7 ms·

This is only part of the problem - and a small part of the problem at that. The real problem as always is zoning. Houses cost roughly the same on a $/sqft basi

This is only part of the problem - and a small part of the problem at that. The real problem as always is zoning. Houses cost roughly the same on a $/sqft basis, adjusted for inflation, as they did in the 1970s. They're more expensive now because outside of town they're twice as big on average [1] - in part due to zoning rules. In town, zoning rules preclude densification necessary for supply to meet demand [2]. And, families are smaller. Check out Japan housing CPI - a market where supply meets demand thanks to federal zoning rules, and is also centrally banked. Dead ass flat. [3] This chart alone basically debunks the theory the Fed is solely responsible for lower housing affordability. Zoning is the issue, not the Fed. [edit] Yes, the fed contributes a little - monthly affordability of a more expensive house is the same when interest rates are lower, but down payments are not. However, if you want to solve the affordability crisis build more houses. Any houses. Now. Compare the Japan housing CPI in [3] to the US housing CPI in [4] and weep. Housing in the US is driving inflation, not responding to it. [1] https://fee.org/articles/new-homes-today-have-twice-the-square-feet-per-person-as-in-1973/ https://fee.org/articles/new-homes-today-have-twice-the-squa... [2] https://en.wikipedia.org/wiki/San_Francisco_housing_shortage https://en.wikipedia.org/wiki/San_Francisco_housing_shortage [3] https://fred.stlouisfed.org/series/JPNCPIHOUMINMEI https://fred.stlouisfed.org/series/JPNCPIHOUMINMEI [4] https://fred.stlouisfed.org/series/CPIHOSNS https://fred.stlouisfed.org/series/CPIHOSNS

rp1 5y ago
The idea that zoning is the issue is always funny to me because it’s very easy to disprove. Plenty of paces in the US have permissive zoning (like the NY metro area). If zoning was the issue, then one would expect affordable housing in these areas, but it is still totally out of reach for most.
noahtallen 5y ago
Part of the problem with the first item you mentioned is that developers don’t really want to build cheap housing (I guess this is an assumption, but it makes sense financially.) They can make way more money catering to the people who can “afford” to build a $500k home, and people who want a very custom design and lots of space. On the renting end, “luxury” apartments will make more money than really basic cheap units. So most of the new housing stock doesn’t help address the problem for people new to housing. Even if you want to build out a very basic, small house, you have to have cash to DIY without a bank, or find some way to finance a builder (increasing the significant labor cost) without having existing equity. So the part of the market that does want cheap, basic housing doesn’t even have a way to influence those units. There is loads of demand for them (young people without money make up a huge portion of the population), but no developers willing to meet that demand when they can just make expensive units. And not enough developers so that some need to chase the cheap market. And in cities, the lot cost is very prohibitive too, before even getting into building a very basic house.
- JamesBarney 5y ago
  We have the same problem with the car market. I can only afford a $5,000 car, but the car manufacturers make all their money building $20,000 cars. I just can't see how Honda making another $20,000 fit is going to help me afford a $5,000 car.
  - arcticbull 5y ago
    I mean VW makes $100,000 Porsches and $20,000 Jettas. At some point it’s not economical to make cheaper cars due to materials and workmanship. You can certainly buy an e-bike for half that, I did. The cost of construction in America is $150/sqft. We’re not even close in cities. Off by an order of magnitude.
    - JamesBarney 5y ago
      Sorry I guess I was more obtuse than I intended. My point was I can buy a used car for $5,000, and Honda building new cars allows that even if the new cars are out of my price range.
      - arcticbull 5y ago
        Ah I see, that makes sense, I misread!
  - letitbeirie 5y ago
    The problem from the manufacturers' perspective is that the gear required to meet 2021 safety, emissions, and fleet efficiency standards by itself almost pushes a new car's price over $5000, and that's without leaving any budget left over to make it a car anybody would want to buy. They do sell vehicles at that price which get around all of those standards, but they lose two wheels in the process.
    - nine_k 5y ago
      You can still easily buy a decent used car for $5k. Try buying a half-decent used home for 25% of its initial sticker price.
seanmcdirmid 5y ago
> The real problem as always is zoning. If the real problem was always zoning, wouldn't dense cities like NYC and Shanghai be cheaper than average, not way over average? > Check out Japan housing CPI - a market where supply meets demand thanks to federal zoning rules, and is also centrally banked. Japan went through a huge bubble in the 1980s. Also, housing (the structures at least) rapidly depreciates in Japan, which prevents them from being used a speculative asset as in countries (even then they still went through a huge bubble in the 80s). It is definitely an alternative model to our own, but I'm not sure how many people will want to experiment with that. Japan also much more strictly restricts immigration than other countries, which makes it, for example, a bad place for Wenzhou house wife real estate speculation.
- meowtimemania 5y ago
  Zoning is also an issue in NYC. The suburbs are unable to become dense do to zoning which causes the prices to go up.
  - nine_k 5y ago
    Brooklyn increases the density steadily. I see a lot of construction around me, mostly higher-density replacing low-density, but it's relatively slow.
- TulliusCicero 5y ago
  > If the real problem was always zoning, wouldn't dense cities like NYC and Shanghai be cheaper than average, not way over average? It's not about supply by itself, it's supply vs demand. Big cities have big populations and economies, which means a lot of demand. But as far as zoning goes, note that like other metros, NYC has actually effectively downzoned areas over time; in fact, a huge proportion of buildings there would now be illegal due to different types of density restrictions: https://www.nytimes.com/interactive/2016/05/19/upshot/forty-percent-of-manhattans-buildings-could-not-be-built-today.html https://www.nytimes.com/interactive/2016/05/19/upshot/forty-... A lot of NIMBY's tend to go, "well, there's still some areas where it's possible to build more, so there's no real issue there". This is approximately like restricting car manufacturing to one state, and then when car prices go through the roof, saying "well, there's still more land to build car factories there, so I don't see the problem, it couldn't possibly be this rule".
deleted 5y ago
[deleted]
deathanatos 5y ago
While I agree zoning is a huge issue (I think that interest rates being so low doesn't help, either, but I concur with your thesis that zoning is the bigger problem), this, however: > Houses cost roughly the same on a $/sqft basis, adjusted for inflation, as they did in the 1970s. Sorry, but no. My parents bought their first home for $72/sq ft. real¹. They sold it for $99/sq ft. The same house last sold for $208 sq ft., and is Zestimated today at $302/sq ft. The value of the home has averaged >7% gains YoY, well outpacing published inflation. Their current home, built significantly later, and like you say, significantly larger, was $149/sq ft. at purchase, and is $182/sq ft. today. Every house I look at sings this same tune. Accounting for inflation, where my parents got a large house ready to move into, for the same amount to day I'm looking at what I call a "contractor's paradise", and that will require significantly more than the sticker price to make it habitable. ¹all dollar figures in this comment will be in 2021 real dollars, not nominal ones. I.e., adjusted for inflation.
- arcticbull 5y ago
  The inflation adjusted $/sqft statement is a blended average across the US. It’s lower outside of towns and higher inside towns. This is tracked by the Census bureau but as always with averages there are values on both sides of the mean. [1] One caveat is it does reflect only new construction. [1] https://infogram.com/1pqdpn20vkmlelcq6qx7jzwz9pf00g9xnq5 https://infogram.com/1pqdpn20vkmlelcq6qx7jzwz9pf00g9xnq5
  - bosie 5y ago
    > blended average across the US > One caveat is it does reflect only new construction. I am not sure what a blended average is but averaging new constructions makes your stats utterly useless? Where are people living mostly and how does the real estate market go there.
    - arcticbull 5y ago
      It's the average price of new construction over time. Generally one would not expect new construction to come in dramatically under market right?
R0b0t1 5y ago
I don't think this is entirely right. The cost of building a home has shot up too, to the point you must take out a very sizeable loan to do so.
sumedh 5y ago
> This chart alone basically debunks the theory the Fed is solely responsible for lower housing affordability. Have you looked at Japan's population, its "dead ass flat" while US population keeps going up. https://datacommons.org/tools/timeline#place=country%2FJPN%2Ccountry%2FUSA&statsVar=Count_Person https://datacommons.org/tools/timeline#place=country%2FJPN%2...
- arcticbull 5y ago
  Doesn't really matter. What matters is that in Japan supply and demand are equal. You could achieve the same outcome in the US with more supply.
  - jeffreyrogers 5y ago
    No, demand is actually down in Japan[0]. That chart shows residential housing vs. under 65 year-old population. So demand is decreasing but residential RE is rising slightly. Your analysis is also ignoring that services cost a lot more in the US than they did in the past. You can't build cheaply in NYC or SF or Seattle anymore because construction workers cost more. [0]: https://lh3.googleusercontent.com/-xDrQEcMyF5Y/YWDyNh-3TiI/AAAAAAAAJ2Y/pqILtYRxjCkvMcKbL9flYDxPxlbwSs5fQCLcBGAsYHQ/image.png https://lh3.googleusercontent.com/-xDrQEcMyF5Y/YWDyNh-3TiI/A...
    - arcticbull 5y ago
      I should have said supply >= demand. Yes, SF has the second-highest construction costs in the US. $330/sqft. [1] Average home prices are $900-1200/sqft. [1] https://www.investsf.com/why-san-francisco-has-the-second-highest-construction-costs-in-the-world/ https://www.investsf.com/why-san-francisco-has-the-second-hi...
tedk-42 5y ago
Please stop. Zoning issues/lack of supply would imply that there are lots of homeless people without a roof over their head. Investors have too much access to property. It's a system of greed that benefits those who entered the market early (typically boomers). Just stop blaming zoning already.
- arcticbull 5y ago
  Sorry but it's zoning's fault haha. > Zoning issues/lack of supply would imply that there are lots of homeless people without a roof over their head. The price of housing only matters to people who don't already have homes they own. 65% of Americans own homes, so that cuts down your working set dramatically. There are a lot of homeless people, yes - 0.2% of the population - but lack of affordable housing tends to be roughly equivalent to "perma-renting" as renting has a lower barrier to entry. To buy a home you have to come up with a lump sum of money to make a down payment. If you can't do that, you're forced to rent or split accommodation or live with your parents. Lack of affordable housing doesn't mean homelessness. There's a lot of elasticity there. > Investors have too much access to property. It's a system of greed that benefits those who entered the market early (typically boomers). Investors buy property to rent because home ownership is unaffordable. Blackrock buying up property is a symptom of the market, not a cause. They don't see houses becoming cheaper because they don't see zoning reform on the horizon, so they believe there will be long-standing demand for their rental units. If housing were to become affordable, due to a large increase in supply, these investors would get bowled over twice - once due to lower real property value and once more due to lack of demand for rental units as folks buy instead. Even foreigners parking capital abroad, more supply makes that (a) a bad idea and (b) kind of irrelevant. I'm not saying that shouldn't be tackled too, but once again, zoning would solve the problem.
  - tedk-42 5y ago
    the conflict you ond i have is you believe investors are benevolent and are helping poor folk who can't buy. i don't believe anything of what youre arguing simply because more supply will continue to be purchased by investors to further drive up prices.

rp1 5y ago

The idea that zoning is the issue is always funny to me because it’s very easy to disprove. Plenty of paces in the US have permissive zoning (like the NY metro area). If zoning was the issue, then one would expect affordable housing in these areas, but it is still totally out of reach for most.

noahtallen 5y ago

Part of the problem with the first item you mentioned is that developers don’t really want to build cheap housing (I guess this is an assumption, but it makes sense financially.) They can make way more money catering to the people who can “afford” to build a $500k home, and people who want a very custom design and lots of space. On the renting end, “luxury” apartments will make more money than really basic cheap units. So most of the new housing stock doesn’t help address the problem for people new to housing. Even if you want to build out a very basic, small house, you have to have cash to DIY without a bank, or find some way to finance a builder (increasing the significant labor cost) without having existing equity. So the part of the market that does want cheap, basic housing doesn’t even have a way to influence those units. There is loads of demand for them (young people without money make up a huge portion of the population), but no developers willing to meet that demand when they can just make expensive units. And not enough developers so that some need to chase the cheap market. And in cities, the lot cost is very prohibitive too, before even getting into building a very basic house.

JamesBarney 5y ago
We have the same problem with the car market. I can only afford a $5,000 car, but the car manufacturers make all their money building $20,000 cars. I just can't see how Honda making another $20,000 fit is going to help me afford a $5,000 car.
- arcticbull 5y ago
  I mean VW makes $100,000 Porsches and $20,000 Jettas. At some point it’s not economical to make cheaper cars due to materials and workmanship. You can certainly buy an e-bike for half that, I did. The cost of construction in America is $150/sqft. We’re not even close in cities. Off by an order of magnitude.
  - JamesBarney 5y ago
    Sorry I guess I was more obtuse than I intended. My point was I can buy a used car for $5,000, and Honda building new cars allows that even if the new cars are out of my price range.
    - arcticbull 5y ago
      Ah I see, that makes sense, I misread!
- letitbeirie 5y ago
  The problem from the manufacturers' perspective is that the gear required to meet 2021 safety, emissions, and fleet efficiency standards by itself almost pushes a new car's price over $5000, and that's without leaving any budget left over to make it a car anybody would want to buy. They do sell vehicles at that price which get around all of those standards, but they lose two wheels in the process.
  - nine_k 5y ago
    You can still easily buy a decent used car for $5k. Try buying a half-decent used home for 25% of its initial sticker price.

seanmcdirmid 5y ago

> The real problem as always is zoning. If the real problem was always zoning, wouldn't dense cities like NYC and Shanghai be cheaper than average, not way over average? > Check out Japan housing CPI - a market where supply meets demand thanks to federal zoning rules, and is also centrally banked. Japan went through a huge bubble in the 1980s. Also, housing (the structures at least) rapidly depreciates in Japan, which prevents them from being used a speculative asset as in countries (even then they still went through a huge bubble in the 80s). It is definitely an alternative model to our own, but I'm not sure how many people will want to experiment with that. Japan also much more strictly restricts immigration than other countries, which makes it, for example, a bad place for Wenzhou house wife real estate speculation.

meowtimemania 5y ago
Zoning is also an issue in NYC. The suburbs are unable to become dense do to zoning which causes the prices to go up.
- nine_k 5y ago
  Brooklyn increases the density steadily. I see a lot of construction around me, mostly higher-density replacing low-density, but it's relatively slow.
TulliusCicero 5y ago
> If the real problem was always zoning, wouldn't dense cities like NYC and Shanghai be cheaper than average, not way over average? It's not about supply by itself, it's supply vs demand. Big cities have big populations and economies, which means a lot of demand. But as far as zoning goes, note that like other metros, NYC has actually effectively downzoned areas over time; in fact, a huge proportion of buildings there would now be illegal due to different types of density restrictions: https://www.nytimes.com/interactive/2016/05/19/upshot/forty-percent-of-manhattans-buildings-could-not-be-built-today.html https://www.nytimes.com/interactive/2016/05/19/upshot/forty-... A lot of NIMBY's tend to go, "well, there's still some areas where it's possible to build more, so there's no real issue there". This is approximately like restricting car manufacturing to one state, and then when car prices go through the roof, saying "well, there's still more land to build car factories there, so I don't see the problem, it couldn't possibly be this rule".

deleted 5y ago

[deleted]

deathanatos 5y ago

While I agree zoning is a huge issue (I think that interest rates being so low doesn't help, either, but I concur with your thesis that zoning is the bigger problem), this, however: > Houses cost roughly the same on a $/sqft basis, adjusted for inflation, as they did in the 1970s. Sorry, but no. My parents bought their first home for $72/sq ft. real¹. They sold it for $99/sq ft. The same house last sold for $208 sq ft., and is Zestimated today at $302/sq ft. The value of the home has averaged >7% gains YoY, well outpacing published inflation. Their current home, built significantly later, and like you say, significantly larger, was $149/sq ft. at purchase, and is $182/sq ft. today. Every house I look at sings this same tune. Accounting for inflation, where my parents got a large house ready to move into, for the same amount to day I'm looking at what I call a "contractor's paradise", and that will require significantly more than the sticker price to make it habitable. ¹all dollar figures in this comment will be in 2021 real dollars, not nominal ones. I.e., adjusted for inflation.

arcticbull 5y ago
The inflation adjusted $/sqft statement is a blended average across the US. It’s lower outside of towns and higher inside towns. This is tracked by the Census bureau but as always with averages there are values on both sides of the mean. [1] One caveat is it does reflect only new construction. [1] https://infogram.com/1pqdpn20vkmlelcq6qx7jzwz9pf00g9xnq5 https://infogram.com/1pqdpn20vkmlelcq6qx7jzwz9pf00g9xnq5
- bosie 5y ago
  > blended average across the US > One caveat is it does reflect only new construction. I am not sure what a blended average is but averaging new constructions makes your stats utterly useless? Where are people living mostly and how does the real estate market go there.
  - arcticbull 5y ago
    It's the average price of new construction over time. Generally one would not expect new construction to come in dramatically under market right?

R0b0t1 5y ago

I don't think this is entirely right. The cost of building a home has shot up too, to the point you must take out a very sizeable loan to do so.

sumedh 5y ago

> This chart alone basically debunks the theory the Fed is solely responsible for lower housing affordability. Have you looked at Japan's population, its "dead ass flat" while US population keeps going up. https://datacommons.org/tools/timeline#place=country%2FJPN%2Ccountry%2FUSA&statsVar=Count_Person https://datacommons.org/tools/timeline#place=country%2FJPN%2...

arcticbull 5y ago
Doesn't really matter. What matters is that in Japan supply and demand are equal. You could achieve the same outcome in the US with more supply.
- jeffreyrogers 5y ago
  No, demand is actually down in Japan[0]. That chart shows residential housing vs. under 65 year-old population. So demand is decreasing but residential RE is rising slightly. Your analysis is also ignoring that services cost a lot more in the US than they did in the past. You can't build cheaply in NYC or SF or Seattle anymore because construction workers cost more. [0]: https://lh3.googleusercontent.com/-xDrQEcMyF5Y/YWDyNh-3TiI/AAAAAAAAJ2Y/pqILtYRxjCkvMcKbL9flYDxPxlbwSs5fQCLcBGAsYHQ/image.png https://lh3.googleusercontent.com/-xDrQEcMyF5Y/YWDyNh-3TiI/A...
  - arcticbull 5y ago
    I should have said supply >= demand. Yes, SF has the second-highest construction costs in the US. $330/sqft. [1] Average home prices are $900-1200/sqft. [1] https://www.investsf.com/why-san-francisco-has-the-second-highest-construction-costs-in-the-world/ https://www.investsf.com/why-san-francisco-has-the-second-hi...

tedk-42 5y ago

Please stop. Zoning issues/lack of supply would imply that there are lots of homeless people without a roof over their head. Investors have too much access to property. It's a system of greed that benefits those who entered the market early (typically boomers). Just stop blaming zoning already.

arcticbull 5y ago
Sorry but it's zoning's fault haha. > Zoning issues/lack of supply would imply that there are lots of homeless people without a roof over their head. The price of housing only matters to people who don't already have homes they own. 65% of Americans own homes, so that cuts down your working set dramatically. There are a lot of homeless people, yes - 0.2% of the population - but lack of affordable housing tends to be roughly equivalent to "perma-renting" as renting has a lower barrier to entry. To buy a home you have to come up with a lump sum of money to make a down payment. If you can't do that, you're forced to rent or split accommodation or live with your parents. Lack of affordable housing doesn't mean homelessness. There's a lot of elasticity there. > Investors have too much access to property. It's a system of greed that benefits those who entered the market early (typically boomers). Investors buy property to rent because home ownership is unaffordable. Blackrock buying up property is a symptom of the market, not a cause. They don't see houses becoming cheaper because they don't see zoning reform on the horizon, so they believe there will be long-standing demand for their rental units. If housing were to become affordable, due to a large increase in supply, these investors would get bowled over twice - once due to lower real property value and once more due to lack of demand for rental units as folks buy instead. Even foreigners parking capital abroad, more supply makes that (a) a bad idea and (b) kind of irrelevant. I'm not saying that shouldn't be tackled too, but once again, zoning would solve the problem.
- tedk-42 5y ago
  the conflict you ond i have is you believe investors are benevolent and are helping poor folk who can't buy. i don't believe anything of what youre arguing simply because more supply will continue to be purchased by investors to further drive up prices.