While I don't disagree, there have to be multiple forces at play here. Take a town like Boise. They have very lenient zoning / building req's. If it was just zoning, their property market wouldn't be so out of whack. In addition to zoning, speculative investing, low interest rates, housing authorities, rent control, the list goes on and on.
IMO, CA prop 13 is just as guilty as restrictive zoning.
We'll never get to see the other side of the experiment, the people of CA would never vote to remove it. Prop 13 interrupts the natural cycle of housing.
I don't disagree that there are other factors at play.
The last part about Prop 13 seems like a bit of a cheap shot. CA is anything but a natural market.
CA government set that poison pill to ensure it must listen to its constituents and remain as "natural" as possible. Now we find they can't enact meaningful reform around zoning, building requirements, parking, or making the city more welcoming to trades, etc.
Why should old taxpayers carry the water for ineffectual govt ?
CA: "We refuse to make the changes needed to let more people in at a reasonable cost. We will instead take more money from one group, so that they leave and we can fleecce someone else ! "
eh - I think short term housing fluctuations are different from long term underbuilding. My understanding was Boise was due to demand shocks that supply hadn't had a chance to respond to.
Is there a dearth of skilled labor for building houses?
As a "youth", I don't have any insight into this as I'm a renter for the foreseeable future, but my parents' and their friends complain about how difficult it is to get anybody to do any sort of construction / home upgrades, e.g. my parents putting in a heat pump.
Given how much the "you're a loser if you don't go to college" narrative has propelled people who may have been happy and skilled at carpentry, plumbing, electrical work, etc, into soulless corporate jobs, this seems like something that the US could take a page out of Germany or Switzerland's book, i.e. much more emphasis on non-uni career tracks starting in high school.
And continuously rising construction costs. Parking minimums are under-discussed here, as the apartment block I used to live in in Los Angeles was probably more underground car park than apartment if you looked at the balance sheet. And yet the parking lot was never more than 20% full.
Restrictive zoning is a consequence of scarcity seeking incentives.
Housing can't be both Affordable and a good Investment. Therefore the only proper value for a home is the price that it costs to build it. The way to do that is a 100% Land Value Tax.
Maybe I dont understand (which I am open too) but it does not seem to make sense unless we transition to a centrally managed economy. Supply and demand drive the price of housing. Whether a house is purchased as an investment or not, it will appreciate based on a variety of factors, including quality of schools, proximity to jobs, etc. If the price of housing did not fluctuate based on demand, and everyone could afford a house anywhere they wanted, who determines who gets the house? House A is on sale and 15 families can afford it. In the current situation, the highest offer takes it. If all offers were forced to be the same, who gets the house? How do you account for bias in the decision process?
I think the way this looks in GP’s proposal is “he who can afford to pay the most rent (taxes) gets the home”, which is a lot like the current system you describe except the rent (taxes) goes toward funding the city and improving such public goods as the schools and roads you mention, instead of rewarding speculators.
Yes, exactly. I go into a bit more in how I envision the plan in a previous post[0]. A much better introduction to the LVT is this book review[1].
People would still bid for the home. You might get one offer for $190k, another offer for $200k. But if enough homes got bid up in the area, taxes would rise and those high bidders would probably lose a small amount.
You know what else will do that? A general sense among the population that certain real estate is a “cant lose” investment and a general shift in desirability from suburbs to urban housing.
> the rapid reversal of white flight to the suburbs among young people in the last 10-15 years
The massive buy-ups in West & Central FL have led to an unprecedented shortage in housing. Rentals get 400 applicants each day and people with money in the bank are facing homelessness. People without have little hope.
Another solution would be encouraging economic development in other areas instead of cramming increasing numbers of people into a small number of geographically constrained cities.
Do you have numbers to back that up? If anything, underbuilding came from a moribund housing market after 2008, as many left the industry and it took way too long to ramp up on talent when housing began to boom again (a lack of people skilled in building houses is still a problem).
But I doubt this is an under building problem at all. Look at Seattle and the area, and there isn’t a shortage of new housing projects at all. They are mostly all luxury, which is the only way builders can make a profit on high land prices, and they sell very quickly regardless.
The U.S. built on average 276,000 fewer homes per year between 2001 and 2020 compared to the period between 1968 and 2000, according to the report which was covered earlier by the Wall Street Journal.
Had building continued at the same pace, there would be 5.5 million more units of housing, the report estimated.
To make up the shortage, the NAR report says the U.S. would have to build 2.1 million homes each year for a decade—more than it built each year during the housing boom of the mid-2000s.
So you compared a 32-year period with a couple of technical recessions and one relatively brief stagflation period averaged over huge growth with an 18-year period dominated by the Great Recession?
Would it be interesting to point out that the US population growth also was much higher in the 1968-2000 period compared to 2001-2020 period on an annual basis?
Why are you comparing a 19 year period to a 32 year period? Ah, I see it is a per year measure.
Well, it isn’t weird that land runs out for new subdivisions. What is left is to build more dense (replace single family housing with apartments or town homes). Still, why is it zoning per se that is the problem rather than just the market? They have the same pricing problems elsewhere in countries with building booms (eg China).
> dense housing is frequently not permitted by zoning. sometimes housing itself isn't permitted.
But where they are permitted, housing prices are still high. Higher even, like NYC and much of New Jersey near NYC. Is there a good example where increased density has led to lower prices, not higher ones?
Most of the area in those places still has significant zoning restrictions on density--the cap is higher than other places, but there's still a cap. That's why there are still brownstones in Brooklyn.
Second, the economics of building dictate that skyscraper-level density will only happen in places where housing is relatively expensive. But there are plenty of examples of density leading to lower prices, in the suburbs.
> But there are plenty of examples of density leading to lower prices, in the suburbs.
Do you have specific examples? The only places I can think of are economically depressed (e.g. in the midwest, or in Florida swampland) and aren't particularly dense.
Maybe Houston? Houston is famous for having almost no zoning, but even Houston seems to be heating up these days.
I found the section "New Evidence on the Effects
of Land-Use Regulation" to be quite interesting in past reads (and discussions) and probably relevant.
You can make a rough comparison by looking at housing starts in Japan[1] vs USA[2] housing starts. Housing cost in Japan has been flat even in major metros like Tokyo. They also build 2-3x as many houses over the long term according to the data cited.
Seattle is a weird example for me (anecdotally). When I lived there in 2017-18 I found the rental market to be great. The city had incentivized building rental units and as a result there were great deals to be had. I was able to negotiate a 15% discount and dictate the length of my lease on Capitol Hill. I don't know what it looks like now, but it was great at the time.
Japan builds a lot of houses because they tear them down after 20 or 30 years. What is Japan's net gain (housing starts - housing ends) per year, not just the number of units started?
> When I lived there in 2017-18 I found the rental market to be great.
The market was weaker in 2017 because of all the new rental capacity that came online. That capacity has long been filled and rents are skyrocketing ATM.
>>We quantify the amount of spatial misallocation of labor across US cities and its aggregate costs. Misallocation arises because high productivity cities like New York and the San Francisco Bay Area have adopted stringent restrictions to new housing supply, effectively limiting the number of workers who have access to such high productivity. Using a spatial equilibrium model and data from 220 metropolitan areas we find that these constraints lowered aggregate US growth by 36 percent from 1964 to 2009.
I’ve got friends in Kansas City whose 100k house is now worth 300k. Friends in Omaha buying new construction for 400k. Housing shortages in Grand Rapids, Michigan where I am from. If you’re immune to all of this, you must be in either a very magical, or very undesirable place. It must not be California, that’s for sure.
Many cheap places have other problems that are reflected in the price of the property (ie. There is a cost to living in a town full of anti-vaxxers/religious nutjobs/etc.)
If you look at California exodus data, its mainly people making less than 100K, population is increasing for people making more than 100K.
Despite this, property prices are still increasing elsewhere. This is a worst of all worlds scenario.
Be very careful over-extrapolating based on known variables. That's my point.
For decades we've have the concentration of populations in a few urban centers because of employment opportunities and other factors. Two years ago, you wouldn't have even thought about that trend ending anytime soon.
Yet here we are with what seems to be the beginning of a structural change to the employment market to remote work for a significant number of potential jobs. We're not there yet of course. But this seems to have already been a boon to medium-sized regional cities (eg Boise).
This was all possible two years ago but it didn't happen. Covid was a big catalyst. No one predicted that.
Likewise, you see young people rejecting the 30 year mortgage, have kids then retire model that was the norm for Baby Boomers. Living remote, tiny homes, van life, etc.
I fully support residential real estate not being used for money laundering, hiding assets from governments and an exchange-traded asset class, to be clear. The focus there should be on the governments who create the rules that allow this to happen and not the players however.
I don't have numbers but I think that remote working is tech-centric and not available for the majority of workers. Also we'll see if it sticks. In any case, I doubt it will have a big impact on home prices.
I think this is a fallacy perpetuated by unrealistic ideals. I bought a house for 175K at 24. I only make 50K a year. I don't have a college degree.
Lot of people saying buying houses is hard, unrealistic, or impractical want to buy mansions with a 10 second commute to their workplace in silicon valley but the reality is most people are not living like that.
Wage workers are still buying houses no problem in what are considered "low income" areas as they have been and interest rates are better than ever.
My ideal is for real housing prices to remain somewhat steady - ie. I don't like that I have to pay much more than inflation to get a house compared to what my parents pay.
It'd be nice to be able to afford a house where I grew up without having to tie a ridiculous amount of my net worth up in this one very pricey illiquid asset, even if I could get the mortgage.
If you can accept technology changes over time (goodbye horse and carriage), and that society changes over time (hello LGBTQI rights), why is it unreasonable to accept the price you pay for goods will change? Naturally, its a given that's not the only change. The materials to build have changed, transporting them has changed, wages have changed. Prices are not going to be the same.
These are policy decisions being made that make it so it is harder to purchase housing near my job or where I grew up, as well as being net detrimental to economic growth (and the growth of wages and output which lowers prices).
This is backwards. If society gets more expensive because we no longer oppress certain groups in the same ways, then it should have been the case that people from these groups were the ones getting cheap housing in the past since they were “buying” a shitty social experience.
But that’s not the case. It was straight white families who got cheap housing while at the same time holding minorities back.
I presented a broad example that society is changing. I did not associate a variation in pricing due to the oppression or lack thereof of certain groups.
We have 1) inflation and 2) population growth. Given the limited amount of resources, land, and labor, why on earth would house prices remain steady?
You'd need at least one of these factors to be reversed, or demand for standalone housing to go down for cultural or economic reasons, before you see long term downward trends.
In general though I agree with the poster above that the affordability "crisis" is really an expectations crisis. Everyone wants to live in a nice neighborhood with great schools that is close to the top employers, but there's simply not enough space, so this results in high competition and therefore prices. For some reason nobody wants to move to the rust belt where houses are nice and cheap. People don't want houses, they want the BEST houses.
Houses don’t go up in value. It’s the land. What makes a piece of land valuable is it proximity to work and leisure. Land in growing cities and towns should go up in value. The only way to make housing price constant is to give people the ability to tear down an old building and built something higher. That’s how cities like Tokyo have more stable housing prices compared to western cities.
Houses have labour and material components. The materials have a labour component too. It's now more expensive to build a house (per square foot) than it was 30 years ago because of wage inflation.
This is one reason why real estate is viewed as a good hedge against inflation.
I don't know where it's being blocked in your view but to use my earlier example of silicon valley, maybe there is a limitation of geographic space, resources in relation to population, and zoning considerations. Maybe silicon valley workers could sponsor the building of a floating land mass to add additional residential space unbound by traditional limitations.
Or we could just not zone as heavily? A recent building near me got blocked because it would add 0.001% (I know it sounds like hyperbole, but I promise I'm being dead serious that was the number) shadow to a nearby park. That is absurd and to pin it on "silicon valley workers" is nativist and dumb.
I know people who live where there is no zoning and went from having nothing but empty land next to their house, to a car mechanic, loud gym, fireworks stand, and many other undesirable businesses (to be living beside) in their backyard. You definitely will want some zoning. I am not familiar with zoning laws in your area and know you are not advocating for no zoning at all, but just food for thought.
Three years ago, I could've bought a house at 60% of current market rate now in my town of 700K. I wasn't in a position to buy that house (under median) then, and I don't want to buy it now given market conditions. The other issue is that the median housing price in my city is now above the FHA limit for this area... so no 10% down mortgages. Again, that wasn't the case 3 years ago.
I also need to replace my lease vehicle next year, so there are two challenging life purchase decisions pending at the moment, and market/global conditions are putting pressure on both.
Well, if Nashville is like Tucson... or any other similarly sized city, those houses are likely not in a great part of town. We have 203 houses and condos under $175k in Tucson right now. I wouldn't live in any of them for their location(s) alone. Suckers from out of state have been buying... and I am sure regret the decision when they have homeless, tweakers and other ne'er-do-well's sleeping in the back yard or stealing anything that isn't bolted down.
Zillow has been buying in my neighborhood, and they overpaid... plain and simple. The offers my neighbors received were too good to be true. I mean, $50k to $150k over the z-estimate. Everyone in Tucson is laughing at Zillow all the way to the bank. Prices are going to crash here and its going to be brutal.
Ahh, you see, I have an ex-wife and a child I share custody with. I'm in the place that I'm in. Others are probably similarly constrained geographically.
I do WFH -- someday, I may head away from my current place, but I'm not that flexible yet.
