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Inflation and the housing question

• coding123 5y ago
  > Likewise, the current bout of inflation operated as a propaganda for my friend’s landlord. And this isn’t the only sector where increased attention on inflation may be enabling further inflationary price increases. I have seen in countless areas of the economy the prices only jumped up AFTER it was news.
• com2kid 5y ago
  If building codes took externalities into account, housing prices would go down. Boarding houses filled a need, but modern safety codes say every bedroom needs a window. I bet people would rather have a roof over their heads, without a window, than sleep outdoors. Want to do work on your house in Seattle? Touch the roofline and you'll need obscene amounts of rework and basically a band new roof. There is a serious shortage of space, so let's make increasing the # of bedrooms in the city as expensive as possible! We need regulation, but regulations need to be created balancing out real world needs.
  • lotsofpulp 5y ago
    You need tort reform first to remove liability from builders, owners, and governments once a fire kills a few people in a building with rooms that have no egress and lawsuits start flying.
    • 2fast4you 5y ago
      If people die in a fire because they can't exit the building quickly and safely, that's a problem and someone should be liable for their negligence. People not dying should be the priority.
      • BitwiseFool 5y ago
        >"People not dying should be the priority." It already is, but like all things the costs and benefits must be weighed. You can prevent 100% of electrical fires by prohibiting buildings from having power.
        • 2fast4you 5y ago
          You can prevent people from dying in a house fire by just not having any homes either. Relaxing safety requirements is not the solution to housing crisis. At best it will just increase the divide. We're going to be packing people like sardines into the cheapest (and consequently most dangerous) "housing" we could build, while people who can afford the luxury live in homes built to modern safety standards. These regulations aren't created just for fun, they're created because people died. Let's not take a step backwards.
          • com2kid 5y ago
            Right now shelters are so unsafe many people choose to sleep on the streets instead. I'm not saying roll building codes back 100 years. I am saying that cities are experiencing an extraordinary problem and we may need to start rethinking some of our fundamentals and sacred cows if we are going to solve these problems.
          • hackerfromthefu 5y ago
            You can also prevent people from dying in a house by making the house too expensive that it's unaffordable for them.
          • BitwiseFool 5y ago
            >"These regulations aren't created just for fun, they're created because people died. Let's not take a step backwards." Of course, and I realize that, I think we all do. The question, though, is at what point is a regulation more expensive than it is practical? It sounds heartless but some regulations don't seem worth the expense of how many lives it is designed to save. One of the reasons why the 4 prong outlet is required for dryers is because someone was changing the inner light bulb in the dryer and killed themselves because they didn't shut off power to the circuit. The regulation is meant to help prevent this in the future, but one has to wonder just how many people are actually being saved by this update. Especially when you personally have to shell out something like $750 to update your three prong outlet.
  • vkou 5y ago
    Safety codes aren't the reason housing is expensive. Land use is. NIMBY policies that ban multi-family tenancies are. Lack of SROs is. Lawn and parking requirements are. The kind of housing we need can be built to code. But it can't be built when political stakeholders actively work against it.
    • rootusrootus 5y ago
      A number of places, including my state, have made blanket changes to zoning that allow multifamily housing where it was previously not allowed. In a short time we should have the answer.
      • gscott 5y ago
        California has an accessory dwelling unit law that if fully realized could take single family homes built on a big lot and give them the ability to have multiple adu units on them... https://additionalhomes.com/adu-law-regulations/ https://additionalhomes.com/adu-law-regulations/
      • com2kid 5y ago
        Here's another idea: Mandate only ADA accessibility for the first floor of a residential building. Before someone says that is a terrible idea, I'd like to point out the majority of housing stock in Manhattan is just that.
    • AmericanChopper 5y ago
      I largely agree with you, but it does tend to be a little bit more complicated than that. Highly restrictive zoning laws are a tremendous problem, but if you want to change them you typically have to address infrastructure as well. If you wanted to do some urban intensification in an area, you’d likely have to build more water, power, waste water and telephony infrastructure first. If you wanted your new higher density urban environment to provide a decent quality of life, you’d then likely have to address increased demand for roads, public transport, schools, hospitals, etc…
    • BitwiseFool 5y ago
  • 2fast4you 5y ago
    I'm sorry but every bedroom DOES need a window. Packing people into as many small artificially lit rooms as we can fit on a lot is not a great idea. I think we need to be very careful about relaxing safety guidelines.
    • anonymoushn 5y ago
      It's important to keep people homeless to save them from not having windows.
      • vorpalhex 5y ago
        Well it's the burning to death with no means of egress that is mostly the concern. Homelessness is probably better than being burnt alive in a fire that removes your escape avenue.
        • plandis 5y ago
          It’s a relative trade off though. People living in tents will still die to fires but also are going to be exposed to other risks that are likely way less prevalent in a windowless home.
          • anonymoushn 5y ago
            The risk under consideration must be minimized at any cost, including costs much greater than the maximum possible benefit.
        • shuckles 5y ago
          Modern fire codes are good enough that I’d be shocked if a code compliant new building with no windows is less safe than a pre-1960s building with windows.
        • com2kid 5y ago
          Modern fire safety standards are worlds above what they used to be when the requirement for windows went into building codes. I'm not saying it is nice, but I am saying that flop houses and boarding houses filled a need in society that, for many people, is currently being met by living outdoors in tents instead.
  • mjevans 5y ago
    Is it a 'window' or an independent egress route? I am 100% for building code requiring the literal safety feature. Though I kind of like the idea of my sleeping room deep inside of a cave of solitude. Possibly with one uncommonly used route that has to be entirely lined with non-flammable materials only.
• asdfasgasdgasdg 5y ago
  It's not price gouging (as the article references) if it's a competitive market and there's no supply shock. It's just the bid up price of the good. Landlords and owners will be able to command high fractions of average incomes as long as there is no slack in the housing market. If you nationalize housing and hold prices low, then there will be supply shortages where some folks will not be able to get housing who would happily pay your price. (This is a fact, not conjecture, and is easily observed in any affordable housing lottery in the United States.) The only way to have low prices and also to satisfy the demand for housing (i.e. have each person who is willing to pay be allocated a unit) is to have slack in the market. No other solution will do it.
  • djbebs 5y ago
    It's not price gouging if the market is uncompetitive and there is a supply shock, because there's no such thing as price gouging.
    • asdfasgasdgasdg 5y ago
      I'm not aware of anyone who claims that the housing market is uncompetitive in the economic sense. There are a ton of independent sellers and a ton of independent buyers. Information is not exactly symmetrical but it's pretty close. These are the hallmarks of a competitive market.
      • mirntyfirty 5y ago
        I’d dispute the ton of independent buyers given the amount of bids placed by the top 10 corporations. Even if the bids are rejected it still has a large effect on pricing
        • deleted 5y ago
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        • gruez 5y ago
          >I’d dispute the ton of independent buyers given the amount of bids placed by the top 10 corporations. What's the ratio like? > Even if the bids are rejected it still has a large effect on pricing If they put in a bunch of bids that end up being rejected, doesn't that work in the opposite direction? If you're selling something on craigslist and you get spammed with a bunch of lowball offers, you're not going to think your widget is more valuable. If anything it's going to make you have second thoughts about your original price and make you want to lower it.
• deleted 5y ago
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• entropi 5y ago
  I am really curious where this whole situation with housing will end up. I am 30 years old, lived in more than a few cities/countries now and since I was a child, the cost of rents/houses have always been increasing, literally everywhere. At what point it is too much? What happens then?
  • refurb 5y ago
    It will take a massive dump, just like it always has. It amazing how short people's attention span is. It's not the last housing crash in the US or Asia was that long ago.
    • solarmist 5y ago
      That’s short term look out over 50+ year periods and it moves in one direction.
      • refurb 5y ago
        Tell that to Detroit.
        • solarmist 5y ago
          I agree, and I will be curious what will happen to all the dying cities and towns. We may have it completely wrong about what makes land valuable, but it seemed that way due to a series of coincidences.
  • akomtu 5y ago
    There won't be a breaking point. We'll just see more and more grey towers with shoebox apartments, like in Japan or many chinese cities. Those towers will be connected to wealthier areas by rail - a cheap way to move the service workers back and forth. SFH will stay, but will become a luxury, like a private jet. The rich need these SFHs as a buffer between their palaces and those grey towers.
    • 5y ago
• m0llusk 5y ago
  The last time we had a prolonged period of high inflation was in the 1970s. At that time not only did housing prices reach historic lows, but it became common knowledge that houses were depreciating assets. That is, without ongoing maintenance replacing the roof and plumbing as needed the house fails and becomes unlivable and useless as an asset. In the current environment blowing a bunch of loose capital or taking out a funny money loan to upgrade a kitchen or bathroom is common, but when interest rates go up and capital is not flowing freely that level of ongoing investment becomes a real burden. But now we have had asset values rising out of control during a prolonged period of low inflation and effectively zero interest rates therefore it will be different this time? More likely we will again see the usual. House prices will stagnate while inflation does its work and people will come to understand that housing is not an endless free money game but in fact a depreciating asset that is difficult and expensive to transfer especially when it is transformed into a boat anchor.
  • api 5y ago
    Isn't there another factor here? The 1970s was still immediately after a huge period of rapid home building. Home building has stagnated and fallen far below demand since then, leading to an outright housing shortage in some metropolitan areas. NIMBY politics are a major factor here. Another factor is that the expansion of the suburbs has hit the limits of practicality. Suburban size is limited by things like commute radius from major city and town centers, the ability of roads to take more cars, and whether or not mass transit is available. Housing too far out starts to become indistinguishable from rural housing. Coupled with NIMBY politics this creates an environment for scarcity to explode. If housing was going up during a period of otherwise tame inflation, it's possible that housing will now really explode. That's what seems to be happening so far. The only thing that is going to bring it down or at least tame the rise is taking on NIMBY politics and zoning and other artificial barriers to increasing the number of housing units. Edit: Of course yet another possibility is that there's some truth to the allegations of inflation hawks over the past 10-20 years: that inflation is actually a lot higher than we think and has been masked by the deflationary effects of technology and globalization. Tech and cheap overseas labor have held down the price of manufactured goods and kept the price of some consumables like food in check, but things not subject to these efficiency gains like college tuition and housing have exploded. In general anything that can't easily be automated or outsourced has gone up in cost. Personally I think all these factors are in play.
• rodgerd 5y ago
  Sounds like the definition of a good economy is fundamentally broken, then.
  • _moof 5y ago
    I was going to say. If people can't get the things they need to meet their basic needs, then the economy is not "good."
• collias 5y ago
  Give every home owner 30-year locked interest rate mortgages at <3%, then immediately raise the rates again, and no one wants to sell...ever. It makes no financial sense to sell a property locked into such a low interest rate while rates are moving up. Combine this situation with fairly stringent housing code requirements that make new housing difficult and expensive to build, and you have a recipe for low supply. Housing prices are exploding, and will continue to do so until one of the above situations change. At the current rate, we will have an entire generation of renters unless they inherit property.
  • ChuckNorris89 5y ago
    >At the current rate, we will have an entire generation of renters unless they inherit property. This is already the case in some European countries like Germany, Austria and Switzerland. Buying without inheritance is nearly unaffordable already for most people. I went, for shits and giggles, to a house viewing hosted by a realtor, to see who can afford so many 600k - 1MM houses when the average national income is around 1800 Euros/month NET. I expected it would be full of people who cashed out on crypto at the right time, but it was all 20 somethings with mon and dad who were there to buy their kids a nest. The middle class who could buy a house while still enjoying luxuries like vacations and a car, from average salaries without inheritance, is dead and buried here. As a double whammy to millennials and younger who will not own their homes, rents are going up, wages are being eroded by inflation and the retirement age is also going up, and the pensions sums to be received are going down. I just hope I can still afford a noose and a second hand chair on my future pension.
  • derekp7 5y ago
    You have a double whammy, because houses are priced based on monthly payments. So when the interest goes up, the market price of the house goes down. Which means that anyone that bought recently will have to wait quite a while to get enough equity to pay for the decreased sale price.
    • pharmakom 5y ago
      Fortunately many people can’t hold forever so there will still be some volume at the lower prices.
• hartator 5y ago
  A good economy is producing goods and services are a lower costs and better quality. USD losing and losing value doesn't produce anything.
• wonnage 5y ago
  If you live in California, property tax is assessed at purchase price + inflation rather than at current market price. Rent control basically extends this same (enormous) benefit to renters. You still miss out on goodies such as being able to transfer the cost basis to your children, but it seems like a minimally invasive way to level the playing field. Repealing prop 13 is basically impossible because you have to deal with sob stories about seniors getting priced out of their homes. We should double down and enact rent control on the same principle.
  • sokoloff 5y ago
    Cambridge MA had rent control from around 1970 to 1995 (with buildings built before 1969 being controlled and newer construction being market rate). The old, rent controlled buildings were terrible, poorly maintained, and far less valuable than the just a few years newer, but maintained, more valuable, and rented at market rate units. IMO, that program was well-intended and even reasonably well-designed, but the rental and housing market got healthier after rent control was abolished (and after the inevitable dislocations cleared and the older buildings could once again be profitable to maintain).
• antisthenes 5y ago
  Once all the bad actors get evicted (renters who abused the eviction moratorium and decided to not pay rent), and courts get caught up on landlord-tenant cases, prices will stabilize. A lot of what we're seeing with COVID is a temporary overshoot in the other direction. Houses and apartment buildings didn't disappear during COVID. And you don't need a long elaborate logistic chain to be able to rent or lease a space.
• kory 5y ago
  Americans don’t want to live in small apartments, and large portion haven’t had to do so for 50 years. Building more small units with no yard to replace the housing that is most desirable is not something Americans will be willing to accept. HN is biased towards tearing down beautiful old high quality of life neighborhoods for more multifamily housing. I think that’s fundamentally the wrong approach, because that isn’t what the market wants. What we should be asking is: * how can we construct new neighborhoods similar to early 1900s single family neighborhoods? Walkable urban cores surrounded by houses in small lots? * can we decentralize jobs over more area to enable less dense housing options for more people—Why aren’t we building new cities? * How can we make housing construction cheaper? Low density housing is generally the cheapest to construct by square foot excluding the land (see above on decentralization of jobs). Still, what makes new construction so expensive is extremely high labor and material costs. Why did a new house cost a few years’ average salary in the early 1900s, and 6-10x the average salary now?
  • solarmist 5y ago
    The problem is the same as it’s always been. Location. There are plenty of towns like this in the Midwest and almost all of them are dying unless they have an industry, or more than one, supporting them. You could have white collar remote towns, but you’d still have to solve the issue of getting service and retail people to live there.