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Ultimately, there is no solution in which the core groups will all be appeased: * If prices keep going up, then home ownership remains a luxury of the wealthy

Ultimately, there is no solution in which the core groups will all be appeased: * If prices keep going up, then home ownership remains a luxury of the wealthy and an exploitation of the poor. Asset holders will be thrilled with returns, but the majority struggling to get or stay on the proverbial property ladder will grow increasingly angry at sky-high rents and prices with stagnant wages * On the other hand, if prices come down then the broader economic engine will grow ornery and stagnate. Large home builders will cut back on builds, purchases, and labor, in an effort to push margins back up. Existing asset owners will be angry at losing (illusory/on-paper-only) money, and cut back on spending, purchases, or renovations until they see their valuations rise again. Only a small subset of prepared buyers will be able to take advantage of these lower prices before investors snatch most of them up and raise prices again anyway. Housing is not a standalone crisis, but a symptom of a larger dysfunctional economic engine that simply does not work for the majority. Higher prices on core necessities should be met with a mixture of rising wages and price controls to reflect broader economic growth or support, but neither happens because of monied interests: if wages rise, companies will outsource and the problem perpetuates, while price controls prevent asset holders from maximizing their return on investment, a sin equivalent to murder in the eyes of the propertied class. And so we have a group who benefits from nothing changing (asset holders, mega-builders, financiers), and a group that benefits from an all new engine design built for modern problems (the working classes, smaller employers, and - increasingly - insurance companies), fighting for the next century of housing policy. I’m hoping the latter wins, despite the pain it would cause the former. Housing is a necessity first, and an asset class last.

deleted 1y ago
[deleted]
almosthere 1y ago
Simple to make people sell, make property tax near Infinity if you rent it out in the first 5 years of property purchase. Old rentals stay rentals, new construction is for people.
- postalrat 1y ago
  New construction is still very expensive.
- stego-tech 1y ago
  It’s not that simple, although taxation is a lever I see more governments willing to tug cautiously on in this crisis. I do think multipliers on low-density housing that’s not owner-occupied year-round is an excellent starting point, though, one that would really only harm a smaller subset of landlords while loosening supply in the short-term (1-5yrs). Still, tax policy alone won’t solve such a complex issue. We need deregulation in matters of zoning, and increased regulation in terms of rent-setting (both amounts and lengths). We also need higher-density housing near transit stops, regulations on sales of existing homes with fossil fuel heat (gas and oil) that promote their proactive replacement prior to sale, stripping HOAs of authority to police familial genetics or relationships in household makeup (to promote more shared housing in existing developments), and so much more. It’s a complex crisis that requires a complex solution.
- epistasis 1y ago
  Still doesn't solve the problem of having enough houses. Rented houses are still housing people. The problem isn't renting, the problem isn't loans, the problem is there's not enough houses where people want them.
  - stego-tech 1y ago
    That’s not entirely true, for a number of reasons. * Low-density housing that’s rented instead of sold drives up rent for the tenant and property values for neighbors, resulting in increased costs for everyone but the landlord (who offsets costs by raising rent) * Investors are predominantly buying affordable homes, not luxury ones. Cheaper prices (even when paying cash to outbuy other bidders) means higher margins. * Construction has fundamentally changed as a result. No longer are structures being built for sustainable operations, but simply to exploit valuation growth before being shoved off to the next buyer. The goal from everyone involved is maximum margin/profit, not quality and sustainable shelter. * There’s a glut of “luxury” apartments in higher-density units that sit vacant as a result of gaming the local marketplace for higher rent instead of maximum occupancy. We have enough houses at present. Really, we do! The problem is that because we treat them as assets and not shelter, the goal is maximum revenue, profit, and/or valuation instead of maximum utilization. Hence, housing crisis.
thinkingtoilet 1y ago
>Existing asset owners will be angry at losing (illusory/on-paper-only) money I wouldn't be. I bought my house to live in it, not as a financial vehicle. I would be thrilled if prices came down and others in my generation could afford a house because I had the dumb luck of purchasing one in 2018 before the shit hit the fan. I couldn't even afford my own house now.
- itake 1y ago
  On the surface, I feel the same as you but as someone that bought a house three years ago at 5.5% interest and has only lost money on the property due to significant home repairs it really doesn’t feel great that my capital is just evaporating. I spent $50,000 replacing the pipes and removing asbestos 1 year after I bought the house. While I don’t expect the down payment and regular mortgage payments to grow and value, it’s very painful when there’s an unexpected repair that requires additional capital that isn’t recaptured in the home value growth. It’s like driving a new car off the dealership parking lot and immediately getting your doors dinged. I’d feel a lot less about it if the car went up in value…
  - thinkingtoilet 1y ago
    But even if your house was worth more in value, you would still have to make those repairs and it would still come out of pocket. It only matters if you bought your house to sell it at a profit. Of course, if you hadn't bought it, you'd be paying someone else's mortgage.
- stego-tech 1y ago
  You and I are in a growing minority on this, I find. When I started my homebuying journey four years ago, I did so expecting to eat an on-paper devaluation of up to 50% during my lifetime - and was fine with that, because I wanted stability, not profit.
  - s1artibartfast 1y ago
    That makes sense if people have more and more of their assets tied up in home value. It's a positive feedback loop. I assume that 50% markdown wouldn't be a 50% loss on your assets or retirement.
ch4s3 1y ago
> On the other hand, if prices come down then the broader economic engine will grow ornery and stagnate A rather small part of the economy relies on high long term returns on housing. You can build homes and sell them for rather small margins and that's good business. Many types of businesses happily run on profit margins that are single digit percentages. > Only a small subset of prepared buyers will be able to take advantage of these lower prices before investors snatch most of them up and raise prices again anyway. In 2024 87% of homes in the US were bought by people who intended to live in them or use them as a second home. If you only want to count primary homes the number is still close to 80%. > but a symptom of a larger dysfunctional economic engine that simply does not work for the majority. Factually the majority of US families live in homes they own, about [65% of US families own their homes])https://fred.stlouisfed.org/series/RSAHORUSQ156S https://fred.stlouisfed.org/series/RSAHORUSQ156S) that is not only a majority but nearly 2/3.
- stego-tech 1y ago
  You’re cherry-picking stats without offering a counter-argument, as if they alone dismantle the whole of the argument. > A rather small part of the economy relies on high long term returns on housing. Directly, yes, but don’t forget the wider array of businesses dependent upon this minority to survive: hardware stores, contractors, many tradespersons, mortgage companies, real estate agents, brokers, closers, lawyers, and more, all of whom get paid/earn less if housing prices come down in the short term (until theoretical volume makes up for the drop of individual transaction values). It’s a wider web that shores up a market valued at ~$50tn. That’s hardly a minority. > In 2024 87% of homes in the US were bought by people who intended to live in them or use them as a second home. If you only want to count primary homes the number is still close to 80%. Taking those numbers at face value means a full 13% to 20% aren’t purchasing a home to live in them, which is problematic in a housing crisis. The fact you included second homes paints an even more distressing picture, because to have a second home means you not only have a primary home, but also the excess capital for a secondary domicile in the middle of a housing crisis. Furthermore, those numbers - if true - are almost certainly national figures. Local ones can vary substantially, and the statistics show that affordable housing is predominantly being bought by investors for rent, not homebuyers to build equity. > Factually the majority of US families live in homes they own, about [65% of US families own their homes]) That’s a grossly misleading statistic on its face, because it ignores demographic data to make the case that somehow a full third of the country simply doesn’t want to own a home. It does so by hiding the average age of homebuyers (which only goes up, indicating only those on the property ladder already are buying homes in large enough numbers to drive the average upward), the types of homes being bought (what about mobile homes/trailers? Or people who live entirely on the road in RVs? Why is it “ownership” if they’re still paying a mortgage to someone? Etc, etc), and regional or local policies that affect these demographics. FRED data is awesome, don’t get me wrong, but that figure is like pulling the U-1 for unemployment and saying everything is rosy. Don’t come in here to blindly spout numbers without a competing or complimenting narrative of your own.
sokoloff 1y ago
Price controls work to ensure scarcity. Flooding the market with new construction (at any price level, though ideally at all sizes and quality of housing) will do more to sustainably lower prices while leaving a functioning market.
- doctorpangloss 1y ago
  a dreary part of this conversation is, nobody wants to play the game, what does random HN user sokoloff mean by the words "functioning market," "sustainably," "flooding", "ideally", "quality", and even "scarcity"? I don't know what you are saying, because you are leaning so deeply on an internal glossary known only to you, made worse by hijacking real words that everyone can look up in a dictionary.
  - sugarplant 1y ago
    how high were you when you made this post?
  - jstimpfle 1y ago
    Funny that GP whas one of the comments that made immediate intuitive sense to me. By the simple principle of demand / supply ~ price, price controls (in a time of high prices, which is because of scarcity), should inhibit creation of more supply. Leaving prices to their natural forces should allow creation of more supply, which, regardless of the price level, should relax the market and lead to lower prices. While price controls might keep the supply affordable to a larger share of the population, that doesn't help the fact that there isn't enough supply, so instead of money, other mechanisms influence who gets to buy the goods. This could be: Who is most willing to invest an unhealthy amount of time and energy, who is eligible to maybe acquire state funding, or simply who is the lucky one. Is any of this better than letting money decide? I tend to think no and think it would be better to have a functioning market with reasonable prices.
  - sokoloff 1y ago
    ?? I'm using those six quoted terms to have a meaning the same as what Google returns as the first definition for five and the second for one (which I think is obvious to all readers from context): "functioning market" - A functioning market, in economic terms, is a system where buyers and sellers can freely interact to exchange goods and services, with prices determined by the forces of supply and demand, and where information is readily available. A well-functioning market is characterized by competition, efficient resource allocation, and the absence of significant barriers to entry and exit. "sustainably" - 1. in a way that can be maintained at a certain rate or level. "flooding" - 2. arrive in overwhelming amounts or quantities. I posit that no one was confused and thought I meant "1. the covering or submerging of normally dry land with a large amount of water." "ideally" - 1. preferably; in an ideal world. "quality" - 1. the standard of something as measured against other things of a similar kind; the degree of excellence of something. "scarcity" - 1. the state of being scarce or in short supply; shortage.
intalentive 1y ago
>Housing is not a standalone crisis, but a symptom of a larger dysfunctional economic engine that simply does not work for the majority. Great point. Healthcare, debt, and housing affordability are interlinked issues that stem from one root: a financialized economy that benefits a tiny minority of rent-seekers at the expense of productive activity and the public at large. Three potential outcomes of this trajectory: 1. Permanent extreme inequality enforced by a "post-liberal" surveillance state. 2. A moderating force, an FDR-like reformer, who represses capital for its own good. 3. Political instability and violence a la Luigi Mangione or worse.
- inglor_cz 1y ago
  Here in Czechia housing costs are absolutely terrible, which is at least partly caused by an insane, Byzantine permitting process under which a basic block of flats in Prague can spend a decade in bureaucratic limbo before the construction can begin. Yet this is not really a problem of financialized economy, the roots are elsewhere: a. lots of NIMBYs, mostly curmudgeonly old people who want to block any change around them and, being in pension, have a lot of time to throw at thwarting anything. My personal experience is that they aren't really looking for money or profit, they just Simply Hate Anything New, Period, b. the ease of weaponizing environmental and planning regulations against any building project, by the means of lawsuits, c. local mayors have de facto (though not de iure) influence on the permitting process and they don't want to lose this tool of power over their constituents. It is an efficient way how to bash your enemies and reward your friends. From what I know about the US, at least a. and b. apply in many places, too.
zozbot234 1y ago
Price controls are a terrible policy. The nice things about rising housing prices is that they can be addressed in a way that also creates a nice tax base for local communities: Raise property taxes on the ground-rent portion of real estate values. For those living in California, this means you need to put an initiative on the ballot to get rid of the infamous Prop 13.
msgodel 1y ago
Normally people deal with this naturally by having fewer children when supplies for basic goods like this are constrained so the population and prices would servo around an equilibrium. High rates of migration upset this equilibrium. In the past it would normally cause wars and genocide because of that. I'm not convinced the current world is any different but a number of other people seem to be.

deleted 1y ago

[deleted]

almosthere 1y ago

Simple to make people sell, make property tax near Infinity if you rent it out in the first 5 years of property purchase. Old rentals stay rentals, new construction is for people.

postalrat 1y ago
New construction is still very expensive.
stego-tech 1y ago
It’s not that simple, although taxation is a lever I see more governments willing to tug cautiously on in this crisis. I do think multipliers on low-density housing that’s not owner-occupied year-round is an excellent starting point, though, one that would really only harm a smaller subset of landlords while loosening supply in the short-term (1-5yrs). Still, tax policy alone won’t solve such a complex issue. We need deregulation in matters of zoning, and increased regulation in terms of rent-setting (both amounts and lengths). We also need higher-density housing near transit stops, regulations on sales of existing homes with fossil fuel heat (gas and oil) that promote their proactive replacement prior to sale, stripping HOAs of authority to police familial genetics or relationships in household makeup (to promote more shared housing in existing developments), and so much more. It’s a complex crisis that requires a complex solution.
epistasis 1y ago
Still doesn't solve the problem of having enough houses. Rented houses are still housing people. The problem isn't renting, the problem isn't loans, the problem is there's not enough houses where people want them.
- stego-tech 1y ago
  That’s not entirely true, for a number of reasons. * Low-density housing that’s rented instead of sold drives up rent for the tenant and property values for neighbors, resulting in increased costs for everyone but the landlord (who offsets costs by raising rent) * Investors are predominantly buying affordable homes, not luxury ones. Cheaper prices (even when paying cash to outbuy other bidders) means higher margins. * Construction has fundamentally changed as a result. No longer are structures being built for sustainable operations, but simply to exploit valuation growth before being shoved off to the next buyer. The goal from everyone involved is maximum margin/profit, not quality and sustainable shelter. * There’s a glut of “luxury” apartments in higher-density units that sit vacant as a result of gaming the local marketplace for higher rent instead of maximum occupancy. We have enough houses at present. Really, we do! The problem is that because we treat them as assets and not shelter, the goal is maximum revenue, profit, and/or valuation instead of maximum utilization. Hence, housing crisis.

thinkingtoilet 1y ago

>Existing asset owners will be angry at losing (illusory/on-paper-only) money I wouldn't be. I bought my house to live in it, not as a financial vehicle. I would be thrilled if prices came down and others in my generation could afford a house because I had the dumb luck of purchasing one in 2018 before the shit hit the fan. I couldn't even afford my own house now.

itake 1y ago
On the surface, I feel the same as you but as someone that bought a house three years ago at 5.5% interest and has only lost money on the property due to significant home repairs it really doesn’t feel great that my capital is just evaporating. I spent $50,000 replacing the pipes and removing asbestos 1 year after I bought the house. While I don’t expect the down payment and regular mortgage payments to grow and value, it’s very painful when there’s an unexpected repair that requires additional capital that isn’t recaptured in the home value growth. It’s like driving a new car off the dealership parking lot and immediately getting your doors dinged. I’d feel a lot less about it if the car went up in value…
- thinkingtoilet 1y ago
  But even if your house was worth more in value, you would still have to make those repairs and it would still come out of pocket. It only matters if you bought your house to sell it at a profit. Of course, if you hadn't bought it, you'd be paying someone else's mortgage.
stego-tech 1y ago
You and I are in a growing minority on this, I find. When I started my homebuying journey four years ago, I did so expecting to eat an on-paper devaluation of up to 50% during my lifetime - and was fine with that, because I wanted stability, not profit.
- s1artibartfast 1y ago
  That makes sense if people have more and more of their assets tied up in home value. It's a positive feedback loop. I assume that 50% markdown wouldn't be a 50% loss on your assets or retirement.

ch4s3 1y ago

> On the other hand, if prices come down then the broader economic engine will grow ornery and stagnate A rather small part of the economy relies on high long term returns on housing. You can build homes and sell them for rather small margins and that's good business. Many types of businesses happily run on profit margins that are single digit percentages. > Only a small subset of prepared buyers will be able to take advantage of these lower prices before investors snatch most of them up and raise prices again anyway. In 2024 87% of homes in the US were bought by people who intended to live in them or use them as a second home. If you only want to count primary homes the number is still close to 80%. > but a symptom of a larger dysfunctional economic engine that simply does not work for the majority. Factually the majority of US families live in homes they own, about [65% of US families own their homes])https://fred.stlouisfed.org/series/RSAHORUSQ156S https://fred.stlouisfed.org/series/RSAHORUSQ156S) that is not only a majority but nearly 2/3.

stego-tech 1y ago
You’re cherry-picking stats without offering a counter-argument, as if they alone dismantle the whole of the argument. > A rather small part of the economy relies on high long term returns on housing. Directly, yes, but don’t forget the wider array of businesses dependent upon this minority to survive: hardware stores, contractors, many tradespersons, mortgage companies, real estate agents, brokers, closers, lawyers, and more, all of whom get paid/earn less if housing prices come down in the short term (until theoretical volume makes up for the drop of individual transaction values). It’s a wider web that shores up a market valued at ~$50tn. That’s hardly a minority. > In 2024 87% of homes in the US were bought by people who intended to live in them or use them as a second home. If you only want to count primary homes the number is still close to 80%. Taking those numbers at face value means a full 13% to 20% aren’t purchasing a home to live in them, which is problematic in a housing crisis. The fact you included second homes paints an even more distressing picture, because to have a second home means you not only have a primary home, but also the excess capital for a secondary domicile in the middle of a housing crisis. Furthermore, those numbers - if true - are almost certainly national figures. Local ones can vary substantially, and the statistics show that affordable housing is predominantly being bought by investors for rent, not homebuyers to build equity. > Factually the majority of US families live in homes they own, about [65% of US families own their homes]) That’s a grossly misleading statistic on its face, because it ignores demographic data to make the case that somehow a full third of the country simply doesn’t want to own a home. It does so by hiding the average age of homebuyers (which only goes up, indicating only those on the property ladder already are buying homes in large enough numbers to drive the average upward), the types of homes being bought (what about mobile homes/trailers? Or people who live entirely on the road in RVs? Why is it “ownership” if they’re still paying a mortgage to someone? Etc, etc), and regional or local policies that affect these demographics. FRED data is awesome, don’t get me wrong, but that figure is like pulling the U-1 for unemployment and saying everything is rosy. Don’t come in here to blindly spout numbers without a competing or complimenting narrative of your own.

sokoloff 1y ago

Price controls work to ensure scarcity. Flooding the market with new construction (at any price level, though ideally at all sizes and quality of housing) will do more to sustainably lower prices while leaving a functioning market.

doctorpangloss 1y ago
a dreary part of this conversation is, nobody wants to play the game, what does random HN user sokoloff mean by the words "functioning market," "sustainably," "flooding", "ideally", "quality", and even "scarcity"? I don't know what you are saying, because you are leaning so deeply on an internal glossary known only to you, made worse by hijacking real words that everyone can look up in a dictionary.
- sugarplant 1y ago
  how high were you when you made this post?
- jstimpfle 1y ago
  Funny that GP whas one of the comments that made immediate intuitive sense to me. By the simple principle of demand / supply ~ price, price controls (in a time of high prices, which is because of scarcity), should inhibit creation of more supply. Leaving prices to their natural forces should allow creation of more supply, which, regardless of the price level, should relax the market and lead to lower prices. While price controls might keep the supply affordable to a larger share of the population, that doesn't help the fact that there isn't enough supply, so instead of money, other mechanisms influence who gets to buy the goods. This could be: Who is most willing to invest an unhealthy amount of time and energy, who is eligible to maybe acquire state funding, or simply who is the lucky one. Is any of this better than letting money decide? I tend to think no and think it would be better to have a functioning market with reasonable prices.
- sokoloff 1y ago
  ?? I'm using those six quoted terms to have a meaning the same as what Google returns as the first definition for five and the second for one (which I think is obvious to all readers from context): "functioning market" - A functioning market, in economic terms, is a system where buyers and sellers can freely interact to exchange goods and services, with prices determined by the forces of supply and demand, and where information is readily available. A well-functioning market is characterized by competition, efficient resource allocation, and the absence of significant barriers to entry and exit. "sustainably" - 1. in a way that can be maintained at a certain rate or level. "flooding" - 2. arrive in overwhelming amounts or quantities. I posit that no one was confused and thought I meant "1. the covering or submerging of normally dry land with a large amount of water." "ideally" - 1. preferably; in an ideal world. "quality" - 1. the standard of something as measured against other things of a similar kind; the degree of excellence of something. "scarcity" - 1. the state of being scarce or in short supply; shortage.

intalentive 1y ago

>Housing is not a standalone crisis, but a symptom of a larger dysfunctional economic engine that simply does not work for the majority. Great point. Healthcare, debt, and housing affordability are interlinked issues that stem from one root: a financialized economy that benefits a tiny minority of rent-seekers at the expense of productive activity and the public at large. Three potential outcomes of this trajectory: 1. Permanent extreme inequality enforced by a "post-liberal" surveillance state. 2. A moderating force, an FDR-like reformer, who represses capital for its own good. 3. Political instability and violence a la Luigi Mangione or worse.

inglor_cz 1y ago
Here in Czechia housing costs are absolutely terrible, which is at least partly caused by an insane, Byzantine permitting process under which a basic block of flats in Prague can spend a decade in bureaucratic limbo before the construction can begin. Yet this is not really a problem of financialized economy, the roots are elsewhere: a. lots of NIMBYs, mostly curmudgeonly old people who want to block any change around them and, being in pension, have a lot of time to throw at thwarting anything. My personal experience is that they aren't really looking for money or profit, they just Simply Hate Anything New, Period, b. the ease of weaponizing environmental and planning regulations against any building project, by the means of lawsuits, c. local mayors have de facto (though not de iure) influence on the permitting process and they don't want to lose this tool of power over their constituents. It is an efficient way how to bash your enemies and reward your friends. From what I know about the US, at least a. and b. apply in many places, too.

zozbot234 1y ago

Price controls are a terrible policy. The nice things about rising housing prices is that they can be addressed in a way that also creates a nice tax base for local communities: Raise property taxes on the ground-rent portion of real estate values. For those living in California, this means you need to put an initiative on the ballot to get rid of the infamous Prop 13.

msgodel 1y ago

Normally people deal with this naturally by having fewer children when supplies for basic goods like this are constrained so the population and prices would servo around an equilibrium. High rates of migration upset this equilibrium. In the past it would normally cause wars and genocide because of that. I'm not convinced the current world is any different but a number of other people seem to be.