5 ms·

Cities are becoming more expensive because of zoning. If you build enough housing that demand equals supply prices will be stable. Tokyo’s population has gone u

Cities are becoming more expensive because of zoning. If you build enough housing that demand equals supply prices will be stable. Tokyo’s population has gone up 50% over the last two decades and property prices and rents are basically flat because they’ve built more housing. Why does this happen in Japan but not NYC or SF? National, not local zoning. State level would probably work too.

sdrothrock 7y ago
> property prices and rents are basically flat because they’ve built more housing. > Why does this happen in Japan but not NYC or SF? I don't think zoning is the complete answer here -- there's a lot of stuff going on in Japan, and in Tokyo in particular, that's very different from the US. For example, a lot of cheaper places are tiny and have no shower or a shared shower. I don't think a lot of Americans would be willing to deal with that, but Japan has a public bath culture/history. In Tokyo in particular, there's a huge amount of public transportation options, which allow people to live farther out and commute easily (with the commute costs being covered by work) -- that's not as simple in NYC. Imagine living in White Plains and commuting to the heart of Tokyo every day in a reliable, timely fashion. Another thing is that a lot of cheaper housing in Tokyo is just old (post-war wood construction with a veneer of modernity) or in just plain bad areas (low-lying areas near rivers, below the water table, on reclaimed land, far from hospitals/fire departments, etc.) On top of all that, housing here just isn't an investment like it is in America. Nobody's house or apartment appreciates with age. It's not as simple as pointing at the average rent and zoning.
- shuckles 7y ago
  Zoning, building codes, and land use / value capture are all policies from which your observations stem. Housing itself is never the investment. It’s the land upon which the home sits, and I’d be willing to bet that land in Tokyo is expensive (though not as much as the infamous bubble highs) and probably increasingly so with improving amenities.
- orthoxerox 7y ago
  Most American houses shouldn't appreciate with age either, as they are made of wood frame and mineral insulation, both of which degrade must faster than brick or concrete. I've watched some walkaround videos of Japanese urban residential districts, and what I've noticed was their different approach to zoning. There are no front lawns or backyards, the doors lead right into the street or into a tiny courtyard. On the other hand, most houses are just a few storeys tall, there are no giant residential towers.
  - sdrothrock 7y ago
    There are definitely no lawns in the city, but usually houses will have a little yard-like area even if it's just for parking bicycles. Land is expensive, so it's a bit of a waste to put a lawn where you could have a larger room if you've bought the land at current prices. Older family houses will definitely have lawns, often complete with a little family shrine. There are plenty of giant residential towers and more going up all the time. The difference there is that there are laws that protect rights to sunlight, so it's difficult to build taller buildings in an established neighborhood: https://www.japantimes.co.jp/community/2014/08/24/how-tos/new-buildings-can-take-sunshine-life/ https://www.japantimes.co.jp/community/2014/08/24/how-tos/ne...
  - wil421 7y ago
    I’ve lived in a house from the 1940s and it only needed a new roof. There’s a log cabin a common ancestor built in the early 1800s that was made from whatever was around. How many high rises made from stone and brick have been torn down in NYC to make room for modern buildings? New England has a ton of really old wood houses that people pay a premium for.
    - sdrothrock 7y ago
      > I’ve lived in a house from the 1940s and it only needed a new roof. That's one of the major differences with Japan too -- a lot of housing is not meant to be multigenerational; it's built with the knowledge that the next person to buy the lot will be tearing it down and building a new house. A lot of the cheaper stuff in Tokyo is older wooden housing that either survived the firebombing or was tossed up cheaply in the post-war years, so it's very no-frills. My current apartment, for example, is raised about 30 cm off the ground with nothing around the actual building -- you can actually peer under the building and see the light from my kitchen going through the floorboards. There's storage built into the floor and if you pick it up, it just exposes a giant hole to the ground. No insulation, single-pane glass, a bathing room with rotting concrete and tile. I'm not saying all old housing in the US is better, but I definitely feel like building codes and/or initial quality was much higher in the US, so you have more buildings that were able to last longer (or through survivorship bias, the ones that lasted this long are just better) -- but in Japan, for whatever reason, you have a lot of these (almost literal) shacks with uninsulated walls and corrugated plastic panels on the roofs or across the windows.
- greggman2 7y ago
  Do you have any stats on apartments without baths? I know apartments with no showers exist but I haven't seen one since 2000. I don't know how common they still are. Prices of new apartments and houses are not that high (well, relative to NYC, SF). Sure there are expensive places like Meguro, but I see ads on the subways all the time for brand new 100m^2 apartments for ~$400k (I guess that's to your point that they are further out but don't a lot of people takes trains in to NYC from far away? I know Google offers buses from Walnut Creek to the Google Campus. That's 50 miles which I think is further than most of the reasonable prices places you can live in Tokyo) Japan also has the interesting issue (like you mentioned) that buying a house or condo is not an investment which I find fascinating. It suggests to me not that housing prices always go up just because of "economics" but also partly by culture and belief. People in many places take it for granted that real estate prices go up so they go up. They expect them to go up. Japanese take for granted that real estate prices go down. To them buying a house or an apartment is like buying a car. After you buy it it's used car / used house and no one wants that (well, less people want that), they want new so price goes down on non-new stuff. If I understand correctly there are only a few small areas of Tokyo (Meguro being one) where prices of used apartments are going up. If you can buy the land, the land prices might go up but if you're buying an apartment/condo you're not buying the land.
  - sdrothrock 7y ago
    > Do you have any stats on apartments without baths? I know apartments with no showers exist but I haven't seen one since 2000. I dug around a bit and I can't find anything outside of some articles with people wondering if those apartments are still worthwhile with the number of public baths going down. I know I've seen train ads for new ones as recently as last year -- it might be worth mentioning that all of these apartments are inside the Yamanote, which explains why they don't have baths... cut everything possible to keep the rent down to something someone could normally hope to afford.
  - jdkee 7y ago
    Apart from internal migration patterns, Japan is experiencing a demographic decline, which could be reflected by a drop in housing values.
tomweingarten 7y ago
NYC is probably not a good example to use here. Its median property prices are negative this year and flat for two years before that. It's likely (IMHO) that the post-recession building boom is a factor. https://streeteasy.com/blog/data-dashboard/?agg=Median&metric=Asking%20Price&type=Sales&bedrooms=Any%20Bedrooms&property=Any%20Property%20Type&minDate=2010-01-01&maxDate=2019-08-01&area=Flatiron,Brooklyn%20Heights https://streeteasy.com/blog/data-dashboard/?agg=Median&metri...
- Wowfunhappy 7y ago
  It's a perfect example for exactly that reason. NYC is expensive, but not as expensive as cities like San Francisco, precisely because we have more apartments here. We should be building significantly more, but this shows the continuum. Tokyo > New York City > San Francisco
  - shuckles 7y ago
    SF has built more units of housing per capita than NYC for seven of the last ten years that I have data for.
    - Wowfunhappy 7y ago
      That’s interesting—I hadn’t seen that! It’s really more a question of absolute supply, though. NYC is a lot more dense than SF.
      - shuckles 7y ago
        Another difference to consider is the superior transit infrastructure which allows for a much larger viable region to live in if you work in Manhattan, versus San Francisco within the Bay Area.
maxsilver 7y ago
> Cities are becoming more expensive because of zoning. If this were true, then all the US cities without zoning should be getting cheaper. But they aren't. They are also getting more expensive, and at similar (sometimes even faster) rates as major coastal cities. > If you build enough housing that demand equals supply prices will be stable. If this were true, then all the cities losing population should be getting cheaper. (Demand falling with stable supply should decrease prices). But they aren't, these cities are also getting more expensive, and at similar (sometimes even faster) rates as major coastal cities, despite the drop in demand. If this were true, then all the cities outbuilding their population growth (cities where new units exceed new residents) should be getting cheaper. (Supply greater than demand). But they aren't, these cities are also getting more expensive, at similar/faster rates as major coastal cities. > (Tokyo) property prices and rents are basically flat because they’ve built more housing. No, Tokyo property prices are flat because they allow housing and land to depreciate, they don't artificially prevent that from happening. The US does prevent this. The US does everything it can in basically every city to prevent depreciation from happening (often at the city, county, state and federal level). If we had let the banks fail in the mortgage crisis last decade, for example, we'd have a much more accurate housing market in the US. But since instead, all housing in every city is guaranteed to appreciate, and since the full faith of the federal government forever backs that guarantee over a long enough time, there's no reason for property values in general to not go up. Every investor with cash who wants the highest risk-free returns is looking at this situation and thinking "it's free real estate".
- randallsquared 7y ago
  > If this were true, then all the US cities without zoning should be getting cheaper. ...by which you mean Houston, since it's the only one. Houston is also getting more expensive, so that doesn't invalidate your point, but a control size of one is concerning. :)
  - maxsilver 7y ago
    > by which you mean Houston, since it's the only one. Well, and Minneapolis, and Grand Rapids (which has had no SFH zoning for over a decade straight now, but despite this, has had endured a ~2.5x increase in housing prices, and almost a 2x increase in rents). But yeah, Houston is a perfect example of this too. And of course, 70%+ of all cities in the Midwest have no enforced zoning. They have zoning laws on the books of course, but regularly waive them with variances for almost every project that requests one. I get that in California specifically, zoning rules actually have a little bit of bite, so in California specifically, fighting zoning rules might be a good thing, and HN is very California-centric, so people's opinions on topics are heavily influenced by their local situation. But California is not the whole of the US, that tactic won't work anywhere else, because by Californian standards, the rest of the country effectively already has almost no zoning. (Either literally, or effectively through waivers/variances). Every other mid-sized-or-larger city in the US is already in "build baby build" mode 24/7, and it's only ever increased prices everywhere it's happened. This should be clear to anyone who has ever paid for an property assessment -- property is valued almost entirely by the cost of the nearby property. The more valuable anything nearby gets, the higher prices everyone will have to pay.
beerandt 7y ago
In addition to zoning: Part of Dodd-Frank made it extremely difficult for contractors to finance new spec houses, or any housing that didn't participate in a federal multi-family housing program. Only the most financially stable companies could stay in the market. Otherwise, construction companies have to find customers (to do the actual financing) before they can start building. This means the market is always trying to catch up, but never really can.

sdrothrock 7y ago

> property prices and rents are basically flat because they’ve built more housing. > Why does this happen in Japan but not NYC or SF? I don't think zoning is the complete answer here -- there's a lot of stuff going on in Japan, and in Tokyo in particular, that's very different from the US. For example, a lot of cheaper places are tiny and have no shower or a shared shower. I don't think a lot of Americans would be willing to deal with that, but Japan has a public bath culture/history. In Tokyo in particular, there's a huge amount of public transportation options, which allow people to live farther out and commute easily (with the commute costs being covered by work) -- that's not as simple in NYC. Imagine living in White Plains and commuting to the heart of Tokyo every day in a reliable, timely fashion. Another thing is that a lot of cheaper housing in Tokyo is just old (post-war wood construction with a veneer of modernity) or in just plain bad areas (low-lying areas near rivers, below the water table, on reclaimed land, far from hospitals/fire departments, etc.) On top of all that, housing here just isn't an investment like it is in America. Nobody's house or apartment appreciates with age. It's not as simple as pointing at the average rent and zoning.

shuckles 7y ago
Zoning, building codes, and land use / value capture are all policies from which your observations stem. Housing itself is never the investment. It’s the land upon which the home sits, and I’d be willing to bet that land in Tokyo is expensive (though not as much as the infamous bubble highs) and probably increasingly so with improving amenities.
orthoxerox 7y ago
Most American houses shouldn't appreciate with age either, as they are made of wood frame and mineral insulation, both of which degrade must faster than brick or concrete. I've watched some walkaround videos of Japanese urban residential districts, and what I've noticed was their different approach to zoning. There are no front lawns or backyards, the doors lead right into the street or into a tiny courtyard. On the other hand, most houses are just a few storeys tall, there are no giant residential towers.
- sdrothrock 7y ago
  There are definitely no lawns in the city, but usually houses will have a little yard-like area even if it's just for parking bicycles. Land is expensive, so it's a bit of a waste to put a lawn where you could have a larger room if you've bought the land at current prices. Older family houses will definitely have lawns, often complete with a little family shrine. There are plenty of giant residential towers and more going up all the time. The difference there is that there are laws that protect rights to sunlight, so it's difficult to build taller buildings in an established neighborhood: https://www.japantimes.co.jp/community/2014/08/24/how-tos/new-buildings-can-take-sunshine-life/ https://www.japantimes.co.jp/community/2014/08/24/how-tos/ne...
- wil421 7y ago
  I’ve lived in a house from the 1940s and it only needed a new roof. There’s a log cabin a common ancestor built in the early 1800s that was made from whatever was around. How many high rises made from stone and brick have been torn down in NYC to make room for modern buildings? New England has a ton of really old wood houses that people pay a premium for.
  - sdrothrock 7y ago
    > I’ve lived in a house from the 1940s and it only needed a new roof. That's one of the major differences with Japan too -- a lot of housing is not meant to be multigenerational; it's built with the knowledge that the next person to buy the lot will be tearing it down and building a new house. A lot of the cheaper stuff in Tokyo is older wooden housing that either survived the firebombing or was tossed up cheaply in the post-war years, so it's very no-frills. My current apartment, for example, is raised about 30 cm off the ground with nothing around the actual building -- you can actually peer under the building and see the light from my kitchen going through the floorboards. There's storage built into the floor and if you pick it up, it just exposes a giant hole to the ground. No insulation, single-pane glass, a bathing room with rotting concrete and tile. I'm not saying all old housing in the US is better, but I definitely feel like building codes and/or initial quality was much higher in the US, so you have more buildings that were able to last longer (or through survivorship bias, the ones that lasted this long are just better) -- but in Japan, for whatever reason, you have a lot of these (almost literal) shacks with uninsulated walls and corrugated plastic panels on the roofs or across the windows.
greggman2 7y ago
Do you have any stats on apartments without baths? I know apartments with no showers exist but I haven't seen one since 2000. I don't know how common they still are. Prices of new apartments and houses are not that high (well, relative to NYC, SF). Sure there are expensive places like Meguro, but I see ads on the subways all the time for brand new 100m^2 apartments for ~$400k (I guess that's to your point that they are further out but don't a lot of people takes trains in to NYC from far away? I know Google offers buses from Walnut Creek to the Google Campus. That's 50 miles which I think is further than most of the reasonable prices places you can live in Tokyo) Japan also has the interesting issue (like you mentioned) that buying a house or condo is not an investment which I find fascinating. It suggests to me not that housing prices always go up just because of "economics" but also partly by culture and belief. People in many places take it for granted that real estate prices go up so they go up. They expect them to go up. Japanese take for granted that real estate prices go down. To them buying a house or an apartment is like buying a car. After you buy it it's used car / used house and no one wants that (well, less people want that), they want new so price goes down on non-new stuff. If I understand correctly there are only a few small areas of Tokyo (Meguro being one) where prices of used apartments are going up. If you can buy the land, the land prices might go up but if you're buying an apartment/condo you're not buying the land.
- sdrothrock 7y ago
  > Do you have any stats on apartments without baths? I know apartments with no showers exist but I haven't seen one since 2000. I dug around a bit and I can't find anything outside of some articles with people wondering if those apartments are still worthwhile with the number of public baths going down. I know I've seen train ads for new ones as recently as last year -- it might be worth mentioning that all of these apartments are inside the Yamanote, which explains why they don't have baths... cut everything possible to keep the rent down to something someone could normally hope to afford.
- jdkee 7y ago
  Apart from internal migration patterns, Japan is experiencing a demographic decline, which could be reflected by a drop in housing values.

tomweingarten 7y ago

NYC is probably not a good example to use here. Its median property prices are negative this year and flat for two years before that. It's likely (IMHO) that the post-recession building boom is a factor. https://streeteasy.com/blog/data-dashboard/?agg=Median&metric=Asking%20Price&type=Sales&bedrooms=Any%20Bedrooms&property=Any%20Property%20Type&minDate=2010-01-01&maxDate=2019-08-01&area=Flatiron,Brooklyn%20Heights https://streeteasy.com/blog/data-dashboard/?agg=Median&metri...

Wowfunhappy 7y ago
It's a perfect example for exactly that reason. NYC is expensive, but not as expensive as cities like San Francisco, precisely because we have more apartments here. We should be building significantly more, but this shows the continuum. Tokyo > New York City > San Francisco
- shuckles 7y ago
  SF has built more units of housing per capita than NYC for seven of the last ten years that I have data for.
  - Wowfunhappy 7y ago
    That’s interesting—I hadn’t seen that! It’s really more a question of absolute supply, though. NYC is a lot more dense than SF.
    - shuckles 7y ago
      Another difference to consider is the superior transit infrastructure which allows for a much larger viable region to live in if you work in Manhattan, versus San Francisco within the Bay Area.

maxsilver 7y ago

> Cities are becoming more expensive because of zoning. If this were true, then all the US cities without zoning should be getting cheaper. But they aren't. They are also getting more expensive, and at similar (sometimes even faster) rates as major coastal cities. > If you build enough housing that demand equals supply prices will be stable. If this were true, then all the cities losing population should be getting cheaper. (Demand falling with stable supply should decrease prices). But they aren't, these cities are also getting more expensive, and at similar (sometimes even faster) rates as major coastal cities, despite the drop in demand. If this were true, then all the cities outbuilding their population growth (cities where new units exceed new residents) should be getting cheaper. (Supply greater than demand). But they aren't, these cities are also getting more expensive, at similar/faster rates as major coastal cities. > (Tokyo) property prices and rents are basically flat because they’ve built more housing. No, Tokyo property prices are flat because they allow housing and land to depreciate, they don't artificially prevent that from happening. The US does prevent this. The US does everything it can in basically every city to prevent depreciation from happening (often at the city, county, state and federal level). If we had let the banks fail in the mortgage crisis last decade, for example, we'd have a much more accurate housing market in the US. But since instead, all housing in every city is guaranteed to appreciate, and since the full faith of the federal government forever backs that guarantee over a long enough time, there's no reason for property values in general to not go up. Every investor with cash who wants the highest risk-free returns is looking at this situation and thinking "it's free real estate".

randallsquared 7y ago
> If this were true, then all the US cities without zoning should be getting cheaper. ...by which you mean Houston, since it's the only one. Houston is also getting more expensive, so that doesn't invalidate your point, but a control size of one is concerning. :)
- maxsilver 7y ago
  > by which you mean Houston, since it's the only one. Well, and Minneapolis, and Grand Rapids (which has had no SFH zoning for over a decade straight now, but despite this, has had endured a ~2.5x increase in housing prices, and almost a 2x increase in rents). But yeah, Houston is a perfect example of this too. And of course, 70%+ of all cities in the Midwest have no enforced zoning. They have zoning laws on the books of course, but regularly waive them with variances for almost every project that requests one. I get that in California specifically, zoning rules actually have a little bit of bite, so in California specifically, fighting zoning rules might be a good thing, and HN is very California-centric, so people's opinions on topics are heavily influenced by their local situation. But California is not the whole of the US, that tactic won't work anywhere else, because by Californian standards, the rest of the country effectively already has almost no zoning. (Either literally, or effectively through waivers/variances). Every other mid-sized-or-larger city in the US is already in "build baby build" mode 24/7, and it's only ever increased prices everywhere it's happened. This should be clear to anyone who has ever paid for an property assessment -- property is valued almost entirely by the cost of the nearby property. The more valuable anything nearby gets, the higher prices everyone will have to pay.

beerandt 7y ago

In addition to zoning: Part of Dodd-Frank made it extremely difficult for contractors to finance new spec houses, or any housing that didn't participate in a federal multi-family housing program. Only the most financially stable companies could stay in the market. Otherwise, construction companies have to find customers (to do the actual financing) before they can start building. This means the market is always trying to catch up, but never really can.