13 ms·

Isn't a 'quick fix', but legalizing the production of various shapes and sizes of housing would help a lot of people, especially long term.

by davidw 5y ago

dominotw 5y ago
how will that quickly fix inflation ?
- scoopertrooper 5y ago
  Inflation (especially asset inflation) is as much expectations about future price rises as it is anything else. If investors expect to a vast expansion of housing stock in 3 years, they'll start exiting the market today, to get ahead of it.
  - coding123 5y ago
    We should start taxing vacation, abnb, secondary empty homes at 100x the property tax rate. That would provide housing VERY quickly. Rental housing can be taxed at 10x UNLESS it is offered 10% below market rate.
  - hogFeast 5y ago
    The evidence for the expectations model has changed significantly over the past two years or so. Obviously, central banks are going to move slower given that expectations has been the consensus for two decades. But I think academics are realising (about seven years after markets realised) that central banks have a huge role in signalling and the consumers form their expectations about inflation based on the past (note: the last point is compatible with evidence for expectations when inflation is falling...in other words, if inflation was falling over your sample you would be unable to distinguish between an expectations-based theory and a moving average-based theory of inflation). Also, investors won't start exiting the market if they expect expansion in housing stock. Financial markets trend, they absorb information imperfectly, they overreact, and there is massive volatility as all this occurs. Indeed, there are some investors who base their investment strategy on the inability of markets to react to capital cycles (Marathon Asset Management have written books about this). Investors have different time scales, if the housing stock was going to expand then you would see capital pile into the sectors because people will chase that growth expecting to flip at a higher price at the top.
- deleted 5y ago
  [deleted]
- tenuousemphasis 5y ago
  They said it is NOT a quick fix.
- ravenstine 5y ago
  I'm not sure it would fix inflation, but it could at least help people actually hold wealth and encourage them to participate in the labor force (putting aside the many obvious reasons why it is currently not worth their time to do so). When you own a home, whether you've paid it off or have a mortgage, you can sell that home and convert it back into currency that you can use for other things. Even better if you can improve upon the home in ways that increase the resale value. Depending on the state of the housing market, it gives the potential to hedge inflation. Homes can be inherited and passed on to descendants. Perhaps one could hold their wealth in precious metals as an alternative, but those metals don't provide value until they are cashed out. A home, on the other hand, provides constant value because you get to live in it and do with it as you please (HOAs and other regulatory bodies notwithstanding). When you rent a home, you are paying to pretend like you own the place. You cannot sell the home, any improvements you make to it benefits the landlord, and you cannot put your home in a will. In other words, when you hand in your rent check every month, that wealth might as well have disappeared into the ether. It's hard to speak for other parts of the world, but my experience in California is that the concept of a "starter home" is a thing of the past. Yes, there are swaths of small homes that may become available, but one that isn't horribly dated can be hard or in disrepair to come by, and these days the price of an existing starter home is pretty outrageous. Whenever you see new construction, typically it's one of 4 things: mansions, McMansions, condos, and large-scale apartment complexes. My assumption is the reason you don't see new starter homes being built is because the only way for developers to make a meaningful profit after years of fighting for municipal approvals is to build one of those 4 types of homes I mentioned because they have the highest return upon sale. Seriously, just take a tour of the Southern California area. You are unlikely to find new single family homes being built that aren't McMansions. Nearly all of the starter homes that would be appropriate for a young couple and a couple of small kids are occupied by retirees, are in need of renovation, and are in less favorable areas. Maybe it's different around the rest of the country and the world, but with the way the housing market and the economy are going, as well as the direction that UN governments want to take things, I predict that will be a spreading and continuing trend. If it wasn't so costly, time consuming, and an overall hassle to build homes of various sizes, more people might be able to maintain and build wealth even in the face of inflation. Otherwise, their currency mostly sits and rots, or gets lost in bad stock market gambles. Hell, just try building a "tiny house" and see how that goes. Many of the people that build those have to build them on wheels for a reason, and not necessarily because they want a quirky portable home. EDIT: Oh, and about the labor force thing... if people have the hope of being to able to own a home and build their own little fiefdom like their parents and grandparents did, they might choose to participate as opposed to being part of the mass workforce exodus we've seen recently. After all, if you have no hope of owning a home and you probably won't retire, why spend your life working hard rather than just working minimally to get by? Even I would work way harder if I didn't think that home ownership would be futile or at most a Pyrrhic victory.
dragontamer 5y ago
Shelter is .5% growth. Gasoline is like 5% per month. This is almost entirely an energy problem Gasoline up over 50% over the year, increasing delivery costs and the price of damn near everything else.
- throwawaygh 5y ago
  This. The short term temporary solution is pressure on OPEC+ and jump-starting Shale (no small task). The long term permanent solution is EVs and massive investment in renewable base load power generation.
  - WanderPanda 5y ago
    Your long term part is quite inflationary as well. If it wouldn’t be more expensive everybody would already driving evs
    - toomuchtodo 5y ago
      EVs cost half the cost per mile as an internal combustion vehicle [1], even less as renewables generation increases driving down the price of power. EVs do have a higher upfront cost, but lower total cost of ownership. Issue green bonds to subsidize the capital cost for borrowers, and increase the tax on internal combustion vehicles sales. EV supply is currently manufacturing constrained; provide incentives to rapidly scale EV and battery manufacturing. [1] https://www.energy.gov/eere/vehicles/articles/fotw-1190-june-14-2021-battery-electric-vehicles-have-lower-scheduled https://www.energy.gov/eere/vehicles/articles/fotw-1190-june...
      - throwawaygh 5y ago
        > EVs do have a higher upfront cost For now. Because they are new. But there's every reason to believe this is temporary. Electric cars are way simpler to manufacture. Far fewer moving parts. Literally.
        5y ago
colechristensen 5y ago
People that advocate this are advocating for lowering the quality of life. Long term it raises the price per square foot and makes it harder to have the space you want and need.
- epistasis 5y ago
  Sorry, but that doesn't make any sense. More housing means less sqft per person? The chain of reasoning to get to that conclusion must be long, because it is certainly not obvious.
  - ryandrake 5y ago
    Almost all "moar housing" discussions, at least on HN, call for building medium-and-dense urban apartments, which tend to be smaller than average sizes of housing. You never hear YIMBY advocates calling for building more 3500 sq.ft. single family suburban or rural homes.
    - davidw 5y ago
      It's entirely possible to build large and dense. I knew a pretty wealthy guy in Padova whose family had an enormous home that all happened to be on the 2nd floor of a 4 story building.
    - spamizbad 5y ago
      I don't understand how my quality of life will improve if I go from my current 1500 sqft home to a 3500 sqft home. Living near shops, walking around town with my family and being able to ride my bike brings me more joy than a larger home office. I suppose if I had a larger family I would want more bedrooms. But we are done growing our family at this point - and mine is roughly the size of the median, so I don't see why we need to flood the market with homes that are too big.
      - _Wintermute 5y ago
        Perhaps slightly off-topic, but as someone who has spent most of my time living in European cities these house sizes are just mind-blowing to me. 1500 sqft is 140 m^2, my first apartment was 30m^2. I can't imagine what you would put in a 3500 sqft (325 m^2) house, never mind something like answering the door if you were at the other side of your house.
kiba 5y ago
It would help a lot of people, but it also hurts a lot of people with mortgage. Liberalizing zoning and implementing LVT would help, but it would means massive structural change in our society. It's a true fix, but that true fix requires that we have important and difficult conversations about said structural changes.
- davidw 5y ago
  It's not going to hurt owners that much, really, not those in it for the long haul. It's unlikely that in a liberalized market, all else being equal, prices would truly crater, as builders would pull back. You'd probably get something more like Germany has been, where prices are fairly stable and boring, rather than an exciting market to speculate in.
- epistasis 5y ago
  People with mortgages have been making out like bandits for decades, and have recently locked in historically low interest rates that leverage their economic gains even further. This is a huge drain on the economic productivity of the younger generations, and anybody who was not able to afford to buy in to the scheme before the recent climbs. It's time to make housing behave at most like a savings account, rather than an investment account.
  - davidw 5y ago
    Exactly. > This is a huge drain on the economic productivity of the younger generations Economists have attempted to quantify the effects of this, and the numbers are huge: https://www.aeaweb.org/articles?id=10.1257/mac.20170388 https://www.aeaweb.org/articles?id=10.1257/mac.20170388
  - Marsymars 5y ago
    > People with mortgages have been making out like bandits for decades, and have recently locked in historically low interest rates that leverage their economic gains even further. Depends on jurisdiction. Canada's housing market has most of the same problems as the US's, but you can't really lock in low interest rates for longer than five years - so if you raise interest rates, you leave people five years from now underwater and having to renew for the next two decades at high rates.
anm89 5y ago
This isn't by a long shot a housing policy issue.

Isn't a 'quick fix', but legalizing the production of various shapes and sizes of housing would help a lot of people, especially long term.

by davidw 5y ago

Isn't a 'quick fix', but legalizing the production of various shapes and sizes of housing would help a lot of people, especially long term.

dominotw 5y ago

how will that quickly fix inflation ?

scoopertrooper 5y ago
Inflation (especially asset inflation) is as much expectations about future price rises as it is anything else. If investors expect to a vast expansion of housing stock in 3 years, they'll start exiting the market today, to get ahead of it.
- coding123 5y ago
  We should start taxing vacation, abnb, secondary empty homes at 100x the property tax rate. That would provide housing VERY quickly. Rental housing can be taxed at 10x UNLESS it is offered 10% below market rate.
- hogFeast 5y ago
  The evidence for the expectations model has changed significantly over the past two years or so. Obviously, central banks are going to move slower given that expectations has been the consensus for two decades. But I think academics are realising (about seven years after markets realised) that central banks have a huge role in signalling and the consumers form their expectations about inflation based on the past (note: the last point is compatible with evidence for expectations when inflation is falling...in other words, if inflation was falling over your sample you would be unable to distinguish between an expectations-based theory and a moving average-based theory of inflation). Also, investors won't start exiting the market if they expect expansion in housing stock. Financial markets trend, they absorb information imperfectly, they overreact, and there is massive volatility as all this occurs. Indeed, there are some investors who base their investment strategy on the inability of markets to react to capital cycles (Marathon Asset Management have written books about this). Investors have different time scales, if the housing stock was going to expand then you would see capital pile into the sectors because people will chase that growth expecting to flip at a higher price at the top.
deleted 5y ago
[deleted]
tenuousemphasis 5y ago
They said it is NOT a quick fix.
ravenstine 5y ago
I'm not sure it would fix inflation, but it could at least help people actually hold wealth and encourage them to participate in the labor force (putting aside the many obvious reasons why it is currently not worth their time to do so). When you own a home, whether you've paid it off or have a mortgage, you can sell that home and convert it back into currency that you can use for other things. Even better if you can improve upon the home in ways that increase the resale value. Depending on the state of the housing market, it gives the potential to hedge inflation. Homes can be inherited and passed on to descendants. Perhaps one could hold their wealth in precious metals as an alternative, but those metals don't provide value until they are cashed out. A home, on the other hand, provides constant value because you get to live in it and do with it as you please (HOAs and other regulatory bodies notwithstanding). When you rent a home, you are paying to pretend like you own the place. You cannot sell the home, any improvements you make to it benefits the landlord, and you cannot put your home in a will. In other words, when you hand in your rent check every month, that wealth might as well have disappeared into the ether. It's hard to speak for other parts of the world, but my experience in California is that the concept of a "starter home" is a thing of the past. Yes, there are swaths of small homes that may become available, but one that isn't horribly dated can be hard or in disrepair to come by, and these days the price of an existing starter home is pretty outrageous. Whenever you see new construction, typically it's one of 4 things: mansions, McMansions, condos, and large-scale apartment complexes. My assumption is the reason you don't see new starter homes being built is because the only way for developers to make a meaningful profit after years of fighting for municipal approvals is to build one of those 4 types of homes I mentioned because they have the highest return upon sale. Seriously, just take a tour of the Southern California area. You are unlikely to find new single family homes being built that aren't McMansions. Nearly all of the starter homes that would be appropriate for a young couple and a couple of small kids are occupied by retirees, are in need of renovation, and are in less favorable areas. Maybe it's different around the rest of the country and the world, but with the way the housing market and the economy are going, as well as the direction that UN governments want to take things, I predict that will be a spreading and continuing trend. If it wasn't so costly, time consuming, and an overall hassle to build homes of various sizes, more people might be able to maintain and build wealth even in the face of inflation. Otherwise, their currency mostly sits and rots, or gets lost in bad stock market gambles. Hell, just try building a "tiny house" and see how that goes. Many of the people that build those have to build them on wheels for a reason, and not necessarily because they want a quirky portable home. EDIT: Oh, and about the labor force thing... if people have the hope of being to able to own a home and build their own little fiefdom like their parents and grandparents did, they might choose to participate as opposed to being part of the mass workforce exodus we've seen recently. After all, if you have no hope of owning a home and you probably won't retire, why spend your life working hard rather than just working minimally to get by? Even I would work way harder if I didn't think that home ownership would be futile or at most a Pyrrhic victory.

dragontamer 5y ago

Shelter is .5% growth. Gasoline is like 5% per month. This is almost entirely an energy problem Gasoline up over 50% over the year, increasing delivery costs and the price of damn near everything else.

throwawaygh 5y ago
This. The short term temporary solution is pressure on OPEC+ and jump-starting Shale (no small task). The long term permanent solution is EVs and massive investment in renewable base load power generation.
- WanderPanda 5y ago
  Your long term part is quite inflationary as well. If it wouldn’t be more expensive everybody would already driving evs
  - toomuchtodo 5y ago
    EVs cost half the cost per mile as an internal combustion vehicle [1], even less as renewables generation increases driving down the price of power. EVs do have a higher upfront cost, but lower total cost of ownership. Issue green bonds to subsidize the capital cost for borrowers, and increase the tax on internal combustion vehicles sales. EV supply is currently manufacturing constrained; provide incentives to rapidly scale EV and battery manufacturing. [1] https://www.energy.gov/eere/vehicles/articles/fotw-1190-june-14-2021-battery-electric-vehicles-have-lower-scheduled https://www.energy.gov/eere/vehicles/articles/fotw-1190-june...
    - throwawaygh 5y ago
      > EVs do have a higher upfront cost For now. Because they are new. But there's every reason to believe this is temporary. Electric cars are way simpler to manufacture. Far fewer moving parts. Literally.
      - 5y ago

colechristensen 5y ago

People that advocate this are advocating for lowering the quality of life. Long term it raises the price per square foot and makes it harder to have the space you want and need.

epistasis 5y ago
Sorry, but that doesn't make any sense. More housing means less sqft per person? The chain of reasoning to get to that conclusion must be long, because it is certainly not obvious.
- ryandrake 5y ago
  Almost all "moar housing" discussions, at least on HN, call for building medium-and-dense urban apartments, which tend to be smaller than average sizes of housing. You never hear YIMBY advocates calling for building more 3500 sq.ft. single family suburban or rural homes.
  - davidw 5y ago
    It's entirely possible to build large and dense. I knew a pretty wealthy guy in Padova whose family had an enormous home that all happened to be on the 2nd floor of a 4 story building.
  - spamizbad 5y ago
    I don't understand how my quality of life will improve if I go from my current 1500 sqft home to a 3500 sqft home. Living near shops, walking around town with my family and being able to ride my bike brings me more joy than a larger home office. I suppose if I had a larger family I would want more bedrooms. But we are done growing our family at this point - and mine is roughly the size of the median, so I don't see why we need to flood the market with homes that are too big.
    - _Wintermute 5y ago
      Perhaps slightly off-topic, but as someone who has spent most of my time living in European cities these house sizes are just mind-blowing to me. 1500 sqft is 140 m^2, my first apartment was 30m^2. I can't imagine what you would put in a 3500 sqft (325 m^2) house, never mind something like answering the door if you were at the other side of your house.

kiba 5y ago

It would help a lot of people, but it also hurts a lot of people with mortgage. Liberalizing zoning and implementing LVT would help, but it would means massive structural change in our society. It's a true fix, but that true fix requires that we have important and difficult conversations about said structural changes.

davidw 5y ago
It's not going to hurt owners that much, really, not those in it for the long haul. It's unlikely that in a liberalized market, all else being equal, prices would truly crater, as builders would pull back. You'd probably get something more like Germany has been, where prices are fairly stable and boring, rather than an exciting market to speculate in.
epistasis 5y ago
People with mortgages have been making out like bandits for decades, and have recently locked in historically low interest rates that leverage their economic gains even further. This is a huge drain on the economic productivity of the younger generations, and anybody who was not able to afford to buy in to the scheme before the recent climbs. It's time to make housing behave at most like a savings account, rather than an investment account.
- davidw 5y ago
  Exactly. > This is a huge drain on the economic productivity of the younger generations Economists have attempted to quantify the effects of this, and the numbers are huge: https://www.aeaweb.org/articles?id=10.1257/mac.20170388 https://www.aeaweb.org/articles?id=10.1257/mac.20170388
- Marsymars 5y ago
  > People with mortgages have been making out like bandits for decades, and have recently locked in historically low interest rates that leverage their economic gains even further. Depends on jurisdiction. Canada's housing market has most of the same problems as the US's, but you can't really lock in low interest rates for longer than five years - so if you raise interest rates, you leave people five years from now underwater and having to renew for the next two decades at high rates.

anm89 5y ago

This isn't by a long shot a housing policy issue.