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The idea from the headline should be viewed at a more macro level. A society that views housing as an investment means that we wind up adopting housing policies

The idea from the headline should be viewed at a more macro level. A society that views housing as an investment means that we wind up adopting housing policies that lead to people being priced out (i.e. regulatory capture). This eventually means people winding up in subpar situations like moving in with parents, couch surfing or living on the street. Now your argument about housing on a personal financial level is spot-on, at least points #1 and #2. As for the latter points, the first purpose of a house should be to house people. When we view housing as an investment we start making economically rational (but morally questionable) arguments like, "ban new apartments because they'll lower my home's value."

klipt 8y ago
Right, the problem is NIMBYs are allowed to rent-seek by preventing construction around them. And in San Francisco, Prop 13 / rent control insulates many people from any consequences of rising prices, as long as they don't have to move, which means they make decisions that push up prices for everyone else. In the economically ideal case we'd have a fair Land Value Tax to encourage as much building as necessary.
- asdff 8y ago
  So what might happen if California enacted statewide rent control? Capping yearly rent increases at inflation + 3%? There are places where properties have doubled in value in less than a dozen years while wages remain stagnant, leading to rents surging and more %income going to housing. Many low income renters are paying 50% or more of their income on rent, that's not sustainable for the wider economy that relies on low skill labor to function, and the solution is not to have people commute 4h every day to clean an office, teach a class, or fight a fire. The housing market moves so much faster than wages ever will, and it seems having only some units rent controlled exacerbates the problem for units that aren't, so why not make every unit in the state a rent controlled unit? The landlords are already insulated from the whiplash of the housing market from statewide property tax control in the form of prop 13, why not let renters enjoy that isolation as well?
  - jdavis703 8y ago
    There are several rent control bills in California right now. AB 36 will allow cities to enact rent control on older buildings. AB 36 would not apply to new construction, only to buildings older than 10 years. This should help to prevent supply crunches, or at least not make them worse. AB 1482 would set a state-wide cap on rent increases, for example inflation + 10%. The idea is to stop massive rent increases that lead to evictions. The exact number hasn’t been determined yet, the bill sponsors are trying to figure out a good number that protects tenants and gives landlords a legally guaranteed return on investment. These bills will face a lot of corporate opposition. It’s important that our electeds here from renters, homeowners and “mom & pop” landlords as they consider these bills.
    - bobthepanda 8y ago
      AB 36 sounds like it would encourage a lot more turnover on older buildings, incentivizing the redevelopment of what is currently affordable housing. New York has similar regulations, and what you end up having happen is that landlords will either redevelop or renovate to whatever the threshold is to get out of the affordable housing requirement.
      - jdavis703 8y ago
        In California landlords are already allowed to pass through “reasonable” capital costs on rent controlled units, so they can essentially already do this.
        shuckles 8y ago
        This is true in theory but in practice often hard to get approved. For example, in San Francisco you can never apply for a pass through on buildings occupied by the elderly or disabled even if that tenant sublets to non-protected people. In my experience, pass throughs are a theoretical concession instead of a practical one.
  - outlace 8y ago
    The price of housing is only part of it. The rising prices reflect the rising demand and the relatively static supply. Even if prices were capped, it doesn’t mean more people would be able to get housing. There’s still fewer units than there are people who want them, so people would get units based on some other mechanism beside price such as a lottery. The unpredictability this would entail would probably be worse than a functioning price mechanism. Imagine you get a job in San Francisco but there’s only a 20% chance you’ll be able to “win” a housing unit where you want. Versus the current reality of for sure being able to find housing given you’re willing to pay enough.
- gnopgnip 8y ago
  What is the downside to a land value tax? Or put another way, how can you fairly assess taxes based on the value of the land? It seems absurd that a vacant parking lot pays basically nothing in property taxes while a hotel of the same size pays tens of thousand a month, but both take up the same amount of space and have the same potential. This kind of tax would certainly lead to better utilization.
  - zzzzzzzza 8y ago
    most straight forward way is to buy a lot demolish everything on it, then sell it on the open market; voila you have a price point, do it a couple time and you can create a gradient Actual valuation methods used in real world by countries like Taiwan, Estonia, and Singapore to levy lvt (all countries with 90% plus home ownership) are more sophisticated than that though
  - closeparen 8y ago
    Land value tax is all about driving each parcel towards its highest-value, most economically rational use. City planning is all about cultivating low-value, (locally) irrational uses. So think about all the stuff that exists because planners kneecap its better-funded competition: art galleries, theaters, cute mom & pop retail, auto service & repair, manufacturing jobs, etc. Would you miss it? Could the city council get away with losing it? LVT says the state should not only stop protecting these things, it should do a 180 and actively kill the uses by levying taxes they can't afford. Rather than slowing/blocking the transition to condos and formula retail, accelerate it. In principle, the new denser buildings could have space for the old low-value uses, but new construction is expensive. The new buildings would have to age a while before those marginal uses could afford them, and in the meantime the tenant organizations would all die. Maybe this could be averted using some central-planning scheme, maybe not. But you can imagine how the electorate might not want to risk it. The trends LVT would tend to accelerate are the ones most residents lament. I think we should allow sites that are already dead or are transitioning voluntarily to drastically increase density. Letting owners do this forces tenants' hands, which is a sad tradeoff (and to the left-NIMBYs, a dealbreaker). LVT goes even further and forces owners' hands, which I'm less wild about.
- Bombthecat 8y ago
  In cologne (Germany) there is a law which forbid high buildings. (https://mobil.ksta.de/das-hoehenkonzept-kirchen-und-dom-sind-der-massstab-6658064 https://mobil.ksta.de/das-hoehenkonzept-kirchen-und-dom-sind...) you can bet your life, that this law will never leave. Preventing high buildings in the citi..
  - legulere 8y ago
    If you want high buildings go to Frankfurt. The structure of a city is what defines it. People move to a place because of how it is.
seem_2211 8y ago
Yah both of these points are valid. I had a good discussion with one of my dad's friends recently (who is a realtor), and mentioned that one of the biggest costs we never talk about is the cost of compliance. Basically, his argument is that the cost of existing housing is driven by the cost of building new housing, of which places like San Francisco have been very effective at limiting! But as well as that, what are the development fees for example? When politicians virtue signal about what percentage of a housing development will be below market rate for example, you have to remember that this sort of thing will be factored into the price you pay. Or the endless studies that city governments (again looking square at you San Francisco) commission. The buyer and the renter pay for these. America actually has relatively cheap housing across the vast majority of the country, so it's not as if the buildings themselves are the major factor in jacking up the prices.
- xKingfisher 8y ago
  There was a fantastic post on this subject by an architect in the Los Angeles subreddit last year. The general gist is that building requirements (parking in particular) make anything other than luxury condos financially infeasible. https://www.reddit.com/r/LosAngeles/comments/6lvwh4/im_an_architect_in_la_specializing_in_multifamily/ https://www.reddit.com/r/LosAngeles/comments/6lvwh4/im_an_ar...
snowwrestler 8y ago
> A society that views housing as an investment means that we wind up adopting housing policies that lead to people being priced out (i.e. regulatory capture). No. Housing that appreciates at exactly the rate of inflation can still be a good investment and a great tool for building wealth.
- bobthepanda 8y ago
  Homeowners aren't necessarily satisfied with that though, and they have voting power. Prop 13 is basically a voter-approved way of guaranteeing the upside of stratospheric rises in property value without reaping any of the downside (increased tax reflecting said skyrocketing property value).
  - snowwrestler 8y ago
    I agree with you. I think articles like this one contribute to the problem by perpetuating a false sense of what housing prices should do to be a "good investment."
  - aey 8y ago
    Prices go up because demand is higher than supply. No other reason. If cities doubled the number of houses built any year the average price went up by 5% or more, this wouldn’t be a problem. The tax rate could even be negative.
    - alasdair_ 8y ago
      >Prices go up because demand is higher than supply. No other reason. If the government mandates that the price of something is X, and X is higher than the price is now, prices go up. Also, remember than nominal price and economic price are distinct. “Price” needs to include all tax subsidies and other incentives/ dicincentives.
      - aey 8y ago
        No they don’t. See the USSR, real prices were completely removed from what the government set. If SF set the price of a house to 100k, people would just bribe each other the difference.
pascalxus 8y ago
Yup. And even if you view housing as an investment and even if you create policies in favor of that, in the long run, you're not going to have greater gains anyways because the growth is not sustainable. Long run, housing always has to revert to a mean increase equivalent to incomes/inflation, even if in the short term you might have a huge run up. In the short term there can be a huge run up causing great pain, but after that it'll come back to it's income/inflation rate increase.
hinkley 8y ago
It also encourages people to buy the biggest house they can afford instead of the smallest one they can be comfortable in. Very few people buy the nicest car or the best TV, because we know those don't have a return. But being bad at math, we can't seem to figure out that we only see 30% of every dollar put into the house (taxes, mortgage, upkeep, improvements) back and we conveniently forget about inflation. Yeah, if your house doubled in value in 25 years that means you kept pace with inflation. You could have done better with CDs.

klipt 8y ago

Right, the problem is NIMBYs are allowed to rent-seek by preventing construction around them. And in San Francisco, Prop 13 / rent control insulates many people from any consequences of rising prices, as long as they don't have to move, which means they make decisions that push up prices for everyone else. In the economically ideal case we'd have a fair Land Value Tax to encourage as much building as necessary.

asdff 8y ago
So what might happen if California enacted statewide rent control? Capping yearly rent increases at inflation + 3%? There are places where properties have doubled in value in less than a dozen years while wages remain stagnant, leading to rents surging and more %income going to housing. Many low income renters are paying 50% or more of their income on rent, that's not sustainable for the wider economy that relies on low skill labor to function, and the solution is not to have people commute 4h every day to clean an office, teach a class, or fight a fire. The housing market moves so much faster than wages ever will, and it seems having only some units rent controlled exacerbates the problem for units that aren't, so why not make every unit in the state a rent controlled unit? The landlords are already insulated from the whiplash of the housing market from statewide property tax control in the form of prop 13, why not let renters enjoy that isolation as well?
- jdavis703 8y ago
  There are several rent control bills in California right now. AB 36 will allow cities to enact rent control on older buildings. AB 36 would not apply to new construction, only to buildings older than 10 years. This should help to prevent supply crunches, or at least not make them worse. AB 1482 would set a state-wide cap on rent increases, for example inflation + 10%. The idea is to stop massive rent increases that lead to evictions. The exact number hasn’t been determined yet, the bill sponsors are trying to figure out a good number that protects tenants and gives landlords a legally guaranteed return on investment. These bills will face a lot of corporate opposition. It’s important that our electeds here from renters, homeowners and “mom & pop” landlords as they consider these bills.
  - bobthepanda 8y ago
    AB 36 sounds like it would encourage a lot more turnover on older buildings, incentivizing the redevelopment of what is currently affordable housing. New York has similar regulations, and what you end up having happen is that landlords will either redevelop or renovate to whatever the threshold is to get out of the affordable housing requirement.
    - jdavis703 8y ago
      In California landlords are already allowed to pass through “reasonable” capital costs on rent controlled units, so they can essentially already do this.
      - shuckles 8y ago
        This is true in theory but in practice often hard to get approved. For example, in San Francisco you can never apply for a pass through on buildings occupied by the elderly or disabled even if that tenant sublets to non-protected people. In my experience, pass throughs are a theoretical concession instead of a practical one.
- outlace 8y ago
  The price of housing is only part of it. The rising prices reflect the rising demand and the relatively static supply. Even if prices were capped, it doesn’t mean more people would be able to get housing. There’s still fewer units than there are people who want them, so people would get units based on some other mechanism beside price such as a lottery. The unpredictability this would entail would probably be worse than a functioning price mechanism. Imagine you get a job in San Francisco but there’s only a 20% chance you’ll be able to “win” a housing unit where you want. Versus the current reality of for sure being able to find housing given you’re willing to pay enough.
gnopgnip 8y ago
What is the downside to a land value tax? Or put another way, how can you fairly assess taxes based on the value of the land? It seems absurd that a vacant parking lot pays basically nothing in property taxes while a hotel of the same size pays tens of thousand a month, but both take up the same amount of space and have the same potential. This kind of tax would certainly lead to better utilization.
- zzzzzzzza 8y ago
  most straight forward way is to buy a lot demolish everything on it, then sell it on the open market; voila you have a price point, do it a couple time and you can create a gradient Actual valuation methods used in real world by countries like Taiwan, Estonia, and Singapore to levy lvt (all countries with 90% plus home ownership) are more sophisticated than that though
- closeparen 8y ago
  Land value tax is all about driving each parcel towards its highest-value, most economically rational use. City planning is all about cultivating low-value, (locally) irrational uses. So think about all the stuff that exists because planners kneecap its better-funded competition: art galleries, theaters, cute mom & pop retail, auto service & repair, manufacturing jobs, etc. Would you miss it? Could the city council get away with losing it? LVT says the state should not only stop protecting these things, it should do a 180 and actively kill the uses by levying taxes they can't afford. Rather than slowing/blocking the transition to condos and formula retail, accelerate it. In principle, the new denser buildings could have space for the old low-value uses, but new construction is expensive. The new buildings would have to age a while before those marginal uses could afford them, and in the meantime the tenant organizations would all die. Maybe this could be averted using some central-planning scheme, maybe not. But you can imagine how the electorate might not want to risk it. The trends LVT would tend to accelerate are the ones most residents lament. I think we should allow sites that are already dead or are transitioning voluntarily to drastically increase density. Letting owners do this forces tenants' hands, which is a sad tradeoff (and to the left-NIMBYs, a dealbreaker). LVT goes even further and forces owners' hands, which I'm less wild about.
Bombthecat 8y ago
In cologne (Germany) there is a law which forbid high buildings. (https://mobil.ksta.de/das-hoehenkonzept-kirchen-und-dom-sind-der-massstab-6658064 https://mobil.ksta.de/das-hoehenkonzept-kirchen-und-dom-sind...) you can bet your life, that this law will never leave. Preventing high buildings in the citi..
- legulere 8y ago
  If you want high buildings go to Frankfurt. The structure of a city is what defines it. People move to a place because of how it is.

seem_2211 8y ago

Yah both of these points are valid. I had a good discussion with one of my dad's friends recently (who is a realtor), and mentioned that one of the biggest costs we never talk about is the cost of compliance. Basically, his argument is that the cost of existing housing is driven by the cost of building new housing, of which places like San Francisco have been very effective at limiting! But as well as that, what are the development fees for example? When politicians virtue signal about what percentage of a housing development will be below market rate for example, you have to remember that this sort of thing will be factored into the price you pay. Or the endless studies that city governments (again looking square at you San Francisco) commission. The buyer and the renter pay for these. America actually has relatively cheap housing across the vast majority of the country, so it's not as if the buildings themselves are the major factor in jacking up the prices.

xKingfisher 8y ago
There was a fantastic post on this subject by an architect in the Los Angeles subreddit last year. The general gist is that building requirements (parking in particular) make anything other than luxury condos financially infeasible. https://www.reddit.com/r/LosAngeles/comments/6lvwh4/im_an_architect_in_la_specializing_in_multifamily/ https://www.reddit.com/r/LosAngeles/comments/6lvwh4/im_an_ar...

snowwrestler 8y ago

> A society that views housing as an investment means that we wind up adopting housing policies that lead to people being priced out (i.e. regulatory capture). No. Housing that appreciates at exactly the rate of inflation can still be a good investment and a great tool for building wealth.

bobthepanda 8y ago
Homeowners aren't necessarily satisfied with that though, and they have voting power. Prop 13 is basically a voter-approved way of guaranteeing the upside of stratospheric rises in property value without reaping any of the downside (increased tax reflecting said skyrocketing property value).
- snowwrestler 8y ago
  I agree with you. I think articles like this one contribute to the problem by perpetuating a false sense of what housing prices should do to be a "good investment."
- aey 8y ago
  Prices go up because demand is higher than supply. No other reason. If cities doubled the number of houses built any year the average price went up by 5% or more, this wouldn’t be a problem. The tax rate could even be negative.
  - alasdair_ 8y ago
    >Prices go up because demand is higher than supply. No other reason. If the government mandates that the price of something is X, and X is higher than the price is now, prices go up. Also, remember than nominal price and economic price are distinct. “Price” needs to include all tax subsidies and other incentives/ dicincentives.
    - aey 8y ago
      No they don’t. See the USSR, real prices were completely removed from what the government set. If SF set the price of a house to 100k, people would just bribe each other the difference.

pascalxus 8y ago

Yup. And even if you view housing as an investment and even if you create policies in favor of that, in the long run, you're not going to have greater gains anyways because the growth is not sustainable. Long run, housing always has to revert to a mean increase equivalent to incomes/inflation, even if in the short term you might have a huge run up. In the short term there can be a huge run up causing great pain, but after that it'll come back to it's income/inflation rate increase.

hinkley 8y ago

It also encourages people to buy the biggest house they can afford instead of the smallest one they can be comfortable in. Very few people buy the nicest car or the best TV, because we know those don't have a return. But being bad at math, we can't seem to figure out that we only see 30% of every dollar put into the house (taxes, mortgage, upkeep, improvements) back and we conveniently forget about inflation. Yeah, if your house doubled in value in 25 years that means you kept pace with inflation. You could have done better with CDs.