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Housing is a universal cost. When prices come down human flourishing goes up. How did we get to a place where governments across the west desperately manipulate

Housing is a universal cost. When prices come down human flourishing goes up. How did we get to a place where governments across the west desperately manipulate markets to increase the cost of a basic necessity? How perverse!

arcticbull 7y ago
I agree with part of your premise -- artificial supply constraints caused by NIMBY-ism precludes building up in highest-demand metros which causes prices to go up. On the other hand, "human flourishing" is unlikely tied to real estate. Real estate is an investment vehicle, and one that is pretty broadly indexed to inflation on average in the US. It's often the case that renting somewhere cheaper will leave you economically advantaged as compared to ownership. I'd suggest playing with the variables on the New York Times rent vs. buy calculator from a few years back [1]. Owning is by no means a "clear win" but rather part of the American wealth-building narrative. [1] https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
- rwmj 7y ago
  I guess the OP means that humans are less able to function if they have to pay out a large proportion of their salary in rent, which is basically true for people living in cities near to jobs. It becomes a constant source of anxiety, and could mean that any break from work threatens to make them homeless. So it's probably fair to say that humans don't "flourish" if house prices (and therefore rent or mortgage payments) are very high in the specific places where jobs are located.
  - bradleyjg 7y ago
    Imagine an article bemoaning the fact that the cost of clean potable water was coming down across the country and calling for massive government intervention to increase the price of drinking water. That’s how this kind of article reads to me.
    - Gibbon1 7y ago
      That's the rentier run society for you. Seriously high rents and real estate prices rat fucks the real economy. The only satisfying thing about the pandemic is before the it hit our companies new landlord told us he was raising the rent to $4/sqft. We've just scored a better for us place a block away for $1.5/sqft. We're taking one of his other tenants with us too.
  - arcticbull 7y ago
    > I guess the OP means that humans are less able to function if they have to pay out a large proportion of their salary in rent, which is basically true for people living in cities near to jobs. I hear you but owning isn't a solution to that for most people. When you take into account the interest on a 30-year fixed-rate mortgage, HOAs, property taxes, homeowners insurance and 1% per year in repairs/upgrades, and periodic remodels. As a renter you're on the hook for none of that. A 1-bedroom 700sqft apartment in downtown SF rents for ~$3750 in my building. It's worth about $840K. You're out: - The opportunity cost on a $168,000 investment. - $2080/month in interest. - $870.00/month in HOA fees. - $83.33/month in homeowners insurance. - $1260/month in property taxes. - $700/month saved up towards your 1%/year repair bill. That means you're paying $4700 per month in what amounts to rent, and you're setting aside $1000 per month in principal saved in the first year. Once you deduct those from the salary you need to afford it in the first place, we're talking right around what rent would be. In general, especially in these areas, not only are your PITI payments really, really high -- rent tracks all-in expenses. Basically the cost of renting an apartment is approximately what the non-recoupables would be owning, for much of the first decade of ownership.
    - bradleyjg 7y ago
      I’m not commenting either way on who should own the housing stock. But whoever owns it, cost to live in it is strongly correlated with cost to buy it. So when prices come down that’s a good thing, not a bad thing. Same as with food, clean water, clothing, and for that matter cell phones, TVs, and musical instruments.
      - arcticbull 7y ago
        Agreed. My points are: (1) renting doesn't necessarily automatically have to put you at a disadvantage to owning (so long as you're investing what would have gone to principal) as there's a lot people forget to factor in. (2) house prices per square foot on average are the same now factoring in inflation as they were in 1970 and (3) house prices in major metros are governed not by anything other than artificial supply constraints imposed by city councils acting on behalf of landowners to the detriment of renters. They are unlikely to change substantially as a result of this financial ... hiccup.
- JSavageOne 7y ago
  > Real estate is an investment vehicle That's the problem. Real estate can't perpetually be both affordable and a good investment.
  - arcticbull 7y ago
    Yes, I agree completely. It's not physically possible, but it's also the core of the American financial wellness narrative. It is heartening however than on average it only tracks inflation, so it's not an investment so much as a store of value.
onion2k 7y ago
I suspect that house prices will never come down significantly because as soon as they start to fall in a crash a billion dollar investment fund will buy up all the housing stock to rent to people, which will keep the prices high and drive more people to renting.
- bradleyjg 7y ago
  I think ultimately lower levels of home ownership (which implies higher levels of corporate home ownership) will be healthy for housing costs. The sick dynamic of governments trying to increase the cost of housing is largely because ownership is so widespread. As much as we like to talk about the political power of deep pocketed corporations, that pales in comparison to the political power of homeowners when they are more than 65% of the population. Bring that number down significantly and we might see a much more reasonable policy environment.
  - onion2k 7y ago
    Governments want people to own homes because people use them as retirement investments. If everyone rented and didn't save the state welfare costs for old people would be huge.
    - bradleyjg 7y ago
      Home prices cannot grow above the rate of general inflation forever. Trying to indefinitely stretch a model that worked spectacularly well due to the unique circumstances the post-WWII economy will end in tears.

arcticbull 7y ago

I agree with part of your premise -- artificial supply constraints caused by NIMBY-ism precludes building up in highest-demand metros which causes prices to go up. On the other hand, "human flourishing" is unlikely tied to real estate. Real estate is an investment vehicle, and one that is pretty broadly indexed to inflation on average in the US. It's often the case that renting somewhere cheaper will leave you economically advantaged as compared to ownership. I'd suggest playing with the variables on the New York Times rent vs. buy calculator from a few years back [1]. Owning is by no means a "clear win" but rather part of the American wealth-building narrative. [1] https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

rwmj 7y ago
I guess the OP means that humans are less able to function if they have to pay out a large proportion of their salary in rent, which is basically true for people living in cities near to jobs. It becomes a constant source of anxiety, and could mean that any break from work threatens to make them homeless. So it's probably fair to say that humans don't "flourish" if house prices (and therefore rent or mortgage payments) are very high in the specific places where jobs are located.
- bradleyjg 7y ago
  Imagine an article bemoaning the fact that the cost of clean potable water was coming down across the country and calling for massive government intervention to increase the price of drinking water. That’s how this kind of article reads to me.
  - Gibbon1 7y ago
    That's the rentier run society for you. Seriously high rents and real estate prices rat fucks the real economy. The only satisfying thing about the pandemic is before the it hit our companies new landlord told us he was raising the rent to $4/sqft. We've just scored a better for us place a block away for $1.5/sqft. We're taking one of his other tenants with us too.
- arcticbull 7y ago
  > I guess the OP means that humans are less able to function if they have to pay out a large proportion of their salary in rent, which is basically true for people living in cities near to jobs. I hear you but owning isn't a solution to that for most people. When you take into account the interest on a 30-year fixed-rate mortgage, HOAs, property taxes, homeowners insurance and 1% per year in repairs/upgrades, and periodic remodels. As a renter you're on the hook for none of that. A 1-bedroom 700sqft apartment in downtown SF rents for ~$3750 in my building. It's worth about $840K. You're out: - The opportunity cost on a $168,000 investment. - $2080/month in interest. - $870.00/month in HOA fees. - $83.33/month in homeowners insurance. - $1260/month in property taxes. - $700/month saved up towards your 1%/year repair bill. That means you're paying $4700 per month in what amounts to rent, and you're setting aside $1000 per month in principal saved in the first year. Once you deduct those from the salary you need to afford it in the first place, we're talking right around what rent would be. In general, especially in these areas, not only are your PITI payments really, really high -- rent tracks all-in expenses. Basically the cost of renting an apartment is approximately what the non-recoupables would be owning, for much of the first decade of ownership.
  - bradleyjg 7y ago
    I’m not commenting either way on who should own the housing stock. But whoever owns it, cost to live in it is strongly correlated with cost to buy it. So when prices come down that’s a good thing, not a bad thing. Same as with food, clean water, clothing, and for that matter cell phones, TVs, and musical instruments.
    - arcticbull 7y ago
      Agreed. My points are: (1) renting doesn't necessarily automatically have to put you at a disadvantage to owning (so long as you're investing what would have gone to principal) as there's a lot people forget to factor in. (2) house prices per square foot on average are the same now factoring in inflation as they were in 1970 and (3) house prices in major metros are governed not by anything other than artificial supply constraints imposed by city councils acting on behalf of landowners to the detriment of renters. They are unlikely to change substantially as a result of this financial ... hiccup.
JSavageOne 7y ago
> Real estate is an investment vehicle That's the problem. Real estate can't perpetually be both affordable and a good investment.
- arcticbull 7y ago
  Yes, I agree completely. It's not physically possible, but it's also the core of the American financial wellness narrative. It is heartening however than on average it only tracks inflation, so it's not an investment so much as a store of value.

onion2k 7y ago

I suspect that house prices will never come down significantly because as soon as they start to fall in a crash a billion dollar investment fund will buy up all the housing stock to rent to people, which will keep the prices high and drive more people to renting.

bradleyjg 7y ago
I think ultimately lower levels of home ownership (which implies higher levels of corporate home ownership) will be healthy for housing costs. The sick dynamic of governments trying to increase the cost of housing is largely because ownership is so widespread. As much as we like to talk about the political power of deep pocketed corporations, that pales in comparison to the political power of homeowners when they are more than 65% of the population. Bring that number down significantly and we might see a much more reasonable policy environment.
- onion2k 7y ago
  Governments want people to own homes because people use them as retirement investments. If everyone rented and didn't save the state welfare costs for old people would be huge.
  - bradleyjg 7y ago
    Home prices cannot grow above the rate of general inflation forever. Trying to indefinitely stretch a model that worked spectacularly well due to the unique circumstances the post-WWII economy will end in tears.