11 ms·

A reason for high housing prices: restrictive land-use regulations

99 points by jseliger 3y ago

rybosworld 3y ago
What about this is invisible? I've heard this touted as the reason for a housing shortage for as long as I can remember.
- raldi 3y ago
  Have you had many conversations on the topic with the typical person on the street? I have (among other things, I’ve collected signatures for ballot measures), and I think about as many people think high housing prices are caused by allowing new development as restricting it.
  - anovikov 3y ago
    How can someone think that? How can increase of supply increase prices? What's the logic behind that perception?
    - raldi 3y ago
      They mistake correlation (new buildings going up as housing prices increase) and causation.
      - AlanSE 3y ago
        Also, builders want to build high-margin houses, not low-margin houses. Also, high-margin housing gets advertised, low-margin housing does not.
    - Aunche 3y ago
      People see newly constructed "luxury" housing. They also see techies that can outbid them on rent. They mix up cause and effect and assume that it's the luxury housing that's bringing in all the techies rather than vice versa.
    - bitsage 3y ago
      Development can sometimes increase demand for previously blighted urban areas. A few years ago, I used to live in expensive re-purposed lofts in an area of Boston metro which was in disrepair in the 90s. There’s a similar story for Bushwick and Williamsburg in NYC. However, by the time an area has become popular, restricting development will only hurt rent affordability. I guess some would like to prevent their neighborhoods from becoming popular in the first place though.
    - s1artibartfast 3y ago
      The logic basically comes down to concepts of induced demand, demographic shift, and gentrification. A community can improve on average while some people see less of that benefit.
  - AlanSE 3y ago
    They see new builds hitting the market and look at the (aspirational) price put there by the builder. It's a borderline conspiracy that Zillow lists certain high-end new developments for a year (before they're built) which pollutes the "for sale" housing inventory. Whereas the "recently sold" is the best metric of how things actually are, the search options don't allow you to get an accurate market sense from these. After all, the app's purpose is not to give you an accurate sense of the market.
  - hgsgm 3y ago
    https://en.m.wikipedia.org/wiki/Gentrification https://en.m.wikipedia.org/wiki/Gentrification
  - artsytrashcan 3y ago
    "New development" covers a wide range of development types. Most of the types that are "allowed" to be developed - per regulation, public investment, what does and doesn't trigger the NIMBY predatory instinct - are types that raise "market rates" like low-density SFH and luxury condos.* The government could "radically incentivize" developers to build high-density housing with basic finishes and fewer amenities, to be sold or rented at affordable rates, but that bumps up against https://news.ycombinator.com/item?id=36632171's https://news.ycombinator.com/item?id=36632171's impeccably correct observation: prices are high because the people who own the housing stock want them to be high. Inventory influences a fraction of the cost. *(That is, however far you're convinced that there even is a market; for rent, thanks to "discounts" that allow property owners to avoid actually advertising lower rates, supply and demand don't exist, only the imperative to raise rates annually.)
- bgm1975 3y ago
  It’s “invisible” in that it’s one of those things people (especially property owners) prefer not to talk or think about. Like how most people grossly discriminate based on perceived appearance or attractiveness. No one wants to admit that they are part of the problem.
- nerdponx 3y ago
  It's also just not true in a lot of areas. I live in an area where nearly every house is already an apartment building or a 100-year old mansion converted to condos or apartments. New construction is all multi-family and transit-oriented. Prices are still high because there's just too many damn people trying to live here. The problem is not that there isn't enough housing in any one particular area. There are a lot of issues with the argument that everyone everywhere just needs to build as much as possible, no matter what, and it's disingenuous to any such argument as NIMBYism. The problem is that there aren't enough nice places that are actually comfortable to live: good access to transit, access to green spaces, not too much traffic, access to shopping and grocery stores, etc. This is broadly because of how American cities and towns are designed.
  - raldi 3y ago
    Tokyo meets all of your listed criteria (though prohibiting on-street car storage is a big part of that) and they’ve been able to keep prices reasonable by allowing supply to meet demand. I think a lot of urbanists want American cities to grow in that direction: way more housing, huge transit investments, less subsidy for driving.
    - hgsgm 3y ago
      Tokyo prices are reasonable? Only per unit not per square meter.
- brodouevencode 3y ago
  In certain places, yes.
- dang 3y ago
  Ok, we've taken invisibility out of the title above.
acyou 3y ago
If you start viewing high and increasing housing prices as a feature of the system, and not a bug, much of the world that seems illogical starts to appear logical. For example, "Why do the powers that be continue to restrict land use? Don't they know that it drives up housing prices?" Instead: "Because high and stable housing prices are desirable for society as a whole, restrictions on land use are put in place in order to carefully limit the amount of supply in the system. The people, voters and institutions doing this are not stupid or malicious, but know exactly what they are doing, and do it quite well."
deleted 3y ago
[deleted]
xnx 3y ago
Housing is expensive because homeowners want it to be and homeowners vote more than non homeowners. Everything else is a side effect of that.
- gspencley 3y ago
  I own two properties, both of which I was lucky enough to be able to afford before the housing crises. Even though I could sell and get a lot more than I paid for either, the fact is that unless I wanted to put that money into something other than a house I'm not going to turn a profit. I also have two daughters who are young adults and still living at home because they can't afford rent. So even for that reason alone I REALLY don't want expensive housing prices.
  - rcme 3y ago
    > Even though I could sell and get a lot more than I paid for either, the fact is that unless I wanted to put that money into something other than a house I'm not going to turn a profit. You’re already profiting simply by having a higher net worth.
    - mdavidn 3y ago
      How is higher net worth a benefit? Gains in a property are unrealized until sold or mortgaged.
      - BugsJustFindMe 3y ago
        > How is higher net worth a benefit? The benefit comes from gains being definitively accumulated by percentage. When your owned amount is higher, equal percent gain is greater absolute gain. > Gains are locked into a property until sold or mortgaged. This is essentially the equivalent of "Gains are locked into money until spent on goods or services." True. But gains are gains and worth is worth regardless of how many seconds or minutes it takes to spend. The only difference is immediate urgency of conversion within a very narrow time window (it does not take that long to get a mortgage on an owned property that is now worth X percent more than it was yesteryear).
phkahler 3y ago
House prices vary inversely with interest rates. This is by far the biggest influence outside of cities like Sanfrancisco. Sellers, agents, and banks all want you to pay as much as possible. Want a loan? "What is your monthly income? We'll figure out how much you qualify for." You might be able to resist these forces, but most people can't, and they set the market rates.
maxcan 3y ago
In other words, regulations that increase the costs of building housing increase the costs of housing. Funny how that works.
skulk 3y ago
I see supply/demand discussed here every day. For this crowd, it's as visible as can get. Here is (IME) one of the more common blind spots when discussing housing prices (specifically rents): price fixing by corporate-run algorithmic cartels: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...
- pydry 3y ago
  Supply and demand doesnt work for land like it does for everything else. The more you tax, say, cars, the fewer youll get and vice versa. The more land is taxed, the more becomes available and vice versa. Land isnt taxed and the main proxy for land tax (property taxes) are at historic lows.
  - cudgy 3y ago
    Property taxes are low? Where is this the case? Most communities base property taxes on millage (percentage) of property values which have been going sky high.
- artsytrashcan 3y ago
  And PP only profiled one company. It's almost certainly being perpetrated by others. The company my own property manager uses once boasted in their promotional literature that using their software boosted prices 15% when compared to controls. Investors are using this software because it allows them to artificially inflate "market rate" rents in concert with competitors, and disconnected from actual demand, full stop.
- darksaints 3y ago
  It’s really hard to claim price fixing when occupancy rates have been 98% or higher for decades, as is the case of nearly all coastal cities in the US. And I have first hand experience with them dropping prices when demand drops (I literally had my renewal rent drop when there was a short downturn). They’re just a dynamic pricing algorithm, they have no power over supply and demand. And it’s kinda annoying to see this idea trotted out when we obviously have a supply problem.
skapadia 3y ago
It's invisible because we like to talk about freedom and free market. But there are so many regulations and policies that essentially funnel money and power into the hands of a few. It makes the notion of freedom and free market somewhat farcical. However, any discussion of the above is considered unpatriotic, so it's always better to blame the individual.
- gjsman-1000 3y ago
  I'm not for unbridled capitalism, but if you have ever tried to start a business in even a slightly regulated field (medical, construction, chimney cleaning, a restaurant, general contracting, just being a handyman), the amount of regulation is incredible and overwhelming. Software development doesn't count - it's probably the least regulated field in the country. Even being a hairdresser requires licensing and venue requirements in most states - minorities have been sued for just trying to do hairdressing in their own homes for a few bucks. Is it fair to call the US a capitalist country? Honestly, I don't think so. It's a weird disastrous mishmash of socialism, capitalism, and English bureaucracy. It's just "more capitalist" than other countries who at least have the intellectual honesty to more fully commit to a system.
  - ttoinou 3y ago
    It's the same all around the world. But rules are usually less applied
  - sh34r 3y ago
    There is nothing socialist about the US. The workers do not own the means of production. Labor union membership is in the single digits. We have some very limited vestiges of social democracy, but social democracy is not socialism. Socialists and social democrats were not allies. Google the meme: “SocDems killed Rosa.” What you’re observing is what unregulated capitalism will always devolve into. It goes by many names: capitalism, crony capitalism, neoliberalism, corporatism, oligarchy, fascism. But the idea is the same. Labor is violently oppressed. The State only serves the interests of capitalists. The State and Capital are often indistinguishable. There is no competition. There are structural barriers that stifle small businesses and enrich rent seeking trusts. It’s a new Gilded Age, brought to life by a new Lochner era for the Supreme Court. I have good news and bad news: this system, whatever you call it, is extremely unstable. Its collapse is inevitable, well within the span of a single human lifetime.
rcme 3y ago
Why don’t we try removing all the insane tax incentives first, e.g. 1031 exchange, and then see what happens? There are so many incentives for investment in real estate. Even if more housing was built, investors would snap up the properties and keep prices high. I don’t understand how you can complain about high prices while investor demand is massively subsidized.
- ttul 3y ago
  Tax incentives for property investing are ridiculous in many countries. In Canada, the capital gains on the sale of your primary residence are tax-free. You just have to live there for about a year. People move annually, flipping as they go, to earn a tax free income while someone investing in the stock market is taxed. It makes no sense to me.
  - rcme 3y ago
    The U.S. has the same tax incentive, but there is an additional tax incentive, called a 1031 exchange, that lets you pay no capital gains if you invest the money in more real estate.
- Kharvok 3y ago
  Without these incentives housing supply would be even lower. The incentives are designed to encourage the creation of additional housing units. Without liquidity in the space new housing creation would stagnate.
  - rcme 3y ago
    So the only way to subsidize supply is indirectly via demand subsidies? I find that hard to believe.
im3w1l 3y ago
I think one underdiscussed reason is transportation. Basically people have a certain commute tolerance, and so the better transportation infrastructure, the further out (where land is cheap) you can build.
brodouevencode 3y ago
Except where it's not. In the Atlanta metro area housing prices are sky high not due to regulation or material costs but due to demand. Presumably from people trying to escape regulation and high material costs.
- antiframe 3y ago
  The Atlanta metro area doesn't have any zoning regulation? That's the first I've heard of it. Cool. So, what would housing prices be if Atlanta did have restrictions? The research says higher. But, it's hard to show that with any rigor since what would you compare Atlanta with? Every city is different and it's a challenge to get a good comparison.
  - brodouevencode 3y ago
    Atlanta has minimal regs compared to other very large cities. The code enforcement here is about as minimal as it gets, and (back when I did construction) there was certainly no proactive enforcement like I've heard friends complain about in places like LA - it was very reactive. I can't imagine it's changed that much.
- hondo77 3y ago
  Why isn't there enough supply in Atlanta?
  - brodouevencode 3y ago
    It hasn't caught up yet. This phenomenon is only a few years old, and Atlanta hasn't been seen as the "escape city" quite like Austin, Charlotte, or Nashville.
  - rank0 3y ago
    It’s been growing consistently for like the past decade. Builders gotta build and they’re definitely working at it! It just takes time and demand has increased very quickly.
- 3y ago
sys_64738 3y ago
RI is the smallest state in the union and a lot of it is wetlands and susceptible to flooding. Land is hard to comeby in that state.
hgsgm 3y ago
NYC is extremely dense and yet extremely expensive.
- antiframe 3y ago
  Sure. It's desirable. What wouldn't cost if it weren't dense? For example, what do you think a single family house with an acre of land would cost within walking distance of Central Park and the Public Library? A bit more than the same house on a rural road 2 hours from that spot. It's all about location and desirability. People can afford an apartment since you can fit a lot more of them in that acre, but few people can afford that house.
- lotsofpulp 3y ago
  What if there were 20 cities like New York City?
  - staringback 3y ago
    This highway is very congested. What if there were 20 more lanes?
    - lotsofpulp 3y ago
      Irrelevant when discussing price changes due to drastic increase in supply of urban housing. 330M people in the USA, let’s say NYC’s public transit/urban environment serves 4M of its people. 20 NYC like cities means 76M more people’s desire to live in a NYC like environment can be satisfied. Surely once you start getting into the tens of millions range, the supply gets closer to meeting demand, if not exceeding it, and prices drop. There are only so many people, after all. A 10 lane highway can easily be saturated by tens of thousands of people in a small window of time. A 100k lane highway would be a better comparison.
      - staringback 3y ago
        There can only be so many cars, after all. You make a good point, why don't we build a 100k lane highway?
pwillia7 3y ago
Would zoning not just be another thing that when filtered through our Gilded Age II corruption will lead to an unfair market? If I was a big developer in cahoots with a local government, wouldn't I seek to influence zoning laws to impede my competitors and harm consumers by inflating prices? This feels like another one of those things that looks inherently bad until you realize with governance and a culture of anti corruption, it might actually work great.
gadders 3y ago
That's the supply-side reason. The demand-side reason is population growth and immigration.
- bendergarcia 3y ago
  Immigration? Really? You think people escaping their destabilized homelands are going to be able to put a down payment, let alone get the credit, or even have the history to get a mortgage? There’s other reasons for demand side being the cause but immigration has got to be pretty far down on that list.
  - pandaman 3y ago
    Unless all the immigrants live in the fields and in the woods, they increase housing demand, likely on the lower end if they are as poor as you describe, and push the whole market up.
  - throw0101a 3y ago
    > Immigration? Really? If you look at Canada (especially southern Ontario) you'll see a large correlation between incoming international students rates and property prices (first in Toronto, then across the region). See especially the trends in 2015. Canada's population rose by one million people in 2022: * https://www.cbc.ca/news/canada/canada-record-population-growth-migration-1.6787428 https://www.cbc.ca/news/canada/canada-record-population-grow... We did not build one million housing units (even taking into account things like families of four, students having room mates, and various other forms of 'household').
  - wizofaus 3y ago
    > people escaping their destabilized homelands That's a pretty small percentage of total immigration surely? All things considered it's reasonable to assume too-high an immigration rate will put upwards pressure on housing prices. If that means we need temporary restrictions on where recent immigrants are allowed to purchase homes I don't see an issue - I certainly don't believe it would be fair for me to move to the US and immediately be able to buy a house wherever I like, helping price out those who have their whole lives rooted there already.
warvair 3y ago
Why doesn't anyone mention real estate agents/agencies when talking about housing prices? When I bought my first home in the early 90s it seemed like a confidence game back then and it's only gotten worse since. What I'm basically talking about is everyone in the business of selling homes, including "your" agent gaslighting you into thinking that home prices will always go up. "You should by this now. You can't lose money. This is a great investment." In recent years it's been "You should offer 20% over asking." It used to make some sense that prices would generally go up for well built/maintained homes in good neighborhoods but that nod to sanity went out the door when AirBnB came along.
- antisthenes 3y ago
  Pick a better agent and stand your ground. You're making arguably the biggest decision/purchase of your life (along with who to marry and whether to have kids or not). Don't let some schmuck with a bunch of fake trophies who you've met 1 hour ago have ANY control over your offers. They advise only, and handle the paperwork, period. RE agents have 0 power over you when Zillow and Redfin have 99% of the same data that the agents have.
- LapsangGuzzler 3y ago
  Real estate agents didn’t invent Airbnb. Like it or not, agents serve an important role in real estate transactions by helping guide homebuyers through an incredibly complicated process. And it’s totally possible to be your own buying agent and save money if you’re willing to put in the work. “You should offer 20% above asking” is the agent giving you advice on how to win the deal, and a good agent will know when offer above or when to come in slightly under and see how open the seller is to negotiating. The agent doesn’t get paid until you buy the property, so they’re motivated to put you in the best position to buy.
  - toomuchtodo 3y ago
    > And it’s totally possible to be your own buying agent and save money if you’re willing to put in the work. This is rarely true. The seller has negotiated and agreed to a commission with their agent, and that is getting paid regardless of whether the buyer is represented or not. Perhaps you can negotiate a purchase price low enough that the seller's agent fee is the seller's problem, but only in a buyer's market (which currently does not exist in any major market I'm aware of). The only time it makes sense to not use an agent is if you're confident you can market and close a transaction yourself selling your own property. It's really unfortunate that there is a 3-6% drag on real estate transactions from agent and brokerage commissions, but various attempts to disrupt this model and drive down the cost have not been successful.
throwaway5947 3y ago
Or mortgages driving up bids, benefitting finance and allowing the wealthy to flip more houses. Almost never mentioned either.
PeterStuer 3y ago
The elephant in the room is housing was turned from a utilitarian good into a speculative asset. This is capitalism in its purest form.
- rank0 3y ago
  Why don’t you go put your money where your mouth is and go build homes for free. Capitalism is the only reason developers create shelter in the first place…
  - bendergarcia 3y ago
    I think you literally proved his point. It’s because capitalism that developers only build profitable properties. They will not build anything that devalues their own portfolio. That’s just capitalism for you.
    - rank0 3y ago
      Im trying to lead him to the conclusion that “capitalism evil” is a silly stance. Why aren’t you and GP out there building houses for a loss? None of the people complaining about capitalism ever actually practice their own ideals. Anyone is free to start a non-profit org that builds homes and you can still cut yourself + employees a salary.
      - PeterStuer 3y ago
        I did not say 'capitalism evil'. It has its strong and weak points. It is just that enlisting everything and everyone on the planet into a pure financial model that can be leveraged for rents and speculaion is what it is about.
- bendergarcia 3y ago
  It’s so simple: Real estate is investment and no one ever wants their investments to devalue. And the only way to slow stop or even decrease housing is to devalue it by building beyond what’s needed. No investor will ever do that. It is capitalism in its purest form. And no kind of free market will fix this issue.
bendergarcia 3y ago
That’s part of the problem. The bigger problem is that housing is an investment vehicle, and so the incentive is only for increasing property values which, one component is limited supply. Maybe it’s cause of land use regulations and maybe it’s because investors do not want to devalue their portfolio.
robomartin 3y ago
It is often interesting for me to read HN when these topics come-up because you can see lack of life and business experience in the comments. In some cases you can also see the great job our schools are doing indoctrinating people with bullshit. This thread does not disappoint. Someone mentioned supply and demand and was summarily put down. And yet, that's at the top of the list in every city in the world. Here, let's explore...picking at random: https://www.zillow.com/homes/for_sale/La-Crescenta.dash.Montrose,-CA_rb/ https://www.zillow.com/homes/for_sale/La-Crescenta.dash.Mont... 16 results https://www.zillow.com/homedetails/2713-Starfall-Dr-La-Crescenta-CA-91214/20924878_zpid/ https://www.zillow.com/homedetails/2713-Starfall-Dr-La-Cresc... Built in 1972, 4 bedrooms, 3 bathrooms, 2,201 square feet. $1,675,000 Let's move north a bit. https://www.zillow.com/homes/Palmdale,-CA_rb/ https://www.zillow.com/homes/Palmdale,-CA_rb/ 500 results https://www.zillow.com/homedetails/38903-Barrington-St-Palmdale-CA-93551/20241531_zpid/ https://www.zillow.com/homedetails/38903-Barrington-St-Palmd...? Built in 1991, 4 bedrooms, 3 bathrooms, 2,202 square feet. $580,000 Move north a bit more... https://www.zillow.com/homes/california-city,-ca_rb/ https://www.zillow.com/homes/california-city,-ca_rb/ 500 results https://www.zillow.com/homedetails/10600-Peach-Ave-California-City-CA-93505/2059278248_zpid/ https://www.zillow.com/homedetails/10600-Peach-Ave-Californi... Built in 2022, 4 bedrooms, 3 bathrooms, 2,137 square feet. $379,000 Of course, some of the price reflects quality of build, finish and materials. However, at a baseline, these homes are comparable. Why does the first cost nearly three times the cost of the second and 4.4x that of the third? When all the smoke and bullshit clears out, the answer is brutally simple: - People are not willing to pay the same price for a similar house in different locations - Less homes are available where people want to live - People bid-up prices in an effort to buy homes where they want to live No, zoning laws are not the main drivers. Why? You can't double or triple the number of homes in the first neighborhood presented. It is physically and logistically impossible. The area cannot support such a move. Someone might say: Sure you can! Buy all the homes and build apartment buildings. Sure, in fantasy land anything is possible. Just the lawsuits from neighboring communities due to the destruction of property values, increased traffic, etc. will take 50 years to resolve. If we leave fantasy-land, this is simply impossible. The power, water an sewer system in that neighborhood might not be able to support expansion. The point is, there's a difference between fantasy and reality. The more expensive homes don't necessarily cost more due to higher construction costs. Although, yes, it does cost more to build in some of these neighborhoods because there is a minimum expectation of quality of materials, fit and finish. For example, in that neighborhood, most homes have smooth flat walls without texture applied. This might not make sense to non-US reader, sorry. Spray texture is used on drywall to hide and mask imperfections. This allows for more relaxed finish requirements, massively reducing labor and all other costs. A smooth wall without texture is what's called a "Level 5" wall and sometimes referred to as "Gallery Finish"...because of how expensive it can be. And still, at the core, it's supply and demand. It's what people are willing to pay to live somewhere. If more people want to live somewhere, prices go up. As prices pass a certain threshold, build quality and architectural design move up several levels, contributing to higher prices as well. This is where all the other factors start to come-in. The cost of materials, labor, fuel, freight/transportation, regulatory frameworks and fees also play a part. If you want to build a house today it will cost you a lot more (maybe double or more) than the same house built, say, ten years ago. That's just a fact of our economic reality. This is affected by everything, from minimum wage to the cost of oil. Real estate isn't complicated. And, no, the housing shortage has little to do with evil planning on the part of the elites to keep the little guys from their turf. This is the same all over the world. Want to buy a house on the Herengracht in Amsterdam? Good luck. You are going to pay about $1MM per 100 square meters (~1000 square feet). Why? Because there are only so many homes. People want them. And they are willing to pay more. Reality does matter.
Bloating 3y ago
My observation is that homeowners tend to be more involved in local government, and have a personal incentive for their homes / land to increase in value. For most, homes are thier single largest investment. Intentionally or not, they use the force of government to insure / inflate the value of their property The Impact of Zoning on Housing Affordability: https://www.nber.org/system/files/working_papers/w8835/w8835.pdf https://www.nber.org/system/files/working_papers/w8835/w8835...
voisin 3y ago
There’s nothing invisible about this. We talk about it all the time in literally every discussion about primary causes of high house prices, right up there with stupidly low interest rates for way too long. Unlike interest rates which can be easily changed, restrictive zoning is primarily a Boomer NIMBY problem, pulling up the ladder behind themselves.

99 points by jseliger 3y ago

What about this is invisible? I've heard this touted as the reason for a housing shortage for as long as I can remember.

raldi 3y ago
Have you had many conversations on the topic with the typical person on the street? I have (among other things, I’ve collected signatures for ballot measures), and I think about as many people think high housing prices are caused by allowing new development as restricting it.
- anovikov 3y ago
  How can someone think that? How can increase of supply increase prices? What's the logic behind that perception?
  - raldi 3y ago
    They mistake correlation (new buildings going up as housing prices increase) and causation.
    - AlanSE 3y ago
      Also, builders want to build high-margin houses, not low-margin houses. Also, high-margin housing gets advertised, low-margin housing does not.
  - Aunche 3y ago
    People see newly constructed "luxury" housing. They also see techies that can outbid them on rent. They mix up cause and effect and assume that it's the luxury housing that's bringing in all the techies rather than vice versa.
  - bitsage 3y ago
    Development can sometimes increase demand for previously blighted urban areas. A few years ago, I used to live in expensive re-purposed lofts in an area of Boston metro which was in disrepair in the 90s. There’s a similar story for Bushwick and Williamsburg in NYC. However, by the time an area has become popular, restricting development will only hurt rent affordability. I guess some would like to prevent their neighborhoods from becoming popular in the first place though.
  - s1artibartfast 3y ago
    The logic basically comes down to concepts of induced demand, demographic shift, and gentrification. A community can improve on average while some people see less of that benefit.
- AlanSE 3y ago
  They see new builds hitting the market and look at the (aspirational) price put there by the builder. It's a borderline conspiracy that Zillow lists certain high-end new developments for a year (before they're built) which pollutes the "for sale" housing inventory. Whereas the "recently sold" is the best metric of how things actually are, the search options don't allow you to get an accurate market sense from these. After all, the app's purpose is not to give you an accurate sense of the market.
- hgsgm 3y ago
  https://en.m.wikipedia.org/wiki/Gentrification https://en.m.wikipedia.org/wiki/Gentrification
- artsytrashcan 3y ago
  "New development" covers a wide range of development types. Most of the types that are "allowed" to be developed - per regulation, public investment, what does and doesn't trigger the NIMBY predatory instinct - are types that raise "market rates" like low-density SFH and luxury condos.* The government could "radically incentivize" developers to build high-density housing with basic finishes and fewer amenities, to be sold or rented at affordable rates, but that bumps up against https://news.ycombinator.com/item?id=36632171's https://news.ycombinator.com/item?id=36632171's impeccably correct observation: prices are high because the people who own the housing stock want them to be high. Inventory influences a fraction of the cost. *(That is, however far you're convinced that there even is a market; for rent, thanks to "discounts" that allow property owners to avoid actually advertising lower rates, supply and demand don't exist, only the imperative to raise rates annually.)
bgm1975 3y ago
It’s “invisible” in that it’s one of those things people (especially property owners) prefer not to talk or think about. Like how most people grossly discriminate based on perceived appearance or attractiveness. No one wants to admit that they are part of the problem.
nerdponx 3y ago
It's also just not true in a lot of areas. I live in an area where nearly every house is already an apartment building or a 100-year old mansion converted to condos or apartments. New construction is all multi-family and transit-oriented. Prices are still high because there's just too many damn people trying to live here. The problem is not that there isn't enough housing in any one particular area. There are a lot of issues with the argument that everyone everywhere just needs to build as much as possible, no matter what, and it's disingenuous to any such argument as NIMBYism. The problem is that there aren't enough nice places that are actually comfortable to live: good access to transit, access to green spaces, not too much traffic, access to shopping and grocery stores, etc. This is broadly because of how American cities and towns are designed.
- raldi 3y ago
  Tokyo meets all of your listed criteria (though prohibiting on-street car storage is a big part of that) and they’ve been able to keep prices reasonable by allowing supply to meet demand. I think a lot of urbanists want American cities to grow in that direction: way more housing, huge transit investments, less subsidy for driving.
  - hgsgm 3y ago
    Tokyo prices are reasonable? Only per unit not per square meter.
brodouevencode 3y ago
In certain places, yes.
dang 3y ago
Ok, we've taken invisibility out of the title above.

acyou 3y ago

If you start viewing high and increasing housing prices as a feature of the system, and not a bug, much of the world that seems illogical starts to appear logical. For example, "Why do the powers that be continue to restrict land use? Don't they know that it drives up housing prices?" Instead: "Because high and stable housing prices are desirable for society as a whole, restrictions on land use are put in place in order to carefully limit the amount of supply in the system. The people, voters and institutions doing this are not stupid or malicious, but know exactly what they are doing, and do it quite well."

deleted 3y ago

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xnx 3y ago

Housing is expensive because homeowners want it to be and homeowners vote more than non homeowners. Everything else is a side effect of that.

gspencley 3y ago
I own two properties, both of which I was lucky enough to be able to afford before the housing crises. Even though I could sell and get a lot more than I paid for either, the fact is that unless I wanted to put that money into something other than a house I'm not going to turn a profit. I also have two daughters who are young adults and still living at home because they can't afford rent. So even for that reason alone I REALLY don't want expensive housing prices.
- rcme 3y ago
  > Even though I could sell and get a lot more than I paid for either, the fact is that unless I wanted to put that money into something other than a house I'm not going to turn a profit. You’re already profiting simply by having a higher net worth.
  - mdavidn 3y ago
    How is higher net worth a benefit? Gains in a property are unrealized until sold or mortgaged.
    - BugsJustFindMe 3y ago
      > How is higher net worth a benefit? The benefit comes from gains being definitively accumulated by percentage. When your owned amount is higher, equal percent gain is greater absolute gain. > Gains are locked into a property until sold or mortgaged. This is essentially the equivalent of "Gains are locked into money until spent on goods or services." True. But gains are gains and worth is worth regardless of how many seconds or minutes it takes to spend. The only difference is immediate urgency of conversion within a very narrow time window (it does not take that long to get a mortgage on an owned property that is now worth X percent more than it was yesteryear).

phkahler 3y ago

House prices vary inversely with interest rates. This is by far the biggest influence outside of cities like Sanfrancisco. Sellers, agents, and banks all want you to pay as much as possible. Want a loan? "What is your monthly income? We'll figure out how much you qualify for." You might be able to resist these forces, but most people can't, and they set the market rates.

maxcan 3y ago

In other words, regulations that increase the costs of building housing increase the costs of housing. Funny how that works.

skulk 3y ago

I see supply/demand discussed here every day. For this crowd, it's as visible as can get. Here is (IME) one of the more common blind spots when discussing housing prices (specifically rents): price fixing by corporate-run algorithmic cartels: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...

pydry 3y ago
Supply and demand doesnt work for land like it does for everything else. The more you tax, say, cars, the fewer youll get and vice versa. The more land is taxed, the more becomes available and vice versa. Land isnt taxed and the main proxy for land tax (property taxes) are at historic lows.
- cudgy 3y ago
  Property taxes are low? Where is this the case? Most communities base property taxes on millage (percentage) of property values which have been going sky high.
artsytrashcan 3y ago
And PP only profiled one company. It's almost certainly being perpetrated by others. The company my own property manager uses once boasted in their promotional literature that using their software boosted prices 15% when compared to controls. Investors are using this software because it allows them to artificially inflate "market rate" rents in concert with competitors, and disconnected from actual demand, full stop.
darksaints 3y ago
It’s really hard to claim price fixing when occupancy rates have been 98% or higher for decades, as is the case of nearly all coastal cities in the US. And I have first hand experience with them dropping prices when demand drops (I literally had my renewal rent drop when there was a short downturn). They’re just a dynamic pricing algorithm, they have no power over supply and demand. And it’s kinda annoying to see this idea trotted out when we obviously have a supply problem.

skapadia 3y ago

It's invisible because we like to talk about freedom and free market. But there are so many regulations and policies that essentially funnel money and power into the hands of a few. It makes the notion of freedom and free market somewhat farcical. However, any discussion of the above is considered unpatriotic, so it's always better to blame the individual.

gjsman-1000 3y ago
I'm not for unbridled capitalism, but if you have ever tried to start a business in even a slightly regulated field (medical, construction, chimney cleaning, a restaurant, general contracting, just being a handyman), the amount of regulation is incredible and overwhelming. Software development doesn't count - it's probably the least regulated field in the country. Even being a hairdresser requires licensing and venue requirements in most states - minorities have been sued for just trying to do hairdressing in their own homes for a few bucks. Is it fair to call the US a capitalist country? Honestly, I don't think so. It's a weird disastrous mishmash of socialism, capitalism, and English bureaucracy. It's just "more capitalist" than other countries who at least have the intellectual honesty to more fully commit to a system.
- ttoinou 3y ago
  It's the same all around the world. But rules are usually less applied
- sh34r 3y ago
  There is nothing socialist about the US. The workers do not own the means of production. Labor union membership is in the single digits. We have some very limited vestiges of social democracy, but social democracy is not socialism. Socialists and social democrats were not allies. Google the meme: “SocDems killed Rosa.” What you’re observing is what unregulated capitalism will always devolve into. It goes by many names: capitalism, crony capitalism, neoliberalism, corporatism, oligarchy, fascism. But the idea is the same. Labor is violently oppressed. The State only serves the interests of capitalists. The State and Capital are often indistinguishable. There is no competition. There are structural barriers that stifle small businesses and enrich rent seeking trusts. It’s a new Gilded Age, brought to life by a new Lochner era for the Supreme Court. I have good news and bad news: this system, whatever you call it, is extremely unstable. Its collapse is inevitable, well within the span of a single human lifetime.

rcme 3y ago

Why don’t we try removing all the insane tax incentives first, e.g. 1031 exchange, and then see what happens? There are so many incentives for investment in real estate. Even if more housing was built, investors would snap up the properties and keep prices high. I don’t understand how you can complain about high prices while investor demand is massively subsidized.

ttul 3y ago
Tax incentives for property investing are ridiculous in many countries. In Canada, the capital gains on the sale of your primary residence are tax-free. You just have to live there for about a year. People move annually, flipping as they go, to earn a tax free income while someone investing in the stock market is taxed. It makes no sense to me.
- rcme 3y ago
  The U.S. has the same tax incentive, but there is an additional tax incentive, called a 1031 exchange, that lets you pay no capital gains if you invest the money in more real estate.
Kharvok 3y ago
Without these incentives housing supply would be even lower. The incentives are designed to encourage the creation of additional housing units. Without liquidity in the space new housing creation would stagnate.
- rcme 3y ago
  So the only way to subsidize supply is indirectly via demand subsidies? I find that hard to believe.

im3w1l 3y ago

I think one underdiscussed reason is transportation. Basically people have a certain commute tolerance, and so the better transportation infrastructure, the further out (where land is cheap) you can build.

brodouevencode 3y ago

Except where it's not. In the Atlanta metro area housing prices are sky high not due to regulation or material costs but due to demand. Presumably from people trying to escape regulation and high material costs.

antiframe 3y ago
The Atlanta metro area doesn't have any zoning regulation? That's the first I've heard of it. Cool. So, what would housing prices be if Atlanta did have restrictions? The research says higher. But, it's hard to show that with any rigor since what would you compare Atlanta with? Every city is different and it's a challenge to get a good comparison.
- brodouevencode 3y ago
  Atlanta has minimal regs compared to other very large cities. The code enforcement here is about as minimal as it gets, and (back when I did construction) there was certainly no proactive enforcement like I've heard friends complain about in places like LA - it was very reactive. I can't imagine it's changed that much.
hondo77 3y ago
Why isn't there enough supply in Atlanta?
- brodouevencode 3y ago
  It hasn't caught up yet. This phenomenon is only a few years old, and Atlanta hasn't been seen as the "escape city" quite like Austin, Charlotte, or Nashville.
- rank0 3y ago
  It’s been growing consistently for like the past decade. Builders gotta build and they’re definitely working at it! It just takes time and demand has increased very quickly.
3y ago

sys_64738 3y ago

RI is the smallest state in the union and a lot of it is wetlands and susceptible to flooding. Land is hard to comeby in that state.

hgsgm 3y ago

NYC is extremely dense and yet extremely expensive.

antiframe 3y ago
Sure. It's desirable. What wouldn't cost if it weren't dense? For example, what do you think a single family house with an acre of land would cost within walking distance of Central Park and the Public Library? A bit more than the same house on a rural road 2 hours from that spot. It's all about location and desirability. People can afford an apartment since you can fit a lot more of them in that acre, but few people can afford that house.
lotsofpulp 3y ago
What if there were 20 cities like New York City?
- staringback 3y ago
  This highway is very congested. What if there were 20 more lanes?
  - lotsofpulp 3y ago
    Irrelevant when discussing price changes due to drastic increase in supply of urban housing. 330M people in the USA, let’s say NYC’s public transit/urban environment serves 4M of its people. 20 NYC like cities means 76M more people’s desire to live in a NYC like environment can be satisfied. Surely once you start getting into the tens of millions range, the supply gets closer to meeting demand, if not exceeding it, and prices drop. There are only so many people, after all. A 10 lane highway can easily be saturated by tens of thousands of people in a small window of time. A 100k lane highway would be a better comparison.
    - staringback 3y ago
      There can only be so many cars, after all. You make a good point, why don't we build a 100k lane highway?

pwillia7 3y ago

Would zoning not just be another thing that when filtered through our Gilded Age II corruption will lead to an unfair market? If I was a big developer in cahoots with a local government, wouldn't I seek to influence zoning laws to impede my competitors and harm consumers by inflating prices? This feels like another one of those things that looks inherently bad until you realize with governance and a culture of anti corruption, it might actually work great.

gadders 3y ago

That's the supply-side reason. The demand-side reason is population growth and immigration.

bendergarcia 3y ago
Immigration? Really? You think people escaping their destabilized homelands are going to be able to put a down payment, let alone get the credit, or even have the history to get a mortgage? There’s other reasons for demand side being the cause but immigration has got to be pretty far down on that list.
- pandaman 3y ago
  Unless all the immigrants live in the fields and in the woods, they increase housing demand, likely on the lower end if they are as poor as you describe, and push the whole market up.
- throw0101a 3y ago
  > Immigration? Really? If you look at Canada (especially southern Ontario) you'll see a large correlation between incoming international students rates and property prices (first in Toronto, then across the region). See especially the trends in 2015. Canada's population rose by one million people in 2022: * https://www.cbc.ca/news/canada/canada-record-population-growth-migration-1.6787428 https://www.cbc.ca/news/canada/canada-record-population-grow... We did not build one million housing units (even taking into account things like families of four, students having room mates, and various other forms of 'household').
- wizofaus 3y ago
  > people escaping their destabilized homelands That's a pretty small percentage of total immigration surely? All things considered it's reasonable to assume too-high an immigration rate will put upwards pressure on housing prices. If that means we need temporary restrictions on where recent immigrants are allowed to purchase homes I don't see an issue - I certainly don't believe it would be fair for me to move to the US and immediately be able to buy a house wherever I like, helping price out those who have their whole lives rooted there already.

warvair 3y ago

Why doesn't anyone mention real estate agents/agencies when talking about housing prices? When I bought my first home in the early 90s it seemed like a confidence game back then and it's only gotten worse since. What I'm basically talking about is everyone in the business of selling homes, including "your" agent gaslighting you into thinking that home prices will always go up. "You should by this now. You can't lose money. This is a great investment." In recent years it's been "You should offer 20% over asking." It used to make some sense that prices would generally go up for well built/maintained homes in good neighborhoods but that nod to sanity went out the door when AirBnB came along.

antisthenes 3y ago
Pick a better agent and stand your ground. You're making arguably the biggest decision/purchase of your life (along with who to marry and whether to have kids or not). Don't let some schmuck with a bunch of fake trophies who you've met 1 hour ago have ANY control over your offers. They advise only, and handle the paperwork, period. RE agents have 0 power over you when Zillow and Redfin have 99% of the same data that the agents have.
LapsangGuzzler 3y ago
Real estate agents didn’t invent Airbnb. Like it or not, agents serve an important role in real estate transactions by helping guide homebuyers through an incredibly complicated process. And it’s totally possible to be your own buying agent and save money if you’re willing to put in the work. “You should offer 20% above asking” is the agent giving you advice on how to win the deal, and a good agent will know when offer above or when to come in slightly under and see how open the seller is to negotiating. The agent doesn’t get paid until you buy the property, so they’re motivated to put you in the best position to buy.
- toomuchtodo 3y ago
  > And it’s totally possible to be your own buying agent and save money if you’re willing to put in the work. This is rarely true. The seller has negotiated and agreed to a commission with their agent, and that is getting paid regardless of whether the buyer is represented or not. Perhaps you can negotiate a purchase price low enough that the seller's agent fee is the seller's problem, but only in a buyer's market (which currently does not exist in any major market I'm aware of). The only time it makes sense to not use an agent is if you're confident you can market and close a transaction yourself selling your own property. It's really unfortunate that there is a 3-6% drag on real estate transactions from agent and brokerage commissions, but various attempts to disrupt this model and drive down the cost have not been successful.

throwaway5947 3y ago

Or mortgages driving up bids, benefitting finance and allowing the wealthy to flip more houses. Almost never mentioned either.

PeterStuer 3y ago

The elephant in the room is housing was turned from a utilitarian good into a speculative asset. This is capitalism in its purest form.

rank0 3y ago
Why don’t you go put your money where your mouth is and go build homes for free. Capitalism is the only reason developers create shelter in the first place…
- bendergarcia 3y ago
  I think you literally proved his point. It’s because capitalism that developers only build profitable properties. They will not build anything that devalues their own portfolio. That’s just capitalism for you.
  - rank0 3y ago
    Im trying to lead him to the conclusion that “capitalism evil” is a silly stance. Why aren’t you and GP out there building houses for a loss? None of the people complaining about capitalism ever actually practice their own ideals. Anyone is free to start a non-profit org that builds homes and you can still cut yourself + employees a salary.
    - PeterStuer 3y ago
      I did not say 'capitalism evil'. It has its strong and weak points. It is just that enlisting everything and everyone on the planet into a pure financial model that can be leveraged for rents and speculaion is what it is about.
bendergarcia 3y ago
It’s so simple: Real estate is investment and no one ever wants their investments to devalue. And the only way to slow stop or even decrease housing is to devalue it by building beyond what’s needed. No investor will ever do that. It is capitalism in its purest form. And no kind of free market will fix this issue.

bendergarcia 3y ago

That’s part of the problem. The bigger problem is that housing is an investment vehicle, and so the incentive is only for increasing property values which, one component is limited supply. Maybe it’s cause of land use regulations and maybe it’s because investors do not want to devalue their portfolio.

robomartin 3y ago

It is often interesting for me to read HN when these topics come-up because you can see lack of life and business experience in the comments. In some cases you can also see the great job our schools are doing indoctrinating people with bullshit. This thread does not disappoint. Someone mentioned supply and demand and was summarily put down. And yet, that's at the top of the list in every city in the world. Here, let's explore...picking at random: https://www.zillow.com/homes/for_sale/La-Crescenta.dash.Montrose,-CA_rb/ https://www.zillow.com/homes/for_sale/La-Crescenta.dash.Mont... 16 results https://www.zillow.com/homedetails/2713-Starfall-Dr-La-Crescenta-CA-91214/20924878_zpid/ https://www.zillow.com/homedetails/2713-Starfall-Dr-La-Cresc... Built in 1972, 4 bedrooms, 3 bathrooms, 2,201 square feet. $1,675,000 Let's move north a bit. https://www.zillow.com/homes/Palmdale,-CA_rb/ https://www.zillow.com/homes/Palmdale,-CA_rb/ 500 results https://www.zillow.com/homedetails/38903-Barrington-St-Palmdale-CA-93551/20241531_zpid/ https://www.zillow.com/homedetails/38903-Barrington-St-Palmd...? Built in 1991, 4 bedrooms, 3 bathrooms, 2,202 square feet. $580,000 Move north a bit more... https://www.zillow.com/homes/california-city,-ca_rb/ https://www.zillow.com/homes/california-city,-ca_rb/ 500 results https://www.zillow.com/homedetails/10600-Peach-Ave-California-City-CA-93505/2059278248_zpid/ https://www.zillow.com/homedetails/10600-Peach-Ave-Californi... Built in 2022, 4 bedrooms, 3 bathrooms, 2,137 square feet. $379,000 Of course, some of the price reflects quality of build, finish and materials. However, at a baseline, these homes are comparable. Why does the first cost nearly three times the cost of the second and 4.4x that of the third? When all the smoke and bullshit clears out, the answer is brutally simple: - People are not willing to pay the same price for a similar house in different locations - Less homes are available where people want to live - People bid-up prices in an effort to buy homes where they want to live No, zoning laws are not the main drivers. Why? You can't double or triple the number of homes in the first neighborhood presented. It is physically and logistically impossible. The area cannot support such a move. Someone might say: Sure you can! Buy all the homes and build apartment buildings. Sure, in fantasy land anything is possible. Just the lawsuits from neighboring communities due to the destruction of property values, increased traffic, etc. will take 50 years to resolve. If we leave fantasy-land, this is simply impossible. The power, water an sewer system in that neighborhood might not be able to support expansion. The point is, there's a difference between fantasy and reality. The more expensive homes don't necessarily cost more due to higher construction costs. Although, yes, it does cost more to build in some of these neighborhoods because there is a minimum expectation of quality of materials, fit and finish. For example, in that neighborhood, most homes have smooth flat walls without texture applied. This might not make sense to non-US reader, sorry. Spray texture is used on drywall to hide and mask imperfections. This allows for more relaxed finish requirements, massively reducing labor and all other costs. A smooth wall without texture is what's called a "Level 5" wall and sometimes referred to as "Gallery Finish"...because of how expensive it can be. And still, at the core, it's supply and demand. It's what people are willing to pay to live somewhere. If more people want to live somewhere, prices go up. As prices pass a certain threshold, build quality and architectural design move up several levels, contributing to higher prices as well. This is where all the other factors start to come-in. The cost of materials, labor, fuel, freight/transportation, regulatory frameworks and fees also play a part. If you want to build a house today it will cost you a lot more (maybe double or more) than the same house built, say, ten years ago. That's just a fact of our economic reality. This is affected by everything, from minimum wage to the cost of oil. Real estate isn't complicated. And, no, the housing shortage has little to do with evil planning on the part of the elites to keep the little guys from their turf. This is the same all over the world. Want to buy a house on the Herengracht in Amsterdam? Good luck. You are going to pay about $1MM per 100 square meters (~1000 square feet). Why? Because there are only so many homes. People want them. And they are willing to pay more. Reality does matter.

Bloating 3y ago

My observation is that homeowners tend to be more involved in local government, and have a personal incentive for their homes / land to increase in value. For most, homes are thier single largest investment. Intentionally or not, they use the force of government to insure / inflate the value of their property The Impact of Zoning on Housing Affordability: https://www.nber.org/system/files/working_papers/w8835/w8835.pdf https://www.nber.org/system/files/working_papers/w8835/w8835...

voisin 3y ago

There’s nothing invisible about this. We talk about it all the time in literally every discussion about primary causes of high house prices, right up there with stupidly low interest rates for way too long. Unlike interest rates which can be easily changed, restrictive zoning is primarily a Boomer NIMBY problem, pulling up the ladder behind themselves.