7 ms·

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, speculat

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...)
  - gjulianm 6y ago
    > If renting is too expensive, you buy, and if buying is too expensive, you rent. Buying a house is not that easy. You need a bank to approve your mortgage, plus pay upfront money (plus pay for furniture and such) that people might not have because high rent prices stop them from saving money. More renters and less buyers might cause more wealthy people entering the market for speculation, compensating the decrease of people that want to buy to live. And on the other hand, given that housing is a necessity and not something that people can live without, landlords can still push prices up even with increased offer. In general, I see a lot of takes on the housing market that focus too much on the theory and forgets the reality: people need houses, moving is not easy nor cheap, speculators and realtors can push prices up without that much pressure, and a lot of people don't have enough to face the expenses of buying a house.
    - stdbrouw 6y ago
      I agree, but my point was not that armchair economics is wonderful, what I tried to say was that it's often useful to find out precisely where theory and reality diverge and to focus solutions on those gaps, to avoid putting the blame on things that don't matter or suggesting regulation that won't work, like social housing (except as a short term solution), rent control or restrictions on who can buy.
      - wayoutthere 6y ago
        I would use a formula based on the tax-assessed value of a property to set a maximum rent. Landlords should be free to reappraise their properties as often as they like to be able to raise rents at the end of a lease, but doing so will increase the tax bill as well. Call it market-adjusted rent control if you like, but there needs to be a tight range between rent and value if we want to encourage more housing starts.
  - eevilspock 6y ago
    You cannot have a "perfect free market" when huge swaths of the population are simply not anywhere near as free as the wealthy and privileged swaths. See the top comments for details. Side note: It's heartening that the HN community has evolved in the last 10 years -- the current top comments wouldn't have been at the top 10 years ago, or even 5 years ago. While I think there is still a long way to go, it has come far from almost unbridled worship of PG, libertarianism and "meritocracy".
- dzhiurgis 6y ago
  Interesting that for natural monopolies (water supplies, power distribution, telco, radio spectrum) governments tend to regulate and de-monopolise. For real estate it's almost opposite and oligopolies are protected.
- csomar 6y ago
  > I have a sinking feeling the situation would quickly improve if ownership had per-person limits Running an economy on feelings is a sure way to ruin an economy. People who buy multiple dwellings would be more than happy to rent them. Renting is good. It provides a liquid market to access housing. If the market is efficient, rent or buy should be a preference rather than a financial decision: The financial impact should be the same. If people refuse to rent, or sell their property then you have something wrong with your economy (too much regulations, people are afraid of devaluation, etc...). You don't fix a structural problem of an economy by implementing a per-person limit to buy houses.
  - filleduchaos 6y ago
    > Renting is good [House] renting is only "good" for the people making a profit off it. For the actual renters it's patently absurd. "Rent-seeking" is a term with negative connotations for a reason.
    - stdbrouw 6y ago
      Argumentation by synonym, that's a new one! "Rent" in an economic context refers to "any payment to an owner or factor of production in excess of the costs needed to bring that factor into production" (https://en.wikipedia.org/wiki/Economic_rent https://en.wikipedia.org/wiki/Economic_rent) as opposed to profits or wages: without a profit nobody would invest in anything and without wages nobody would work so these are both necessary costs. In a well-functioning market the monthly payment to your landlord is primarily a compensation for the cost of capital (profit) as well as administration and maintenance (wage), though of course if there's a bubble in the housing market, landlords will be happy to take advantage of that too (rent).
    - mb7733 6y ago
      As someone who has had to move often for work and school, renting has been pretty good for me and my partner. What would the alternative be?
      - filleduchaos 6y ago
- datacruncher01 6y ago
  It's a hard problem to tackle as it would have to be a national law but that goes into individual state jurisdiction. I would say if our goal is to increase affordable housing we just need more of it. Ban renting of single family dwellings, but allow and encourage it where increased density is achieved (apartments, condos, multiplexes, etc). Owners of single family dwellings will scramble to convert their rentals to duplexes / multiplexes and create the additional inventory while companies acquire multiple properties to convert into apartment complexes.
- iso1631 6y ago
  When we were young my (now) wife kept jumping from job to job around the south east, and we'd move pretty much every year. As we were renting it didn't cost much to move - hire a van for a couple of days and job done. However when we settled down with kids priorities changed, living close to a train station with good connections for work was less important, school catchment areas were, and the main importance is stability. The longest rental contract you can take in the UK is 3 years, after that who knows what will happen - maybe the owner will sell up, maybe they'll double the rent. A 5 year or even 10 year fixed mortgage gives certainty. But the key thing is we wouldn't be able to rent if nobody owned properties they didn't live in.
conjectures 6y ago
It's very simple. If you have N house-seekers and M house-sellers then when N >> M: houses get expensive. Given it's hard to change N, raising M implies building more houses. In the UK the equivalent of 'zoning' regulations keeps M low. Government 'help to buy' here exacerbates the problem as it directly increases N without directly increasing M. The fundamental model here is musical chairs.
- iso1631 6y ago
  I'd still be renting if it wasn't for help to buy. The mortgage payment was the same as we'd pay in rent, so affordable, but saving up even a 10% deposit would have been impossible.
  - conjectures 6y ago
    I'm glad you found a place, but I think this amounts to help to buy incrementing N.
    - iso1631 6y ago
      Yes it lets more people without money buy houses, which I can see why socialists don't like that (same as they didn't like buying your council house - reducing dependency on the state) The problem with the council house sell off was not replacing them on a 1:1 ratio -- for every house sold, a new one was built. It also reduces the number of people renting, which lowers rental prices, which is also good. It may increase the price of new houses for cash buyers. I have little sympathy for people that wealthy. If you want to get more houses built, institute a land value tax. Taylor Wimpy owns 6,000 heactares of land. With just 25 houses per hectare, that's 150,000 unbuilt houses across the country. Assuming that a land value tax would replace council tax that would be about £1500 a year tax, or £225m a year in tax, maybe that would encourage them to speed up construction rather than building them at a rate that maximises profits.
      - nybble41 6y ago
        > The problem with the council house sell off was not replacing them on a 1:1 ratio -- for every house sold, a new one was built. At least you agree that there is a problem with supply. > It also reduces the number of people renting, which lowers rental prices, which is also good. Converting renters into buyers without building more housing reduces both the demand for and the supply of rental housing. This will not reduce rental prices. > It may increase the price of new houses for cash buyers. I have little sympathy for people that wealthy. Your sympathy is not required, but you should at least see how landlords paying higher prices for housing leads to higher rents for tenants.

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...)
- gjulianm 6y ago
  > If renting is too expensive, you buy, and if buying is too expensive, you rent. Buying a house is not that easy. You need a bank to approve your mortgage, plus pay upfront money (plus pay for furniture and such) that people might not have because high rent prices stop them from saving money. More renters and less buyers might cause more wealthy people entering the market for speculation, compensating the decrease of people that want to buy to live. And on the other hand, given that housing is a necessity and not something that people can live without, landlords can still push prices up even with increased offer. In general, I see a lot of takes on the housing market that focus too much on the theory and forgets the reality: people need houses, moving is not easy nor cheap, speculators and realtors can push prices up without that much pressure, and a lot of people don't have enough to face the expenses of buying a house.
  - stdbrouw 6y ago
    I agree, but my point was not that armchair economics is wonderful, what I tried to say was that it's often useful to find out precisely where theory and reality diverge and to focus solutions on those gaps, to avoid putting the blame on things that don't matter or suggesting regulation that won't work, like social housing (except as a short term solution), rent control or restrictions on who can buy.
    - wayoutthere 6y ago
      I would use a formula based on the tax-assessed value of a property to set a maximum rent. Landlords should be free to reappraise their properties as often as they like to be able to raise rents at the end of a lease, but doing so will increase the tax bill as well. Call it market-adjusted rent control if you like, but there needs to be a tight range between rent and value if we want to encourage more housing starts.
- eevilspock 6y ago
  You cannot have a "perfect free market" when huge swaths of the population are simply not anywhere near as free as the wealthy and privileged swaths. See the top comments for details. Side note: It's heartening that the HN community has evolved in the last 10 years -- the current top comments wouldn't have been at the top 10 years ago, or even 5 years ago. While I think there is still a long way to go, it has come far from almost unbridled worship of PG, libertarianism and "meritocracy".
dzhiurgis 6y ago
Interesting that for natural monopolies (water supplies, power distribution, telco, radio spectrum) governments tend to regulate and de-monopolise. For real estate it's almost opposite and oligopolies are protected.
csomar 6y ago
> I have a sinking feeling the situation would quickly improve if ownership had per-person limits Running an economy on feelings is a sure way to ruin an economy. People who buy multiple dwellings would be more than happy to rent them. Renting is good. It provides a liquid market to access housing. If the market is efficient, rent or buy should be a preference rather than a financial decision: The financial impact should be the same. If people refuse to rent, or sell their property then you have something wrong with your economy (too much regulations, people are afraid of devaluation, etc...). You don't fix a structural problem of an economy by implementing a per-person limit to buy houses.
- filleduchaos 6y ago
  > Renting is good [House] renting is only "good" for the people making a profit off it. For the actual renters it's patently absurd. "Rent-seeking" is a term with negative connotations for a reason.
  - stdbrouw 6y ago
    Argumentation by synonym, that's a new one! "Rent" in an economic context refers to "any payment to an owner or factor of production in excess of the costs needed to bring that factor into production" (https://en.wikipedia.org/wiki/Economic_rent https://en.wikipedia.org/wiki/Economic_rent) as opposed to profits or wages: without a profit nobody would invest in anything and without wages nobody would work so these are both necessary costs. In a well-functioning market the monthly payment to your landlord is primarily a compensation for the cost of capital (profit) as well as administration and maintenance (wage), though of course if there's a bubble in the housing market, landlords will be happy to take advantage of that too (rent).
  - mb7733 6y ago
    As someone who has had to move often for work and school, renting has been pretty good for me and my partner. What would the alternative be?
    - filleduchaos 6y ago
datacruncher01 6y ago
It's a hard problem to tackle as it would have to be a national law but that goes into individual state jurisdiction. I would say if our goal is to increase affordable housing we just need more of it. Ban renting of single family dwellings, but allow and encourage it where increased density is achieved (apartments, condos, multiplexes, etc). Owners of single family dwellings will scramble to convert their rentals to duplexes / multiplexes and create the additional inventory while companies acquire multiple properties to convert into apartment complexes.
iso1631 6y ago
When we were young my (now) wife kept jumping from job to job around the south east, and we'd move pretty much every year. As we were renting it didn't cost much to move - hire a van for a couple of days and job done. However when we settled down with kids priorities changed, living close to a train station with good connections for work was less important, school catchment areas were, and the main importance is stability. The longest rental contract you can take in the UK is 3 years, after that who knows what will happen - maybe the owner will sell up, maybe they'll double the rent. A 5 year or even 10 year fixed mortgage gives certainty. But the key thing is we wouldn't be able to rent if nobody owned properties they didn't live in.

conjectures 6y ago

It's very simple. If you have N house-seekers and M house-sellers then when N >> M: houses get expensive. Given it's hard to change N, raising M implies building more houses. In the UK the equivalent of 'zoning' regulations keeps M low. Government 'help to buy' here exacerbates the problem as it directly increases N without directly increasing M. The fundamental model here is musical chairs.

iso1631 6y ago
I'd still be renting if it wasn't for help to buy. The mortgage payment was the same as we'd pay in rent, so affordable, but saving up even a 10% deposit would have been impossible.
- conjectures 6y ago
  I'm glad you found a place, but I think this amounts to help to buy incrementing N.
  - iso1631 6y ago
    Yes it lets more people without money buy houses, which I can see why socialists don't like that (same as they didn't like buying your council house - reducing dependency on the state) The problem with the council house sell off was not replacing them on a 1:1 ratio -- for every house sold, a new one was built. It also reduces the number of people renting, which lowers rental prices, which is also good. It may increase the price of new houses for cash buyers. I have little sympathy for people that wealthy. If you want to get more houses built, institute a land value tax. Taylor Wimpy owns 6,000 heactares of land. With just 25 houses per hectare, that's 150,000 unbuilt houses across the country. Assuming that a land value tax would replace council tax that would be about £1500 a year tax, or £225m a year in tax, maybe that would encourage them to speed up construction rather than building them at a rate that maximises profits.
    - nybble41 6y ago
      > The problem with the council house sell off was not replacing them on a 1:1 ratio -- for every house sold, a new one was built. At least you agree that there is a problem with supply. > It also reduces the number of people renting, which lowers rental prices, which is also good. Converting renters into buyers without building more housing reduces both the demand for and the supply of rental housing. This will not reduce rental prices. > It may increase the price of new houses for cash buyers. I have little sympathy for people that wealthy. Your sympathy is not required, but you should at least see how landlords paying higher prices for housing leads to higher rents for tenants.