7 ms·
How do you lower the price of real estate?
by ericmcer 5y ago
How do you lower the price of real estate?
- betaby 5y agoIncrease supply by building more and building up.
- sanxiyn 5y agoThis doesn't help in the short term, because building takes time. Moving people is faster than constructing buildings.
- TuringNYC 5y agoYou're right it does not help in the short term, but we've been speaking about the Bay Area problems (for example) for two decades and vigorously discussing it in the past decade -- building five years ago could have solved today's problem. Similarly, we could speak about it for another decade, or we could build now and solve part of the problem in five years. This also doesn't exclude other fixes that can happen orthogonally.
- Telemakhos 5y ago> building takes time It does not have to take nine months (the national average) to build a house or a hundred houses. Housing can be and in times of necessity has been built rapidly and well. My favorite example is Hilton Village in Newport News, VA, built to house workers at Newport News Shipyard at the tail end of and after World War I. Five hundred units were constructed within two years, and they were built cheaply yet with a randomization to the sequence of models and detailing that kept the houses from feeling like a cookie-cutter development, avoiding pitfalls into which many suburbs today fall. A hundred years later the homes remain occupied and in fact prized today for their charm. The barriers to affordable, desirable, swiftly built housing are artificial.
- prostoalex 5y agoManufactured housing is probably the best bet for "built cheaply yet with a randomization", but most high-cost-of-living areas lack the available land. So then you need to build up, and that opens the Pandora's box of building code compliance, labor costs and material cost. The city of Los Angeles presumably has access to average material costs and average labor costs, but the simple apartment complex they developed to house the homeless still ended up at $746,000 a unit https://www.nbclosangeles.com/investigations/las-homeless-housing-now-costs-more-than-some-luxury-condos/2425373/ https://www.nbclosangeles.com/investigations/las-homeless-ho...
- BurningFrog 5y ago"Moving people" OTOH sounds violent.
- sanxiyn 5y agoIt doesn't have to. For example, if people are moving from Bay Area to Texas, we should think about how to accelerate that.
- bsenftner 5y agoIsn't Jimmy Carter and Habit For Humanity building new homes, each in under 30 days, around the southern east coast? https://allthatsinteresting.com/jimmy-carter-houses https://allthatsinteresting.com/jimmy-carter-houses
- LegitShady 5y agoYou're unlikely to find an instant solution to a problem decades in the making, period.
- TuringNYC 5y agoThis alone would solve almost all the wage "problems" in the Bay Area.
- travoc 5y agoWon’t cure all. Building costs are soaring. Try building something new for less than $200/sf and you’ll see that the price of dirt is only part of the cost.
- sfifs 5y agothat in the US i believe is mostly regulatory capture (guilds & licensing, unions, in some cases inappropriate regulations) https://www.vox.com/policy-and-politics/2017/1/1/14112776/new-york-second-avenue-subway-phase-2 https://www.vox.com/policy-and-politics/2017/1/1/14112776/ne...
- Agathos 5y agoThrow out property taxes and implement land taxes. Stop assessing a tax penalty on building up.
- SilverRed 5y agoThe dirt is pretty expensive. In many areas just a block of dirt will sell for $1-2M. While a nice apartment in the same area sells for $600,000 AUD.
- falcolas 5y agoBased on my local market, this doesn’t work. Builders (more likely their financiers) hold on to houses until they sell at their target price. They don’t rent them, they don’t lower the target price. They’ll wait for months or years for the sale to come in order to maximize their returns, and they have enough liquidity to be able to wait.
- anigbrowl 5y agoAccurate. I used to have about 20 neighbors on the adjoining two lots, until the previous owner pushed them all out and then sold to some investors who wanted to convert the properties into condos. They gathered dust for 2 years then there's been 18 months of half-assed construction. Why rush? They're accruing value by the day.They didn't even get proper permits, but the fine is nominal.
- api 5y agoThat can be fixed with idle real estate taxes. They would have to at least rent them.
- someguydave 5y agoend all state subsidies of residential mortgages
- lotsofpulp 5y agoI would love to see this, getting rid of all the less than 20% down and 30 year fixed rate taxpayer subsidized mortgages in the US would help lower house prices very quickly.
- coldcode 5y agoNot necessarily, currently there are a lot of Wall Street companies buying real estate at any price (Zillow, etc). That is contributing some to the price inflation. My house has increased insanely in just the past 30 days for no obvious reason.
- someguydave 5y agosure but zillow needs to find someone else to sell to, and that someone is likely getting a government backed mortgage
- rjsw 5y agoDon't think that is enough by itself. There is no subsidy on residential mortgages in the UK but still the same problems with house prices.
- someguydave 5y agomy understanding is that the UK government has a mortgage guarantee scheme, which is a subsidy
- Quinner 5y agoIncrease interest rates.
- sanxiyn 5y agoYes, but how? Monetary authority can change nominal interest rate but has little control of real interest rate, and it's real interest rate you want to change.
- adam_arthur 5y agoReal interest rates will certainly increase if Fed increases nominal rates. The real rate is of course the inflation adjusted rate, and Fed policy has been one of the prime drivers of higher inflation. If they weren't printing 120B a month, or monetizing government spending, real rates would go up. Treasury yields are artificially suppressed by their bond buying. Beyond asset purchases, simply raising short term rates would immediately dampen inflation, though has economic consequences as well (slow business activity). Unfortunately the Fed seems more interested in supporting markets than doing what's right for the longer term health of the economy. Wealth inequality has been primarily perpetuated through monetary policy... Though fiscal plays a role too, of course.
- ptr2voidStar 5y agoI don't think interest rates mean what you think it does. One can't simply raise interest rates on a whim.
- jim-jim-jim 5y agoDecommoditize it. Penalize investors. Make it prohibitively expensive to own a property but not live in it. Expropriate investment properties from those who do have them, as Berlin is currently considering.
- sanxiyn 5y agoDoesn't this reduce investment in real estate, hence reduce supply?
- jim-jim-jim 5y ago"Supply" is the "just spin up more instances" of housing. It's an incantation that libertarians invoke to make the elephant in the room vanish. We'd be better served long term by addressing a fundamental inefficiency: literal rent seeking.
- deleted 5y ago[deleted]
- SilverRed 5y ago> Make it prohibitively expensive to own a property but not live in it. How does this decrease my rent? I do not want to own property because I do not want my entire wealth invested in a single asset. For me, renting is ideal and then my money goes in to a wide array of assets which provides a better safety net than expecting that house prices will always stay the same or go up in the future. Renting also affords me the ability to move whenever I feel like upgrading or downgrading without being stuck trying to sell the previous property and paying insane taxes each time.
- ilammy 5y ago> because I do not want my entire wealth invested in a single asset That's the idea: with cheaper real estate you won't have to put your entire wealth into it, trading it would also be easier, and so ownership would be more attractive option.
- bsenftner 5y agoMake it illegal for Private Equity to increase their current large nationwide ownership of over 300K single family homes in the United States, which they rent out, do not maintain, and push rental rates higher nation-wide. This behavior generates large scale misery and should be illegal.
- sokoloff 5y agoThere’s a bit over 120 million households in the US. How could ownership (and productive rental) of a mere 300k SFRs meaningfully shift the market and generate level scale misery? That’s a PE-owned rental for every 400 households.
- arrosenberg 5y agoThey're not evenly distributed, they're concentrated in high COL areas.
- vvarren 5y agoThe real hill to die on is the private equity firms buying trailer parks, then extorting poor people who own trailers but not the land under them. Imagine having a 50 year old trailer you grew up in and you inherited, and it’s your only asset but it’s too old to move. Suddenly the trailer park is bought by a hedge fund and rent is increased to an unaffordable level. This is happening all over America right now.
- indymike 5y ago1. Change property tax laws that ensure an always increasing property value. 2. Ensure that real estate is zone and rezoned quickly to ensure supply in a market. 3. Create policy that makes it uneconomical to hold unused real estate. 4. Quickly make underused or misused real estate re-enter the market. E.g. speed up clean up and demolition of vacated real estate.
- goodpoint 5y agoDiscourage gentrification using taxation. Discourage owning empty homes with taxation. Make evictions more difficult, even for squatting. Require mixed use and prohibit office-only / mall-only areas and McMansions.
- iratewizard 5y agoGentrification is the problem? Not real estate investment trusts buying up single family homes? Turn off your TV.
- InvertedRhodium 5y agoNothing says that problems have to be mutually exclusive.
- iratewizard 5y agoGentrification is a racist term that reduces market forces on housing down to "white middle class people need to stop moving into previously lower class areas."
- InvertedRhodium 5y agoThat sounds more like classism to me.
- Sevii 5y agoThe easiest way is probably to mandate work from home for all jobs that are primarily done on a computer.
- adam_arthur 5y agoIncrease interest rates. Rezone for more density. Allow building with less red tape. Government incentives to build. It can be very easy if there's the political will. Look at what China did when they built all those empty cities... which are now pretty much filled. If we built 30 million new housing units in the next few years, I guarantee you the cost of housing would decline significantly. If it's profitable to build, builders will do it. Unfortunately the US government has been more keen on supporting housing prices rather than lowering them.
- mmarq 5y agoAt least in the UK, we may see an improvement if government stopped inflating real estate prices with new schemes every year (help-to-buy or the latest stamp duty suspension) and if investing in property to rent it, attracted as much tax as investing in training to get a better job. Also, in the UK, stronger regulations (such as a set of first-world tenant-protection laws and stronger requirements for landlod to look after their properties) would help.
- api 5y agoBuild more of course.