5 ms·

Many cities effectively ban or heavily restrict new housing developments that increase density. I'm really not surprised real estate prices continue to rise wh

Many cities effectively ban or heavily restrict new housing developments that increase density. I'm really not surprised real estate prices continue to rise when building new units is often an extremely expensive, risky process that in some areas can be stopped at any time with literally no reason required

geodel 2y ago
Huh, why is college getting expensive, healthcare getting expensive, day care getting expensive, hell even streaming services getting expensive, none of these are heavily restricted that no development is happening there. And in many cities breakneck construction activity is happening still real estate is getting very expensive. This seems rather simplistic reason to me.
- drdec 2y ago
  > why is college getting expensive Because of government subsidies. (If you were willing to pay $100k for college and the government will give you $50k, now the college can charge $150k. Yes that's simplistic but it's the crux.) > healthcare getting expensive Healthcare is doubly removed from price feedbacks - patients don't pay for doctors, insurance companies do. Patients don't even pay for insurance, employers do. Not too mention that the number of new doctors in the US is artificially constrained. > day care getting expensive can't help you on this one > streaming services getting expensive Streaming services started out undercutting cable prices. That's no longer necessary so the price is stabilizing. Plus now they are expected to produce their own content. Expecting everything to have the same root cause is unrealistic.
- wisty 2y ago
  https://en.wikipedia.org/wiki/Baumol_effect https://en.wikipedia.org/wiki/Baumol_effect > In economics, the Baumol effect, also known as Baumol's cost disease, first described by William J. Baumol and William G. Bowen in the 1960s, is the tendency for wages in jobs that have experienced little or no increase in labor productivity to rise in response to rising wages in other jobs that did experience high productivity growth. Stuff that's made in China gets relatively cheap, so stuff that's not made in China gets relatively more expensive.
- addicted 2y ago
  One can easily see how high real estate prices can translate to all those being more expensive. Colleges pay rent. Colleges pay salaries to people who pay rent. All those go up with high real estate prices. Further, even if the college owns a land, the money they earn on that land has to compete with what a developer who is willing to tear it down and put up a residential building which now earns higher rent or sale price. I don’t think all the increase comes down to high real estate costs but it’s clear that high real estate costs can easily raise prices downstream across nearly every area.
- lolinder 2y ago
  I have a strong suspicion that a lot of it is the rise of the two income household. In the early years it increased household buying power, but as it became the norm many services began raising prices because people could actually afford to pay them now. So the net result is that the increased productivity from nearly doubling the workforce turns into higher and higher executive salaries while the average middle class household is now roughly back where we started, with the added burden of a whole second career.
  - geodel 2y ago
    Yes, this seems to make lot of sense. Initially second income maybe additional savings, day-to-day conveniences, some extra luxuries etc, now it is part of survival. Since second job is sold as "freedom from household drudgery" and GDP booster it can't really be challenged.
  - Earw0rm 2y ago
    Yeah, and property is a positional good. Its price is a function purely of willingness to pay. So if you double household income, and perhaps quadruple theoretical discretionary income (after food, energy, gas and so on), give it 40 years and real-estate inflation eats the damn lot.
    - sir0010010 2y ago
      The price of every good and service is a function both of willingness to pay and supply. Positional goods cease to be so if you substantially increase their supply - this is why Rolex, Gucci, etc are constantly worried about knockoffs.
      - Earw0rm 2y ago
        Yes, if you can substantially increase supply in the top decile or quartile, in terms of desirability. That's difficult, for all sorts of reasons. NIMBYs protecting their investment is one aspect, but the maths of density, transport infrastructure and travel times is another big deal. Walkable, interesting downtowns AND big floorplans AND low taxes AND abundant supply within a short travel time is a tough set of constraints.
- dottjt 2y ago
  The reason is growing inequality. Those are just symptoms of it.
- mixmastamyk 2y ago
  All government interference—significantly restricting supply and then doling out free money/tax-breaks to pay for whats left. As if govt leaders never took an econ 101 class.
  - cyberax 2y ago
    There is no supply restriction. We're close to the record-high number of housing units per capita, it's only a bit lower than in 2007, and we're likely to surpass it by 2026.
    - daedrdev 2y ago
      This is not the right calculation. Housing units per household makes more sense, as the number of people per housing unit has been shrinking since we started collecting data as peoples preferences change. From what I can tell it peaked in 2011 at 1.17 and has declined to 1.12 since, and considering that we expect some vacancy from moving, condemned units, and people prefer certain areas and dont like many others, the trend does not support that we have enough housing. Not to mention the prices clearly show demand is there
    - sir0010010 2y ago
      The calculation changes if you only include adults in the denominator - there is a lot more adults relative to children compared to the past. The solution is to remove the very much existent density and other supply restrictions - see: https://marginalrevolution.com/marginalrevolution/2024/04/the-shortage-of-housing-and-the-rising-numbers-of-houses-per-capita.html https://marginalrevolution.com/marginalrevolution/2024/04/th... and https://kevinerdmann.substack.com/p/household-size-and-the-housing-stock?r=18smg1&utm_medium=ios&triedRedirect=true https://kevinerdmann.substack.com/p/household-size-and-the-h... which goes into more detail
      - cyberax 2y ago
        > The calculation changes Nope. It becomes slightly further from the record high numbers, but still better than at any time before 90-s. At this point, the misery caucus is just grasping at straws. In a couple of years, the housing inventory will make even that metric irrelevant, but the price of housing will still be going up. > The solution is to remove the very much existent density and other supply restrictions Nope. The solution is the opposite: preserve the SFH at all costs and shut down the misery caucus. Build new cities, not new density. Create jobs outside of dense hellscapes. Because the reality is that NOT A SINGLE CITY has lowered the housing sale prices by increasing the density of existing areas. Not a single one in the US, Europe, or Japan.

geodel 2y ago

Huh, why is college getting expensive, healthcare getting expensive, day care getting expensive, hell even streaming services getting expensive, none of these are heavily restricted that no development is happening there. And in many cities breakneck construction activity is happening still real estate is getting very expensive. This seems rather simplistic reason to me.

drdec 2y ago
> why is college getting expensive Because of government subsidies. (If you were willing to pay $100k for college and the government will give you $50k, now the college can charge $150k. Yes that's simplistic but it's the crux.) > healthcare getting expensive Healthcare is doubly removed from price feedbacks - patients don't pay for doctors, insurance companies do. Patients don't even pay for insurance, employers do. Not too mention that the number of new doctors in the US is artificially constrained. > day care getting expensive can't help you on this one > streaming services getting expensive Streaming services started out undercutting cable prices. That's no longer necessary so the price is stabilizing. Plus now they are expected to produce their own content. Expecting everything to have the same root cause is unrealistic.
wisty 2y ago
https://en.wikipedia.org/wiki/Baumol_effect https://en.wikipedia.org/wiki/Baumol_effect > In economics, the Baumol effect, also known as Baumol's cost disease, first described by William J. Baumol and William G. Bowen in the 1960s, is the tendency for wages in jobs that have experienced little or no increase in labor productivity to rise in response to rising wages in other jobs that did experience high productivity growth. Stuff that's made in China gets relatively cheap, so stuff that's not made in China gets relatively more expensive.
addicted 2y ago
One can easily see how high real estate prices can translate to all those being more expensive. Colleges pay rent. Colleges pay salaries to people who pay rent. All those go up with high real estate prices. Further, even if the college owns a land, the money they earn on that land has to compete with what a developer who is willing to tear it down and put up a residential building which now earns higher rent or sale price. I don’t think all the increase comes down to high real estate costs but it’s clear that high real estate costs can easily raise prices downstream across nearly every area.
lolinder 2y ago
I have a strong suspicion that a lot of it is the rise of the two income household. In the early years it increased household buying power, but as it became the norm many services began raising prices because people could actually afford to pay them now. So the net result is that the increased productivity from nearly doubling the workforce turns into higher and higher executive salaries while the average middle class household is now roughly back where we started, with the added burden of a whole second career.
- geodel 2y ago
  Yes, this seems to make lot of sense. Initially second income maybe additional savings, day-to-day conveniences, some extra luxuries etc, now it is part of survival. Since second job is sold as "freedom from household drudgery" and GDP booster it can't really be challenged.
- Earw0rm 2y ago
  Yeah, and property is a positional good. Its price is a function purely of willingness to pay. So if you double household income, and perhaps quadruple theoretical discretionary income (after food, energy, gas and so on), give it 40 years and real-estate inflation eats the damn lot.
  - sir0010010 2y ago
    The price of every good and service is a function both of willingness to pay and supply. Positional goods cease to be so if you substantially increase their supply - this is why Rolex, Gucci, etc are constantly worried about knockoffs.
    - Earw0rm 2y ago
      Yes, if you can substantially increase supply in the top decile or quartile, in terms of desirability. That's difficult, for all sorts of reasons. NIMBYs protecting their investment is one aspect, but the maths of density, transport infrastructure and travel times is another big deal. Walkable, interesting downtowns AND big floorplans AND low taxes AND abundant supply within a short travel time is a tough set of constraints.
dottjt 2y ago
The reason is growing inequality. Those are just symptoms of it.
mixmastamyk 2y ago
All government interference—significantly restricting supply and then doling out free money/tax-breaks to pay for whats left. As if govt leaders never took an econ 101 class.
- cyberax 2y ago
  There is no supply restriction. We're close to the record-high number of housing units per capita, it's only a bit lower than in 2007, and we're likely to surpass it by 2026.
  - daedrdev 2y ago
    This is not the right calculation. Housing units per household makes more sense, as the number of people per housing unit has been shrinking since we started collecting data as peoples preferences change. From what I can tell it peaked in 2011 at 1.17 and has declined to 1.12 since, and considering that we expect some vacancy from moving, condemned units, and people prefer certain areas and dont like many others, the trend does not support that we have enough housing. Not to mention the prices clearly show demand is there
  - sir0010010 2y ago
    The calculation changes if you only include adults in the denominator - there is a lot more adults relative to children compared to the past. The solution is to remove the very much existent density and other supply restrictions - see: https://marginalrevolution.com/marginalrevolution/2024/04/the-shortage-of-housing-and-the-rising-numbers-of-houses-per-capita.html https://marginalrevolution.com/marginalrevolution/2024/04/th... and https://kevinerdmann.substack.com/p/household-size-and-the-housing-stock?r=18smg1&utm_medium=ios&triedRedirect=true https://kevinerdmann.substack.com/p/household-size-and-the-h... which goes into more detail
    - cyberax 2y ago
      > The calculation changes Nope. It becomes slightly further from the record high numbers, but still better than at any time before 90-s. At this point, the misery caucus is just grasping at straws. In a couple of years, the housing inventory will make even that metric irrelevant, but the price of housing will still be going up. > The solution is to remove the very much existent density and other supply restrictions Nope. The solution is the opposite: preserve the SFH at all costs and shut down the misery caucus. Build new cities, not new density. Create jobs outside of dense hellscapes. Because the reality is that NOT A SINGLE CITY has lowered the housing sale prices by increasing the density of existing areas. Not a single one in the US, Europe, or Japan.