5 ms·

The assumption here is that housing can't be affordable by nature, but has to be made affordable by government intervention. Is that the case? Would it be pos

The assumption here is that housing can't be affordable by nature, but has to be made affordable by government intervention. Is that the case? Would it be possible to build an apartment building that simply will be affordable, without the government giving the developer a pile of other people's money? I also wonder about the incentive that's created when artificially affordable housing is provided in an area that's expensive because of high demand: doesn't that prevent a shortage of low-skill labor that would otherwise be a limiting factor in that demand? That is, if it's too expensive for many people who might work low-paying service and manual jobs to live nearby, the rising cost of that sort of labor might begin to lessen other people's desire to live there and businesses' desire to locate there, mitigating the housing problem.

sandwichinvest 5y ago
In both cases, we have quite a lot of historical evidence. There aren't many prominent examples of housing at all income levels being created without government intervention. And when there's an affordable housing crunch in a desirable city with a wide spectrum of jobs, people commute and live further away, which is bad for everyone involved.
- datavirtue 5y ago
  If they simply did not charge income tax on home sales we would have an army of solo developers and house flippers engaging in a flurry of small builds. There is still cheap land to be had where single family 1500sq ft homes can be built but developers can't do it because of the up front costs and taxes making such a thing impossible for them. Solo builders can do it...until they factor in the governments' cut. The margins too thin, risk too great. Eliminating income tax on home sales is dead simple, has no cost, and would enable a lot of one-off projects. I am trying to build a two bedroom house in a small country township in Ohio. My upfront costs just to get county, state, and township approval are already at $15k with me doing all the work. No approval yet. The piece of land (1ac) I'm developing was held by various corporate builders for years until I bought it from another individual for $7k. This house is for myself but it could easily be built on speculation and sold but I would have to live in it for three years to avoid the $30k income tax on the sale. No way am I fighting through all this red tape and risk to hand over $30k in taxes. That $30k is another piece of land brought to shovel ready for another build...pissed away. Income taxes are a regression to solo builders that make each build a daunting risk. The government is not allowing profit on smaller single family homes...period.
  - rileymat2 5y ago
    Can’t you avoid the income tax by incorporating and rolling profit into the next project expenses in the same year? I don’t see any reason to distort the market by removing income tax on income.
    - datavirtue 5y ago
      Perhaps, that sounds like more expense and red tape. Another barrier/wall that demonstrates my point exactly. Just to build homes? The people with these skills can't use them because of all the administrative, tax, and obscure compliance munitia hamstringing the process. The market is already distorted to hell.
  - sandwichinvest 5y ago
    This might be totally true for Ohio. Most of the attention on the housing crunch is in cities where there is zero cheap land and the only development that should happen is high-density.
velcrovan 5y ago
> Would it be possible to build an apartment building that simply will be affordable, without the government giving the developer a pile of other people's money? Sure it’s possible. How often, statistically, will it happen when there is a complete lack of financial incentive to do so? Basically never. My question is, what evidence and metrics show that it is always a net negative when the government creates incentives for affordable housing?
- JasonFruit 5y ago
  We don't really have that problem with other goods: is it possible to make cheap and expensive bed sheets, or kitchen scales, bookshelves, or phones? Yes, in all those cases, and there's a financial incentive to do so: people who cannot afford an expensive version will pay for one they can afford. Where exactly is the difference between those goods and housing? At first I thought land, because the same land could be used for expensive or cheap housing — but that's the case with the raw materials for those other products, and just as in the case of land for housing, not all raw material is equally desirable. As to your question, we really can't have good evidence one way or the other, because there are too many variables. I'm attempting to reason about it, and am not really sure I have answers myself, but I'm not comfortable assuming that having government take care of a problem makes the problem go away.
  - renewiltord 5y ago
    The difference is if you want to make a cheap phone the people who don’t want you to are few, but if you want to build a cheap home there are lots of people who will try to stop you. The presence of the opposing force in numbers is what is damaging.
    - foogazi 5y ago
      No - the problem is in the cost You can make cheap phones in China and sell them in the US You can’t make cheap homes in Indiana and sell them in San Francisco Why are there cheap homes in Indiana ? Look at the costs involved: land is cheaper. All the other components: materials and labor are the same
throwaway849302 5y ago
ransom1538 5y ago
IMHO after being a landlord and homeowner: home affordability is doomed. Homeowners vote to stop new construction to prop up their investment. Homeowners pretty much own local legislation: mayors, supervisors, boards etc. There is really no hope. People don't want affordable homes in their neighborhood - they want affordable homes in your neighborhood. The only way to stop this madness is to inversely tax homes based on their share of affordable homes in their area through state laws. Good luck passing that.
thomasguide 5y ago
From my own professional experience: it costs a minimum of $350 per net rentable square foot for new construction of mid-rise rental apartment buildings. This includes all materials, labor and design/permitting costs, and the cost of land acquisition in the urban core of a second-tier U.S. real estate market (NC Triangle). $350,000, 1000-square-foot three-bedroom apartments are affordable housing. But good luck finding one in a new building!

sandwichinvest 5y ago

In both cases, we have quite a lot of historical evidence. There aren't many prominent examples of housing at all income levels being created without government intervention. And when there's an affordable housing crunch in a desirable city with a wide spectrum of jobs, people commute and live further away, which is bad for everyone involved.

datavirtue 5y ago
If they simply did not charge income tax on home sales we would have an army of solo developers and house flippers engaging in a flurry of small builds. There is still cheap land to be had where single family 1500sq ft homes can be built but developers can't do it because of the up front costs and taxes making such a thing impossible for them. Solo builders can do it...until they factor in the governments' cut. The margins too thin, risk too great. Eliminating income tax on home sales is dead simple, has no cost, and would enable a lot of one-off projects. I am trying to build a two bedroom house in a small country township in Ohio. My upfront costs just to get county, state, and township approval are already at $15k with me doing all the work. No approval yet. The piece of land (1ac) I'm developing was held by various corporate builders for years until I bought it from another individual for $7k. This house is for myself but it could easily be built on speculation and sold but I would have to live in it for three years to avoid the $30k income tax on the sale. No way am I fighting through all this red tape and risk to hand over $30k in taxes. That $30k is another piece of land brought to shovel ready for another build...pissed away. Income taxes are a regression to solo builders that make each build a daunting risk. The government is not allowing profit on smaller single family homes...period.
- rileymat2 5y ago
  Can’t you avoid the income tax by incorporating and rolling profit into the next project expenses in the same year? I don’t see any reason to distort the market by removing income tax on income.
  - datavirtue 5y ago
    Perhaps, that sounds like more expense and red tape. Another barrier/wall that demonstrates my point exactly. Just to build homes? The people with these skills can't use them because of all the administrative, tax, and obscure compliance munitia hamstringing the process. The market is already distorted to hell.
- sandwichinvest 5y ago
  This might be totally true for Ohio. Most of the attention on the housing crunch is in cities where there is zero cheap land and the only development that should happen is high-density.

velcrovan 5y ago

> Would it be possible to build an apartment building that simply will be affordable, without the government giving the developer a pile of other people's money? Sure it’s possible. How often, statistically, will it happen when there is a complete lack of financial incentive to do so? Basically never. My question is, what evidence and metrics show that it is always a net negative when the government creates incentives for affordable housing?

JasonFruit 5y ago
We don't really have that problem with other goods: is it possible to make cheap and expensive bed sheets, or kitchen scales, bookshelves, or phones? Yes, in all those cases, and there's a financial incentive to do so: people who cannot afford an expensive version will pay for one they can afford. Where exactly is the difference between those goods and housing? At first I thought land, because the same land could be used for expensive or cheap housing — but that's the case with the raw materials for those other products, and just as in the case of land for housing, not all raw material is equally desirable. As to your question, we really can't have good evidence one way or the other, because there are too many variables. I'm attempting to reason about it, and am not really sure I have answers myself, but I'm not comfortable assuming that having government take care of a problem makes the problem go away.
- renewiltord 5y ago
  The difference is if you want to make a cheap phone the people who don’t want you to are few, but if you want to build a cheap home there are lots of people who will try to stop you. The presence of the opposing force in numbers is what is damaging.
  - foogazi 5y ago
    No - the problem is in the cost You can make cheap phones in China and sell them in the US You can’t make cheap homes in Indiana and sell them in San Francisco Why are there cheap homes in Indiana ? Look at the costs involved: land is cheaper. All the other components: materials and labor are the same

throwaway849302 5y ago

ransom1538 5y ago

IMHO after being a landlord and homeowner: home affordability is doomed. Homeowners vote to stop new construction to prop up their investment. Homeowners pretty much own local legislation: mayors, supervisors, boards etc. There is really no hope. People don't want affordable homes in their neighborhood - they want affordable homes in your neighborhood. The only way to stop this madness is to inversely tax homes based on their share of affordable homes in their area through state laws. Good luck passing that.

thomasguide 5y ago

From my own professional experience: it costs a minimum of $350 per net rentable square foot for new construction of mid-rise rental apartment buildings. This includes all materials, labor and design/permitting costs, and the cost of land acquisition in the urban core of a second-tier U.S. real estate market (NC Triangle). $350,000, 1000-square-foot three-bedroom apartments are affordable housing. But good luck finding one in a new building!