly the same, but some of those lots increase in price because the ADU adds value.
> When a house with an ADU will reliably fetch 20% more than one without, then eventually all houses on the market will have ADUs, with the consequence that people buying will need to depend on short term rental income in order to make their mortgage.
If you significantly increase the number of units available via ADUs, then there's a lot more options to rent, and the demand to purchase houses goes down, bringing the prices down.
If the number of properties with ADUs doesn't go up enough to have that effect, then STR via ADUs will not significantly impact the housing market.
The reality is that if every house in the city had an ADU, most of them will not be used for STR, as the demand for STR isn't that high. They bring in a lot of money precisely because there aren't many options. If every house in LA suddenly had an ADU, you wouldn't get a proportionate increase in visitors. There will be an equilibrium point.
This is also ignoring the pain involved in building an ADU on an existing property. Depending on the locale, it can more than double your property taxes. Most existing homeowners will not build an ADU. Too much hassle, with uncertain income - most AirBnB hosts don't make much money via AirBnB - it's a fairly active investment and requires a lot of time/coordination.
> If you significantly increase the number of units available via ADUs, then there's a lot more options to rent, and the demand to purchase houses goes down, bringing the prices down.
Why would demand to purchase houses go down? People aren't buying houses because they can't find rentals. People buy houses because they want to be homeowners.
I live in the BC interior. It is virtually impossible to find a place that does not have an ADU. Old house, new house, small house, large house, it doesn’t matter: perhaps 1 out of 50 is single occupancy, all the rest have a rental suite. I think your notions are incorrect.
Unfortunately most of the ADUs around here are converted garages--maybe 300 square feet with a micro kitchen. They're essentially hotel rooms, not a place where someone would live. This is a much different thing than a multi-unit lot.
I think making sub-letting normalized again might not be worst idea. At least for people who like that sort of stuff. It is easy way to increase density without actually having to rebuild anything.
AIUI, that’s the current requirement for NYC. I stayed in about 6 or 7 AirBnBs in NYC, and all of them were occupants renting out a room in their apartment.
I realize that I'm about to mention a couple of niche cases, but there are times when short-term rentals are entirely appropriate and don't really affect the local market much. We should be careful how the laws are written.
One classic example is the case of a very popular event happening in a small market that is otherwise unremarkable. Say, the Masters golf tournament: for about two weeks a year, Augusta, GA, is full of non-locals. Many residents will take vacation during this time and rent their home out to golf fans from around the world. Very few people want to rent a home in Augusta any other time of year. (It's also small enough that you're not required to fill out any additional tax forms, just report the income.)
Another is the case of a home that, for whatever reason, will not sell in the current market but would reasonably be expected to in relatively short order. A brief, 3- to 6-month rental for, e.g., a family that is constructing a new home that is not yet ready but who have sold their existing home and need somewhere to live is an excellent use.
Like I said, somewhat niche uses, but it's worth keeping in mind that there can be legitimate, minimally-distorting uses.
NYC bans short term rentals in multi family buildings already, unless the host is also staying there and not renting the whole apartment. So the short term rental restrictions probably do help, but it is hard to compare nyc to more suburban and rural areas
We could also...build more housing and eliminate most zoning restrictions.
I also don't know what a "short term rental" is, that would devastate beach areas that rent out homes to tourists. I don't think that's a viable solution.
Housing prices have not gone up in any major way in a few major industrialized countries, Japan, Korea, Germany. You know what they did? They built more housing. Building in San Francisco, New York, etc is near impossible, especially if you aren't connected. Communities often vote against new housing because a) they don't want certain people in their area and b) we've wrongly viewed housing as an investment vehicle and more housing hurts values.
Why should they have to be explicitly built and zoned for renting? Why shouldn't they be used by tourists? Just make it easy to build more so that there is enough for everyone.
Are there unlimited tourists? Sounds like a pretty sweet gig since tourism is like miracle grow for local economies. But alas no, there are not unlimited tourists, there is just limited housing supply.
I get tired of bringing it up but I lived in a Tokyo apartment, 5 walk minutes from a train station, 10 min walk to a large park, nice schools, very quite area though just 5 minutes walk to lots of restaurants. 750 sq ft, 4th floor with elevator, 15 year old building (at the time). Rent was (at the exchange rates of the time) $860/month. Inflation adjusted that’s $1,075 which can’t gets you a spare bedroom in first tier American cities.
At the time Tokyo had no restrictions on short term rentals nor on foreign investment or property investing or any kind.
Tokyo’s big secret is that they let developers build apartment buildings.
> Properties are bought up to be flipped, added to the short term rental market, and/or bought as secondary/tertiary homes.
I have several friends in the contracting/home services industry. The stories I hear about home flippers buying houses, asking for the cheapest paint/flooring/light fixture work possible, and then relisiting the homes with a 50% markup are wild. It seems a lot of people got into flipping homes around the start of the pandemic and lucked into one of the sharpest real estate market increases in a long time. They assume it's an easy way to make a lot of money with their interior design skills, but really they would have profited just as much or more if they just sat on the home from 2020 to late 2021 and sold it after the market went up.
I generally don't think outright bans work because the binary solutions become controversial and prone to political manipulation and stalling. Increasing taxes on these speculative transactions is the way to solve this, I think.
Simply eliminating the 1031 exchange that allows investors to defer tax liabilities on real estate investments would make a huge, immediate change in the velocity of speculation. The real estate lobby would go ballistic at the proposal, but I think it needs to be done ASAP. It doesn't make sense that real estate investors get such special tax treatment.
I would like to see the 1031 exchange become available for people who intent to occupy their properties. It makes no sense that someone could own and live in a home for 50 years, want to trade for a smaller home, and be unable to afford the taxes.
Tell that to someone who lives in a perfectly ordinary, well maintained single family house in what is now an expensive part of the Bay Area that would sell for $3.5M, and whose basis is essentially zero. If they want to move to a nice condo selling for $2M, they can probably squeak by, but most of that $1.5M gain will disappear.
This is a problem for people who want to move. But, and this is mostly speculation, this is bad for everyone else too. It makes the market less liquid, which means that people are less likely to live where they want. It also reduces the incentive to build the kinds of units people want to live in. Suppose you want to build 100 nice condos. It’s harder to sell them to existing homeowners, and, in turn, those owners’ homes don’t go on the market. With fewer houses on the market, a smaller stream of buyers with lots of money can keep buying houses at unreasonable prices, and the market prices get pushed up.
Better would just be making gains due to inflation tax-free - it makes no sense that capital gains aren't indexed to inflation. Tax the real gains, not the nominal ones.
That's a problem with taxes in general for capital. why don't they have a tax exemption where I can defer paying taxes until I switch jobs and as long as I switch to a like kind job I can defer even more.
I think the best idea I've heard would be to excessively tax capital gains for the LAND appreciation. We don't' want to discourage people who actually provide value by buying properties and making them nicer or creating more units.
A neighboring city of my suburb has large swathes of ranchy style homes on half an acre, those can easily be converted to triplexes or at least large family homes rather than tiny 3 bedrooms. We don't want to discourage investors from that sort of development.
However, we do want to discourage investors from 'flipping' homes and riding up appreciation, or even worse, investors buying houses that just sit empty.
IIRC, NYC and Jersey City already made Airbnbs illegal unless if it's owner-occupied. Outside of ultra-luxury apartments like 432 Park Ave, there isn't really that much vacancy in NYC. Disincentivizing investing is a good way to make homes cheaper to buy, but it won't make renting any cheaper in places with already high demand.
We can discourage investments simply with more equitable property taxes. Currently, more expensive apartments are taxed at a much lower rate than cheaper ones.
In my neck of the woods in New Delhi, the vast majority of new developments are scooped up by investors as well. Anecdotally, a lot of this is “black money” from government corruption. Since the cost basis of this investors is actually zero, they have infinite staying power.
Drive through New Delhi’s suburbs and the towns nearby and you’ll see vast empty towers. Many have been on the block for years without any price cuts.
Property prices have been largely stagnant and have underperformed inflation for a decade. Even now, the prices are beyond the reach of the vast majority of working Indians.
None of the policies you suggest were necessary in the past, when housing was much more affordable even though NYC was still drawing in many people from elsewhere. Why would those policies be necessary now?
You need to look elsewhere for the cause of the problem.
It's near 0% interest rates and devaluation of the currency, combined with central banks propping up the price of bonds, leading to strongly negative real yields on bonds, driving investors to seek something to retain the value of their money.
"In my anecdotal experience in NYC+NYS the vast majority of buyers are investors, not homeowners"
I feel like we'd have non-anecdotal evidence about this somewhere. Nationwide, the number of investor buyers is 15%. Foreigners, the other boogeyman is below 5%
Short term speculation taxes would also help immensely - increase the taxes you'll owe on a sale of a property held for a short period in some graduated manner. This, coupled with a vacancy tax, should force more properties into productive hands.
We have a similar issue here in Canada, but with one very troublesome addition: foreign investors.
First it was for money laundering but now (in addition) increasingly it’s “regular people” in foreign countries who are seeing each neighbourhood explode in popularity, thinking that if they buy the rental income is how they will feed their families. They have no idea that the prices are simply inflated and unsustainable, let alone that they are most likely buying an unliveable property sight unseen.
The net result is that each speculative group is boosting the other as they race for the sky and leave all the renters on the ground.
There's no data to back up the claim that "foreign investors" are contributing to Canada's issues in any significant way. It certainly does not explain exploding house prices in small towns 2 and 3 hours outside of major cities, where vacancies are hitting record lows.
The history of Canadian real estate being used to launder money is right out there. Look at the Panama and Pandora papers..
Currently:
“For years, foreign money has been coming into Canada to buy residential real estate,”
“This has fuelled concerns about the impact on costs in cities like Vancouver and Toronto and worries about Canadians being priced out of the housing market in cities and towns across the country.”
These are direct quotes from our Prime Minister Justin Trudeau. In addition, he's hoping that a plan to ban foreigners from purchasing residential real estate will get him re-elected. There may not be hard data YET, but it's clear that what the govt sees is in line with what we the public see.
As for what we the public see:
- Foreigners flying in to major airports, then taking taxi cabs to small towns and remote properties with the intent to purchase. And we're not talking one or two, we're talking about enough that taxi drivers are talking about how concerned they are about the pattern
- Properties that have been un-sellable for years suddenly being purchased by foreign investors sight-unseen as the market heats up in that specific area
- Rental properties being taken off the market: first purchased, then renos started and never finished
- Residential houses (including house hacks and house rentals) being taken off the market by being purchased and held (in the past these kinds of properties were owned by holding companies that had a vested interest in making sure they do not have any more transactions and therefore fly under the radar, but more recently people are buying and holding until a future time where they can sell for more): A for sale sign goes away but no one ever moves in.
- Property values going down when a buyer purchases a property then fails to hire a property manager (resulting in the house falling in to disrepair). Turns out they had no idea that there are no local property managers and it's just communities of people doing favours for each other.
As for how that explains
> exploding house prices in small towns 2 and 3 hours outside of major cities, where vacancies are hitting record lows
Foreign investors aren't looking at proximity to cities, they're looking at what areas 'are hot'. They're typically overpaying which urges everyone to overpay, and we still have all the expected real estate purchases: people who want to escape the city after earning their down payments, new home buyers, domestic investors (including speculators), and so-on.
The result is higher and higher prices being paid for less and less properties. Vacancies have severely dropped because in multiple local areas that are on my radar (either I'm there, have talked to someone there, or have contacts there) mainly because the number of places to rent have been reduced.
Have a hard time believing this is true in NYC proper.
Most of the housing stock in NYC are co-ops, which have fairly strict rules about renting out units. Condos are significantly more expensive to purchase, and there is pretty much nothing you can purchase right now that would yield positive cash flow given how pricey real estate is even with rents so high.
Airbnb is technically banned in NYC, and while I'm sure there continue to be illegal Airbnbs I don't see many listings myself that are for the entire unit as opposed to a room if it isn't a monthly rental.
that doesn’t tell you anything. it’s the short term airbnbs for the entire property that are illegal. you can still rent out a room in a place you live in as far as I know. or do monthly rentals.
As I said above, that's with "WHOLE APARTMENT" checked. What I saw above was for a 3 day stay that for some reason defaulted to November. Those are 100% illegal and they are all available.
Here, let me do the legwork for you, this one shows 413 stays:
They are very useful for victims of domestic abuse where there are no shelters available and other things like people working on short assignments - sure they could get a hotel, but for small business competing with big tax avoiding corporations is often an only way to make it work. Also people not always want to commit to long term rental if they don't know area or they change jobs often.
> 2. Huge increase in short term rental taxes to the point where it's barely profitable
These taxes will be moved on to the renters, so it will make crisis worse.
3. Adjustable property taxes based on vacancy. Something like a 5x property tax multiple for 50% vacancy and scaling down to 1x for 5% vacancy.
This could work to an extent, but you'll find corporations hiring fake tenants if it makes financial sense.
I think the crux of the matter is that residential property is treated like a legitimate investment. We should start from banning pension funds and other funds from investing in such packages - they drive prices up, as they want properties at any cost and tax property flippers.
I live in the US and my county and city do something called a “homestead exemption” on property taxes that you get after living in a house for a year. It’s 10-20% of the value so it’s a few thousand a year.
Cranking this up may be a way to reduce rentals and investment properties.
I would say that a simple palliative would be (possibly dramatically) increasing the taxes on single family homes that are not owner occupied. We have enough homes to end the housing crisis, it's just too cheap for businesses to horde them and profit off of the misery they are (hopefully unintentionally) creating.
There are a lot of things that 1 person can do that are essentially harmless but when a hundred million people do at the same time can cause huge social and ecological damage.
It's the central banking system that is broken. Through quantitative easing central banks pushed down interest rates artificially low. Low bank interest pushed up housing prices to the sky. Most home buyers look at the monthly interest payment expenses which determine house prices. Now that we have high inflation(partially created by quantitative easing) central banks will have to raise interest rates. The reason for higher central bank interest rates is an annual is two percent inflation target. High-interest rates will push housing prices down.
Its like Dr. Jekyll and Mr. Hyde. Central banks will have to fix the inflation monster that they partially created.
Another part is globalization was causing deflation pressure but central banks measure domestic inflation on a global wage market. Now that trend has partially changed due to protectionism.
They borrow money to fund construction and don't earn income on it until much later, after leasing or selling completed properties. The higher the interest rate, the more it costs, and delays mean more interest paid while waiting.
Because nobody spending 50% of their take home pay on rent will ever be able to retire.
This all basically boils down to defined benefit pension schemes being a thing of the past. My dad worked for the same company for 30 years, paid off his 3x gross income mortgage, and retired on a final salary inflation-linked pension.
I'm earning 3x as much as my dad ever did, still borrowing almost 5x my salary over 33 years for a worse/smaller home, and have no guarantees on my pension beyond what I sacrifice and what the stock market yields.
I'm not sure it is absolutely needed. But it is sensible long term investment even with flat property values. On other hand we could move toward to public housing with prices levels aimed to cover initial investment and maintenance.
Freedom. You don't have to move everything in one month because your landlord wants you out. You can drive a screw through the wall and not have your landlord shout at you.
50 years ago housing was affordable in areas that are now expensive, like Silicon Valley and Vancouver. That outcome did not require land value taxes or targeted taxes on landlords or bans on foreign investment or other novel solutions like a lot of posters here are suggesting. It was just easier and cheaper and more profitable to build housing back then, and the market took care of the rest.
What changed? It got harder to build because the government empowered NIMBYISM and nonsense “environmental impact” rules (hint: nobody actually cares about the endangered burrowing owls, they just don’t want affordable housing near their homes).
The affordability crisis was caused by government.
Any solution that piles even more government on top of the current government-caused problem is a no go — especially pie-in-the-sky solutions like land value taxes.
The only solution is to make it easier to build. But that's politically painful so it’s not going to happen. We even see places like California making it more expensive to build by requiring solar panels on new homes, in order to virtue signal about climate change without actually solving anything. So, invest in expensive areas, they are only going to get more expensive!
Exactly! And then complain there is an over-population issue because the average engineer can't buy a house within 20km radius of world's top billionares. If there is an issue it's that the wealth is concertrated in few "small" areas.
What makes people think housing should be affordable in the "most wanted" locations? You can't physically fit unlimited people in a small area.
> the average engineer can't buy a house within 20km radius of world's top billionaires
Although before WFH (and maybe even afterwards), the world's top billionaires were insisting engineers live within 20km of them so they can work at their companies. Industries like tech (and finance, and defence) heavily cluster, leading to certain cities/regions getting horrendously expensive.
> You can't physically fit unlimited people in a small area.
You can certainly fit a lot more people in most major Western cities, without even much difference in lifestyle. Simply allow people to build what they want on their land, within reason. We've seen this in New Zealand, where recent law changes have allowed townhouses (terraced housing, with shared walls but otherwise freehold) and many many townhouses are being built everywhere.
Most houses are still standalone houses, no one is forcing you to develop your property, but if every 20th section is turned from a single house into 6 townhouses, a lot more people are able to fit into a smaller space while still having a comfortable, quiet home in a good location.
Our intertenancy walls have good soundproofing, enforced by regulations, so you don't really hear your neighbours. You can pay more for a standalone house, or less for a house with shared walls.
It's hard to tell, because it somewhat coincided with interest rates moving (first down, then now up), but it seems to have increased rental supply enough that the rental market is becoming competitive. Land prices generally went up, which you would expect when you can extract more rents from the same piece of land. More housing density = more rent per land area!
The US is nowhere near the point where population density/pressure is an explanation for the affordability problem. Outside of NYC and Chicago there are very few parts of the country as dense as anything in Europe.
But it doesn't matter, the patterns are already set where it makes it incredibly difficult to change some existing "non dense housing" in the US.
E.g. look at Austin TX, it's housing prices have skyrocketed in the past 5-10 years. It's not particularly dense, but the vast majority of the existing housing stock is typical single family homes - there are very few open tracks of land where you can just build dense housing. So to increase density, you have to change existing neighborhoods to be more dense, and I'm not sure I've ever seen folks that I previously thought of as rational, compassionate individuals fight tooth and nail over even modest increases in density.
It's not that expensive to build housing in the middle of nowhere. The issue is that people want to live where close to their job, close to good schools etc.
> empowered NIMBYISM and nonsense “environmental impact” rules
dangerously oversimplified
source: professional urban planners
we AMPLIFY the rhetoric because, yes, you (and I) want to be heard. UrbanPlanning is not new! as well as ugly and counter-productive tactics on all sides of this debate.
While you're right in part, I think you're missing how today everyone want to move in only a few cities and small town economies are dying in many countries.
This doesn't address in this global ponzi scheme how banks are fueling the competition between home buyers by dumping toxic credit, and how wage stagnation makes it impossible to escape this trap.
No solution is possible that doesn't wipe hundreds of billions of asset value from banks and homeowners, and we need to accept that.
> While you're right in part, I think you're missing how today everyone want to move in only a few cities and small town economies are dying in many countries.
That's not really new. The big cities in the United States grew dramatically during the 20th century, at rates far higher than they are growing today: For example, a hundred years ago cities like Detroit, NYC, Chicago, San Francisco, Los Angeles etc. were growing far faster than they are today.
Yes, the big difference is in the decay of small towns. There are far fewer middle class jobs than before, what can you really make in small towns that's competitive in the global economy?
I don't like this blaming of "the government" as if it's some external entity.
Shadowy "government" is not the problem, existing home owners are the problem. And it's not hard to see why, if someone buys a house, they then have incentive to make their house as expensive as possible after they've bought it (within reason, and this is something land value taxes are meant to address). All this "government intervention" that makes it harder to build is nearly always done at the local level at the behest of the people who live there.
If anything, this shows why, e.g., state governments can be a part of the solution, by restricting local governments from putting in tons of roadblocks that make it harder to add housing (which is exactly what California did, though obviously they still have a long way to go).
I’m happy about the California state government overruling local governments in certain zoning disputes, although it’s still a subpar solution to letting the market work. But that’s politics.
On the other hand, that’s the same state government that is adding $25-30k to the cost of building even an ADU/in-law unit because now all new residential construction has to have solar panels!
50 years ago Silicon Valley was not Silicon Valley. We called it San Jose and it was one of the most boring places imaginable. The highlights were the Winchester mystery house and the 3 story Chuck E Cheese. I'm still mildly astonished at what it turned it to - go walk around it sometime and wonder how a grey foggy miles of concrete turned into the epicenter of the digital world.
In retrospect the combo of Cal and Stanford may have made it inevitable, but it's still a dump.
The majority of CEQA lawsuits today are about shadows and impacts on vehicle traffic/parking; they have nothing to do with "the environment" as most people think of it.
> The result, in America as elsewhere, is a widening generational gap between Baby Boomers, who are statistically more likely to own a home, and Millennials and Gen Z — who are watching their dreams of buying one go up in smoke.
Plenty of observations and suggestions in the comments, but most missing the core issue: we turned housing into a retirement scheme, and encouraged investment, which of course inflated prices.
We then concocted a lot of policies to sustain demand, and hamper supply, the keep this scheme afloat.
Housing cannot be both affordable and a good investment.
You make it sound like a nefarious plan or some backroom deal. It seems more like real estate became our de facto retirement scheme due to everything else paling in comparison.
Pensions? Gone.
Savings? Nope, no interest (ha ha) in that.
Stock market? Sure, but its volatility prevents sane people from putting their entire nest egg into it....
If you're in the U.K., I'd highly recommend reading "Rethinking the economics of land and housing" which outlines the history of several clear policies decisions that _encouraged_ housing as an investment which (along with supply restrictions) are in turn why it outperforms lots of other forms of investment. It's not just the market speaking, it's been shaped through lots of conscious decision making that can be undone.
It wasn’t a nefarious backroom deal. But it was a very conscious choice by many governments, spearheaded by the UK and US. And once we ventured a little bit down that path, it’s impossible to unwind bc nobody wants to lose money on their home.
the word "scheme" has negative connotations (of something shady) in America that it doesn't have in other countries. Also, it is very much an intentional policy of governments in some countries to encourage people to invest in a house as their retirement savings.
I am an American living in London, well aware of the difference. I meant scheme in the American sense. Housing policies for the past 50 years are rotten to the core.
It was a nefarious front-room deal. Administrations used to campaign on higher housing values (as if that were a different thing to higher housing costs/prices.) Policies have been designed to pump public money into the housing market through subsidies and tax breaks.
If housing prices drop, the middle-class homeowner gets vocally angry at the presiding administration.
Housing used to be both affordable and a good investment. That is how it worked for a long time.
What's new is that it is harder to build housing than it used to be. The escape valve for an overpressured market used to be building new housing -- and if the new housing meets demand it does not cause the prices of existing housing to tank. The market simply reaches an equilibrium. That's what is not functioning today.
We don't need land value taxes or weird rules about rentals or discouraging investment or any of that -- we need to make it easier to supply new housing. Any solution that does not involve making it easier to build new housing is just not going to work.
Housing cannot be both affordable and a good investment indefinitely. Obviously. A good investment means the price goes up quickly and at some point the price is higher than what most people can afford. Whatever solution you propose must stop housing from being such a good investment. If you say the approach is to build more, the answer to "how much more?" is "until housing is not a good investment," so the point stands. A lot of people will agree with you on "build more" but I bet only with an explicit caveat of "as long as housing continues to be a good investment for me" and so the agreement is completely useless. There is no agreement to actually fix anything.
> A good investment means the price goes up quickly and at some point the price is higher than what most people can afford.
No, a good investment is something that increases in value over time. Not "quickly." That's a get-rich-quick expectation, not an investment expectation.
You also seem to be assuming that housing prices increase but incomes do not. That is not the case in a healthy economy. (And growth in an economy is normal and expected and good, not unsustainable.)
This is not a theoretical situation. We know, for sure, that housing can both be a good investment and affordable because it worked that way for a long time. And we also know what changed -- barriers to building new housing have increased.
For housing to be a good investment it has to be competitive with other investments, meaning much higher than inflation.
Since housing is a large and increasing portion of CPI, this is mathematically impossible. As housing increasingly dominated the inflation calculation it determines inflation. QED.
> For housing to be a good investment it has to be competitive with other investments, meaning much higher than inflation.
You could make the same argument to say that bonds are a bad investment. It's not true, depending on what the investor expects. Raw performance is not the only criteria by which investments are evaluated.
Another aspect of investment vehicles is the risk:reward ratio. Bonds are low-risk and thus expected to have lower returns than a higher-risk investment like stocks. That does not mean that bonds are a bad investment. It simply means they have a risk:reward ratio suitable for some investment purposes but not others.
Before the current supply crunch, housing was a reasonably safe investment that resulted in a reasonable return over the lifetime of a homeowner -- and it did tend to keep up with inflation. It was not a "bad" investment. It was not growing over 10% a year like it is today, but that's a recent phenomenon caused by shortages.
"We know, for sure, that housing can both be a good investment and affordable because it worked that way for a long time."
You are referring to a period (the 20th century) that saw tremendous urbanization due to one-time advances in technology. Those will not be repeated. For details, see "Rise and Fall of American Growth" (Gordon).
It wasn't turned into a scheme by anyone, it's the nature of land. See Ricardo's Law of Rent; owners of land are able to extract rent from the tenants, and in desirable locations they can extract larger amounts of rent. If you want to make money without doing any work, buy land in desirable, growing locations and rent it out.
The solution is a land value tax, accompanied with a citizen's dividend or a reduction in other taxes such as income taxes.
Hit the nail on the head. Promoting housing as a vehicle for wealth accumulation will be viewed as one of the greatest failures in modern economic policy in the West.
It's easy to blame Wall Street, corporations, immigrants, but the reality is much simpler: these policies are wildly popular with the first few generations of voters who saw their property prices go up, so governments are deathly afraid to touch them.
The next generations are the ones who suffer, but they don't vote (yet). Politically safer to kick the can down the road and make it someone else's problem in 10 to 20 years' time.
Setting aside geographical variation, I'd like to understand better is how much of this problem is due to:
a) Not enough housing supply to meet population demand (in a purely physical people-in-homes allocation sense)
vs.
b) Too much housing wealth tied up in boomer ownership (e.g. overly large houses with just 2, 1, or even 0 people living in them most of the time)
In other words, to what extent does the solution correspond to:
a) We absolutely need to build more, there's no other way
vs.
b) Significantly higher redistributive taxes (e.g. land/property taxes, wealth taxes) to incentive people to both "right-size" their living situation as well as compensate for how lucky the boomer generation happened to be in terms of housing
I'm sure the answer is "both" to some extent, but I'm just wondering if there's hard data that actually compares the two rather than just opinion.
How about an exponential land tax? Own one property: no tax. Own two: 1 percent tax on each. Own three: 2 percent on each. Own four: 4 percent on each. Own five: 8 percent on each. Still allows for genuine homeownership, a home in a place convenient for work and a holiday home an achievable aspiration for high performers whilst making mass property ownership uneconomical.
Going through my comments and realised that 'foreign citizens' could be interpreted wrong by anyone who comes across this in the future. I meant anyone who doesn't live in the same country as the property they are purchasing e.g wealthy citizens of other countries who are buying property as investment vehicles rather than residences.
Similar to how some tax thresholds are determined on a company-group basis, except grouping by beneficial owner (the "ultimate" owner, i.e. the person who owns the LLCs).
One possible approach would be to mandate that any LLC owning property must have completely transparent financials and ownership records. Any LLC that doesn’t comply has its residential property seized and is banned from purchasing residential property. From this you could then create another rule which stated that any shareholder/owner with a stake greater than 1% of the company (or a smaller percentage for billion dollar companies) is classified as an owner of the property. The exponential land value tax is applied at the rate of the owner/shareholder with the most properties.
In addition, the exponential tax could start much higher e.g the first residency held by an LLC is charged at 8% the second at 16% etc.
Or we could just blanket ban LLCs from holding residential property. As far as I can tell, the arguments for allowing it to do so are pretty weak. If a company wants shelter for workers it can:
A) partner with a construction company to build and sell them to workers
B) put money into the local economies in which it operates by paying for hotel rooms
The crux of the matter is that until landlord is relegated to small scale side gig rather than ‘most lucrative profession’ as it currently is, this problem will continue to get more and more out of hand.
Personally, I think the way out of this is for affected countries to form single issue political parties. Agree or disagree with Brexit, no one can argue that ultimately UKIP was successful in changing the face of British politics. I think it’s about time for a United Kingdom Housing Party to do the same on the real issue underlying much of the discontent of the last few decades.
Higher taxes on property - and higher taxes on unused, vacant, and especially abandoned lots and non-primary residences would go a long way I think to increasing housing supply.
As it is, it's a good investment because supply is globally constrained. Investors have parked a huge portion of the world's wealth into land. It's obvious when you talk to investors. This investment can spur development, or it can greedily be sat on.
The problem is right there in the title: Global Housing Market. The commodification of housing has been disastrous. The cost to develop new housing and the length of time it takes has means market manipulation is always going to be an easier path to profitability. Why would anyone build something new when they can just sit on what they have and let it appreciate while renters subsidize the mortgage and taxes.
Imagine if you could just put iron ore in a warehouse and make a 25% return every year, we'd have no steel!
Can state level actors do market manipulation of countries to destabilize them?
I mean, look at all the private equity buying up properties in the US, causing our shortages, who is funding that? Is that an actual threat to security?
It used to be we were paranoid about foreign ownership of production, well we don't make anything anymore, so this is another means.
Every time this issue comes up, people seem to think there is a single silver bullet that will resolve it. This is a perfect storm problem and will take a solution from multiple angles:
- Restrict and tax short-term rentals.
- Introduce a scaling speculation tax on three or more properties to remove the incentive for small-medium size investors to hoard. It will return supply back to the market.
- Limit residential real-estate purchases to citizens and permanent residents (i.e. taxpayers).
- Remove barriers to development to increase supply. Ignore the NIMBYs.
- Cap rental increases.
- Introduce a vacancy tax.
- Limit immigration until the housing issue is resolved.
- Eliminate "blind bidding" from real estate sales.
I doubt any government has the political will to truly tackle this though, especially when most politicians are landlords and speculators themselves.
Each of these would and is causing uproar in every country or region that introduced or tried to introduce similar laws. And the last one is plain impossible to realize. How do you even approach limiting immigration in the modern world? I'd argue a lot could be done by revitalizing deserted areas, where houses exist but people are gone. Usually there is one primary cause: find it and try to find a solution, even if it takes years.
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All EU countries, all next to each other - Germany is bar far the biggest success - also the most densely populated - and yet hasn't seen home prices run away like in France and Spain. On the other side - Portugal hasn't either.
Like Spain, it hasn't exactly had an amazing economic boom...
It helps if you compare against a point in time, where you have just absorbed an impoverished communist economy that has to start from 0.
I think that has little to do with WWII.
It's also strange that South Korea is at -40% when the article states:
>In South Korea, President Moon Jae-in’s party took a drubbing in mayoral elections this year after failing to tackle a 90% rise in the average price of an apartment in Seoul since he took office in May 2017
We're essentially operating an eternal monopoly game (someone got there before you, sorry future kids, you're out of luck) when it comes to housing.
How do we fix this?
Someone owns them, raise the taxes on them until someone lives in them.
> - 6,694 of those vacancies were units currently listed for rent that hadn’t yet found tenants. Another 1,031 were homes for sale that didn’t yet have buyers.
> - 6,294 were homes with either current owners or renters that were just not living there. This can happen for any number of reasons: hospital stays, long trips out of town, delayed move-ins, even cases of homeowners who have died but are still technically counted as the resident.
> - 8,523 were “occasional use” homes—i.e., these were second homes, vacation homes, some types of short-term rentals, or just any unit that was accounted for but not lived in most of the year. (The Mercury-News references these but classifies them separately from vacant homes, whereas the census considers these vacancies in themselves.)
> - Finally, the census designated 11,760 homes in the catch-all category of “other vacant.”
"Other vacant." Is a hodge-podge of condemned units, units in foreclosure, units in renovation or seismic retrofitting, a plethora of other corner cases and odds and ends, and homes actually just sitting empty doing not much.
(source: https://sf.curbed.com/2020/2/24/21149381/san-francisco-vacan...)
https://www.lendingtree.com/home/mortgage/vacancy-rates-stud...
1. https://landgeist.com/2021/08/03/vacancy-rate-in-the-us/
I'd prefer if we focus on simply increasing the supply. Ban single family house zoning. Encourage more high density apartment buildings. Build more cities.
How is this supposed to un-break the housing market?
This is an exception to the tax rule and it’s a significant factor behind house prices (artificially low interest rates, and supply being other causes). It actually became a “smart” investment to over leverage for a primary residence because it’s a tax free investment that outperformed interest rates and other taxed investments.
It's not compatible wih the strange religious belief that homeowners should be handed free money from the government at the expense of everyone else, including their own children, for not doing anything socially useful.
That's the root problem, but it'll take a while to fix, because people like getting free money at the expense of other people as long as there's enough hoops to jump through that they feel like they deserve it, even when they don't, and enough hoops for them to not click that they are everybody else's "other people" and probably losing on the deal overall.
That doesn't preclude ownership - condos and co-ops work as well as apartments.
Out in the boonies a land value tax wouldn't discourage single family, because the land is not valuable (in comparison to a city).
They lead to increases in density (i.e. more housing) because there is stronger incentive to build more living units on smaller pieces of land.
Currently, in kentucky, if you own a certain acreage (it's something low like 10) your property is taxed on it's agricultural value instead of it's real value. So you build a 2.5 million mcmansion on a 10 acre lot and you pay taxes on 10k in agricultural value instead of taxes on that 2.5 million.
All the huge property speculators own large lots in the big cities and they won't subdivide and sell to individuals because if they subdivided they would have to pay taxes on what it's worth instead of some ridiculous "agricultural" value. One of the big builders here owns a 300 acre plot in the heart of the city. They pay taxes on like 50k agricultural value instead of the millions it's worth and drive up the prices of other lots because of it. They can speculate at no cost.
Mind you, they sell the lots in .2 acre plots when they develop them and the new homeowner pays taxes on the full value of the plot + house.
Shifting land to large housing use cases is one of the main ideas.
This "conversationalist" approach is what NIMBYs hide behind. We can't build in Las Vegas because of a tortoise species. We can't go beyond N levels due to "conserving" the history of a district.
Let the public (ideally across a broad area like a state or country) decide what areas need to be conserved for habitats. Don't let private land trusts / conservationlists be the mask that NIMBYs hide behind.
That aside, the point here is that if something is being held for the common good, it should be held in common. "The Government" isn't a perfect check or steward, but there's actual accountably there, something which does not exist at all in the case of private ownership.
Of course, it would be a change from the existing setup, resulting in a different layout, so some ecosystems might be damaged and "replaced" by worse ones.
One would hope that, if a big change like this were to occur, it would be paired with some support to protect existing habitats.
This is a bug not a feature (but yes, is a problem).
It's basically "inflation that affects you less the more property you own" and people seem aware that inflation can collapse societies if not tamed.
A counter-balancing wealth transfer like a UBI or some kind of pension scheme for people not yet retired that ties into the tax raised from land would work. But we'll bumble into it step by step as usual, no point rushing to create a better world when we can keep making it worse for a few decades.
A temporary one. Ensure only people over a certain age who own land are excluded, and only while they are alive. Once they die (or sell), the inheritors/new owners are not excluded. And ensure you can't make it perpetual by placing it into a trust.
Oversupply will take care of the downstream issues. They will cease to be good investments and become commodities. Rents will have to come down in a competitive market.
Oversupply will have to be on a regional level. A vacant house in a small town doesn't compensate for an occupied house in a city 100km away.
Zoning laws prevent this in the US/Canada in many places. Existing homeowners don't want to change. More houses means more crowding, higher traffic, construction noise, obstructed skylines, more pressure on schools, police etc. We can't accept that argument when weighed against homelessness or poverty anymore. Fuck their skylines, shelter is a basic necessity and it often has to be close to work, shopping, school etc. Living in the middle of nowhere is not an option.
Land redistribution (which is structurally similar) only really tends to happen after a revolution and that tends to be bloody. Landowners throw resources at violent and politically extreme reactionaries to send off the threat of their rent entitlements being democratically revoked.
So, it's unlikely to happen soon and if it does happen it'll probably get pretty ugly first. The path of least resistance will be a gradual slide into a kind of neofeudalism.
https://threadreaderapp.com/thread/1510262323176374278.html
https://news.ycombinator.com/item?id=30891217
Great comment from the above thread: https://news.ycombinator.com/item?id=30897398
And when they do stop, it’s only to tear down a building so they can build another one in it’s place.
Japan is a deflationary case study.
https://www.asahi.com/ajw/articles/14538387#:~:text=Tokyo's%....
https://japanpropertycentral.com/tag/average-rent-tokyo/
[1] https://robbreport.com/shelter/home-design/japanese-homes-ar...
Helps that the whole country is on a fault line; nothing is going to stand up for a while anyways so you may as well establish a culture of rebuilding.
https://gestaltu.com/wp-content/uploads/2016/08/120927-Japan...
Buildings always depreciate, and North America has its fair share of homes not intended to last generations. In Vancouver it's become common for wealthy homebuyers to knock down houses that are less than 20 years old to put up something fresh, but that didn't stop property values from appreciating.
And in China it's perhaps even more the case that homes aren't built to last, and they even have an oversupply issue if anything, as well as a much more advanced population decline than Japan did circa 1990. And yet real estate in China has still attracted so much investment speculation that it's even less affordable, and my guess is it's following the same trajectory that Japan did. Property speculation is a powerful force.
I think a much better explanation is that the Japanese RE bubble taught Japanese speculators a lasting lesson, and the subsequent demographic decline, universal zoning, and widespread availability of mass transit kept it cheap.
Land and real estate are also a huge income shelters for Chinese elites. They cannot appear too wealthy, so they buy real estate to hide their wealth. Only recently, last 5 years, has China instituted a national real estate registry. I wonder how much of the market disruption of the last few years is due to large players trying to divest themselves.
It's not clear that tilting the rent/own preference toward ownership results in a net increase of housing prices, because for every unit of homeowner demand it adds to the market, it also removes one unit of landlord demand.
I know there was stuff like proposing to pay people to move away, but I don't know if that's a real thing?
If you reward people for conserving a scarce resource, they'll use less of it.
If you reward people for wasting a scarce resource, they'll use more of it.
There's some natural human value attached to space, but in the current system people are incentivized to own more than they need, because to do anything else would be giving up free money, but the fact that everyone else is doing the same, ruins things for everyone.
Things have changed a lot since then but it seemed to have been very successful at fixing the housing crisis of the time.
Building housing is expensive but we manage to fund the military today. We were able to build a massive countrywide network of roads and highways and train tracks a 100 years ago. So fuck capital too. Of course they don't want to build it, and this is a _necessary_ consequence of making housing not be an investment. It will not be profitable to build. But it will be good for humanity anyways. So it has to be atleast partially funded by taxpayers. That might even mean we all collectively get screwed by high rents and high taxes for a decade while we do that. As long as it actually does benefit future generations, so be it. There's plenty of room for efficiency in building as well so that's not necessarily the only way. Subways cost 10-50x more to build today than they used to and there are hundreds of companies that live off leeching public funds.
The wealth of most of our political class is also tied to their real estate holdings. 1/5 of our politicians are landlords in Canada; our housing minister has multiple properties. Make it make sense.
> We were able to build a massive countrywide network of roads and highways and train tracks a 100 years ago.
Building the first road/train track connecting A to B pays for itself (probably many-fold) in increased revenue from taxes you can collect because such a connection significantly increases the economy.[1] It's not clear that more housing will have that impact.
And for all the people complaining about zoning and NIMBYISM: That's a very local phenomenon in a few cities. Where I live we have neither of these problems, and housing is still a major issue. I'd wager that's true in most US cities that have housing problems. Preaching about zoning and NIMBYism is merely showing a disconnect with the rest of the country and is a red herring.
Solve the incentive problem - at current building prices builders cannot afford to make housing for lower income folks. Either make the cost to build cheaper or, as the parent says, get the government to subsidize building it so they can make a profit.
[1] Fixing up existing roads doesn't, which is why if budget isn't properly allocated for maintenance, you'll get poor infrastructure.
The main thing that impedes is is regulatory/zoning limitations
And while I'm mostly in favour of code limits (so, minimum size, insulation requirements, fire-proof requirements, etc) most of the impeding regulations are things like maximum height size, blocking developments based on the "character of the area" (read: NIMBYS complaining) etc
That's one of the reasons of past housing bubbles
"Oversupply" is also dependent on the actual target market. Several places lack cheaper housing but have an oversupply of more expensive ones (more bdrs, fancier areas, etc)
The other recent phenomenon/issue is loose monetary policy. When interest rates are too low, asset values increase. We have just had a period of very low rates for an extended period of time. As interest rates rise, prices should level out or drop off.
While I agree with this, bear in mind that for some people, housing is the only "investment"/inflation hedge available to them. Without public pensions, lower to middle class people need something to fund retirement and we should be careful that " make residential property a much less attractive financial investment" doesn't just hurt those people vs the REIC, Berkshire Hathaways, etc.
If there was any more leeway to raise rent and keep renters, it would have been raised already by landlord
In the longer term and at the macro level, renting ultimately competes with cost of mortgaging. If the cost of home ownership goes down, so should rents. Again, government backed loans could help those renters who can afford the monthly repayments but lack the upfront deposit/capital to purchase.
What is needed is lower residential house purchases prices which will flow into rental costs (eventually). In the long run, rents are always based on the underlying asset value.
The other thing that could help lower residential property prices is obviously on the supply side, which I have deliberately avoided.
Monopoly prices = increasing prices reduces revenue.
Also look up "rent seeking".
'lack of space' is not the issue for the most part.
It's largely a choice, not a need.
You don't get to live in the choicest places in the country, that's not part of the equality deal.
- Overriding local governments and HOAs and loosening zoning regulations. Let developers build almost any kind of housing almost anywhere they want.
- Banning or severely restricting the sale of residential units to companies, LLCs, and corporations.
- Using taxpayer money to train more construction workers and building more houses, then selling them on the open market
- Banning the sale of land and housing to non citizens or non residents
I'd also note there are plenty of cities with massive housing affordability problems but little in the way of historic buildings (Hong Kong, San Jose & much of SV etc.). Even in my own city (which often rates as one of the least affordable for housing), historic buildings make up a small percentage of total housing.
Most houses built since 1920 don't have the same value. But the meme of "old=worth preserving" still lingers on. In San Francisco there are old row homes built as temporary housing after the 1906 Earthquake. They are preserved only due to their age, not any intrinsic value. Houses built in first half and mid century are developing major structural issues. Their foundations may be cracking beyond repair. Their plumbing and electrical are several generations beyond current standard. They may have been built in a more temperate climate and lack central heating/cooling. Their layout may not make sense for a modern lifestyle.
These houses should be torn down, and new ones built in their place. But this is really difficult to do in some areas due to preservation committees holding on to every scrap of history. Instead you get completely insane practices like gutting a house except for 4 posts and rebuilding a new house within it. Or building a new houses around an old one.
The lot next to my apartment was like that. Instead of razing the structure and building a new one, they had to engineer a way to build a new house around what was a literal rotting shack. The new structure retains almost 0 of the original framing, and definitely retains none of its architectural features. So the project cost probably hundred of thousands more, and took months longer, just to satisfy some petty council's need to never tear down an old building.
As the oldest generation dies off, I would hope to see these attitudes change, and the USA open to more rebuilding. But unfortunately these rules will remain on the books. The capital class has no incentive to change it, because it would disrupt their control over the housing supply.
Right now we are trading housing (and food, water, government services) for cheap labor in many countries.
Individuals, or lenders through financing.
> Which party eats the losses?
Lenders
> How would this actually result in more housing?
Really interesting in how this would be modeled.
Or not yet anyway; if we see the bubble pop it perhaps will, but that's far from a clean solution. The crux is how do you incentivize building a lot, and I mean a lot, without expectations of appreciating property values? And yet if you have expectations of appreciating property values, how do you prevent speculators from driving up prices and making things unaffordable?
No thank you.
There aren’t enough future kids for this scenario.
An interesting thought experiment, in any event.
Landlords would subdivide houses into individual rooms and rent them out.
> they wouldn't be able to evict someone if their circumstances changed and they were unable to pay the extra.
Maybe not via the courts, but they would just shot off the water, and the heat, and then invite unwanted guests to live in the "unoccupied" apartment, until the non-paying tenant left.
Isn't our current crisis primarily a shortage of low income housing? Is all low income housing a "slum"? Landlords would be competing for good renters, so they would be incentivized to offer good living environments.
>Maybe not via the courts, but they would just shot off the water, and the heat, and then invite unwanted guests to live in the "unoccupied" apartment, until the non-paying tenant left.
They couldn't do so legally as long as the tenant continued to pay the official rent amount, any more than any landlord can currently shut off utilities to a tenant who is paid up on their rent.
Additionally, remove all zoning laws. The free market will handle zoning.
In the West in the 20th century governments implemented some common sense policies to keep socialism at bay. Countries that didn't, like Russia, were engulfed by socialists.
Look at how many young people openly admit to being communists. If this rent-seeking is sustained we'll eventually get the Khmer Rouge.
Woah there, let's not throw the baby out with the bath water!
Zoning laws in the US seem very broken, but they are much more sensible in much of the world.
A free-for-all seems like a bad idea - would you really want to live next door to a knackers yard, an abattoir, a tannery, a coal power plant, a chemical plant, a fish processing factory etc, a rubbish dump, a night club?
I'm not sure about all of that, but I think having bars, restaurants, stores, etc. intermingled within short walking distance of houses in suburbs would certainly be great.
The answer is just to build more housing.
Actual problem: Seems to be mostly in western countries.
Obviously this wouldn't be a silver bullet, but I really wish North American urban planning would allow for more freedom in housing structures, and put more emphasis on public transportation. Hard to have faith though.
[1] https://missingmiddlehousing.com/
Many of them don't even care if they have 50% vacancy because the investment of the property/land is worth more to them than anything.
Lastly, many of these investors are foreign or even money laundering and just want to dump their massive cash flow into some kind of a physical investment (in this case, Canadian land/property).
We have whole malls that are just ghost towns sitting in the Northern part of my city that aren't even properly built (incorrect piping/HVAC) to function solely for the purpose of legitimizing money laundering and foreign ownership of Canadian land.
Building more housing is good, I won't argue that, but the players in this market are so rich they will just buy ALL of it the moment it appears on the market and our local builders are all so corrupt they would love nothing more than to sign a deal to build 20,000 apartment units and immediately sell them all over to these crooked investors. There are literal video recordings of our 3 major builders bragging to one another about how "they own this city" and "we can keep selling these empty properties forever, the city can't do anything about it" and "if anyone opposes us, we'll show them who owns whose ass".
This is becoming so obvious it's ridiculous here. We have had a 15-30% vacancy rate for both business and residential near our downtown sector for the last 3 years during COVID, yet we have a record high of buildings being built. The foreign investment is so huge that they just keep building even when there is no market for the space. They don't care, it's all about moving money out of foreign assets into concrete assets here in Canada.
Canada has become the money laundering capital of the world: https://nationalpost.com/opinion/sabrina-maddeaux-canada-bec...
Vancouver tried, but I don't think they aimed high enough; many speculators just view the tax as the cost of doing business and subtracted it from their gains. At least it's up to 3% now; the 1% initial was way too small.
Added bonus if we measure vacancy right it will kill the short term air bnb market at the same time. I have no issue with people renting their home out a few weeks a year while they are on vacation for some extra cash, but it's heinous there are apartments owned solely for short term rental when tons of people can't afford homes.
The solution is to spread out from concentrated megacities. Overcrowding happens in cycles historically, and every time it happens it's bad for human health and the health of human society.
Everyone wants the space of a single family home and the slew of "modern amenities" a city offers, while lamenting they can't afford it. Our parents and their parents lived in far out areas that were cheap / semirural at time of purchase and matured to very nice places to live over decades of hard work put in by the local community. Of course those well-built-up areas are expensive, and of course the people that created those communities don't want to see them completely changed by density. We just need to build more opportunities like these, and people need to be willing to sacrifice on location at the start to see the area build up around them over time.
1. Not being introduced to the breadth of options that are available
2. Being told, or else insinuated to, that certain options represent higher status or achievement than others
Americans want small detached houses because the ubiquity of the social construct known as "the American dream" drilled it into everyone's heads from the postwar period onward. Sitcoms through the television era both represented and reinforced this ideal. But choices can be unmade as easily as they are made.
...Do...do you even program? Or build?
Because that right there tells me that you've never, ever been realistically engaged with a long term decision with long tails (read: other people that aren't you as stakeholders, or strings of dependent decisions).
There is nothing more permanent than a temporary stopgap, and bells that can be unrung are exceedingly rare, and never ever trivial to implement.
You constantly stress that your neighbors are going to come down and yell at you because your kid is throwing a tantrum, you have to deal with your idiot neighbors downstairs screaming and yelling at each other till 2 in the morning. If you have a newborn baby you are plauged by the constant fear that your neighbors are going to be too loud and wake the baby up.
So no it isn't just a status or American dream option it's a significant change in quality of life.
It seems like too many of these discussions on HN consider only young single people and they just ignore that many people have families and children they need to keep around all the time.
Adding multi-family homes just adds a new, cheaper option that increases density. There are lots of benefits to it, and its really reductive to say "The 'missing middle' is bad because I wouldn't want to live like that".
I also don't know how you can see into the 30-something-story windows of high-rise luxury condos to determine whether or not they are being used.
These are obvious considerations and I am surprised they did not cross your mind.
I have my doubts about the CA change. Zoning is one of many tools that local governments use to restrict housing. Water rights, parking minimums, setbacks, impact fees, environmental review, permitting, historic preservation, architectural review, etc, etc, etc.
And in California, Prop 13 means its structurally unprofitable to allow construction of housing because over time the taxes on a home won't cover the cost to the school district for any children that live there. So its fiscally irresponsible for local govs to allow housing, regardless of any preferences the residents have.
It seems you don't mind your kid making noise but you don't like neighbours yelling either. Living with neighbours may be difficult but most likely you are making their life difficult too. You don't need a detached house. Good acoustic isolation solves this issue but comes with a price.
But perhaps more importantly, the problem of nosy or overbearing neighbors doesn't go away when you move into a single family home, it gets strengthened and bureaucratized into what's commonly known as an HOA.
I personally would rather have close neighbors that I have the opportunity to make personal relationships with, versus the dispersed set of homeowners over a much larger area who get to fine me if they don't agree with how I decorate "my" house.
In my experience the tyranny of HOAs vastly outstrips any conflicts that may arise between apartment neighbors, but then again I try my best to treat the people with whom I share my space with respect instead of contempt.
Pretty sure most americans have experience living in apartments before they buy. I am just too old now to live below a toddler who decides 3 am is a good time to burn some calories running around.
It has nothing to do with 'status' , i just want peace and a good night of sleep.
I don't agree with your analysis that people don't want to live in dense house because of they are brainwashed with "american dream"
Single family homes are objectively nicer in many ways. Some, like mine, are even in very walkable neighborhoods. I've lived in apartments and houses, and I'd take the house every single time. That's not because I grew up in a house, either. I hated housework as a kid and the family thought I'd be a downtown condo dweller until I actually wanted to buy a house.
The vast majority of people do not care about walkability. Maybe that's because they grew up without it--even given that, you can't seriously tell me the vast majority of people would pick the "missing middle" over a small house in a walkable area given the choice.
If I was forced to pick between walkable + apartment or house + long commute to anything, I'd do the commute every single time.
If I was forced to pick between walkable + apartment or house + long commute to anything, I'd do the apartment every single time. Especially since it would likely be cheaper.
Wow, such authority. Sources for this strong factual claim? More likely, the vast majority of people have never experienced living in a walkable neighborhood, and can't imagine the benefits it confers, and so do not (literally cannot) consider that option. This reinforces the point I made above -- people's desires are shaped by the level of exposure to various ideas and experiences.
> a small house in a walkable area
You mean all those that are already owned, and for which there is no more space available in cities? This is an imaginary alternative that has no basis in contemporary reality, unless you wish to build an entirely new metro area.
Not to belabor the point too much, but obviously this is the wrong direction re: walkability. The geometry of the situation simply doesn't make sense when you can only fit an average of 3-4 people on lots each of minimum 10k sq ft. Walkability and density are highly correlated.
> house + long commute to anything, I'd do the commute every single time
Everyone I know who grew up in these kinds of living situations (especially ones with such domineering parents who impose their own preferences for housing instead of considering the factors important for early-life development) have pretty severe social deficits now. Your kids would spend all their time in front of screens while at home because there's literally nothing else to do when your parents are busy.
If you don't have kids and you live in a single-family home, you're, objectively speaking, wasting space, unless you regularly open your home to others for events.
Which, I suppose, is why single family zoning continues to live on. It’s the nicest way to live for many people.
But going back to the pro-density thing. I think what is misunderstood is that most people arguing for more density aren't arguing for everyone to live in Manhattan - that's a big problem too. They're advocating for mixed-use, medium density walkable neighborhoods. These neighborhoods would include single family homes with yards and sidewalks, but also cafes, elementary schools, gyms, grocery stores, bars, and office space too. You wouldn't have to drive a car everywhere but obviously you could own as many as you'd like. This would also help the local economy because you can pay a barista that lives in your neighborhood (maybe in a townhouse or a condo while they attend college) instead of a rubber manufacturer 4 states away.
Society has already decided that these costs are well worth it for the value of living in suburbia
> and political unrest since people won't be able to afford to live in homes.
It's debatable whether it's the need for a detached house that makes housing unaffordable outside of city cores. Again, the solution is to decentralize.
> They're advocating for mixed-use, medium density walkable neighborhoods.
Great, but they love to select their desired area then try to force changes on existing residents that purchased a home in the area for a suburban feel. That's the concern people have. Nobody would mind if density advocates founded a new jurisdiction to build a place like this.
Maybe - I mean I'm not sure that society is really making a choice since there doesn't seem to be any sort of market mechanic to decide what to build. But also you'll notice that houses in dense areas are more expensive than suburban homes so the market has decided that the suburban homes are less valuable. It's also not necessarily a good argument in terms of what we should or should not do.
> It's debatable whether it's the need for a detached house that makes housing unaffordable outside of city cores. Again, the solution is to decentralize.
We are decentralized.
> Great, but they love to select their desired area then try to force changes on existing residents that purchased a home in the area for a suburban feel. That's the concern people have. Nobody would mind if density advocates founded a new jurisdiction to build a place like this.
See point #1. Alternatively if the people who move there "decide as a society" that it should be different then that's an equivalent argument from your perspective.
One problem is that these (as you call them) stopgap options are mostly non-existent or if they exist they exist in good neighborhoods that were built properly and are economically out of reach. Another problem is that it probably doesn't make economic sense for everyone to be a family in a single-family detached house. Plenty of young people or widowers or whatever may not want to live in a single-family detached home with all of the associated maintenance and work that goes into it. We need options, and a variety of living arrangements available for different lifestyles and different economic factors. Frankly, nobody is going to build cheap SFH. It's a contradiction. Focusing on that just means you build houses for the extremely wealthy or the extremely poor.
If you are wondering why, it's because home builders like any business chase ROI so they're going to build homes with $350,000 in materials and labor that they sell for $600,000 and then the poor don't have housing but the government has the political capital to build low-income housing, so nobody in between has great options. Home builders unfortunately aren't going to buy land and then build $175,000 3br/2ba homes and turn around and sell them for $250,000. It just doesn't make economic sense for them to do so. They can build condos, townhomes, and other mixed modality living arrangements and make enough money on them, but that's about it. And naturally they're not going to build in the middle of nowhere because they have to find workers and also because people still need to live near jobs.
Today's Slow Boring newsletter (https://www.slowboring.com/p/a-bold-agenda-for-dc-housing) explained the numbers pretty well:
But the factual situation is pretty clear: (1) Dense, walkable neighborhoods feature very high home prices, indicating a large amount of unmet demand for high-density living. (2) Surveys show clearly that a majority of Americans prefer to live in auto-oriented suburbs and do not want to live in dense, walkable neighborhoods.
The way to resolve this apparent paradox is to note: (3) Currently only a tiny minority of Americans live in dense, walkable neighborhoods.
Make it hard to be build and there will be immense pressure to build but it won’t happen.
The two ends are constantly trying to find an equilibrium. The only way to make housing affordable is to overbuild, but private money won’t do it for obvious reasons.
The government could subsidize building but in essence that’s just making rich people richer. Perhaps that’s the only way short of forcing people to build (like prison labor or something horrible like that).
—-
I used to believe that eliminating zoning and increasing density is the solution (still think so), but induced demand is a thing. When I studied this I found no evidence denser areas are cheaper. In fact the denser areas tend to be more expensive from my own research.
Denser areas are more expensive because that’s where people want to live, and land is at a premium.
And the land becoming more expensive is the point. If an area becomes more popular then it will be denser meaning the land is more expensive meaning the housing is more expensive.
Building denser does not necessarily result in cheaper housing in the net.
There's an insane premium on zoning and permitting the land to build, as well as having the irreplaceable liberty to be covered by a grandfathered structure that is no longer legally buildable.
Somehow Russia is ahead of time and went strait to the wild stance.
Solves 90% of all economic problems.
1. Statewide bans on short term rentals
2. Huge increase in short term rental taxes to the point where it's barely profitable
3. Adjustable property taxes based on vacancy. Something like a 5x property tax multiple for 50% vacancy and scaling down to 1x for 5% vacancy.
These proceeds should go toward a public/private partnership to build more housing.
I live in Canada, but we have the same issues.
It's going to be a very interesting cross-generational political battle. The sheer number of "normal people" who own investment properties and AirBNBs now is extraordinary. I know people scraping by working average jobs that own multiple units. Meanwhile, the younger generation can't buy a home.
We've normalized the idea that real estate can't lose and everyone should own multiple properties, and we can't come back from that without one side suffering a ton of pain.
Of course, a major answer to this problem is to simply ban non-americans from buying american property, but that will implode real estate and hurt a lot of homeowners.
That is the voting middle-upper class. The majority are voters. And they won't want any of that.
You can’t have your cake and eat it too. Homeowners need to get hurt in order for housing to be more affordable. Housing taking up huge chunks of earnings is a terrible state of affairs for citizens and the economy.
Given we already have chronic undersupply, shouldn't the default position be to prioritize citizens and others who can demonstrate a greater need?
> That should drive down our prices
No, in Canada, foreign owned properties make up a tiny percentage of the total, so banning it doesn't actually have any impact. Works as future protection for sure, but that's all.
The "foreign investors" are a convenient strawman that hides bigger underlying problems.
The way to fix this is painful but it is to revoke all incentives and to make people put down 25-50% as down payments. It will cool the market to near absolute zero short term but it will help long term in keeping housing to actually be housing.
Now that doesn't mean the incentives aren't skewed. But I don't think landlords buying their 20th house are getting the same benefits as a first time buyer.
I have no idea what "the governments offers cash back" means; but certainly the mortgage interest tax deduction is only available for homes in which you actually live for at least part of the year - it's not available for rental properties.
You can deduct mortgage interest as an expenses if you're renting a property, but that's exactly the same as any other loan used for a business activity and not specific to real-estate.
The big one being taxpayer funded 30 year fixed rate mortgages, and subsidizing the existence of 0% and 5% downpayment mortgages.
>Your interest on your mortgage is tax free,
Literally 90% of US tax filers do not benefit from this, since it requires itemizing.
>the government offers cash back, etc.
I have not heard of this.
There are a variety of state, local and sometimes federal tax credits or down payment assistance for new home buyers.
There may be additional tax benefits that accrue to a business that is paying interest, but that’s separate from personal deductions.
I wonder, though, what percentage of buyers this would affect. Lots of houses are behind purchased now with 100% down.
Then there'll be plenty of stock.
Investors made up 20% of buyers in the last quarter across major metro areas: https://therealdeal.com/2022/06/15/investors-seize-record-sh.... Historically they’ve made up much less than that. Housing prices are skyrocketing where I live in exurban Maryland, and in Eugene Oregon where my wife is from, but there’s no investors to be seen in those places. I’m not certain what the cause is, but I’d suspect it’s two decades of central bank policies dumping cash into the economy.
Correct. This article has the receipts:
https://www.vox.com/platform/amp/22524829/wall-street-housin...
And the conclusion is worth sharing:
> The role of institutional investors is still being studied, but the popularity of the narrative strikes at something dangerous: People want a convenient boogeyman and when they get it, they often ignore the structural problems that are harder to combat. Housing undersupply is the result of decades of locals opposing new home building. It’s not something that can be blamed on Wall Street greed and the nefarious tinkering of a private equity firm. And that’s a much harder truth to stomach.
A huge part of the problem is the NIMBYs.
Also one of the largest investors, Accel, totally didn't own Trulia, which was totally not bought by Zillow. And Zillow totally isn't a major advertiser on Vox[0].
[0] https://www.vox.com/ad/16158882/zillow-zestimate-explained
Or they all don't believe it's the investors because they're right and that's what the data says.
Where's my check? Should I contact Accel? If I'm owed money pro-rata vs. Vox's readership, I should be able to buy a new car with the money.
[1] https://www.vox.com/22789296/housing-crisis-rent-relief-cont...
Just off the top of my head, in a town of 100K, I can pretty easily think of 100's of homes that were not built because of NIMBYs.
Also, did you miss the bit where Zillow got their asses handed to them because they screwed up and lost a lot of money?
But I don't think we should blame the central bank for the low interest rates anymore than we should blame a thermostat for running the heater all the time during an unprecedented cold spell. The central bank if anything was probably not keeping interest rates low enough for the last two decades considering how low the employment to prime age population ratio and inflation were. Interest rates are just especially low compared to historical standards because of the sovereign wealth funds, growing inequality, reduced population growth, and Asia becoming much richer with crazy savings rates.
A vacancy tax can be trivially avoided. Would there be an exception for renovation? Again, easy to game.
Airbnbs are legitimate demand. We just need over-supply now. The government should be able to step in.
Why solve a problem when you can just nuke it, right?
I hang out with AirBnB investor folks. There's a simple solution that works: Require the owner live on the property. Every AirBnB investor will skip the city/county if that is the rule, but still leaves room for legitimate residents to make some money (e.g. rent out the basement, etc). The latter isn't taking housing away from anyone - for most owners it's not economical to convert the basement to make it a long term rental.
If people bought their houses anticipating high rental income to make ends meet, that's a separate problem, and less bad than "people are becoming homeless because there are too few housing units".
It's not like the inventory of lots for sale doubles -- it stays exactly the same, but some of those lots increase in price because the ADU adds value.
> When a house with an ADU will reliably fetch 20% more than one without, then eventually all houses on the market will have ADUs, with the consequence that people buying will need to depend on short term rental income in order to make their mortgage.
If you significantly increase the number of units available via ADUs, then there's a lot more options to rent, and the demand to purchase houses goes down, bringing the prices down.
If the number of properties with ADUs doesn't go up enough to have that effect, then STR via ADUs will not significantly impact the housing market.
The reality is that if every house in the city had an ADU, most of them will not be used for STR, as the demand for STR isn't that high. They bring in a lot of money precisely because there aren't many options. If every house in LA suddenly had an ADU, you wouldn't get a proportionate increase in visitors. There will be an equilibrium point.
This is also ignoring the pain involved in building an ADU on an existing property. Depending on the locale, it can more than double your property taxes. Most existing homeowners will not build an ADU. Too much hassle, with uncertain income - most AirBnB hosts don't make much money via AirBnB - it's a fairly active investment and requires a lot of time/coordination.
Why would demand to purchase houses go down? People aren't buying houses because they can't find rentals. People buy houses because they want to be homeowners.
One classic example is the case of a very popular event happening in a small market that is otherwise unremarkable. Say, the Masters golf tournament: for about two weeks a year, Augusta, GA, is full of non-locals. Many residents will take vacation during this time and rent their home out to golf fans from around the world. Very few people want to rent a home in Augusta any other time of year. (It's also small enough that you're not required to fill out any additional tax forms, just report the income.)
Another is the case of a home that, for whatever reason, will not sell in the current market but would reasonably be expected to in relatively short order. A brief, 3- to 6-month rental for, e.g., a family that is constructing a new home that is not yet ready but who have sold their existing home and need somewhere to live is an excellent use.
Like I said, somewhat niche uses, but it's worth keeping in mind that there can be legitimate, minimally-distorting uses.
NYC bans short term rentals in multi family buildings already, unless the host is also staying there and not renting the whole apartment. So the short term rental restrictions probably do help, but it is hard to compare nyc to more suburban and rural areas
I also don't know what a "short term rental" is, that would devastate beach areas that rent out homes to tourists. I don't think that's a viable solution.
Housing prices have not gone up in any major way in a few major industrialized countries, Japan, Korea, Germany. You know what they did? They built more housing. Building in San Francisco, New York, etc is near impossible, especially if you aren't connected. Communities often vote against new housing because a) they don't want certain people in their area and b) we've wrongly viewed housing as an investment vehicle and more housing hurts values.
I get tired of bringing it up but I lived in a Tokyo apartment, 5 walk minutes from a train station, 10 min walk to a large park, nice schools, very quite area though just 5 minutes walk to lots of restaurants. 750 sq ft, 4th floor with elevator, 15 year old building (at the time). Rent was (at the exchange rates of the time) $860/month. Inflation adjusted that’s $1,075 which can’t gets you a spare bedroom in first tier American cities.
At the time Tokyo had no restrictions on short term rentals nor on foreign investment or property investing or any kind.
Tokyo’s big secret is that they let developers build apartment buildings.
I have several friends in the contracting/home services industry. The stories I hear about home flippers buying houses, asking for the cheapest paint/flooring/light fixture work possible, and then relisiting the homes with a 50% markup are wild. It seems a lot of people got into flipping homes around the start of the pandemic and lucked into one of the sharpest real estate market increases in a long time. They assume it's an easy way to make a lot of money with their interior design skills, but really they would have profited just as much or more if they just sat on the home from 2020 to late 2021 and sold it after the market went up.
I generally don't think outright bans work because the binary solutions become controversial and prone to political manipulation and stalling. Increasing taxes on these speculative transactions is the way to solve this, I think.
Simply eliminating the 1031 exchange that allows investors to defer tax liabilities on real estate investments would make a huge, immediate change in the velocity of speculation. The real estate lobby would go ballistic at the proposal, but I think it needs to be done ASAP. It doesn't make sense that real estate investors get such special tax treatment.
This is a problem for people who want to move. But, and this is mostly speculation, this is bad for everyone else too. It makes the market less liquid, which means that people are less likely to live where they want. It also reduces the incentive to build the kinds of units people want to live in. Suppose you want to build 100 nice condos. It’s harder to sell them to existing homeowners, and, in turn, those owners’ homes don’t go on the market. With fewer houses on the market, a smaller stream of buyers with lots of money can keep buying houses at unreasonable prices, and the market prices get pushed up.
A neighboring city of my suburb has large swathes of ranchy style homes on half an acre, those can easily be converted to triplexes or at least large family homes rather than tiny 3 bedrooms. We don't want to discourage investors from that sort of development.
However, we do want to discourage investors from 'flipping' homes and riding up appreciation, or even worse, investors buying houses that just sit empty.
We can discourage investments simply with more equitable property taxes. Currently, more expensive apartments are taxed at a much lower rate than cheaper ones.
https://www.bloomberg.com/graphics/2021-new-york-property-ta...
https://www.airbnb.com/s/New-York--NY/homes?adults=1&place_i...
Drive through New Delhi’s suburbs and the towns nearby and you’ll see vast empty towers. Many have been on the block for years without any price cuts.
Property prices have been largely stagnant and have underperformed inflation for a decade. Even now, the prices are beyond the reach of the vast majority of working Indians.
You need to look elsewhere for the cause of the problem.
I feel like we'd have non-anecdotal evidence about this somewhere. Nationwide, the number of investor buyers is 15%. Foreigners, the other boogeyman is below 5%
First it was for money laundering but now (in addition) increasingly it’s “regular people” in foreign countries who are seeing each neighbourhood explode in popularity, thinking that if they buy the rental income is how they will feed their families. They have no idea that the prices are simply inflated and unsustainable, let alone that they are most likely buying an unliveable property sight unseen.
The net result is that each speculative group is boosting the other as they race for the sky and leave all the renters on the ground.
Currently:
“For years, foreign money has been coming into Canada to buy residential real estate,”
“This has fuelled concerns about the impact on costs in cities like Vancouver and Toronto and worries about Canadians being priced out of the housing market in cities and towns across the country.”
These are direct quotes from our Prime Minister Justin Trudeau. In addition, he's hoping that a plan to ban foreigners from purchasing residential real estate will get him re-elected. There may not be hard data YET, but it's clear that what the govt sees is in line with what we the public see.
As for what we the public see:
- Foreigners flying in to major airports, then taking taxi cabs to small towns and remote properties with the intent to purchase. And we're not talking one or two, we're talking about enough that taxi drivers are talking about how concerned they are about the pattern
- Properties that have been un-sellable for years suddenly being purchased by foreign investors sight-unseen as the market heats up in that specific area
- Rental properties being taken off the market: first purchased, then renos started and never finished
- Residential houses (including house hacks and house rentals) being taken off the market by being purchased and held (in the past these kinds of properties were owned by holding companies that had a vested interest in making sure they do not have any more transactions and therefore fly under the radar, but more recently people are buying and holding until a future time where they can sell for more): A for sale sign goes away but no one ever moves in.
- Property values going down when a buyer purchases a property then fails to hire a property manager (resulting in the house falling in to disrepair). Turns out they had no idea that there are no local property managers and it's just communities of people doing favours for each other.
As for how that explains
> exploding house prices in small towns 2 and 3 hours outside of major cities, where vacancies are hitting record lows
Foreign investors aren't looking at proximity to cities, they're looking at what areas 'are hot'. They're typically overpaying which urges everyone to overpay, and we still have all the expected real estate purchases: people who want to escape the city after earning their down payments, new home buyers, domestic investors (including speculators), and so-on.
The result is higher and higher prices being paid for less and less properties. Vacancies have severely dropped because in multiple local areas that are on my radar (either I'm there, have talked to someone there, or have contacts there) mainly because the number of places to rent have been reduced.
Most of the housing stock in NYC are co-ops, which have fairly strict rules about renting out units. Condos are significantly more expensive to purchase, and there is pretty much nothing you can purchase right now that would yield positive cash flow given how pricey real estate is even with rents so high.
Airbnb is technically banned in NYC, and while I'm sure there continue to be illegal Airbnbs I don't see many listings myself that are for the entire unit as opposed to a room if it isn't a monthly rental.
Here, let me do the legwork for you, this one shows 413 stays:
https://www.airbnb.com/s/New-York--New-York--United-States/h...
Instead, only allow short term rentals where the owner is present. This means multi family units or rooms in houses or apartments.
As for taxing them, it’s a nice idea but AirBnB is already not paying hotel taxes.
As for vacancy taxes, I’m more skeptical just because this hasn’t seemed to have worked anywhere it’s been tried (eg Vancouver).
We just need to stop being so friendly to people parking money in residential real estate with punitive taxation and restrictions.
They are very useful for victims of domestic abuse where there are no shelters available and other things like people working on short assignments - sure they could get a hotel, but for small business competing with big tax avoiding corporations is often an only way to make it work. Also people not always want to commit to long term rental if they don't know area or they change jobs often.
> 2. Huge increase in short term rental taxes to the point where it's barely profitable
These taxes will be moved on to the renters, so it will make crisis worse.
3. Adjustable property taxes based on vacancy. Something like a 5x property tax multiple for 50% vacancy and scaling down to 1x for 5% vacancy.
This could work to an extent, but you'll find corporations hiring fake tenants if it makes financial sense.
I think the crux of the matter is that residential property is treated like a legitimate investment. We should start from banning pension funds and other funds from investing in such packages - they drive prices up, as they want properties at any cost and tax property flippers.
Cranking this up may be a way to reduce rentals and investment properties.
There are a lot of things that 1 person can do that are essentially harmless but when a hundred million people do at the same time can cause huge social and ecological damage.
Housing is, though. Everyone should have a roof over their head.
Two different things
Its like Dr. Jekyll and Mr. Hyde. Central banks will have to fix the inflation monster that they partially created.
Another part is globalization was causing deflation pressure but central banks measure domestic inflation on a global wage market. Now that trend has partially changed due to protectionism.
Perhaps one reason is that they did build a lot of housing in 2008 and got burned? (At least, in less fashionable places.)
This all basically boils down to defined benefit pension schemes being a thing of the past. My dad worked for the same company for 30 years, paid off his 3x gross income mortgage, and retired on a final salary inflation-linked pension.
I'm earning 3x as much as my dad ever did, still borrowing almost 5x my salary over 33 years for a worse/smaller home, and have no guarantees on my pension beyond what I sacrifice and what the stock market yields.
There's a reason why it's called a title.
What changed? It got harder to build because the government empowered NIMBYISM and nonsense “environmental impact” rules (hint: nobody actually cares about the endangered burrowing owls, they just don’t want affordable housing near their homes).
The affordability crisis was caused by government.
Any solution that piles even more government on top of the current government-caused problem is a no go — especially pie-in-the-sky solutions like land value taxes.
The only solution is to make it easier to build. But that's politically painful so it’s not going to happen. We even see places like California making it more expensive to build by requiring solar panels on new homes, in order to virtue signal about climate change without actually solving anything. So, invest in expensive areas, they are only going to get more expensive!
They might have overdone it, but still. They did exactly build entirely new cities.
What makes people think housing should be affordable in the "most wanted" locations? You can't physically fit unlimited people in a small area.
Although before WFH (and maybe even afterwards), the world's top billionaires were insisting engineers live within 20km of them so they can work at their companies. Industries like tech (and finance, and defence) heavily cluster, leading to certain cities/regions getting horrendously expensive.
You can certainly fit a lot more people in most major Western cities, without even much difference in lifestyle. Simply allow people to build what they want on their land, within reason. We've seen this in New Zealand, where recent law changes have allowed townhouses (terraced housing, with shared walls but otherwise freehold) and many many townhouses are being built everywhere.
Most houses are still standalone houses, no one is forcing you to develop your property, but if every 20th section is turned from a single house into 6 townhouses, a lot more people are able to fit into a smaller space while still having a comfortable, quiet home in a good location.
Our intertenancy walls have good soundproofing, enforced by regulations, so you don't really hear your neighbours. You can pay more for a standalone house, or less for a house with shared walls.
E.g. look at Austin TX, it's housing prices have skyrocketed in the past 5-10 years. It's not particularly dense, but the vast majority of the existing housing stock is typical single family homes - there are very few open tracks of land where you can just build dense housing. So to increase density, you have to change existing neighborhoods to be more dense, and I'm not sure I've ever seen folks that I previously thought of as rational, compassionate individuals fight tooth and nail over even modest increases in density.
dangerously oversimplified
source: professional urban planners
we AMPLIFY the rhetoric because, yes, you (and I) want to be heard. UrbanPlanning is not new! as well as ugly and counter-productive tactics on all sides of this debate.
This doesn't address in this global ponzi scheme how banks are fueling the competition between home buyers by dumping toxic credit, and how wage stagnation makes it impossible to escape this trap.
No solution is possible that doesn't wipe hundreds of billions of asset value from banks and homeowners, and we need to accept that.
That's not really new. The big cities in the United States grew dramatically during the 20th century, at rates far higher than they are growing today: For example, a hundred years ago cities like Detroit, NYC, Chicago, San Francisco, Los Angeles etc. were growing far faster than they are today.
Shadowy "government" is not the problem, existing home owners are the problem. And it's not hard to see why, if someone buys a house, they then have incentive to make their house as expensive as possible after they've bought it (within reason, and this is something land value taxes are meant to address). All this "government intervention" that makes it harder to build is nearly always done at the local level at the behest of the people who live there.
If anything, this shows why, e.g., state governments can be a part of the solution, by restricting local governments from putting in tons of roadblocks that make it harder to add housing (which is exactly what California did, though obviously they still have a long way to go).
On the other hand, that’s the same state government that is adding $25-30k to the cost of building even an ADU/in-law unit because now all new residential construction has to have solar panels!
In retrospect the combo of Cal and Stanford may have made it inevitable, but it's still a dump.
Sigh, Gen X, forgotten again.
We then concocted a lot of policies to sustain demand, and hamper supply, the keep this scheme afloat.
Housing cannot be both affordable and a good investment.
You make it sound like a nefarious plan or some backroom deal. It seems more like real estate became our de facto retirement scheme due to everything else paling in comparison.
Pensions? Gone.
Savings? Nope, no interest (ha ha) in that.
Stock market? Sure, but its volatility prevents sane people from putting their entire nest egg into it....
If housing prices drop, the middle-class homeowner gets vocally angry at the presiding administration.
What's new is that it is harder to build housing than it used to be. The escape valve for an overpressured market used to be building new housing -- and if the new housing meets demand it does not cause the prices of existing housing to tank. The market simply reaches an equilibrium. That's what is not functioning today.
We don't need land value taxes or weird rules about rentals or discouraging investment or any of that -- we need to make it easier to supply new housing. Any solution that does not involve making it easier to build new housing is just not going to work.
No, a good investment is something that increases in value over time. Not "quickly." That's a get-rich-quick expectation, not an investment expectation.
You also seem to be assuming that housing prices increase but incomes do not. That is not the case in a healthy economy. (And growth in an economy is normal and expected and good, not unsustainable.)
This is not a theoretical situation. We know, for sure, that housing can both be a good investment and affordable because it worked that way for a long time. And we also know what changed -- barriers to building new housing have increased.
Since housing is a large and increasing portion of CPI, this is mathematically impossible. As housing increasingly dominated the inflation calculation it determines inflation. QED.
You could make the same argument to say that bonds are a bad investment. It's not true, depending on what the investor expects. Raw performance is not the only criteria by which investments are evaluated.
Another aspect of investment vehicles is the risk:reward ratio. Bonds are low-risk and thus expected to have lower returns than a higher-risk investment like stocks. That does not mean that bonds are a bad investment. It simply means they have a risk:reward ratio suitable for some investment purposes but not others.
Before the current supply crunch, housing was a reasonably safe investment that resulted in a reasonable return over the lifetime of a homeowner -- and it did tend to keep up with inflation. It was not a "bad" investment. It was not growing over 10% a year like it is today, but that's a recent phenomenon caused by shortages.
This is truly semantics and is quite pedantic. I’d highly recommend avoiding these types of arguments.
You’re digging in for a very specific and weird reason - I’d suggest not.
So far, we have not seen economic growth without proportional growth in material inputs, including energy.
https://en.wikipedia.org/wiki/Dematerialization_(economics)
"We know, for sure, that housing can both be a good investment and affordable because it worked that way for a long time."
You are referring to a period (the 20th century) that saw tremendous urbanization due to one-time advances in technology. Those will not be repeated. For details, see "Rise and Fall of American Growth" (Gordon).
Housing rose with inflation for 400 years. This bullshit is a 21st century thing when housing became a bitcoin-like financial scam.
It wasn't turned into a scheme by anyone, it's the nature of land. See Ricardo's Law of Rent; owners of land are able to extract rent from the tenants, and in desirable locations they can extract larger amounts of rent. If you want to make money without doing any work, buy land in desirable, growing locations and rent it out.
The solution is a land value tax, accompanied with a citizen's dividend or a reduction in other taxes such as income taxes.
It's easy to blame Wall Street, corporations, immigrants, but the reality is much simpler: these policies are wildly popular with the first few generations of voters who saw their property prices go up, so governments are deathly afraid to touch them.
The next generations are the ones who suffer, but they don't vote (yet). Politically safer to kick the can down the road and make it someone else's problem in 10 to 20 years' time.
a) Not enough housing supply to meet population demand (in a purely physical people-in-homes allocation sense)
vs.
b) Too much housing wealth tied up in boomer ownership (e.g. overly large houses with just 2, 1, or even 0 people living in them most of the time)
In other words, to what extent does the solution correspond to:
a) We absolutely need to build more, there's no other way
vs.
b) Significantly higher redistributive taxes (e.g. land/property taxes, wealth taxes) to incentive people to both "right-size" their living situation as well as compensate for how lucky the boomer generation happened to be in terms of housing
I'm sure the answer is "both" to some extent, but I'm just wondering if there's hard data that actually compares the two rather than just opinion.
In addition, the exponential tax could start much higher e.g the first residency held by an LLC is charged at 8% the second at 16% etc.
Or we could just blanket ban LLCs from holding residential property. As far as I can tell, the arguments for allowing it to do so are pretty weak. If a company wants shelter for workers it can: A) partner with a construction company to build and sell them to workers B) put money into the local economies in which it operates by paying for hotel rooms
The crux of the matter is that until landlord is relegated to small scale side gig rather than ‘most lucrative profession’ as it currently is, this problem will continue to get more and more out of hand.
Personally, I think the way out of this is for affected countries to form single issue political parties. Agree or disagree with Brexit, no one can argue that ultimately UKIP was successful in changing the face of British politics. I think it’s about time for a United Kingdom Housing Party to do the same on the real issue underlying much of the discontent of the last few decades.
As it is, it's a good investment because supply is globally constrained. Investors have parked a huge portion of the world's wealth into land. It's obvious when you talk to investors. This investment can spur development, or it can greedily be sat on.
Imagine if you could just put iron ore in a warehouse and make a 25% return every year, we'd have no steel!
I mean, look at all the private equity buying up properties in the US, causing our shortages, who is funding that? Is that an actual threat to security?
It used to be we were paranoid about foreign ownership of production, well we don't make anything anymore, so this is another means.
- Restrict and tax short-term rentals.
- Introduce a scaling speculation tax on three or more properties to remove the incentive for small-medium size investors to hoard. It will return supply back to the market.
- Limit residential real-estate purchases to citizens and permanent residents (i.e. taxpayers).
- Remove barriers to development to increase supply. Ignore the NIMBYs.
- Cap rental increases.
- Introduce a vacancy tax.
- Limit immigration until the housing issue is resolved.
- Eliminate "blind bidding" from real estate sales.
I doubt any government has the political will to truly tackle this though, especially when most politicians are landlords and speculators themselves.