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by definition, the bay area real estate market is a free market. housing is a problem across the entire country because of low supply as a result of underbuildi

by definition, the bay area real estate market is a free market. housing is a problem across the entire country because of low supply as a result of underbuilding (among other things). and yes, the underbuilding is even more extreme in places like the bay area due to zoning. i should have been more specific: capitalism will not solve the problem of housing. it had it's chance to build housing to meet demand during the low interest rate environment and yet it didn't provide. this underbuilding happened in places with both lax zoning and prohibitive discretionary zoning. all the while, rents keep raising in the free market due to low supply. capitalism will not build to meet the needs in a high interest rate / high inflation environment because the payoff won't be worth the risk. there needs to be some government intervention on the scale of the new deal if we want to solve our housing crisis. can somebody give a good argument why capitalism will solve our housing problems, with an emphasis on how it will work in a high interest rate inflationary environment? i'm genuinely curious to hear an argument for that. and use examples where it addressed problems in an area with both lax zoning and bay area-like zoning, since imo reforming zoning regulations is only one part of the puzzle.

bobthepanda 3y ago
Banks, developers, and realtors are not a unified cartel, they will totally undercut each other if they can, and they are humans that do not have the power of prediction. Generally speaking, the mechanism by which prices decline is that overzealous building in the boom phase leads to overleveraged people losing their shirts in the bust. The most spectacular example of this is the Japanese asset bubble which has never been returned to; at its peak, the Imperial Palace had a valuation more than the entire state of California. But where I live in Seattle, we are starting to see the effects of the high interest rates; homes are staying available for longer, I am seeing 10-20% valuation drops compared to a year ago and further price cuts in my neighborhood. A particular source of pain this cycle will be people who bought for AirBnB who can’t afford the interest payments anymore. —- Zoning is not free in the Bay Area. One major difference is “by-right” development, where buildings that meet predefined codes are automatically approved without political review. For example, most development in New York is by-right. By-right development is not the norm in California, which leads to an expensive, extractive review where people attempt to get their pound of flesh on every single project.
- greenie_beans 3y ago
  i don't think you're listening to what i'm saying, i feel like we're talking past each other at this point. i know how discretionary zoning works. it's a huge problem in SF. but other housing markets are underbuilt in places where discretionary zoning isn't a problem. my point is that we'll continue to underbuild to a much worse degree in a high interest inflationary environment. it's a compounding problem that gets worse over time. i'll be dead by the time we have enough housing if we wait for private developers to solve this problem. there needs to be zoning reform + government intervention in my opinion, since clearly the status quo isn't working. (i define the status quo as the current zoning regulations + the profit driven mode of building, both of those contribute to this problem) my argument is simple: profitable opportunities will become more rare in the current macro environment, thus causing even less building and making the lack of housing problem worse. so there needs to be another solution, like government subsidizing private developers or something, idk, there are a ton of ideas but i'm not trying to argue about it on hacker news.
  - bobthepanda 3y ago
    It depends on how far you overbuilt in the current boom. The hangover can last quite a while depending on how far overbuilding has gone. Like I said, the Japanese bubble was entirely market driven and the real estate prices there have never recovered from the last spate of overbuilding 30 years after the fact. And like I said, I'm observing rental and price drops beginning now where I live. There's also the fact that right now, anyone still working on a project is going to try and complete it to be able to sell something rather than to sell nothing and still pay their loans; right now there are multiple 40 story residential towers in Seattle still chugging along despite the start of rent falls. You can't have this excess if you never built rapidly enough in the first place. And at that point you've missed your shot. I think public building is an important part of a long-term solution. However, I also think that local and state governments can't do it alone, and the feds are very unwilling to help, so in terms of the realism of getting 60 senators on board with funding publicly built housing, it's a bit of a fool's errand.

bobthepanda 3y ago

Banks, developers, and realtors are not a unified cartel, they will totally undercut each other if they can, and they are humans that do not have the power of prediction. Generally speaking, the mechanism by which prices decline is that overzealous building in the boom phase leads to overleveraged people losing their shirts in the bust. The most spectacular example of this is the Japanese asset bubble which has never been returned to; at its peak, the Imperial Palace had a valuation more than the entire state of California. But where I live in Seattle, we are starting to see the effects of the high interest rates; homes are staying available for longer, I am seeing 10-20% valuation drops compared to a year ago and further price cuts in my neighborhood. A particular source of pain this cycle will be people who bought for AirBnB who can’t afford the interest payments anymore. —- Zoning is not free in the Bay Area. One major difference is “by-right” development, where buildings that meet predefined codes are automatically approved without political review. For example, most development in New York is by-right. By-right development is not the norm in California, which leads to an expensive, extractive review where people attempt to get their pound of flesh on every single project.

greenie_beans 3y ago
i don't think you're listening to what i'm saying, i feel like we're talking past each other at this point. i know how discretionary zoning works. it's a huge problem in SF. but other housing markets are underbuilt in places where discretionary zoning isn't a problem. my point is that we'll continue to underbuild to a much worse degree in a high interest inflationary environment. it's a compounding problem that gets worse over time. i'll be dead by the time we have enough housing if we wait for private developers to solve this problem. there needs to be zoning reform + government intervention in my opinion, since clearly the status quo isn't working. (i define the status quo as the current zoning regulations + the profit driven mode of building, both of those contribute to this problem) my argument is simple: profitable opportunities will become more rare in the current macro environment, thus causing even less building and making the lack of housing problem worse. so there needs to be another solution, like government subsidizing private developers or something, idk, there are a ton of ideas but i'm not trying to argue about it on hacker news.
- bobthepanda 3y ago
  It depends on how far you overbuilt in the current boom. The hangover can last quite a while depending on how far overbuilding has gone. Like I said, the Japanese bubble was entirely market driven and the real estate prices there have never recovered from the last spate of overbuilding 30 years after the fact. And like I said, I'm observing rental and price drops beginning now where I live. There's also the fact that right now, anyone still working on a project is going to try and complete it to be able to sell something rather than to sell nothing and still pay their loans; right now there are multiple 40 story residential towers in Seattle still chugging along despite the start of rent falls. You can't have this excess if you never built rapidly enough in the first place. And at that point you've missed your shot. I think public building is an important part of a long-term solution. However, I also think that local and state governments can't do it alone, and the feds are very unwilling to help, so in terms of the realism of getting 60 senators on board with funding publicly built housing, it's a bit of a fool's errand.