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Observation: Housing is not affordable (for any but the rich). Hypothesis: Basic market theory suggests that the need for housing is probably inelastic (everyo

Observation: Housing is not affordable (for any but the rich). Hypothesis: Basic market theory suggests that the need for housing is probably inelastic (everyone needs it, can't do without it), therefore if housing is to become more affordable an increase in supply must happen. Prediction: If additional housing were encouraged (near where jobs are actually located) prices would eventually stabilize at sustainable levels. Prediction 2: non-inflated housing prices will also lower the cost of living in those areas, creating a net benefit for members of society (which are not of the rent-seeking classes). Testing: Please vote according to the above logic. Results: To be determined.

ThrustVectoring 8y ago
One big problem with this is that people vote their incentives. If you're a homeowner in San Francisco, are you really going to vote to halve the price of your home and immediately put your mortgage underwater? People voting themselves higher house prices through using local zoning laws to create housing shortages is a national crisis. We need something pretty dramatic, like congress using the interstate commerce clause to ensure the free movement of labor via banning states and local municipalities from enacting their own zoning. Or a national land-value tax.
- wpasc 8y ago
  Could not agree with this more. I live in SF and the difficulty in building new housing is so outrageous. To make the housing prices in SF lower, supply must increase. While it makes sense for voters in a locality to have control/say in the environment around them, the ability of homeowners to control land they do not own and prevent new construction and shift the burden to other districts and public transportation is extremely flawed.
- pmwhite 8y ago
  That is the fear, yes, but housing prices do not jump so quickly. They really are not likely to drop, as, perhaps, climb much more slowly. It seems we have achieved a self-reinforcing civic virtue "anti-pattern", where middle class anxiety about high housing prices ends up squeezing the future housing supply. In other words, the negative feedback via anxiety caused by high demand may be greater than the usual positive correcting effect we expect from the "invisible hand", to add supply in the face of high demand. IMHO it is a matter of homeowners acting on incomplete information. Sure, your house price going up seems nice, but it is only a significant benefit if you sell and move elsewhere for your retirement days. Those who actually like where they live and want to set roots have the practical problem of how affordable the place they live is now and when they retire. That is a death by a thousand cuts. Regarding the future, I do hope to make the world a better place through my job. But in the practical world of the now, we need mechanics, teachers, grocers, plumbers, nurses, handymen, construction workers/contractors, waiters, etc. etc. or the SF Bay becomes an expensive hellhole. Having enough people around who keep the community livable requires more affordable housing.
lliamander 8y ago
Another possibility is that, by pricing many potential employees out of the market, local zoning laws force businesses to move to where there employees are (either through opening up new facilities/branch offices, or allowing remote work). The consequence of which is that there becomes a plurality of growing urban centers rather than one megapolis, and the citizens get to live in houses larger than sardine cans.
- pmwhite 8y ago
  In the SF Bay Area, the East Bay may relieve growth pressure to some degree. But fundamentally that can only go so far. If we cannot figure out how to develop wisely along the transportation spine of 101/Caltrain/ElCam, then we are pretty much doomed. Replicating a failing model in other places is likely to be a vast sprawling failure, rather than a success.
  - lliamander 8y ago
    What constitutes a failure vs. a success? Even if we[0] permit limitless high-density housing, there's a limit to the number of people an environment[1] can hold. Pushing an environment to the limit of it's carrying capacity strikes me as a risky proposition. [0]I say "we", but I am not a resident of the bay. [1]by "environment" I mean not just air, water, physical space etc., but also infrastructure, good govenance, and other public goods.
    - pmwhite 8y ago
      To oversimplify the issue a bit, it boils down to which you believe is more auspicious for both the planet and humankind: (1) a mix of housing with more dense housing, or (2) a mix of housing with more suburban single family dwellings. While there are many arguments for #2, I believe most of those arguments are more emotional than real. In fact, in the world of many young dual income families on the SF peninsula specifically, lots of families spend approximately zero time in their yards. While I recognize that individual families should, of course, have the freedom to splurge their resources on dwellings that are underutilized, as a matter of social policy, it is foolish to promote a suburban lifestyle as some kind of ideal when it turns out the reality is very different. (Due to a family health issue, I once had a year where I needed to be available at home, but I did have MUCH time to garden. It was shocking how extremely rarely most of my neighbors' yards were used. Even the majority of yards of families with children were unused, both weekdays and weekends.)
mendelsd 8y ago
Simon Wren-Lewis argues that increasing supply won't help so long as there exists an arbitrage between rental yields and interest rates. Wealthy people will just outbid everyone else for the increased supply: https://mainlymacro.blogspot.com/2018/02/house-prices-and-rents-in-uk.html https://mainlymacro.blogspot.com/2018/02/house-prices-and-re... Richard Werner points out that the mortgage lending, with associated house price inflation, caught fire in the UK after Thatcher eliminated "corset" credit controls. That may be key to sorting the whole mess out.

ThrustVectoring 8y ago

One big problem with this is that people vote their incentives. If you're a homeowner in San Francisco, are you really going to vote to halve the price of your home and immediately put your mortgage underwater? People voting themselves higher house prices through using local zoning laws to create housing shortages is a national crisis. We need something pretty dramatic, like congress using the interstate commerce clause to ensure the free movement of labor via banning states and local municipalities from enacting their own zoning. Or a national land-value tax.

wpasc 8y ago
Could not agree with this more. I live in SF and the difficulty in building new housing is so outrageous. To make the housing prices in SF lower, supply must increase. While it makes sense for voters in a locality to have control/say in the environment around them, the ability of homeowners to control land they do not own and prevent new construction and shift the burden to other districts and public transportation is extremely flawed.
pmwhite 8y ago
That is the fear, yes, but housing prices do not jump so quickly. They really are not likely to drop, as, perhaps, climb much more slowly. It seems we have achieved a self-reinforcing civic virtue "anti-pattern", where middle class anxiety about high housing prices ends up squeezing the future housing supply. In other words, the negative feedback via anxiety caused by high demand may be greater than the usual positive correcting effect we expect from the "invisible hand", to add supply in the face of high demand. IMHO it is a matter of homeowners acting on incomplete information. Sure, your house price going up seems nice, but it is only a significant benefit if you sell and move elsewhere for your retirement days. Those who actually like where they live and want to set roots have the practical problem of how affordable the place they live is now and when they retire. That is a death by a thousand cuts. Regarding the future, I do hope to make the world a better place through my job. But in the practical world of the now, we need mechanics, teachers, grocers, plumbers, nurses, handymen, construction workers/contractors, waiters, etc. etc. or the SF Bay becomes an expensive hellhole. Having enough people around who keep the community livable requires more affordable housing.

lliamander 8y ago

Another possibility is that, by pricing many potential employees out of the market, local zoning laws force businesses to move to where there employees are (either through opening up new facilities/branch offices, or allowing remote work). The consequence of which is that there becomes a plurality of growing urban centers rather than one megapolis, and the citizens get to live in houses larger than sardine cans.

pmwhite 8y ago
In the SF Bay Area, the East Bay may relieve growth pressure to some degree. But fundamentally that can only go so far. If we cannot figure out how to develop wisely along the transportation spine of 101/Caltrain/ElCam, then we are pretty much doomed. Replicating a failing model in other places is likely to be a vast sprawling failure, rather than a success.
- lliamander 8y ago
  What constitutes a failure vs. a success? Even if we[0] permit limitless high-density housing, there's a limit to the number of people an environment[1] can hold. Pushing an environment to the limit of it's carrying capacity strikes me as a risky proposition. [0]I say "we", but I am not a resident of the bay. [1]by "environment" I mean not just air, water, physical space etc., but also infrastructure, good govenance, and other public goods.
  - pmwhite 8y ago
    To oversimplify the issue a bit, it boils down to which you believe is more auspicious for both the planet and humankind: (1) a mix of housing with more dense housing, or (2) a mix of housing with more suburban single family dwellings. While there are many arguments for #2, I believe most of those arguments are more emotional than real. In fact, in the world of many young dual income families on the SF peninsula specifically, lots of families spend approximately zero time in their yards. While I recognize that individual families should, of course, have the freedom to splurge their resources on dwellings that are underutilized, as a matter of social policy, it is foolish to promote a suburban lifestyle as some kind of ideal when it turns out the reality is very different. (Due to a family health issue, I once had a year where I needed to be available at home, but I did have MUCH time to garden. It was shocking how extremely rarely most of my neighbors' yards were used. Even the majority of yards of families with children were unused, both weekdays and weekends.)

mendelsd 8y ago

Simon Wren-Lewis argues that increasing supply won't help so long as there exists an arbitrage between rental yields and interest rates. Wealthy people will just outbid everyone else for the increased supply: https://mainlymacro.blogspot.com/2018/02/house-prices-and-rents-in-uk.html https://mainlymacro.blogspot.com/2018/02/house-prices-and-re... Richard Werner points out that the mortgage lending, with associated house price inflation, caught fire in the UK after Thatcher eliminated "corset" credit controls. That may be key to sorting the whole mess out.