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I may be wrong, but it seems to me like this is a simple supply/demand issue. Increase the supply. Yes, that's detrimental to those who already have homes (lik

I may be wrong, but it seems to me like this is a simple supply/demand issue. Increase the supply. Yes, that's detrimental to those who already have homes (like me). But if I were a dispassionate judge-of-the-world, and I were weighing these two groups needs, I'd err on the side of supporting those without homes over those who have them. Also, increase the supply of SMALL homes. Why is every new house a McMansion? Why do we have to buy 50+ year old homes to get something smaller? Those smaller homes are the entry to the market, and seemingly no one is making them, unless you count condos (which I do not). Of course, I understand builders are building the homes that make them the most money. I'm not suggesting they're doing anything wrong. But there is an underserved market for entry-level homes, and if the free market isn't going to solve the supply issue, it seems fair for governments to step in, build affordable homes, and sell them at a reasonable (10-20%) profit.

zbrozek 4y ago
They're all huge because getting anything built at all is a Herculean lift, so to make it worth your while it's going to be big and expensive. Blame red tape.
vannevar 4y ago
It is a supply/demand issue, but it is not simple. Demand for housing in the sense of people needing housing is not the same as economic demand for housing. And in order to have economic demand for housing, you have to have people with the means to buy. The housing market is not a smooth curve from zero to McMansion---there is effectively a cutoff. Right now, even if builders sold their houses at cost, in places with sufficient economic activity to support employment, the real estate cost would still put those houses out of reach of most low-income buyers. Because real estate in the past few decades has risen faster than wages, mortgage payments and rent have risen as a percentage of income for most Americans. Renters simply can't accumulate the capital needed for a down payment, nor the credit rating needed for a reasonable mortgage interest rate. So while intervening directly in housing is one policy solution, another would be to prevent the wealthy from continuing to capture a wildly disproportionate share of economic growth, which would both slow acute real estate appreciation in urban areas (by reducing the capital the wealthy have to buy up rental properties) and increase the pool of able buyers for lower income housing.
- Fernicia 4y ago
  > even if builders sold their houses at cost, in places with sufficient economic activity to support employment, the real estate cost would still put those houses out of reach of most low-income buyers This makes no sense. Even if the low income families can't buy the new units, the people who do vacate their old units and there is less demand for the unit those low income families currently occupy. > Renters simply can't accumulate the capital needed for a down payment, nor the credit rating needed for a reasonable mortgage interest rate. Both of these are variable costs, depressed by increases to the housing supply. > prevent the wealthy from continuing to capture a wildly disproportionate share of economic growth, which would both slow acute real estate appreciation in urban areas (by reducing the capital the wealthy have to buy up rental properties) This is like banning supermarkets buying from farmers. Do we want every property developer to also have to specialise in rental management? Or are we trying to get every renter to open mortgages?
  - vannevar 4y ago
    >Even if the low income families can't buy the new units, the people who do vacate their old units and there is less demand for the unit those low income families currently occupy. You're making the mistake I mentioned, confusing demand for actual housing with demand for real estate. It will indeed marginally depress demand for housing, but capital can step in and absorb the marginal supply, for rental or other purposes. As long as there is more demand from capital than supply, real estate prices will stay high even if actual demand for low income housing remains stable or even declines. >This is like banning supermarkets buying from farmers. Farmers are selling perishable goods, not income-producing assets. As long as real estate is income-producing, it will be a viable investment, and as the old saying goes, they aren't making more of it. So whatever the dynamics of the actual housing market are, the underlying dynamics of the real estate market will tilt the table toward capital. And the sharper the income gradient is in society, the worse the problem will become.
    - nickelcitymario 4y ago
      I ask this not to argue, but in the hopes that I might learn something: > As long as there is more demand from capital than supply, real estate prices will stay high even if actual demand for low-income housing remains stable or even declines. Wouldn't this be true of just about any good? I agree that an unregulated increase in supply is likely to result in increase of properties purchased for use as a rental property, but: (1) The more property there is available for sale, the less I'm willing to pay for any given property. I'm not sure why real estate would be different. (2) If your argument is that such property will be purchased predominantly by landlords, I don't see how that counteracts the economics of supply and demand. Why wouldn't this still drive down rent? Unless you're suggesting collusion by landlords? > and as the old saying goes, they aren't making more of it. I feel like I must be misunderstanding you, because this seems to contradict your argument? I'm suggesting the solution is more supply -- literally making more of it. What am I missing? Again, not trying to be argumentative. I feel like you're seeing or understanding something that I don't, and I'd appreciate being able to understand your perspective here.
wintermutestwin 4y ago
>Also, increase the supply of SMALL homes. Why is every new house a McMansion? This is a huge part of the problem. The issue is that there are so many fixed costs to build (permitting, utility, special taxes, etc...) that don't depend on sq ft. At the same time, all valuation is based on sq ft. This creates a huge incentive for builders to max out sq ft. Solutions are to get all school funding from the state, streamline permitting based on pre-approved designs, give builders reduced utility hook up costs in areas that are lacking viable housing density. IOW - good luck with that problem. Similar to the new ADU laws in CA, it would be awesome if they encouraged small communities with tiny houses and some common resources.
fiftyfifty 4y ago
It's more than just supply and demand. There are a lot of companies and private investors buying up multiple residential properties to rent out. There are a significant amount of properties simply being rented out on Airbnb/VRBO and their ilk. This is having a measurable impact on housing prices, and making additional housing unavailable to local residents. We need to increase tax penalties on companies and individuals buying up residential properties that aren't their primary residence and municipalities need to do a better enforcing zoning laws that are probably already on the books that should prevent short term rentals in residential areas. https://www.forbes.com/sites/garybarker/2020/02/21/the-airbnb-effect-on-housing-and-rent/?sh=1a386d9f2226 https://www.forbes.com/sites/garybarker/2020/02/21/the-airbn...
- 0xffff2 4y ago
  That's just supply and demand. Either there is demand for rentals, or these companies and individuals are losing their shirts and the houses will be back on the market eventually.

zbrozek 4y ago

They're all huge because getting anything built at all is a Herculean lift, so to make it worth your while it's going to be big and expensive. Blame red tape.

vannevar 4y ago

It is a supply/demand issue, but it is not simple. Demand for housing in the sense of people needing housing is not the same as economic demand for housing. And in order to have economic demand for housing, you have to have people with the means to buy. The housing market is not a smooth curve from zero to McMansion---there is effectively a cutoff. Right now, even if builders sold their houses at cost, in places with sufficient economic activity to support employment, the real estate cost would still put those houses out of reach of most low-income buyers. Because real estate in the past few decades has risen faster than wages, mortgage payments and rent have risen as a percentage of income for most Americans. Renters simply can't accumulate the capital needed for a down payment, nor the credit rating needed for a reasonable mortgage interest rate. So while intervening directly in housing is one policy solution, another would be to prevent the wealthy from continuing to capture a wildly disproportionate share of economic growth, which would both slow acute real estate appreciation in urban areas (by reducing the capital the wealthy have to buy up rental properties) and increase the pool of able buyers for lower income housing.

Fernicia 4y ago
> even if builders sold their houses at cost, in places with sufficient economic activity to support employment, the real estate cost would still put those houses out of reach of most low-income buyers This makes no sense. Even if the low income families can't buy the new units, the people who do vacate their old units and there is less demand for the unit those low income families currently occupy. > Renters simply can't accumulate the capital needed for a down payment, nor the credit rating needed for a reasonable mortgage interest rate. Both of these are variable costs, depressed by increases to the housing supply. > prevent the wealthy from continuing to capture a wildly disproportionate share of economic growth, which would both slow acute real estate appreciation in urban areas (by reducing the capital the wealthy have to buy up rental properties) This is like banning supermarkets buying from farmers. Do we want every property developer to also have to specialise in rental management? Or are we trying to get every renter to open mortgages?
- vannevar 4y ago
  >Even if the low income families can't buy the new units, the people who do vacate their old units and there is less demand for the unit those low income families currently occupy. You're making the mistake I mentioned, confusing demand for actual housing with demand for real estate. It will indeed marginally depress demand for housing, but capital can step in and absorb the marginal supply, for rental or other purposes. As long as there is more demand from capital than supply, real estate prices will stay high even if actual demand for low income housing remains stable or even declines. >This is like banning supermarkets buying from farmers. Farmers are selling perishable goods, not income-producing assets. As long as real estate is income-producing, it will be a viable investment, and as the old saying goes, they aren't making more of it. So whatever the dynamics of the actual housing market are, the underlying dynamics of the real estate market will tilt the table toward capital. And the sharper the income gradient is in society, the worse the problem will become.
  - nickelcitymario 4y ago
    I ask this not to argue, but in the hopes that I might learn something: > As long as there is more demand from capital than supply, real estate prices will stay high even if actual demand for low-income housing remains stable or even declines. Wouldn't this be true of just about any good? I agree that an unregulated increase in supply is likely to result in increase of properties purchased for use as a rental property, but: (1) The more property there is available for sale, the less I'm willing to pay for any given property. I'm not sure why real estate would be different. (2) If your argument is that such property will be purchased predominantly by landlords, I don't see how that counteracts the economics of supply and demand. Why wouldn't this still drive down rent? Unless you're suggesting collusion by landlords? > and as the old saying goes, they aren't making more of it. I feel like I must be misunderstanding you, because this seems to contradict your argument? I'm suggesting the solution is more supply -- literally making more of it. What am I missing? Again, not trying to be argumentative. I feel like you're seeing or understanding something that I don't, and I'd appreciate being able to understand your perspective here.

wintermutestwin 4y ago

>Also, increase the supply of SMALL homes. Why is every new house a McMansion? This is a huge part of the problem. The issue is that there are so many fixed costs to build (permitting, utility, special taxes, etc...) that don't depend on sq ft. At the same time, all valuation is based on sq ft. This creates a huge incentive for builders to max out sq ft. Solutions are to get all school funding from the state, streamline permitting based on pre-approved designs, give builders reduced utility hook up costs in areas that are lacking viable housing density. IOW - good luck with that problem. Similar to the new ADU laws in CA, it would be awesome if they encouraged small communities with tiny houses and some common resources.

fiftyfifty 4y ago

It's more than just supply and demand. There are a lot of companies and private investors buying up multiple residential properties to rent out. There are a significant amount of properties simply being rented out on Airbnb/VRBO and their ilk. This is having a measurable impact on housing prices, and making additional housing unavailable to local residents. We need to increase tax penalties on companies and individuals buying up residential properties that aren't their primary residence and municipalities need to do a better enforcing zoning laws that are probably already on the books that should prevent short term rentals in residential areas. https://www.forbes.com/sites/garybarker/2020/02/21/the-airbnb-effect-on-housing-and-rent/?sh=1a386d9f2226 https://www.forbes.com/sites/garybarker/2020/02/21/the-airbn...

0xffff2 4y ago
That's just supply and demand. Either there is demand for rentals, or these companies and individuals are losing their shirts and the houses will be back on the market eventually.