6 ms·

Not sure what the scam is. Sounds like normal supply and demand.

by dh5 6y ago

fossuser 6y ago
Forcing artificially low housing supply via legislation.
- shuckles 6y ago
  The land values are legit. That they cannot be amortized across many occupants is not.
  - epistasis 6y ago
    I get where you are coming from, but my intuition is that we have actually created a massive bubble in land prices by restricting use so much. Land would get a hell of a lot cheaper if we massively decreased demand by letting people live in ways that use less land.
    - Ericson2314 6y ago
      Well there are countervailing trends here: on one hand, land being extra scarce because it is used inefficiently, and on the other, land being extra valuable because it is used efficiently. https://en.wikipedia.org/wiki/Jevons_paradox https://en.wikipedia.org/wiki/Jevons_paradox is probably the answer: Non-idiotic land use would make the cost of floor area decrease, but the cost of land increase.
    - shuckles 6y ago
      Land values in urban areas always increase in response to upzoning and loosening of development restrictions.
      - epistasis 6y ago
        That's because we have restricted land use so much that any upzoning is in response to intense pressure, which focuses massive amounts of capital that was waiting on the sidelines to compete for the new opportunity. If, instead, we hadn't massively down zoned everything in the 20th century, an upzoning wouldn't be "giving away" lots of value, because there would be an abundance of locations that could be used. This is why small focused upzonings like those that happen in NYC and SF are so disastrous and destroy neighborhoods. Instead of gradual city-wise change like what happens in more affordable places like Tokyo, SF and NYC are super expensive because they set zoning so almost everything is "built out." Any area that is "built out" has reached complete failure in city planning, in my opinion. Which is pretty much all of the Bay Area.
      - shuckles 6y ago
        I'm a little confused. Land values in Tokyo are high and have climbed consistently above inflation (post-bubble, of course).
        epistasis 6y ago
        Edit: I should preface this by saying that I'm not an economist, and would welcome nothing more than being able to learn through this discussion, and am quite likely to be wrong on this! I appreciate the engagement. But housing prices are affordable in comparison to places that have restricted use in less efficient ways. "Higher" is a relative term, and the question of what the baseline should be is quite complicated. They are also quite variable depending on what you can do with the land; if use is extremely restricted it can keep a plot of land down in price, even while it inflated the cost of land overall in the market.
    - creddit 6y ago
      Land value != property value
      - epistasis 6y ago
        Yes, of course, but the high housing costs in the Bay Area come mostly from the cost of land these days. Single family home-owners work to maximize their property values, and though they have made the construction process very expensive, land is most often far more valuable than the structure on it these days. This is quite shocking for most people around the country; when I was shopping around for home insurance quotes probably about a third of the people I talked to commented on how expensive land was. (But not the house, oddly!)
  - fossuser 6y ago
    Tokyo seems to be able to do it without an issue. [Edit: I think I was confused by the negatives in your comment, I think we're in agreement] It’s an incentive problem, and a lot of people are incentivized to keep supply down. Housing can be affordable or it can be a long term investment, but it can’t really be both. If a lot of people are desperate to have their property grow in value, they will fight anything that threatens that. I think it’d be interesting to revoke prop 13 in a staged way. You can either build some large X amount of new housing each year or you can accept a 10% increase of the property tax on your property each year until it reaches the market value rate. If you’re going to constrain supply you should have to pay the cost. Though for the same power reasons this could never pass politically.
- epistasis 6y ago
  This exactly. I consider nearly all economic rents a "scam." A land-value tax set to the value of the economic rent would be a great corrective force on this.
  - creddit 6y ago
    The best populist movement ever was Georgism. The ones we have today are pretty awful
Steven_Vellon 6y ago
The scam is the fact that prices are being propped up by constraining supply. If things get to a breaking point and the State limits the abilities of municipalities to block housing construction then the price of housing will deflate significantly.

Not sure what the scam is. Sounds like normal supply and demand.

by dh5 6y ago

Not sure what the scam is. Sounds like normal supply and demand.

fossuser 6y ago

Forcing artificially low housing supply via legislation.

shuckles 6y ago
The land values are legit. That they cannot be amortized across many occupants is not.
- epistasis 6y ago
  I get where you are coming from, but my intuition is that we have actually created a massive bubble in land prices by restricting use so much. Land would get a hell of a lot cheaper if we massively decreased demand by letting people live in ways that use less land.
  - Ericson2314 6y ago
    Well there are countervailing trends here: on one hand, land being extra scarce because it is used inefficiently, and on the other, land being extra valuable because it is used efficiently. https://en.wikipedia.org/wiki/Jevons_paradox https://en.wikipedia.org/wiki/Jevons_paradox is probably the answer: Non-idiotic land use would make the cost of floor area decrease, but the cost of land increase.
  - shuckles 6y ago
    Land values in urban areas always increase in response to upzoning and loosening of development restrictions.
    - epistasis 6y ago
      That's because we have restricted land use so much that any upzoning is in response to intense pressure, which focuses massive amounts of capital that was waiting on the sidelines to compete for the new opportunity. If, instead, we hadn't massively down zoned everything in the 20th century, an upzoning wouldn't be "giving away" lots of value, because there would be an abundance of locations that could be used. This is why small focused upzonings like those that happen in NYC and SF are so disastrous and destroy neighborhoods. Instead of gradual city-wise change like what happens in more affordable places like Tokyo, SF and NYC are super expensive because they set zoning so almost everything is "built out." Any area that is "built out" has reached complete failure in city planning, in my opinion. Which is pretty much all of the Bay Area.
    - shuckles 6y ago
      I'm a little confused. Land values in Tokyo are high and have climbed consistently above inflation (post-bubble, of course).
      - epistasis 6y ago
        Edit: I should preface this by saying that I'm not an economist, and would welcome nothing more than being able to learn through this discussion, and am quite likely to be wrong on this! I appreciate the engagement. But housing prices are affordable in comparison to places that have restricted use in less efficient ways. "Higher" is a relative term, and the question of what the baseline should be is quite complicated. They are also quite variable depending on what you can do with the land; if use is extremely restricted it can keep a plot of land down in price, even while it inflated the cost of land overall in the market.
  - creddit 6y ago
    Land value != property value
    - epistasis 6y ago
      Yes, of course, but the high housing costs in the Bay Area come mostly from the cost of land these days. Single family home-owners work to maximize their property values, and though they have made the construction process very expensive, land is most often far more valuable than the structure on it these days. This is quite shocking for most people around the country; when I was shopping around for home insurance quotes probably about a third of the people I talked to commented on how expensive land was. (But not the house, oddly!)
- fossuser 6y ago
  Tokyo seems to be able to do it without an issue. [Edit: I think I was confused by the negatives in your comment, I think we're in agreement] It’s an incentive problem, and a lot of people are incentivized to keep supply down. Housing can be affordable or it can be a long term investment, but it can’t really be both. If a lot of people are desperate to have their property grow in value, they will fight anything that threatens that. I think it’d be interesting to revoke prop 13 in a staged way. You can either build some large X amount of new housing each year or you can accept a 10% increase of the property tax on your property each year until it reaches the market value rate. If you’re going to constrain supply you should have to pay the cost. Though for the same power reasons this could never pass politically.
epistasis 6y ago
This exactly. I consider nearly all economic rents a "scam." A land-value tax set to the value of the economic rent would be a great corrective force on this.
- creddit 6y ago
  The best populist movement ever was Georgism. The ones we have today are pretty awful

Steven_Vellon 6y ago

The scam is the fact that prices are being propped up by constraining supply. If things get to a breaking point and the State limits the abilities of municipalities to block housing construction then the price of housing will deflate significantly.