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>By the free market alone, letting everyone get a home sounds like a terrible decision Ah, but that's the thing about the free market. It doesn't care, for be

>By the free market alone, letting everyone get a home sounds like a terrible decision Ah, but that's the thing about the free market. It doesn't care, for better or worse. If the barriers to building new houses are low and demand is high, new houses will get built and prices will drop until an equilibrium is reached. >On the other side, letting housing to be crazy expensive, with few people capable of getting a new house, will always be profitable. You seem to have conflated a free market with one consisting of too few people with a great deal of regulatory capture, where the criticisms you've mentioned here apply.

dmix 4y ago
Notably housing shortages are a new phenomenon, we weren't having this problem earlier in the century. The only difference between now and then is we have far, far more regulations and zoning rules in the way. Technically houses are cheaper to build than in the past, knowledge and building materials are more plentiful, and capital markets are more efficient with more banks offering mortgages. So by multiple measures housing should be less of a problem, not worse. This is the reality we've built by choice, people act like they don't know how we got here. If you go on Reddit they think if we all just became unionized and have more $$ we'd go back to the 1960s and all have houses again. But that problem with housing supply won't go away until we fix the root cause, throwing more wages (or gov money) at it without expanding supply will just increase prices further.
- mthoms 4y ago
  >the only difference between now and then is we have far, far more regulations and zoning rules in the way. Some places have more or less run out of land. For example Vancouver is limited in it's north, west and south expansion by mountains, ocean, and an international border respectively. I believe there are similar issues in San Francisco, Seattle, New York, etc. Indeed, higher density is the answer... I'm just pointing out that the increase in regulations is not the "only" thing that's changed.
- ABCLAW 4y ago
  >The only difference between now and then is we have far, far more regulations and zoning rules in the way. No, the only difference is that a metric fuckton of money which used to be parked in productive equity investments ran out of productive uses because the taps were never turned off and started to slush into the real estate market via REITs. The price of Toronto RE, for instance, has not tracked with regulatory costs - it has shot up shortly after the aftermath of 2008, when global capital watched Canada have one of the most stable real estate markets skip the fallout of the subprime mortgage crisis. Paired with the rock bottom cost of money, Canadian Real Estate was viewed as a particularly stable investment class, prompting both Foreign Investors and REITs to dump capital into the market. The value in the market is the fact that it WAS better regulated that the competition, but it's now a toxic asset class. No study that I can find indicates that the volume of regulatory costs associated with the Toronto or Vancouver housing markets can be attributed to the specific inflection points associated with our current pricing environment. Wages cannot support the volume of leverage in the Canadian housing market. The numbers on display as reported by RBC yearly indicate that the average house in Vancouver costs more than 100% of the gross wages of the average worker in the city. This number is typically 30-40% in most functioning RE markets. So if consumer demand literally cannot create the numbers we're seeing, then we need to look at other systemic changes in the demand profile for the asset. And it's pretty easy to see what's going on if you spend 2 hours calling brokers. Toronto condos aren't sold to people to live there; they're pre-marketed to block investors aiming to purchase groups of units for rentals and finance their purchases with rental cashflows - condominium sales come with rental guarantees for 3-5 years - even if the rental market crashes, even the speculative investors won't feel it until developers start to display counterparty risk issues to increasingly large groups of block investors. So why not leverage yourself to the tits? The entire market has to crater for your investment to fail to produce a return. The underlying cashflow supporting development of these units, rental dollars, don't actually need to exist for the investments to pay off (which makes sense, because they literally cannot as per the income/financing ratio described above). Beyond this, REITs have a tax advantaged position in respect of other cashflow positive investment classes The idea that regulatory burden is the cause of cost increases of this magnitude is lunacy.

dmix 4y ago

Notably housing shortages are a new phenomenon, we weren't having this problem earlier in the century. The only difference between now and then is we have far, far more regulations and zoning rules in the way. Technically houses are cheaper to build than in the past, knowledge and building materials are more plentiful, and capital markets are more efficient with more banks offering mortgages. So by multiple measures housing should be less of a problem, not worse. This is the reality we've built by choice, people act like they don't know how we got here. If you go on Reddit they think if we all just became unionized and have more $$ we'd go back to the 1960s and all have houses again. But that problem with housing supply won't go away until we fix the root cause, throwing more wages (or gov money) at it without expanding supply will just increase prices further.

mthoms 4y ago
>the only difference between now and then is we have far, far more regulations and zoning rules in the way. Some places have more or less run out of land. For example Vancouver is limited in it's north, west and south expansion by mountains, ocean, and an international border respectively. I believe there are similar issues in San Francisco, Seattle, New York, etc. Indeed, higher density is the answer... I'm just pointing out that the increase in regulations is not the "only" thing that's changed.
ABCLAW 4y ago
>The only difference between now and then is we have far, far more regulations and zoning rules in the way. No, the only difference is that a metric fuckton of money which used to be parked in productive equity investments ran out of productive uses because the taps were never turned off and started to slush into the real estate market via REITs. The price of Toronto RE, for instance, has not tracked with regulatory costs - it has shot up shortly after the aftermath of 2008, when global capital watched Canada have one of the most stable real estate markets skip the fallout of the subprime mortgage crisis. Paired with the rock bottom cost of money, Canadian Real Estate was viewed as a particularly stable investment class, prompting both Foreign Investors and REITs to dump capital into the market. The value in the market is the fact that it WAS better regulated that the competition, but it's now a toxic asset class. No study that I can find indicates that the volume of regulatory costs associated with the Toronto or Vancouver housing markets can be attributed to the specific inflection points associated with our current pricing environment. Wages cannot support the volume of leverage in the Canadian housing market. The numbers on display as reported by RBC yearly indicate that the average house in Vancouver costs more than 100% of the gross wages of the average worker in the city. This number is typically 30-40% in most functioning RE markets. So if consumer demand literally cannot create the numbers we're seeing, then we need to look at other systemic changes in the demand profile for the asset. And it's pretty easy to see what's going on if you spend 2 hours calling brokers. Toronto condos aren't sold to people to live there; they're pre-marketed to block investors aiming to purchase groups of units for rentals and finance their purchases with rental cashflows - condominium sales come with rental guarantees for 3-5 years - even if the rental market crashes, even the speculative investors won't feel it until developers start to display counterparty risk issues to increasingly large groups of block investors. So why not leverage yourself to the tits? The entire market has to crater for your investment to fail to produce a return. The underlying cashflow supporting development of these units, rental dollars, don't actually need to exist for the investments to pay off (which makes sense, because they literally cannot as per the income/financing ratio described above). Beyond this, REITs have a tax advantaged position in respect of other cashflow positive investment classes The idea that regulatory burden is the cause of cost increases of this magnitude is lunacy.