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Naively, you would expect this to be fixed via basic economics: high demand and low supply lead to high prices, which should lead to MORE supply, which should l

Naively, you would expect this to be fixed via basic economics: high demand and low supply lead to high prices, which should lead to MORE supply, which should lower prices. And yet this doesn't seem to be the case. Very little building seems to be happening relative to the explosion in demand, and when it does happen it's mostly houses for rich folks, not ordinary ones. The system isn't self-healing anymore. It's jammed up. Obviously this most recent spike is probably connected to exodus from the major cities due to covid, but the trend has been happening for years, maybe a full decade now. The best I can tell, this is yet another example of our economy becoming increasingly imaginary. Again, naively you would expect people to buy houses to LIVE IN, and other people to BUILD those homes so they could be sold to the first group of people. But in the recent past it seems the housing market has joined an ever-growing list of things like crypto, Game Stop stock, and who knows what else; a perverse wonderland where everything is detached from reality and rampant, delusional speculation rules the day. The difference is, no one needs crypto, or Game Stop shares, so if crazy people want to monopolize them, fine. People DO need places to live. Many can't afford one even under good conditions. And now yet another thing ordinary people need has been stolen from them by the rich, fenced and moated off, never to be seen again. Meanwhile food prices are going up and up and up, while portions get smaller and smaller. Inflation looks ready to explode. And soon, Covid will (hopefully) be over. Which means the "pause" that was put on everything will go away. No more government assistance to ease things. No more "coming together" to fight the common enemy. You may thing there's strife online and off now, but when we "go back to normal," in a few months, or a year, a whole ton of salt is going to be ground into the waiting wound, and this housing shortage will be at the top of a long, long list of grievances. 2020 was nothing compared to what's coming.

andrewmcwatters 5y ago
I fear that developed nations are in a fiat currency end-game where interest rates stay at near zero levels for the foreseeable future meaning that borrowing stays cheap for decades on end, which exacerbates asset prices, incentivizes builders to only produce real estate projects like “luxury” apartments, and makes government borrowing easy, too, so that bond yields produce negative returns for investors. We’re living in a world where politicians aren’t fighting the international housing crisis, and I think the only meaningful way you can do so is by nations coming together and forming a Breton Woods type era of agreement to establish the world over what housing rights look like and what restrictions companies, REITs, builders, and landlords have so as to prevent neofeudalism from continuing to proliferate.
visualradio 5y ago
> Naively, you would expect this to be fixed via basic economics: high demand and low supply lead to high prices, which should lead to MORE supply, which should lower prices Classical economics says only half the real estate asset price corresponds to actual capital. The land-fraction of real estate value is a monopoly price. The capitalized ground-rent increases the scarcer land becomes. Investors maximize asset gains by holding out for high prices as possible. > The system isn't self-healing anymore. It's jammed up The fictitious capitalization of ground-rent into asset prices has caused problems since classical antiquity. This is business as usual and everyone should know how this works by now. > but the trend has been happening for years, maybe a full decade now North American land speculation goes back to 1600-1700s and John Law's Mississippi company. It caused lots of problems during westward expansion. There is typically a real estate bubble and crash every 18 years since 1840s. Cycle can be interrupted with financial regulation, central bank window guidance to discourage credit creation for speculative asset purchases, and special taxes. Ideally we'd want state governments to appoint commissioners to chair equalization boards to redo land valuations at state level, introduce a federal direct land tax on comparable sales price of estates less replacement cost of improvements, increase realization of real estate asset gains taxes, requires brokers to appraise replacement cost of improvements separately from comparable sales price, and cap mortgage guarantees by federal GSEs at 200% of replacement cost of non-obsolete fixed capital improvements whenever that is lower than comparable sales price.
- mycologos 5y ago
  Coincidentally, it seems like Allentown (the town featured in this article) has had a land value tax for decades [1]? [1] https://www.strongtowns.org/journal/2019/3/6/non-glamorous-gains-the-pennsylvania-land-tax-experiment https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...

andrewmcwatters 5y ago

I fear that developed nations are in a fiat currency end-game where interest rates stay at near zero levels for the foreseeable future meaning that borrowing stays cheap for decades on end, which exacerbates asset prices, incentivizes builders to only produce real estate projects like “luxury” apartments, and makes government borrowing easy, too, so that bond yields produce negative returns for investors. We’re living in a world where politicians aren’t fighting the international housing crisis, and I think the only meaningful way you can do so is by nations coming together and forming a Breton Woods type era of agreement to establish the world over what housing rights look like and what restrictions companies, REITs, builders, and landlords have so as to prevent neofeudalism from continuing to proliferate.

visualradio 5y ago

> Naively, you would expect this to be fixed via basic economics: high demand and low supply lead to high prices, which should lead to MORE supply, which should lower prices Classical economics says only half the real estate asset price corresponds to actual capital. The land-fraction of real estate value is a monopoly price. The capitalized ground-rent increases the scarcer land becomes. Investors maximize asset gains by holding out for high prices as possible. > The system isn't self-healing anymore. It's jammed up The fictitious capitalization of ground-rent into asset prices has caused problems since classical antiquity. This is business as usual and everyone should know how this works by now. > but the trend has been happening for years, maybe a full decade now North American land speculation goes back to 1600-1700s and John Law's Mississippi company. It caused lots of problems during westward expansion. There is typically a real estate bubble and crash every 18 years since 1840s. Cycle can be interrupted with financial regulation, central bank window guidance to discourage credit creation for speculative asset purchases, and special taxes. Ideally we'd want state governments to appoint commissioners to chair equalization boards to redo land valuations at state level, introduce a federal direct land tax on comparable sales price of estates less replacement cost of improvements, increase realization of real estate asset gains taxes, requires brokers to appraise replacement cost of improvements separately from comparable sales price, and cap mortgage guarantees by federal GSEs at 200% of replacement cost of non-obsolete fixed capital improvements whenever that is lower than comparable sales price.

mycologos 5y ago
Coincidentally, it seems like Allentown (the town featured in this article) has had a land value tax for decades [1]? [1] https://www.strongtowns.org/journal/2019/3/6/non-glamorous-gains-the-pennsylvania-land-tax-experiment https://www.strongtowns.org/journal/2019/3/6/non-glamorous-g...