14 ms·

Pretty much every mainstream economist put the blame for this squarely on the massively increased regulation of the housing market since the 70s causing a massi

Pretty much every mainstream economist put the blame for this squarely on the massively increased regulation of the housing market since the 70s causing a massive decrease in the amount of new construction, not wealth itself.

teraku 6y ago
Hahahahahahahahahahahahahahahahahahahaha What? Seriously?
- zachkatz 6y ago
  https://www.strongtowns.org/journal/2019/7/3/making-normal-neighborhoods-legal-again https://www.strongtowns.org/journal/2019/7/3/making-normal-n...
  - teraku 6y ago
    But there is nothing about pricing in there. I mean, I'll be honest and share that I didn't know the housing regulations are so f-ed up in the US, but they are pretty complicated everywhere. What drives housing prices is a deflation of living goods coupled with an inflation of luxury goods which makes finding safe investments for large sums of money with relatively high yields hard to find. This is driven by an increasing inequality gap, which makes rich people desperately trying to find more things to invest their money into. And they have found housing in urban areas is the safest bet right now. So houses are bought and sold for the millions in hopes somebody else buys it for higher prices or the area justifies the rent.
    - comp_throw7 6y ago
      Many things driving housing pricing (nothing is monocausal!), but the main thing driving housing pricing in the locations where people constantly talk about housing pricing (SFBA, NYC, London, etc) are restrictions on building. That's basically it. Housing is a relatively poor investment vehicle compared to broad equity market indices; the only reason you'd want exposure as a "rich person" to it is for diversification, and for that you wouldn't really care to buy in overinflated markets with significant political risks.
    - lmm 6y ago
      > But there is nothing about pricing in there. Sure, but that part immediately follows - there was a good piece from a property developer working in Los Angeles (which has a lot of those kind of regulations) that was posted here a couple of months back. Because of all these regulations (parking minimums, max heights, setback requirements and so on), the only kind of housing that is profitable or even possible to build is luxury housing - the land costs x, the things that the regulations require cost y, you have to charge a lot more than the city's existing housing stock (most of which is grandfathered in) so you can only justify that by targeting the high end. There is definitely speculation in the housing market, but most or all of the price rise can be explained by simple supply and demand. And since housing demand is fairly inelastic (everyone needs a house), a small amount of undersupply means a big increase in price.
    - imtringued 6y ago
      High prices are a symptom of poorly planned neighborhoods.
mnsc 6y ago
Pretty much every mainstream economist defending the mainstream economy to preserve the status quo in that widening the income gap is a good thing for the mainstream economy you mean?
- saddlerustle 6y ago
  High housing prices is terrible for the economy. It's the cause of the decrease in worker mobility which is probably a big the part of the stagnation in productivity growth. Estimates put it at a full 10% of GDP lost.
- gameman144 6y ago
  There are actually loads of mainstream economists today who recognize and are looking to address the wealth gap. Most of the pushback I've read about has been objections that specific policies proposed to solve it have side-effects that create a whole new slew of problems.
- imtringued 6y ago
  Pretty much every economist thinks "high prices? make more!". That applies to housing too.
  - engineeringwoke 6y ago
    Buh... but the GDP went up? That's good right?
  - Mauricebranagh 6y ago
    Which is then snapped up in a lot of cities (London SF Vancouver) by the newly rich from places like China / Russia as a way to get their money out of the country.
piva00 6y ago
Wait, all mainstream economists put the blame on massive increase of regulation all around the developed world? I really doubt it's happened everywhere, from NYC, San Francisco, Los Angeles, Houston, Portland, Seattle to Berlin, Paris, Stockholm, Copenhagen, Oslo, München, Vienna, Brussels, Amsterdam and so on. Everywhere housing prices went way up, I doubt everywhere had the same issues with regulations since the 70s. Now let's talk about cheap credit...
- marvin 6y ago
  Yes - GP is right. When they say regulation, they mean preventing market forces from building as much prices allow. This NIMBYism is a global phenomenon and the root cause. All the other factors certainly contribute, but cheap credit only affects how much the most desperate buyer is able to pay. This becomes the limiting factor almost everywhere, meaning that prices would be equally unaffordable if credit wasn’t cheap. Building much more is the only fundamental solution, as this will reduce the proportion of desperate buyers. But of course local democracy prevents that - meaning, the problem persists indefinitely and we’re only wasting time discussing it.
  - piva00 6y ago
    > cheap credit only affects how much the most desperate buyer is able to pay I disagree with this statement, cheap credit allows banks to offer longer term mortgages and buyers able to afford a larger principal with the same per-month cost, pushing the prices upwards due to keeping payments low on a per-month basis, due to low interests and longer term plans. This definitely pushes the price of all market upwards. It's a similar effect to tuition costs in the US, cheap credit, bankruptcy laws make them pretty safe for banks to take risk, flooding the market and allowing universities to hike prices. Building is fundamental, but cheap credit has an upwards pressure in price, magnifying the effect. All in all, I completely agree with your take on the solution. Build fucking more, population and specially cities have grown quite a lot on the past 3-4 decades, we still live with most dwellings built then than now.
    - ihyfhgyfhth 6y ago
stdbrouw 6y ago
That's simply not true. Economists who try to explain the housing crisis have pointed to increased regulation, cheap credit leading to an asset bubble, speculation, ill-advised tax cuts for homeowners, NIMBYism (not by government but by current residents), irrational buy vs. rent decisions, changing preferences for city vs. suburb, relaxed downpayment requirements, changing lifestyles and demographics with bachelors and asset-rich elderly people taking up a lot of housing stock, population increases, stricter building codes and demands for comfort, the rise of short-term rentals for tourism, reluctance by governments and builders to look too far into the future in case demand collapses, and so on, and so on. If you'd have to pick one factor, I'd have to guess it's easy money leading people to buy more expensive homes than they ought to, which drives up prices, but it probably depends a lot from country to country.
- TeMPOraL 6y ago
  What about just, people buying multiple houses/apartments to rent them out? IANAE, but I have a sinking feeling the situation would quickly improve if ownership had per-person limits (and no easy way to pool the limits into a company). Countries could build new housing faster than the population grows, but as long as it can be scooped up by the wealthy for renting out, the scarcity would prevail.
  - stdbrouw 6y ago
    Not an expert in macroeconomics either, but in a perfect free market there shouldn't be a lot of difference between renting and buying: if you can get a 5% yearly return by renting out a house, then the person renting from you can probably also get a 5% yearly return by investing their freed-up capital elsewhere and/or by not having to pay interest. If renting is too expensive, you buy, and if buying is too expensive, you rent. If one kind of investment like land or housing turns out to be particularly lucrative, capital will flow towards that type of investment and drive down returns towards the average again. Companies rent and lease stuff all the time, even if they have the money to buy, because often it just makes more sense. So there has to be something to disturb that happy picture and benefit owners at the expense of renters: a wonky tax structure, speculation, rate of return on land consistently higher than for other asset classes, cultural norms that value homeownership, who knows. Ownership of multiple dwellings by the wealthy might play a role, but in itself it's not a sufficient condition for high housing prices. (It would be different if the wealthy were buying these houses to live in them or to leave them empty, as that would increase demand and constrain supply. Happening in London, Vancouver and a bunch of other places, I think. Also sort of like what happened with the quinoa fad: https://en.wikipedia.org/wiki/Quinoa#Effects_of_rising_demand_on_growers https://en.wikipedia.org/wiki/Quinoa#Effects_of_rising_deman...)
deleted 6y ago
[deleted]
danjac 6y ago
In the UK the governments of the 70s and 80s stopped building houses and started selling off their existing housing stock. https://en.wikipedia.org/wiki/Housing_Act_1980 https://en.wikipedia.org/wiki/Housing_Act_1980 > By 2013, some tenants who had purchased their council flats, sold them later to speculators, investors or property companies. By 2013, a one-bedroom council flat that sold for £50,000 in the early 1990s, for example, had a market price of £250,000.[9] A tight housing market led to increased rent as construction of new homes decreased.[9]
kuu 6y ago
Spain and its empty 3.5M houses send you regards. https://www.thelocal.es/20140225/spain-worst-in-europe-for-empty-properties/ https://www.thelocal.es/20140225/spain-worst-in-europe-for-e...
- Arkhaine_kupo 6y ago
  The price of those houses should be 10% of what it is, but the problem is banks own them and if they reduce the price then their numbers look red. They are artificially inflated housing prices to keep bank bonds from plummeting.
  - agustif 6y ago
    So how do you fix this shit? We're basically fucked. It's not like our government will get EU's permission to let the banks fail or something...
    - krageon 6y ago
      > So how do you fix this shit The banks in question are essentially in agreement about prices and work together to keep them inflated. That's essentially cartel formation and needs to be prosecuted. From a social standpoint, denying folks a roof over their head just because you want some numbers on a paper to look good should already mean that everyone ostracizes you. It's unquestionably evil.
      - agustif 6y ago
        I don't think our judiciary arm, which is supposedly independent from our government, but reality is much more messy than that, will do anything about this shit. Revolving doors... and all. Maybe change could be enacted on the local government level which is the power more easily sizeable by real people and not political drones, in order to hijack current zoning laws which as far as I know are heavily concentrated down to local adminstrations like -ayuntamientos-, which in itself seems to be what's making things more complicated as corruption is harder to spot there, even if it's more obviously done than at higher levels... Anyways... Maybe a return to the ghost villages once a job is not easily found in a city but online, but remote seems hard to implement here locally on a culture level at least until a couple generations of older folks retire from management, where one could get cheap land and construct with fairly advanced and economically minded new construction processes, like 3d printing homes or whatever, maybe... But at the end of the day, we're still fucked, paying high rents for small jails in highly contaminated city centres... One can only dream to retire on the countryside for now.
sharperguy 6y ago
I keep hearing people debate about why housing prices are so high but it confuses me. Didn't housing prices fall dramatically in the 2008 financial crisis? Didn't various governments put vast amounts of money into the economy in an effort to ensure house prices returned to their previous levels and continued to rise? It seems as if high housing prices are an explicit policy of most major powers at this time.
- nl 6y ago
  > Didn't housing prices fall dramatically in the 2008 financial crisis? No, not really. https://www.statista.com/statistics/240991/average-sales-prices-of-new-homes-sold-in-the-us/ https://www.statista.com/statistics/240991/average-sales-pri... > Didn't various governments put vast amounts of money into the economy in an effort to ensure house prices returned to their previous levels and continued to rise? No. They put lots of money into the economy as Keynesian economic expansion policy, to combat unemployment. House prices simply weren’t as dramatically effected as you seem to think. Check the statistics on the previous link if you don’t believe me.
- ihyfhgyfhth 6y ago
  Yes, exactly. https://betterdwelling.com/canada-says-property-bubble-not-great-for-locals-good-for-foreign-investors/ https://betterdwelling.com/canada-says-property-bubble-not-g...
- HWR_14 6y ago
  No, housing prices didn't fall dramatically in the wake of the 2008 crisis. I mean, sure, they fell 33%, but they were still higher (compared to income) than at the beginning before the start of the 2000-2008 bubble, at least in the 80 years of records I can trivially look up. That's true in the US and UK. I'd contend that preventing massive asset depreciation, including housing, was an explicit policy of every major economic power in North America, Europe and China. I don't know, but suspect other major economic powers also participated in that, but I'm not as well versed. (I should point out that in the 1950s it was just as large a multiplier of household income, but in that time we went from one wagerearner to two.)

teraku 6y ago

Hahahahahahahahahahahahahahahahahahahaha What? Seriously?

zachkatz 6y ago
https://www.strongtowns.org/journal/2019/7/3/making-normal-neighborhoods-legal-again https://www.strongtowns.org/journal/2019/7/3/making-normal-n...
- teraku 6y ago
  But there is nothing about pricing in there. I mean, I'll be honest and share that I didn't know the housing regulations are so f-ed up in the US, but they are pretty complicated everywhere. What drives housing prices is a deflation of living goods coupled with an inflation of luxury goods which makes finding safe investments for large sums of money with relatively high yields hard to find. This is driven by an increasing inequality gap, which makes rich people desperately trying to find more things to invest their money into. And they have found housing in urban areas is the safest bet right now. So houses are bought and sold for the millions in hopes somebody else buys it for higher prices or the area justifies the rent.
  - comp_throw7 6y ago
    Many things driving housing pricing (nothing is monocausal!), but the main thing driving housing pricing in the locations where people constantly talk about housing pricing (SFBA, NYC, London, etc) are restrictions on building. That's basically it. Housing is a relatively poor investment vehicle compared to broad equity market indices; the only reason you'd want exposure as a "rich person" to it is for diversification, and for that you wouldn't really care to buy in overinflated markets with significant political risks.
  - lmm 6y ago
    > But there is nothing about pricing in there. Sure, but that part immediately follows - there was a good piece from a property developer working in Los Angeles (which has a lot of those kind of regulations) that was posted here a couple of months back. Because of all these regulations (parking minimums, max heights, setback requirements and so on), the only kind of housing that is profitable or even possible to build is luxury housing - the land costs x, the things that the regulations require cost y, you have to charge a lot more than the city's existing housing stock (most of which is grandfathered in) so you can only justify that by targeting the high end. There is definitely speculation in the housing market, but most or all of the price rise can be explained by simple supply and demand. And since housing demand is fairly inelastic (everyone needs a house), a small amount of undersupply means a big increase in price.
  - imtringued 6y ago
    High prices are a symptom of poorly planned neighborhoods.

mnsc 6y ago

Pretty much every mainstream economist defending the mainstream economy to preserve the status quo in that widening the income gap is a good thing for the mainstream economy you mean?

saddlerustle 6y ago
High housing prices is terrible for the economy. It's the cause of the decrease in worker mobility which is probably a big the part of the stagnation in productivity growth. Estimates put it at a full 10% of GDP lost.
gameman144 6y ago
There are actually loads of mainstream economists today who recognize and are looking to address the wealth gap. Most of the pushback I've read about has been objections that specific policies proposed to solve it have side-effects that create a whole new slew of problems.
imtringued 6y ago
Pretty much every economist thinks "high prices? make more!". That applies to housing too.
- engineeringwoke 6y ago
  Buh... but the GDP went up? That's good right?
- Mauricebranagh 6y ago
  Which is then snapped up in a lot of cities (London SF Vancouver) by the newly rich from places like China / Russia as a way to get their money out of the country.

piva00 6y ago

Wait, all mainstream economists put the blame on massive increase of regulation all around the developed world? I really doubt it's happened everywhere, from NYC, San Francisco, Los Angeles, Houston, Portland, Seattle to Berlin, Paris, Stockholm, Copenhagen, Oslo, München, Vienna, Brussels, Amsterdam and so on. Everywhere housing prices went way up, I doubt everywhere had the same issues with regulations since the 70s. Now let's talk about cheap credit...

marvin 6y ago
Yes - GP is right. When they say regulation, they mean preventing market forces from building as much prices allow. This NIMBYism is a global phenomenon and the root cause. All the other factors certainly contribute, but cheap credit only affects how much the most desperate buyer is able to pay. This becomes the limiting factor almost everywhere, meaning that prices would be equally unaffordable if credit wasn’t cheap. Building much more is the only fundamental solution, as this will reduce the proportion of desperate buyers. But of course local democracy prevents that - meaning, the problem persists indefinitely and we’re only wasting time discussing it.
- piva00 6y ago
  > cheap credit only affects how much the most desperate buyer is able to pay I disagree with this statement, cheap credit allows banks to offer longer term mortgages and buyers able to afford a larger principal with the same per-month cost, pushing the prices upwards due to keeping payments low on a per-month basis, due to low interests and longer term plans. This definitely pushes the price of all market upwards. It's a similar effect to tuition costs in the US, cheap credit, bankruptcy laws make them pretty safe for banks to take risk, flooding the market and allowing universities to hike prices. Building is fundamental, but cheap credit has an upwards pressure in price, magnifying the effect. All in all, I completely agree with your take on the solution. Build fucking more, population and specially cities have grown quite a lot on the past 3-4 decades, we still live with most dwellings built then than now.
  - ihyfhgyfhth 6y ago

stdbrouw 6y ago

That's simply not true. Economists who try to explain the housing crisis have pointed to increased regulation, cheap credit leading to an asset bubble, speculation, ill-advised tax cuts for homeowners, NIMBYism (not by government but by current residents), irrational buy vs. rent decisions, changing preferences for city vs. suburb, relaxed downpayment requirements, changing lifestyles and demographics with bachelors and asset-rich elderly people taking up a lot of housing stock, population increases, stricter building codes and demands for comfort, the rise of short-term rentals for tourism, reluctance by governments and builders to look too far into the future in case demand collapses, and so on, and so on. If you'd have to pick one factor, I'd have to guess it's easy money leading people to buy more expensive homes than they ought to, which drives up prices, but it probably depends a lot from country to country.

TeMPOraL 6y ago
What about just, people buying multiple houses/apartments to rent them out? IANAE, but I have a sinking feeling the situation would quickly improve if ownership had per-person limits (and no easy way to pool the limits into a company). Countries could build new housing faster than the population grows, but as long as it can be scooped up by the wealthy for renting out, the scarcity would prevail.
- stdbrouw 6y ago
  Not an expert in macroeconomics either, but in a perfect free market there shouldn't be a lot of difference between renting and buying: if you can get a 5% yearly return by renting out a house, then the person renting from you can probably also get a 5% yearly return by investing their freed-up capital elsewhere and/or by not having to pay interest. If renting is too expensive, you buy, and if buying is too expensive, you rent. If one kind of investment like land or housing turns out to be particularly lucrative, capital will flow towards that type of investment and drive down returns towards the average again. Companies rent and lease stuff all the time, even if they have the money to buy, because often it just makes more sense. So there has to be something to disturb that happy picture and benefit owners at the expense of renters: a wonky tax structure, speculation, rate of return on land consistently higher than for other asset classes, cultural norms that value homeownership, who knows. Ownership of multiple dwellings by the wealthy might play a role, but in itself it's not a sufficient condition for high housing prices. (It would be different if the wealthy were buying these houses to live in them or to leave them empty, as that would increase demand and constrain supply. Happening in London, Vancouver and a bunch of other places, I think. Also sort of like what happened with the quinoa fad: https://en.wikipedia.org/wiki/Quinoa#Effects_of_rising_demand_on_growers https://en.wikipedia.org/wiki/Quinoa#Effects_of_rising_deman...)

deleted 6y ago

[deleted]

danjac 6y ago

In the UK the governments of the 70s and 80s stopped building houses and started selling off their existing housing stock. https://en.wikipedia.org/wiki/Housing_Act_1980 https://en.wikipedia.org/wiki/Housing_Act_1980 > By 2013, some tenants who had purchased their council flats, sold them later to speculators, investors or property companies. By 2013, a one-bedroom council flat that sold for £50,000 in the early 1990s, for example, had a market price of £250,000.[9] A tight housing market led to increased rent as construction of new homes decreased.[9]

kuu 6y ago

Spain and its empty 3.5M houses send you regards. https://www.thelocal.es/20140225/spain-worst-in-europe-for-empty-properties/ https://www.thelocal.es/20140225/spain-worst-in-europe-for-e...

Arkhaine_kupo 6y ago
The price of those houses should be 10% of what it is, but the problem is banks own them and if they reduce the price then their numbers look red. They are artificially inflated housing prices to keep bank bonds from plummeting.
- agustif 6y ago
  So how do you fix this shit? We're basically fucked. It's not like our government will get EU's permission to let the banks fail or something...
  - krageon 6y ago
    > So how do you fix this shit The banks in question are essentially in agreement about prices and work together to keep them inflated. That's essentially cartel formation and needs to be prosecuted. From a social standpoint, denying folks a roof over their head just because you want some numbers on a paper to look good should already mean that everyone ostracizes you. It's unquestionably evil.
    - agustif 6y ago
      I don't think our judiciary arm, which is supposedly independent from our government, but reality is much more messy than that, will do anything about this shit. Revolving doors... and all. Maybe change could be enacted on the local government level which is the power more easily sizeable by real people and not political drones, in order to hijack current zoning laws which as far as I know are heavily concentrated down to local adminstrations like -ayuntamientos-, which in itself seems to be what's making things more complicated as corruption is harder to spot there, even if it's more obviously done than at higher levels... Anyways... Maybe a return to the ghost villages once a job is not easily found in a city but online, but remote seems hard to implement here locally on a culture level at least until a couple generations of older folks retire from management, where one could get cheap land and construct with fairly advanced and economically minded new construction processes, like 3d printing homes or whatever, maybe... But at the end of the day, we're still fucked, paying high rents for small jails in highly contaminated city centres... One can only dream to retire on the countryside for now.

sharperguy 6y ago

I keep hearing people debate about why housing prices are so high but it confuses me. Didn't housing prices fall dramatically in the 2008 financial crisis? Didn't various governments put vast amounts of money into the economy in an effort to ensure house prices returned to their previous levels and continued to rise? It seems as if high housing prices are an explicit policy of most major powers at this time.

nl 6y ago
> Didn't housing prices fall dramatically in the 2008 financial crisis? No, not really. https://www.statista.com/statistics/240991/average-sales-prices-of-new-homes-sold-in-the-us/ https://www.statista.com/statistics/240991/average-sales-pri... > Didn't various governments put vast amounts of money into the economy in an effort to ensure house prices returned to their previous levels and continued to rise? No. They put lots of money into the economy as Keynesian economic expansion policy, to combat unemployment. House prices simply weren’t as dramatically effected as you seem to think. Check the statistics on the previous link if you don’t believe me.
ihyfhgyfhth 6y ago
Yes, exactly. https://betterdwelling.com/canada-says-property-bubble-not-great-for-locals-good-for-foreign-investors/ https://betterdwelling.com/canada-says-property-bubble-not-g...
HWR_14 6y ago
No, housing prices didn't fall dramatically in the wake of the 2008 crisis. I mean, sure, they fell 33%, but they were still higher (compared to income) than at the beginning before the start of the 2000-2008 bubble, at least in the 80 years of records I can trivially look up. That's true in the US and UK. I'd contend that preventing massive asset depreciation, including housing, was an explicit policy of every major economic power in North America, Europe and China. I don't know, but suspect other major economic powers also participated in that, but I'm not as well versed. (I should point out that in the 1950s it was just as large a multiplier of household income, but in that time we went from one wagerearner to two.)