To make housing affordable, one must make it unpalatable to investors. Lack of housing is not a problem - an excess of demand from speculative investors fueled by too low interest rates is the problem.
Affordable housing is uninvestable housing. Until advocates admit this, the walking in circles will continue.
i) Price controls do not work at reducing prices, there are two millennia worth of proof for this.[1]
ii) Higher interest rates lower housing prices by lowering the availability of loans. This is a good thing unless you are already bought into the ponzi of ever declining rates.
iii) Affordable housing is uninvestable housing. A house is a deprecative asset, the same way cars are. A house does not produce anything. You live in it and it wears down.
I’m going further to say that the speculative investment style itself is the problem, for many if not all areas. Once this kind of investor comes in, they want to squeeze the market for all it has, effects be damned. They may as well bet on crop failure – and they do.
The problem as I see it, is investment without value added, a.k.a rent seeking.
Buying an apartment and renting it for long duration without any value added is a problem. If you buy something without expectations of its economical value increasing, only its price, that's a problem.
Buying an apartment and hosting it for short duration in Airbnb (or another way) to tourists, while providing real service, is a real investment. It created real economic value. I'm OK with these kind of investments.
The root of the problem comes from the central bank. There's asset inflation that is virtually ignored, created by low rates, QE, and regulation around mortgages. That asset inflation makes "investing" without creating value a good strategy.
I'm going further to say that every investing is speculative in itself, because investing is the activity of buying an asset, speculating that there will be a return.
> A house is a deprecative asset, the same way cars are. A house does not produce anything. You live in it and it wears down.
This is 100% inaccurate.
Land, which is the real "value" in owning a home does not depreciate, nor can you make more of it. As more and more people mature and look to enter the real-estate market they can either:
- Pay more to live where they want and convince someone to move
- move further away, to a new subdivision.
Next, not all cars depreciate, nor do houses. If properly maintained they last a long time. Head over to your local car show and see what it costs to buy a car from the 1960's now vs what is cost back then.
I once owned a house built in 1915 and it was still in great shape.
> i) Price controls do not work at reducing prices, there are two millennia worth of proof for this.[1]
Strongly agree. it is insane when renters protest they want more and more rent control. It simply doesn't work and demanding more of something that has failed to do anything is odd.
Land most often does not wear down, but the built structure obviously does.
And even for a condo in a desirable neighbourhood in Manhattan, >50% the value of the property is likely in the value of the structure. i.e. the land value portion would be <50%
The total demand from investors is a drop in the bucket compared to aggregate demand. Additionally, investors don’t actually consume housing, so they aren’t increasing demand. What you’re suggesting is that investors purchase housing and then somehow charge tenants more than they otherwise would be charged, which is of course absurd. Tenants will be charged as much as the landlord can charge.
I agree about making housing uninvestable, but the issue is supply, not demand.
It’s both and local factors are huge. Over 30% of the single family homes bought in the last two years where I live have been from investors that are turning them into short term rentals. It’s completely fucked the market.
I did res real estate about 10 yrs ago for a very brief period.
Housing prices are driven by comps. That is, what did similar-ish properties in the same area sell for. In other words, one sale today can drive the price of multiple other properties tomorrow.
If investors are more able and willing to bid up, those effects will be felt elsewhere in that area whether investors are involved in those other properties or not.
I do agree, the solution is to address supply. But I wanted to address your point about investors not impacting all sales. The fact is, they can and I presume do.
Land*time is the unit that people consume, and the land produces this at an instantaneous rate of 1. So you're wrong about it not producing anything, but right about everything else, in my view.
If you want to properly make land uninvestable, you have to put property taxes at the rental rate.
I don’t think people are buying a 1960s car because of “engine options”. New engines are objectively better in both performance and emissions.
If a new law allowed an old 289 design to be installed in a new mustang with no modern emission requirements, the new car would not suddenly skyrocket in value.
There's an objective truth beyond Marxism. Markets, demand, offer.
You seem to have the vision that my property is not my property and somebody else should decide what I do with my property, not me. This kind of vision ended up in blood and death of some many millions of people all over the world.
This got me wondering. How does one aquire property such that it your own? I'm thinking of some patch of land that doesn't belong to anybody, since nobody owns it there is noone I can aquire it from. Seems like there is some form of original sin involved in any form of owning land.
This is the mindset all young people should have. One works for what one owns. It doesn’t matter how ‘hard’ the times are. We are Americans: we “beat the odds”, just like we did from the start.
This is highly inaccurate. Every boom in any market is due to it being a good investment. This is the success of capitalism and one of the reasons it is hard to beat.
Saying investing will kill something is easy. The alternative is much, MUCH harder. It is easier to run a mail service like usps than create more housing and maintain it using govt money. People have like zero clue about finance smh
So many people here do not know the details of NYC rent regulation, and are posting generalizations and falsehoods.
Basically, you cannot raise rents aside from annual increases that are below inflation, and you are limited to a relatively small amount of renovations, and cannot increase the rents much if you do.
So you either commit to a potentially multi lifetime below market tenancy that will bankrupt you eventually, or you keep it vacant and hope to demolish it or combine units or pray that the law will change.
Or sell it to a guy who will run air bnbs until the city puts him out of business at which point it will go in the tax lien sale. In any event, nobody is investing in bringing these units back online in this legislative environment.
But isn’t this only true if you want to profit from the property?
What about you buy the property for you and your family to live in rather than as an investment that needs high return?
The property value will still increase with time. That should offer some form of protection for the initial capital investment if you need to sell later in life.
Buying it for you and your family to live in *is* an investment.
The only thing you're doing when prioritizing that type of investment over others is you're picking winners and losers for political reasons... at great cost to everyone else.
Likely the people renting these apartments couldn’t afford to buy at almost any price.
A much more logical system would be for the government to raise minimum wage and welfare to the point that people can afford rentals at the market rate rather than rent control which is a head in sand solution.
The current implementation seems to be causing an issue where it is not in the landlord's interest to offer the units to the market. It is the regulation's fault for creating disincentives for the landlord, so it depends on how you allocate blame for making a judgement based on that.
That doesn't mean we shouldn't try, or that we need to stick to a counterproductive plan because some people think arguing about regulations on free markets is more important than fixing a pressing problem.
Rent control is about as useful as solving climate change by drawing a lower number on the screen of the thermometer.
Rents are a product of market conditions. You have to solve those conditions rather than try to stop the output from changing. Fixing the rent results in supply dropping off so the supply/demand equation is still met.
They are not predatory. They are entirely market based. Why shouldn't companies be allowed to charge whatever is the market price? Or maybe in general we should start applying price controls to absolutely everything. Let's say only ever allow 5% net profit on any good or service.
Any time you apply artificial price controls you create scarcity. Ask Venezuelans. The same bad policies are applied over and over with the same effects.
Why would it bankrupt you? "Rent stabilization" is in place in the big French metropolises (a landlord can only increase rents at a specific rate at specific intervals) and there's no shortage od landlords due to compensating policies encouraging building.
It’s unreal how many people in the comments here haven’t spent any time researching basic issues in Western housing markets.
People keep talking about evil investors and taxing secondary and investment properties. But the biggest group of housing investors are primary residence owners: we turned housing into a nest egg retirement plan, and now we can’t undo that.
Housing cannot be both affordable and a good investment. Housing should not be any different from any other good or service. This all stems from massive government intervention in housing markets decades ago on the basis of horrible conclusions of family wealth, and further intervention isn’t going to fix things.
You want cheaper housing? Slash regulations and NIMBYism, and get government out of the equation.
Some time ago I saw a TV programme with a couple that invested in housing like that, kind of as a side-business. They also gave seminars on how to do that as a regular person; the tagline was "everyone in the country can get rich by investing in housing!" Ehhhh...
That said, there seem to be multiple factors going on, all combined resulting in the prices we're seeing today: housing as retirement plan, investment companies, population growth, increased urbanisation, AirBnB and short-term rentals, increase of expats, dysfunctional government. It's very hard for me to tell which factor is responsible for how much, which will probably differ per locality, but I don't think there a single factor that explains it all.
Yes on slashing NUMBYism. Its a form of predatory control where those who walked in the door first shut it in the face of the person behind them.
Sadly, NIBMYism was created to give more voice and democracy to everyone. Giving local community groups veto power and other rights empowered some of the worst of us into using it to block all types of housing (especially affordable housing). A perfect example of how a republic is sometimes better than a democracy.
> Sadly, NIBMYism was created to give more voice and democracy to everyone.
NIMBYism wasn't created, it's a naturally emergent property of a rational actor. Then the government poured fuel on the fire with subsidized housing loans, and quantitative easing more generally.
But NIMBYism exists because most people have been conditioned over the past decades that they will make a lot of money from their primary residence. And this is what needs to die.
I don't know about where you live; but, here in Texas, NIMBYism is an outgrowth of redlining, whose stated purpose was anti-Semitic & anti-nonwhite: it was literally rooted in antidemocratic ideals.
How do you avoid NIMBYism without the government intervening? Communities tend to self-segregate and self-police unless there's a higher power that doesn't allow it.
NIMBYism is the government intervention. People pass laws giving the government additional powers to regulate specific aspects of zoning and construction.
Gentlemen, experts of economy, it's time to realize we are walking in circles from one government intervention to the other. Capping rents, reducing inflation, minimum wage and UBI, cutting or raising taxes, regulations regulations regulations. Each comment here points out the failure of the last intervention, only to promise the next silver bullet recipe.
100-200 years ago your voice would be shouting about how government intervention in the labour market was hurting it. How giving workers more rights was big government taking over the economy and that we should be free from it.
Interventions might fail, just like leaving this to the market might fail. It's all a constant juggling of incentives, unforeseen consequences and catching up. UBIs and minimum wage are not designed to solve house affordability, so I'm not even sure why you'd lump it into capping rents, etc.
Without interventions you leave all the power to the profiteers, to the ones seeking to rent-seek as most as possible, so I'm very sure your approach of "less intervention" would just bring another set of unforeseen consequences with a worse side: complete lack of accountability. At least a failed governmental intervention has someone accountable for it, leaving the system to regulate itself (free market™) leaves no one accountable for the suffering it causes. Or even worse, it becomes a personal responsibility™ issue and the victims will be blamed for not trying hard enough.
I don't mind the interventions, and the goal of the economy is to serve the people, not the other way round, but narrative that government "gave the workers more rights" is largely false.
We became richer, thanks to the industrial revolution, not government coordination, and could afford to abolish slavery and work less. Same way we stopped wars of conquest conveniently when they stopped being profitable compared to large scale manufacturing and trade.
Government is at the mercy of these large trends just like the people.
I didn't mean to say that intervention is wrong. On the contrary, I believe in strong interventions. Just that they shouldn't be dismissed so quickly with the next hack.
There is no trick to make a free market work, for certain things we are in this together and should funnel a lot of money to lift up the poor.
The essence of civilization is helping out each other, that's why the first civilizations are defined as the ones where archeologists could find signs of medical procedures.
The rate of NYC housebuilding was fastest in the 1950s when its rent control laws were strongest and rent was most affordable. Rent control apparently doesnt inhibit construction significantly.
I suspect it inhibits NIMBYism by keeping asset values down. Land is more scarce than construction materials and labor.
High rents->high asset values->freaking out about your riculous mortgage->freakimg about additional supply driving down your property price->turning up to town planning meeting to declare a laundrette "historic".
Were houses rent controlled in addition to multifamily residential? I'd expect developers to focus on houses when multifamily residential apartment buildings were under rent control. Is that the point you were trying to make?
It's good to point out a lot of nimbyism is defensive. As much as we like to demonize it, people are legitimately worried about their life savings investment getting cut in half if suddenly tons of new places were built
I have the solution but it will require massive government investment and oversight.
Incentivize construction and cutting red tape to mass produce housing of a few million houses a year. This will hurt property owners but will open up affordability.
I think for high demand urban centres/markets, this is just going to lead to Braess's paradox of more roads = more cars = more traffic. More units = more people = more opporunities = maybe even higher rent. Unless there's ridiculous amount of oversupply. Perhaps greater NYC needs 60 million units to stablize price for 59M people that want to move there to reach the demand equilibirum of a overcrowded megacity 3x population of the current state. Gov needs to keep building units to put supply ahead of demand until until an urban centre becomes undesirable and people stop coming. Soon, ecumenopolis.
E: over comment limit
@Eisenstein They're not. I'm a fan of them. Like JP mega cities are relatively affordable with greater Tokyo having "reasonably" 22M people. But for US/west, highly desirable cities + high immigration, cities like NYC, I think has capacity draw/support people that push past what's stustainable based on regional geographic ceiling. NYC's already depend on stupidenous water transport infra. I feel (based on no evidence in particular) that NYC would grow to 40M people and run out of water, but rent stays the same/if not higher because there's even more opportunties and 80M people wants to move there.
Well, when working with with malevolent economic actors, stopping intervention is probably the last thing you want to do. It’s like saying you’ll stop pursuing robberies because there are always robberies.
"More regulations" and "less regulations" are both wrong perspectives, arrived at from ideology. We need more good regulations (e.g. banning waste dumping) and less bad regulations (e.g. price controls). There's absolutely no substitute for pragmatism and evaluating each individual regulation on its own merits.
The answer is obvious. Just follow the public land strategy of Singapore in urban centers. The city slowly purchases the land from citizens over a thirty year period.
I've seen a few comments already pointing out government regulations that are in fact working in other countries (France and Japan were already mentioned).
I would think that having discussions about working, net positive regulations would be pointless. I'm not sure why you think that discussing broken ones is indicative of all of them.
If you're proposing making housing a 'right' and not a personal asset, how do we go about that? One debate in NYC is over people who have rent controlled or rent stabilized units in very expensive neighborhoods. Should their subsidized housing be a "luxury product" or not?
I'm of the mindset where if you need housing, the community or government should provide housing. American is wealthy enough to do this and it's just the ethical thing to do. I also feel that if you are given housing, it should be local, but not always your desired location. For example, if you grew up in the East Village and you now need public housing, be prepared to move to Inwood. You're still in Manhattan, but its a 30 minute express train to your old neighborhood.
Holy crap. If I owned one of these, I'd also let it fall into disrepair until the city condemned it, then build literally anything else:
> Any time a tenant vacated, landlords received a “vacancy bonus” that let them increase the rent of the unit by up to 20%, and once an apartment’s rent reached a certain dollar amount — most recently, $2,774 a month — the unit left the rent-regulation system entirely, allowing the landlord to rent it at any price.
$2774 / month is definitely less than I'd want to charge to deal with a tenant that cannot be evicted, but whose apartment must be maintained using labor priced for NYC. I'd guess most of the apartments that are being held off-market are way below that threshold, and also need substantial repairs.
Wait, I pay 3K for my apartment in Manhattan. It’s by no means a palace but it’s not a shithole. The previous tenant lived in my apartment for 8 years. The “maintenance” you speak of constituted of painting everything with a single coat of white paint. I’m pretty sure that’s a lot less than 3K a month
My friend pays 2,600 for a one bed in LES.
So why are you making it sound like 2,774 is somehow poverty?
> $2774 / month is definitely less than I'd want to charge to deal with a tenant that cannot be evicted,
Being a landlord isn’t really a full time job unless you have a lot of units. I think my landlord puts in <1hr a month of work so anything I pay over his mortgage seems like “free money”.
Most people are normal innocent people who won’t cause trouble even if they can’t be evicted.
Most apartments in SF are rent controlled and you can’t be evicted (everything in SF is rent controlled unless the city exempts it from being too new). It seems like that’s the least of the cities problems. If anything, the city needs more rent controlled units to encourage land development.
If you have an apartment that hasn't turned over for 20+ years, you can either rerent it at a low text and get sued by your tenant for lead or habitability violations, or you can borrow money and invest it at less than 2% in a renovation. Both ways you lose a fortune.
Or you leave it vacant and still lose money, but you don't have to work as hard doing it
I’ve been curious about the dynamics around the often-cited statement “rent control doesn’t work”.
It seems that with rent control, you’d have higher demand and lower supply resulting in excess demand (both theoretically and it seems in practice). Does anyone know of any studies that:
- Analyse the effects of rent control in the presence of “vacancy-busting” measures like heavy vacancy tax/fines? (i.e forcing supply to stay high?)
- Analyse the price elasticity of the demand and supply respectively? (i.e is the excess demand mostly demand driven or supply driven?)
No links, but Berlin's rent control policy was practically an RCT because it only applied to half the city. Many papers were written on the situation and I'm sure one answers your questions.
- western house prices are driven (up) mostly by available mortgages and a vaguely poor future discounting ability by most people. In other words adding 10k to the offer just to get the win does not add much to your mortgage but gets you a house.
- increases in rates badly hurts people
- a free market in real estate is never really going to happen (because politics) but if it existed it would move the politics over to other parts of the economy- if people could not afford to live in the city, wages would need to be adjusted.
In short there is no place for a "free" market because the point of human civilisation is to protect (ourselves / our tribe / those we sympathise with) people from the cold winds of unfettered nature. Whatever part of the whack-a-mole politics is being focused on, the end goal is "decent lifestyle with minimised suffering / extremes".
Ie - insurance against the worst.
providing insurance against the worst for all society is either a question of paying the huge cost of tragedy for everyone as their tragedy hits, or it is a question of government laying their hands across all ye whack-a-moles and trying to prevent anyone from having the worst outcomes.
I think I am arriving at a theory of government that has the goals of totalitarianism but different methods - probably Thaler's Liberterian Paternalism.
Anyway - understanding the mechanisms of the housing market is important from mortgage availability, land availablity, road and infrastructure building and workers available all seem the big parts.
I mean you can just look at practical, realist governments like in Singapore, and even China to some extent.
The problem is once you're deep in the problem, how do you get out? If you let prices collapse then a lot of homeowners will face negative equity.
It's scary in Europe where we are facing rising interest rates coupled with the energy crisis and cost-push inflation from that and supply chain issues. It's like the governments have just accepted that hundreds of thousands of people will face redundancy and homelessness next year, with no plan whatsoever.
> The problem is once you're deep in the problem, how do you get out? If you let prices collapse then a lot of homeowners will face negative equity.
Easy. You tax the shit out of non-primary and empty residences. This puts negative pressure on 'investing' into a house/apartment and waiting for it to appreciate, then selling it, without ever living in it or renting it. This also doesn't disadvantage people who bought to live.
China has its own problems, so not sure which portion you are referring to. In China, there is almost nothing to invest in except for houses. The Chinese stock market is filled with scams, and I've heard many Chinese don't dare to touch it. So everyone invests in housing (apartments), and prices go through the roof. Some years ago, the government restricted investment, limiting the number of properties a person can own. So people put properties in their relatives or children's name.
Aside from those issues, recently Evergrande (one of China's biggest real estate developers) failed to service it's debt, and is considered by many to be extremely over leveraged. China recently updated regulation to place stricter limits on real estate developers debt.
> In short there is no place for a "free" market because the point of human civilisation is to protect (ourselves / our tribe / those we sympathise with) people from the cold winds of unfettered nature. Whatever part of the whack-a-mole politics is being focused on, the end goal is "decent lifestyle with minimised suffering / extremes".
If that were even a tiny, tiny bit true, corporations would have been banned from SFH long ago. As would 'investors' and AirBNB...
Readit News
Affordable housing is uninvestable housing. Until advocates admit this, the walking in circles will continue.
i) Price controls do not work at reducing prices, there are two millennia worth of proof for this.[1]
ii) Higher interest rates lower housing prices by lowering the availability of loans. This is a good thing unless you are already bought into the ponzi of ever declining rates.
iii) Affordable housing is uninvestable housing. A house is a deprecative asset, the same way cars are. A house does not produce anything. You live in it and it wears down.
[1] https://en.wikipedia.org/wiki/Edict_on_Maximum_Prices
Buying an apartment and renting it for long duration without any value added is a problem. If you buy something without expectations of its economical value increasing, only its price, that's a problem.
Buying an apartment and hosting it for short duration in Airbnb (or another way) to tourists, while providing real service, is a real investment. It created real economic value. I'm OK with these kind of investments.
The root of the problem comes from the central bank. There's asset inflation that is virtually ignored, created by low rates, QE, and regulation around mortgages. That asset inflation makes "investing" without creating value a good strategy.
This is 100% inaccurate.
Land, which is the real "value" in owning a home does not depreciate, nor can you make more of it. As more and more people mature and look to enter the real-estate market they can either:
- Pay more to live where they want and convince someone to move
- move further away, to a new subdivision.
Next, not all cars depreciate, nor do houses. If properly maintained they last a long time. Head over to your local car show and see what it costs to buy a car from the 1960's now vs what is cost back then.
I once owned a house built in 1915 and it was still in great shape.
> i) Price controls do not work at reducing prices, there are two millennia worth of proof for this.[1]
Strongly agree. it is insane when renters protest they want more and more rent control. It simply doesn't work and demanding more of something that has failed to do anything is odd.
And even for a condo in a desirable neighbourhood in Manhattan, >50% the value of the property is likely in the value of the structure. i.e. the land value portion would be <50%
So the parent is accurate.
Even though the population has been steadily increasing?
https://www.macrotrends.net/cities/23083/new-york-city/popul...
Canada is a good example of that, we have a lollipop demographic, lots of old people, not enough young.
Housing is going to crash here over the next decade, I just don't see how it can't with the pop crash that is coming.
Immigration isn't making up for the loss either and doesn't appear to be able to as we have trouble retaining people.
I agree about making housing uninvestable, but the issue is supply, not demand.
Housing prices are driven by comps. That is, what did similar-ish properties in the same area sell for. In other words, one sale today can drive the price of multiple other properties tomorrow.
If investors are more able and willing to bid up, those effects will be felt elsewhere in that area whether investors are involved in those other properties or not.
I do agree, the solution is to address supply. But I wanted to address your point about investors not impacting all sales. The fact is, they can and I presume do.
I'm certain these properties were refinanced when ZIRP hit.
Now interest rates are so damn high, they can pay off their refinancing without doing anything.
The property is now essentially free even without a tenant.
Yay!
Dead Comment
If you want to properly make land uninvestable, you have to put property taxes at the rental rate.
They have worked in some cities in Europe.
It has to more than just a cap on price. Demand is managed too with systems of entitlement.
I am unsure of the details but I know my children tangled with the system whilst on OE in Amsterdam. It was well established and functioning.
Unless you believe the legends of shady foreign investors who buy scores of homes, and then leave them empty
https://www.propublica.org/article/realpage-accused-of-collu...
I really think the era of "depreciation" on cars is coming to an end.
If a new law allowed an old 289 design to be installed in a new mustang with no modern emission requirements, the new car would not suddenly skyrocket in value.
You seem to have the vision that my property is not my property and somebody else should decide what I do with my property, not me. This kind of vision ended up in blood and death of some many millions of people all over the world.
Don’t believe me? Start building a gas station in your driveway and see how far you get.
Saying investing will kill something is easy. The alternative is much, MUCH harder. It is easier to run a mail service like usps than create more housing and maintain it using govt money. People have like zero clue about finance smh
Basically, you cannot raise rents aside from annual increases that are below inflation, and you are limited to a relatively small amount of renovations, and cannot increase the rents much if you do.
So you either commit to a potentially multi lifetime below market tenancy that will bankrupt you eventually, or you keep it vacant and hope to demolish it or combine units or pray that the law will change.
Or sell it to a guy who will run air bnbs until the city puts him out of business at which point it will go in the tax lien sale. In any event, nobody is investing in bringing these units back online in this legislative environment.
What about you buy the property for you and your family to live in rather than as an investment that needs high return?
The property value will still increase with time. That should offer some form of protection for the initial capital investment if you need to sell later in life.
The only thing you're doing when prioritizing that type of investment over others is you're picking winners and losers for political reasons... at great cost to everyone else.
They aren’t individually purchasable units.
A much more logical system would be for the government to raise minimum wage and welfare to the point that people can afford rentals at the market rate rather than rent control which is a head in sand solution.
You have implicit profit living in your property through imputed rent.
Why would pricing the rent lower than the insane market prices cause bankruptcy for the owner?
Deleted Comment
That doesn't mean we shouldn't try, or that we need to stick to a counterproductive plan because some people think arguing about regulations on free markets is more important than fixing a pressing problem.
Rents are a product of market conditions. You have to solve those conditions rather than try to stop the output from changing. Fixing the rent results in supply dropping off so the supply/demand equation is still met.
People keep talking about evil investors and taxing secondary and investment properties. But the biggest group of housing investors are primary residence owners: we turned housing into a nest egg retirement plan, and now we can’t undo that.
Housing cannot be both affordable and a good investment. Housing should not be any different from any other good or service. This all stems from massive government intervention in housing markets decades ago on the basis of horrible conclusions of family wealth, and further intervention isn’t going to fix things.
You want cheaper housing? Slash regulations and NIMBYism, and get government out of the equation.
That said, there seem to be multiple factors going on, all combined resulting in the prices we're seeing today: housing as retirement plan, investment companies, population growth, increased urbanisation, AirBnB and short-term rentals, increase of expats, dysfunctional government. It's very hard for me to tell which factor is responsible for how much, which will probably differ per locality, but I don't think there a single factor that explains it all.
Sadly, NIBMYism was created to give more voice and democracy to everyone. Giving local community groups veto power and other rights empowered some of the worst of us into using it to block all types of housing (especially affordable housing). A perfect example of how a republic is sometimes better than a democracy.
NIMBYism wasn't created, it's a naturally emergent property of a rational actor. Then the government poured fuel on the fire with subsidized housing loans, and quantitative easing more generally.
But NIMBYism exists because most people have been conditioned over the past decades that they will make a lot of money from their primary residence. And this is what needs to die.
I've mentioned this to a number of people, one thing I've noticed - most people really don't understand compound interest and exponentials well.
> compound interest and exponentials well.
They are not magic. Wealth cannot increase exponentially unless it increases exponentially.
Exponential growth never continues.
People draw lines on graphs and say: "compound interest and exponential growth" without making the connection to reality.
You cannot eat interest payments nor lines on graphs.
Interventions might fail, just like leaving this to the market might fail. It's all a constant juggling of incentives, unforeseen consequences and catching up. UBIs and minimum wage are not designed to solve house affordability, so I'm not even sure why you'd lump it into capping rents, etc.
Without interventions you leave all the power to the profiteers, to the ones seeking to rent-seek as most as possible, so I'm very sure your approach of "less intervention" would just bring another set of unforeseen consequences with a worse side: complete lack of accountability. At least a failed governmental intervention has someone accountable for it, leaving the system to regulate itself (free market™) leaves no one accountable for the suffering it causes. Or even worse, it becomes a personal responsibility™ issue and the victims will be blamed for not trying hard enough.
Enough is fucking enough of this...
We became richer, thanks to the industrial revolution, not government coordination, and could afford to abolish slavery and work less. Same way we stopped wars of conquest conveniently when they stopped being profitable compared to large scale manufacturing and trade.
Government is at the mercy of these large trends just like the people.
There is no trick to make a free market work, for certain things we are in this together and should funnel a lot of money to lift up the poor.
The essence of civilization is helping out each other, that's why the first civilizations are defined as the ones where archeologists could find signs of medical procedures.
Those laws should be abolished.
Dead Comment
I suspect it inhibits NIMBYism by keeping asset values down. Land is more scarce than construction materials and labor.
High rents->high asset values->freaking out about your riculous mortgage->freakimg about additional supply driving down your property price->turning up to town planning meeting to declare a laundrette "historic".
Incentivize construction and cutting red tape to mass produce housing of a few million houses a year. This will hurt property owners but will open up affordability.
How it will work you all can argue
E: over comment limit
@Eisenstein They're not. I'm a fan of them. Like JP mega cities are relatively affordable with greater Tokyo having "reasonably" 22M people. But for US/west, highly desirable cities + high immigration, cities like NYC, I think has capacity draw/support people that push past what's stustainable based on regional geographic ceiling. NYC's already depend on stupidenous water transport infra. I feel (based on no evidence in particular) that NYC would grow to 40M people and run out of water, but rent stays the same/if not higher because there's even more opportunties and 80M people wants to move there.
[1] https://en.wikipedia.org/wiki/Million_Programme
Because it's the same system proposing and implementing them. A broken system is very unlikely to ever produce correct results.
Second, there are some functions of society that may operate better outside a capitalistic system.
One could make the argument that the police are a necessary function of society that should not be governed by market forces.
I wonder if basic housing is a similar necessity?
I'm of the mindset where if you need housing, the community or government should provide housing. American is wealthy enough to do this and it's just the ethical thing to do. I also feel that if you are given housing, it should be local, but not always your desired location. For example, if you grew up in the East Village and you now need public housing, be prepared to move to Inwood. You're still in Manhattan, but its a 30 minute express train to your old neighborhood.
> Any time a tenant vacated, landlords received a “vacancy bonus” that let them increase the rent of the unit by up to 20%, and once an apartment’s rent reached a certain dollar amount — most recently, $2,774 a month — the unit left the rent-regulation system entirely, allowing the landlord to rent it at any price.
$2774 / month is definitely less than I'd want to charge to deal with a tenant that cannot be evicted, but whose apartment must be maintained using labor priced for NYC. I'd guess most of the apartments that are being held off-market are way below that threshold, and also need substantial repairs.
Being a landlord isn’t really a full time job unless you have a lot of units. I think my landlord puts in <1hr a month of work so anything I pay over his mortgage seems like “free money”.
Most people are normal innocent people who won’t cause trouble even if they can’t be evicted.
Most apartments in SF are rent controlled and you can’t be evicted (everything in SF is rent controlled unless the city exempts it from being too new). It seems like that’s the least of the cities problems. If anything, the city needs more rent controlled units to encourage land development.
Or you leave it vacant and still lose money, but you don't have to work as hard doing it
It seems that with rent control, you’d have higher demand and lower supply resulting in excess demand (both theoretically and it seems in practice). Does anyone know of any studies that:
- Analyse the effects of rent control in the presence of “vacancy-busting” measures like heavy vacancy tax/fines? (i.e forcing supply to stay high?)
- Analyse the price elasticity of the demand and supply respectively? (i.e is the excess demand mostly demand driven or supply driven?)
- western house prices are driven (up) mostly by available mortgages and a vaguely poor future discounting ability by most people. In other words adding 10k to the offer just to get the win does not add much to your mortgage but gets you a house.
- increases in rates badly hurts people
- a free market in real estate is never really going to happen (because politics) but if it existed it would move the politics over to other parts of the economy- if people could not afford to live in the city, wages would need to be adjusted.
In short there is no place for a "free" market because the point of human civilisation is to protect (ourselves / our tribe / those we sympathise with) people from the cold winds of unfettered nature. Whatever part of the whack-a-mole politics is being focused on, the end goal is "decent lifestyle with minimised suffering / extremes".
Ie - insurance against the worst.
providing insurance against the worst for all society is either a question of paying the huge cost of tragedy for everyone as their tragedy hits, or it is a question of government laying their hands across all ye whack-a-moles and trying to prevent anyone from having the worst outcomes.
I think I am arriving at a theory of government that has the goals of totalitarianism but different methods - probably Thaler's Liberterian Paternalism.
Anyway - understanding the mechanisms of the housing market is important from mortgage availability, land availablity, road and infrastructure building and workers available all seem the big parts.
The problem is once you're deep in the problem, how do you get out? If you let prices collapse then a lot of homeowners will face negative equity.
It's scary in Europe where we are facing rising interest rates coupled with the energy crisis and cost-push inflation from that and supply chain issues. It's like the governments have just accepted that hundreds of thousands of people will face redundancy and homelessness next year, with no plan whatsoever.
Easy. You tax the shit out of non-primary and empty residences. This puts negative pressure on 'investing' into a house/apartment and waiting for it to appreciate, then selling it, without ever living in it or renting it. This also doesn't disadvantage people who bought to live.
Aside from those issues, recently Evergrande (one of China's biggest real estate developers) failed to service it's debt, and is considered by many to be extremely over leveraged. China recently updated regulation to place stricter limits on real estate developers debt.
Curious to know what you suggest.
If that were even a tiny, tiny bit true, corporations would have been banned from SFH long ago. As would 'investors' and AirBNB...