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Just another symptom of the broader issue: at scale, real estate is either an investment or it actually houses people. It cannot be both. Unfortunately, the e

by rland 5y ago

Just another symptom of the broader issue: at scale, real estate is either an investment or it actually houses people. It cannot be both. Unfortunately, the engine driving this thing (the whole country) is real estate as an investment.

pirate787 5y ago
This is false dichotomy. Investment capital builds and improves all real estate. The real issue are zoning restrictions that limit supply and Fed policy that has flooded the system with few places to invest.
- rland 5y ago
  Who passes zoning restrictions time and time again?
yanderekko 5y ago
>It cannot be both. Uh, of course it can.
Unklejoe 5y ago
> It cannot be both. I see this mentioned often, as if it's supposed to be obvious, but I don't really get it. Care to explain?
- dghlsakjg 5y ago
  A minimum unit of housing per person is a necessity for society. It is also incredibly difficult to scale since we can't just build more land in the places it is needed. We expect the value of our investments to rise at a rate faster than inflation. If housing is a good investment eventually it becomes unaffordable for the minimum unit per person. We are so used to the concept that housing always goes up that it is hard to grasp, so a good thought exercise is to flip housing with food. Imagine if the price of food went up more than inflation year after year, and cities restricted how much of it could be grown and sold. We would have people that buy and hold food so they can sell it to hungry people for even more next year. Some people would starve because no one is selling anything below a certain price. North America has built a system around the idea of housing values always going up. But eventually you hit a limit where a necessity of life becomes completely unaffordable (compounding returns being what they are). So if you believe that housing is an investment in aggregate (that is that all housing lumped together will rise faster than inflation), then the inevitable conclusion is that housing becomes unaffordable for more and more people higher and higher up the income chain (Ahem, bay area). Every other good that we consume with tends to go down in price (indexed to inflation especially when value is considered). Food, clothing, electronics, cars are all much better deals than they were 50 years ago. Housing is the opposite
  - josephcsible 5y ago
    > Every other good that we consume with tends to go down in price (indexed to inflation especially when value is considered). Food, clothing, electronics, cars are all much better deals than they were 50 years ago. Housing is the opposite Those things all get used up, worn out, or obsoleted over time. Land area does none of the above.
    - dghlsakjg 5y ago
      I know I mentioned land area in my original post, but I am speaking more specifically about housing. A 10 year old TV is inferior in every way to a new one that costs less in absolute and real terms, the value is incredible. The same is true for cars, clothing, and most other things we buy. Housing hasn't improved, but the cost has risen incredibly. Housing, as a good, is rather unique in this way, and this isn't true globally. A 30 year old housing unit in Japan is something that gets torn down. In North America the age of a home has little to do with its price.
fshbbdssbbgdd 5y ago
It’s reasonable to use investment capital to produce housing, then have people live in the housing and pay rent to provide returns to the investor. That’s a good way for society to enable people who can’t build a home to still get to live in a home. This shouldn’t provide permanent unbounded returns, because housing doesn’t last forever, needs to be maintained, and other investors can build more housing to compete away excess returns. The problem is investment returns for land, especially in combination with density restrictions. That’s where the housing affordability problem comes in.

by rland 5y ago

pirate787 5y ago

This is false dichotomy. Investment capital builds and improves all real estate. The real issue are zoning restrictions that limit supply and Fed policy that has flooded the system with few places to invest.

rland 5y ago
Who passes zoning restrictions time and time again?

yanderekko 5y ago

>It cannot be both. Uh, of course it can.

Unklejoe 5y ago

> It cannot be both. I see this mentioned often, as if it's supposed to be obvious, but I don't really get it. Care to explain?

dghlsakjg 5y ago
A minimum unit of housing per person is a necessity for society. It is also incredibly difficult to scale since we can't just build more land in the places it is needed. We expect the value of our investments to rise at a rate faster than inflation. If housing is a good investment eventually it becomes unaffordable for the minimum unit per person. We are so used to the concept that housing always goes up that it is hard to grasp, so a good thought exercise is to flip housing with food. Imagine if the price of food went up more than inflation year after year, and cities restricted how much of it could be grown and sold. We would have people that buy and hold food so they can sell it to hungry people for even more next year. Some people would starve because no one is selling anything below a certain price. North America has built a system around the idea of housing values always going up. But eventually you hit a limit where a necessity of life becomes completely unaffordable (compounding returns being what they are). So if you believe that housing is an investment in aggregate (that is that all housing lumped together will rise faster than inflation), then the inevitable conclusion is that housing becomes unaffordable for more and more people higher and higher up the income chain (Ahem, bay area). Every other good that we consume with tends to go down in price (indexed to inflation especially when value is considered). Food, clothing, electronics, cars are all much better deals than they were 50 years ago. Housing is the opposite
- josephcsible 5y ago
  > Every other good that we consume with tends to go down in price (indexed to inflation especially when value is considered). Food, clothing, electronics, cars are all much better deals than they were 50 years ago. Housing is the opposite Those things all get used up, worn out, or obsoleted over time. Land area does none of the above.
  - dghlsakjg 5y ago
    I know I mentioned land area in my original post, but I am speaking more specifically about housing. A 10 year old TV is inferior in every way to a new one that costs less in absolute and real terms, the value is incredible. The same is true for cars, clothing, and most other things we buy. Housing hasn't improved, but the cost has risen incredibly. Housing, as a good, is rather unique in this way, and this isn't true globally. A 30 year old housing unit in Japan is something that gets torn down. In North America the age of a home has little to do with its price.

fshbbdssbbgdd 5y ago

It’s reasonable to use investment capital to produce housing, then have people live in the housing and pay rent to provide returns to the investor. That’s a good way for society to enable people who can’t build a home to still get to live in a home. This shouldn’t provide permanent unbounded returns, because housing doesn’t last forever, needs to be maintained, and other investors can build more housing to compete away excess returns. The problem is investment returns for land, especially in combination with density restrictions. That’s where the housing affordability problem comes in.