Ask yourself, do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same inability to build or is there maybe some other common cause?
In my view this is symptomatic of a more fundamental issue - global asset price inflation driven by a broken financial system (i.e. a system being artificially pumped up with cheap credit). Housing is just where the rubber hits the road and regular lives are directly effected. Just look at the tight correlation between the increase in the money supply and property prices.
For those who insist that the number of properties is inadequate, take a look at the numbers for each of the countries I mentioned in the first chart here: https://www.oecd.org/els/family/HM1-1-Housing-stock-and-cons... (Total number of dwellings per thousand inhabitants, 2022 and 2011).
This is a problem of underutilisation in my view. Too many properties are being used as investments and not as a primary residence.
Cheap credit causes an increase in demand. This is not demand for homes but additional 'artificial' demand for properties as investments. Think short term rentals, second homes, land banked properties, etc. By definition, only investment properties can be underutilised - owner occupied homes are occupied! So in an environment that encourages property investment you will see more underutilisation.
What will cause prices to fall is higher interest rates. This is what has been happening in NZ.
Sort of? See eg https://www.ft.com/content/dca3f034-bfe8-4f21-bcdc-2b274053f... for some graphs that show Europe vs anglophone countries in an obvious way. Obviously there are lots of differences between the countries, eg the specifics of their planning systems and economies. The US is different because of the big diversity of local governments – housing is more affordable lots of people outside of desirable cities, and places like Austin and Houston do build lots of homes and that seems to be a possible reason they haven’t grown like prices in California.
Credit costs have followed similar trends everywhere (obviously there are differences, especially in the US) and yet house prices have not followed similar trends but rather behaved differently in different places. I agree that when interest rates are lower you should expect to see higher prices, but that’s because interest rates change the price that a given income can afford. I don’t think interest rates are good at explaining the changes to affordability over time, or why affordability is different in different places.
Also, in your linked chart, you see something like 20% more dwellings per person in developed EU countries vs English-speaking countries, which doesn’t feel like no difference at all.
The issue in the article of affordability becoming worse across the US recently is probably interest rate related – prices change more slowly than interest rates, 30-year fixed rate mortgages mean rates change more slowly, and the higher rates mean existing mortgage-payers don’t want to move as they’ll lose their low rate, which reduces supply. I don’t know why prices are still up though – if interest rates being high was making housing unaffordable, one would expect prices to be down.
Here in Canada, the desirable places to live all have relatively low vacancy rates for residential housing, and have for quite some time. Ie, it's rare to see cities with vacancy rates for apartments exceeding 3%, let alone a healthy 5%.[0] The CMHC estimates that by 2030 we will need 3.5M additional homes beyond the expected number to be produced.[1] The PBO has come up with similar numbers; roughly speaking, Canada needs to complete a new home every 50 seconds just to maintain current price levels.
There's much gnashing of teeth up here over our housing crisis, and it's clear to me that it's a multi-factor concern[2]. While there simply exists much more demand than the supply can service, the reasons for low supply are many and complicated. There are the obvious zoning and infrastructure issues; we don't build for mid and high density nearly enough, and we rely too heavily on cars. There's the labour supply issue the politicians focus on. But most unnerving, to me, is the suggestion that we simply do not have the capacity to produce or source the raw materials necessary in construction.
0: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=341001...
1: https://www.cmhc-schl.gc.ca/blog/2023/estimating-how-much-ho...
2: https://thoughtleadership.rbc.com/the-great-rebuild-seven-wa...
In my experience, people "intuitively" jump to basically every conclusion besides this one. "Greedy landlords" or "[favorite scapegoat] collusion" are intuitive conclusions which are far more common than supply and demand.
> Ask yourself, do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same inability to build or is there maybe some other common cause?
Yes they do, to varying degrees. The Anglo land use regime is a disaster.
https://www.forbes.com/sites/hyunsoorim/2024/05/20/here-are-...
> Ask yourself, do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same inability to build or is there maybe some other common cause?
This is something I've wondered, and I'm of the opinion there's two reasons that are rarely discussed. One is the great recession/sub-prime crisis, which, at least in the US, caused a collapse in housing construction - I'm not sure how much this is true for other countries. The other is the coming of age of millennials, leading to a "bump" of people in their 20-30s trying to get their first home - I'd expect this to apply to most of the countries listed.
The problem is multi-faceted.
Is there asset price inflation due to cheap money? Yes.
Have foreign nationals been parking their cash in real estate in certain western countries? Yes.
Has restrictive zoning and NIMBY-ism reduced the incoming supply of new homes? Yes.
Multiple things can be true at the same time, all contributing to the current state of affairs.
The problem is that the private housing production system responds to increased credit availability only at the margins and does not over produce. That’s largely because houses are still hand built and not really substitutable like a vehicle. You don’t generally have a choice of two houses on the same site.
However if you produce houses publicly then you can force private housing to compete outside the margins. At which point you get excess supply, as we see with cars and then house prices start to stabilise and even depreciate. At which point the “investment” hoards would start to liquidate.
We need the housing market to behave like the production car market, not the classic car market.
The fix is public policy producing housing in order to force a situation of excess supply.
As per the usual government mouthpieces, it was a roaring success -
"NAMA's overall contribution of €10.5 billion to the State, comprising its projected surplus €4.9 billion and recoupment of the €5.6 billion of state aid it paid to the participating institutions, represents a significant outperformance relative to expectations at inception in late 2009" https://www.rte.ie/news/business/2024/0306/1436280-nama-ibrc...
Sadly it has resulted in arguably the worst housing crisis in the EU. 68 per cent of people aged between 25-29 in Ireland still live at home. This figure is nearly 26 per cent higher than the EU average of 42.1.
This is a quadruple whammy for people who just want somewhere to live. It means people who only have budget for an older home need to be hasty with purchases so they can get ahead of the speculators. It directly reduces the supply of homes by extending the period in which they aren't occupied. It reduces the supply of more affordable housing by quickly converting it all into more expensive housing. And it robs people who might want to fix up their own home of the opportunity to choose their own decor.
It's not actually front running, but it still feels like a similar kind of problem.
The issue here is that demand shifts regionally over time. Dwelling units in Detroit don't satisfy demand in San Francisco. The result is that you continually have to increase supply in the places demand currently is. To keep prices flat, the number of units per thousand inhabitants has to increase over time, because the number of empty units in areas that have fallen out of demand will increase, but the high prices you're trying to avoid will be somewhere else.
> By definition, only investment properties can be underutilised - owner occupied homes are occupied!
This is also not true. You can have e.g. a 3-bedroom home with one occupant, even if the occupant is the owner. You can also certainly have underutilized land -- any single family home in an area where there is demand for more housing but zoning prevents it from being constructed on that piece of land. Because then you have that acre of land providing housing for one family when it could have been two or twenty.
> global asset price inflation driven by a broken financial system (i.e. a system being artificially pumped up with cheap credit).
This can only happen when supply is artificially constrained. If it cost $200,000 to add a housing unit and suddenly everyone can get a bigger loan than before, the instantaneous effect would be for housing prices to increase -- but once they're above the construction cost, construction occurs until they no longer are, i.e. until they fall back below $200,000.
At that point cheap credit might cause people to buy bigger houses, or use the loan money to buy things other than housing, but long-term you can't get the price of the same housing unit to increase above the cost of creating more of them, or supply would just increase until it fell back to that cost.
What you can do is increase the cost of creating supply, e.g. by restricting where it can be done, so that the cost of doing it goes up and with it the price of a given housing unit. Which is what has happened.
One thing that has definitely not helped is hostile building codes that prevent density. In some cities in the US, building height is constrained by the nearest single family home. Then there’s the parking minimums for buildings that allocate more space for parking than for building space for people.
In Austin, TX (USA), you frequently see buildings with massive amounts of multilayered parking but a smaller fraction of the building used for residential or commercial space. Some “clever” developers have tried to disguise the parking structures as part of the building itself to hide this fact from public view.
Problem with America is that we think this is 1950 and we can scale by building more deadass suburbs, expensive regional highways, and further strain our limited pool of resources (water, sewage, electrical infra) to support suburban living without any consequences.
However, the tax is still far too low and it contains various loopholes that allows developers to hold condos empty for years until deep-pocketed buyers show up [2].
Vancouver isn’t unique. Housing is being traded like poker chips everywhere, often but not always by ultra-wealthy foreign nationals with zero regard for the local consequences.
[0] https://vancouver.ca/home-property-development/empty-homes-t...
[1] https://dailyhive.com/vancouver/vancouver-empty-homes-tax-st...
[2] https://vancouversun.com/news/local-news/dan-fumano-some-new...
1. People have mortgages with very low interest rates. If they sell the home, they give up that cheap mortgage for a much higher mortgage interest rate with the next home. So, they stay.
2. The capital gains tax exemption of $500,000 has not risen with inflation. Selling your appreciated home will result in a large tax bill. It makes sense to sit in the home until you die, then it gets a basis boost when transferred to the heirs.
The UK, Ireland, Canada, and New Zealand are at the bottom of % vacant dwellings indicating the opposite of underutilization.
I hear this argument a lot and always wonder if the causal direction is flipped: people use housing as an investment because it’s scarce, not that it’s scarce because it’s used as an investment. If there weren’t so many restrictions on building, the supply would grow to meet the demand and parking your money in property wouldn’t be such a hot idea.
Yes, it is. It’s everything.
It’s inflation.
It’s that none of the countries you mentioned built anything during the covid craze (word selected specifically).
It’s regulation and complexity and permitting and zoning.
It’s AirBNB.
It’s remote work.
It’s manipulated stock markets and poor returns on other investments.
It’s blackrock and VCs and MBAs.
It’s out of country investors.
It’s everything.
So why these reductionist “well, I know it isn’t X” posts are supposed to be insightful, I have no idea.
Who told you it needs to be one thing, or can be disproven as one thing?
The main thing is that the US has been printing dollars for several decades - primarily to deal with or prevent periodic financial crises. Ben Bernacke's "Helicopter Dollars" speech was infamous but nothing has changed but the (increasing) scale (and, yes, all the central banks of the developed world are doing it too).
Effectively, the modern order has come to involve an endless hand-out to those who already have money while "market discipline" prevails against those who don't. Of course, this has long term problems aside from its immorality.
Do they all have zoning, urban planning requirements, and restrictions on what landowners can do with their property? Yes?
This isn't a complicated issue, this is 100% a self inflicted "problem" that can be solved with the stroke of a pen.
Pro-tip: abolish all restrictions on what landowners can build in the property. No licensing requirements, no filings, no nothing.
The sum total requirement for someone to build something anywhere should be them asking themselves "do I have permission from the landowner to do this?" And getting to work.
Secondly, I’ve done a lot of engagement with policy makers and builders and you are not going to get affordable housing being built if you relax zoning laws (which I’m in favor of across the whole city). Instead, what is supposed to happen is that the older properties become less attractive and hence their prices (or rent) are supposed to fall. That’s the theory anyhow. Anyway, the builders all say there is no financial incentive for them to build affordable housing, they make so much more on luxury buildings. You’ll only get it if the local government does it themselves and most in America are reluctant to get involved (it’s why they like saying 15% of a complex should be ‘affordable’ because they don’t have to do anything about it, the builders do, and it’s too small an impact to fix the issue).
The number is irrelevant - people want to live in desirable areas where's there are jobs, and are constrained as such. Rebuilding high density in towns and cities is an issue, as well as maintaining decent services ( hospitals, roads, public transport, post office etc).
You say that houses are being treated as investments, that's why these crises happen; but then why are building materials and tradespeople also at sky-high prices (in Ireland)? Is it all competition on investment building?
Can confirm that as interest rates went up, people just can't afford the enormous loans anymore and prices of houses (and apartments to a lesser extent as they're a bit cheaper overall) fell, up to 20% at the worst, I believe. But as soon as interest rates are expected to go down, prices already shoot up again (even while interests are still high as people and banks estimate how much they may expect to spend in the near future).
Immigration. It's not that immigrants buy up the houses (opposites, we tend to live cramped up in flat shares). It's that they support landlords profits (with cream on top of not knowing your rights) and have overall pressure on market.
Building should at least match immigration/population growth.
Also not building dense enough. Kiwis always tout "I wouldn't wanna live in a house without a backyard" - well I don't wanna rent forever either. Given choice of no housing and shitty housing I choose shitty housing.
You picked culturally-similar countries with common law systems and a history of local zoning.
Working people are perfectly willing to purchase homes they can afford. In fact, it is safe to assume that it is one of their top priorities. If affordable housing isn't being created, something is amiss. See above!
Dubai is expanding like there is no tomorrow, and the price of down town and marina just keeps increasing, regardless of how many new high rise areas the emirate undertakes.
China has hundreds of literally empty cities, yet people are being priced out of living in Beijing.
The question is not about a lack of new buildings, or under utilization of current buildings but simply you cannot built _dense_ enough to follow demand.
Yes, everybody does. The population exploded everywhere, and rent-seekers enriching themselves out of land price increases popped out everywhere. All at about the same time.
Maybe? 2008 happened. At that point, there was a policy choice: allow a deflationary collapse, or prevent it. If we allowed it, there would be a lot of ruined businesses and ruined people. There would have been a lot of people who lost their houses. Instead, we chose to prevent the collapse, and we wound up here, where people can't afford houses. That's almost the same place, except that 1) the numbers are higher, and 2) it happened gradually rather than in a shock. That is, people didn't lose their existing houses, but new families can't buy their first homes.
So is this better or worse? My impression is that, for all the problems, it's still better than a collapse in 2008 would have been. But given the situation in 2008, some damage was inevitable. This amount of damage 16 years later is actually pretty good, considering.
Another one is the hyper-concentration of high paying jobs and other opportunities in a small number of cities.
There's always been a power law distribution for cities and opportunity with larger cities tending to win out, but since roughly 2000 it seems like it's greatly intensified. I've asked this question to many older people and have looked up some stats and both back up the sense that this has gotten significantly worse in the last 2-3 decades.
In the USA if you are not in one of maybe six cities you are second-tier, and it's much harder to find high paying and upwardly mobile jobs. The very top tier cities of SF Bay, NYC, Seattle, and LA are of course fantastically expensive.
Telework helps a bit but generally you still have to do time in one of those cities to establish yourself enough to get good high-paying telework jobs. Telework is often a senior-level thing or something you need a strong network to land.
One thing that's surprised me is that I'd expected this situation to lead to building being relatively cheap compared to buying. But land + labor + materials price increases seem to have left building less competitive in most areas meaning new supply can't actually undercut the market much, if at all. Or seemingly won't. It really feels like there's nothing that can give at the moment, like it's some kind of doom loop.
Also there is a shift from people living in families to living single or just with one person which is more inefficient and requires more space.
I've been looking at getting a house built, and that starts at about €200k*, but the land in Berlin is at least another €200k on top of that (and usually more).
If I was willing to live in the back end of nowhere, I can get the land for almost nothing, halving the total cost.
But then I'd be living in the back end of nowhere, and turning that into an interesting town (let alone city) would need some very expensive infrastructure to be built, just to support that many residents.
Make the infrastructure cheap, and you can build New Towns.
Most of the developed world seems to struggle with infrastructure during my lifetime, be it major roads, railways, sewage, electricity networks, or anything else.
* list price €100k but that's a cheat as it's the outer shell only, no plumbing or interior plastering
Yes! Yes they all do! None of them are producing housing at anywhere near the rate required.
The statistics are skewed because the demand varies a lot between different regions .e.g there are towns in Italy selling houses for $1 (well sort off...) that doesn't mean that housing is affordable in Milan or other major cities. Same Applies to US, Canada, Ireland etc.
1. Asset price inflation generally
2. Population growth (incl. immigration)
3. A lack of building (housing stock is inflexible, e.g.: if we need more two beds, then no number of 1 beds or 4+ beds is sufficient, really).
4. We are changing our ways of living (see 3), that’s partly social norms and partly demographic
5. Working from home changed the market. If the economic hub of your country is priced well above the national average excl. the hub, then WFH will see prices move towards the average incl. the hub, if not higher.
Not only does the pump of money increase housing purchases (it's a short against the currency), but unstable currencies also cause real estate to go up as wealth looks for safety.
An important nitpick: cheap credit intensifies the search for returns. You need to consider why those races end in real estate. In the US, at least, the answer is that the American single family house is the single most privileged asset class in the history of the world. The entire economy assumes that housing prices will grow at a rate that outpaces inflation. You cannot, in that system, be a person who calmly watches to evaluate the correctness of the hypothesis.
No, you shut up and push. Whether you're the President or the Fed or some affordable housing commission, you shut up and push for housing as an appreciating asset.
Half of my city and many other cities around my country were built during the communist 70s and 80s... and then we stopped building and maybe built 5, 6 apartment buildings in the last 30 years.
Then urbanization came, centralization, everyone wants to live in a city.. but we're not building more housing.
We can look around europe.. how many apartment projects were done in the 70s and 80s, and how many are being built now.... we built whole new neighbourhoods back then, and now we have 4 people sharing a two bedroom apartment.
Housing more people in a concentrated area creates more demand for services, which creates more demand for housing which jacks up prices. Packing 1,000 people into an apartment build creates extremely high demand for plumbing, house cleaning etc, services, which jack up housing prices. But if cities were low-density with commerce centers decenteralized across many neighbhorhoods or towns, you don't create location demand hotspots (e.g. cities) that jack up prices.
Property taxes and interest rates are a forcing function to keep unoccupied properties in check, as long as the appreciation doesn't dramatically exceed the risks of being a LL. For Tier 1-3 markets in the USA, you can't cash flow properties as rent is drastically lags property ownership costs.
I've been told that immigration isn't a driver for the housing problems in the USA though, interestingly.
The person with the second vacation home isn't a priority but the fund with hundreds or thousands (or 10s of thousands as is the case in the US) should be a focus.
I think this part is what kills the anti-investment argument. If we hypothetically got rid of all the property investors we’d have only owner-occupied units. So then where do you find a vacant house when you want to move out of your folks’ place? Everyone has to find land, buy it, and build? (I won’t even get into the fact that single family homes aren’t really a sustainable use of land)
As long as there are enough vacant units investors will lower rent enough to fill them to an equilibrium. Nobody makes money on apartment buildings that are 50% empty.
Let’s not forget that low financing rates allows companies like homebuilders to build homes and subdivisions on credit that are intended to be owner-occupied. These developments are never intended to be rentals.
I think it’s a little funky that, especially in the US, nobody really had a problem with apartment buildings being apartments until landlords started owning single family homes. Now everyone has pitchforks over it and want to ban investors from owning homes - which seems kind of insane when you think about how cities with skyscrapers work. It would make condo and apartment buildings impossible. There’s nothing different about a single family home compared to an apartment besides form factor.
The thing that all those countries have in common is low supply in the tradespeople. Those are all countries where you’re better off learning to do a desk job rather than working for a construction company. In addition, a bunch of home builders went bust in 2008 in the United States.
In the case of Canada and the US they also have some horrible bad habits when it comes to city planning. Single family home building causes the growth Ponzi scheme raising the cost of city services per capita and pushes affordable housing crazy far from the city center and strains single occupant car highway infrastructure. You’ve got to own one car per person in the US in Canada in addition to your mortgage. Then load up student loans on top of that.
There are problems which feed into there not being enough building; the biggest one is definitely that property represents a major portion of Americans' investment portfolios, and thus our democratic system is filled with people (and companies) (and their representatives) who are heavily biased toward any decision that will raise property values. But its not that low building causes this; its just NIMBYism. This causes low building; it causes weird municipal rules about density; it causes expensive permitting; etc.
People also say "well, there's not enough land in the place people want to live so of course house prices are insane". Also bullshit. The "place people want to live" changes and expands all the time. Exurbs that were forests 15 years ago are now extremely hot. Why? BECAUSE WE BUILT. That's it. That's all it takes. Build housing. Build parks and sidewalks. Allow cool businesses to open.
Everyone, including and especially local governments, has made this so freakin complicated when its seriously not. Its freakin MBA prediction brain all over again. They're so afraid they don't understand the full problem, or the implications of their decision, that they refuse to act (build) and instead blame the lack of action (building) on intractably large problems like "interest rates" or "blackrock".
Note that Trump's tariffs on Canadian lumber increased the cost of new construction by 20% over a period of a few months (the article mentions the cost of materials, but not the root cause, which was this tariff, and some climate disasters, like when the Texas storms took out 20% of global PVC production for a year or so). Biden has been aggressively increasing tariffs, so they are both directly to blame.
The interest rate spike and high inflation were predicted by pretty much all economists when Trump decided to needlessly keep rates low during his first term, so blaming Biden never made much sense to me
Anyway, lots of studies have been done looking for root causes for homelessness and unaffordable housing. Every theory I've heard (drugs, mental health, nice weather for tent encampments, joblessness, etc, etc) has been shot down by such studies except the idea that if you have fewer houses per capita, then you will have more homeless people and more expensive houses.
Assuming global financial stuff changed radically but we didn't build more houses, where would these people with lots of money in the bank live, exactly? Also, wouldn't that cause the price of housing to increase (increased demand, constrained supply, and inflation from the increased money supply)?
The graph you cite says the US has 0.4 houses per person. That means that, on average, we don't have enough houses for people that are single, couples without a live-in kid, or single parents.
It goes on to say that 7% of US houses are vacant, but that wouldn't make up the gap. Also, many houses in the US are vacant because there are in places where the economy has dried up, and there aren't adequate utilities, schools, groceries, etc. Even if those houses were somehow renovated, many people would still be better off financially if they chose to live on the street instead of in those places.
You need to increase carrying costs. Land value tax is the best way but it's about as far as you can get from what's implemented anywhere
Following this logic it would be a net positive to buy an apartment building, move everyone out, and live in it as a single family home.
Yes, housing prices are determined by supply and demand.
This was found to be true by a California Circuit of Appeals: https://x.com/CSElmendorf/status/1774115015551074434
This is found to be true by Blackstone, who frequently notes that shortages and low increases in new supply are fundamental to their strategy of buying and building housing for rent: https://x.com/RikAdamski/status/1643477536695803904 https://x.com/IDoTheThinking/status/1378737834824060931 "We could also be adversely affects by overbuilding or high vacancy rates of homes in our markets, which could result in an excess supply of homes and reduce occupancy and rental rates."
There are plenty of sources which show a strong correlation between new supply and housing prices: https://x.com/sam_d_1995/status/1762597879154123241 https://x.com/JeremiahDJohns/status/1761205726230216943 https://x.com/ArmandDoma/status/1770961181093859375 https://x.com/jayparsons/status/1761028332781478227 (STRONGEST:) https://x.com/JeremiahDJohns/status/1761205728356802806
There is plenty of unused space in our cities for new housing: https://x.com/ftw_cool/status/1779228107754623084
Texas vs California; Texas builds a lot and has lower housing price growth, California builds little and has high housing price growth: https://x.com/jburnmurdoch/status/1760995124690231526
This effect holds regardless of if the new housing is "affordable", "below-market rate", or "luxury": https://x.com/jayparsons/status/1712110658601255211
That supply and demand applies to housing has been reported repeatedly in the news: https://x.com/AlecStapp/status/1757939504126832802
Lots of new apartments have been built lately. The effect on rent growth is obvious: https://x.com/mnolangray/status/1755818637750161540
Landlords themselves acknowledge the difficulty of finding tenants and getting high rents when there is a glut of housing inventory: https://x.com/sam_d_1995/status/1752346758254887132
Surprisingly, supply and demand also affect housing prices in the Midwest: https://x.com/StatisticUrban/status/1752008654734147718
Real estate investors and landlords acknowledging that new construction lowers rents and increases vacancies in their properties: https://x.com/SmackTrout/status/1652396524389961731
In the UK, we have an issue with immigration that nobody wants to speak about. The birth rate in the UK is 1.49 in 2022 [1], meaning that housing demand should be going down. We build houses to last, and yet there is a massive shortage - why? In 2023 the ONS reported we had a net migration of 685k people [2], where 9% of the population do not have a British nationality at all.
The demand for housing in the UK (and related infrastructure) can be entirely explained by net migration. The reason the housing market is bubbling is because the demand is so insanely high. We need to build 340k houses a year to keep up with demand [3].
The fundamental issue in the UK is that we borrowed too much from the future, in terms of loans, but also pensions. They think that increasing the population dramatically will solve the problem, but it's actually destroying the UK. We are building on farmland, the infrastructure (water, gas, electric, roads, schools, etc, etc) is failing under the weight of the new housing. The interest on the debt owed [5] I believe is projected to exceed spending on the NHS (national healthcare system) by 2035.
The question we need to ask is whether large net migration is worth it, or whether we should largely reduce it. It seems clear to me that the UK is currently trying to grow too fast. It'll be a bitter pill to swallow, but at some point you need to deal with the spiralling situation.
> This is a problem of underutilisation in my view. Too many properties are being used as investments and not as a primary residence.
In NZ and many other Countries they put bans on foreign buyers exactly to stop this investment [4]. I know many, many professionals living in NZ that cannot afford to buy a home. They are all stuck renting, despite all earning in the top 25%.
[1] https://www.theguardian.com/uk-news/2024/feb/23/birthrate-in...
[2] https://commonslibrary.parliament.uk/research-briefings/sn06...
[3] https://commonslibrary.parliament.uk/research-briefings/cbp-...
[4] https://www.pittandmoore.co.nz/publications/foreign-buyer-ba...
Prior to covid, the global economy was booming. US and UK had low unemployment rates. the US especially was remarkably doing well, with lowest unemployment rate for minority communities.
There is a price to pay for completely disregarding long-term economic costs of reckless responses to a what was a moderately severe flu epidemic. We went nuts and shut ourselves down. And on top of that, we helicopter dropped 4-6 trillion dollars of freshly printed cash.
And the reckless governance continues in the name of flaming conflicts in Europe and ME. A lot of what happened in the recent years is attributable to just atrocious governance.
I don't know about the others, but we're building about 50% of what we need for Australia's population growth. Neo-liberalism has resulted in decades of de-funding of public education, which trains tradespeople, and now we have a shortage of tradespeople. And we're getting another tax cut in a few weeks so I guess that problem, plus all the others with same cause, is just going to get worse.
But yeah, the root of the problem is because governments are subsidizing housing/costs, and the problem with subsidies, is that the money for them has to come from somewhere, meaning they come with a burden (ie cost) placed elsewhere.
In the US this is primarily done via the government backing mortgage debt. It creates a vicious circle where homeowners raise their prices, the Fed ensures the funds for the mortgages, and the buyer is on the hook for paying it.
This is also why college prices are high. The government offers student loans to help people afford college, but colleges see this and raise their prices to capture that additional funding, and the student ends up on the hook for paying the price. Rinse and repeat...
I've believed for a long time that heavily taxing income from second+ properties, similar to capital gains, would help reduce rent-seeker hoarding, to help free up and reduce the cost of properties for primary-residence owners.
The reason "not building" is not the issue, is because even brand new homes are being scooped up in investments.
Raise property taxes for all non-occupied, airbnbs, and fuck even rentals, and while it might cause rentals to temporarily go up, housing prices will drop like a brick. Make it unreasonable to rent out a home. Heck make it unreasonable to own a second home unless you're Bill Gates.
A few high profile jury nullifications would probably be sufficient, but we gotta be the rational economic agents that the theories think we are and work together on this.
The entire framing of the issue as a false NIMBY/YIMBY dichotomy is a distraction from the reality that there is not and has never been a supply issue. The only issue is artificial demand from speculators who choose to withhold and deny a basic human right in the hope that it might magically raise in value for no reason instead of depreciate like every other asset.
To counter this may be impossible; there are limits to how small you can build a SFH, and there is only so much land commuting distance from job centers.
Condos and apartments are generally a very bad investment, have huge disadvantages of high fees and lack of green space, so are a poor substitute. It’s sometimes better than renting, but it can swing wildly based on build quality of building, the maintenance, and competence of the board — very hard to evaluate or hedge against versus a SFH where you have autonomy. And in the US we rarely build family focused condos — so few have playrooms or playgrounds or 3 bed room units (outside NYC)
Spot on. You're not alone. For a more thorough and clinical review of how we're f'ed and why see Lyn Alden's "Broken Money".
To your point, ppl are fond to talk about the economy. That's a distraction. It's a false god. Fact: the economic system and the sociopolitical system both side on a foundation. That foundation is the financial system. Full stop.
Not everything is a purely financial decision. A home is primarily a place to live, not an investment opportunity.
This kind of reductionism where everything boils down to financials is exactly how we ended up in this mess to start with. Maybe we shouldn't have structured everything around that because ... people just want a house to live in.
Could I make more in an index fund? Sure, probably. But I can’t make a rental into what I want it to be, you are often not even allowed to paint the walls.
I can’t plant a garden in an index fund.
Even if ownership doesn't make sense from a financial standpoint it's still somewhat essential for parents of school age children. Renters can be forced to move on short notice if the landlord declines to renew the lease, like if they're planning to sell or redevelop the property. This instability has a cost that goes beyond financial concerns.
The problem now is that property buying at scale for the long term is a model private funds are trying, interest rates are going up, and housing supply at the lower end of the scale is constricted because there's no profit building those houses. All of which means people who want to buy a house rather than pay a landlord are basically screwed.
So, in 10/yr I'm still paying $2000/mo while rents have moved to $3200/mo
Okay on top of all that, a down payment is 20% of the cost of a house. Buying the house is perhaps a little more like a leveraged loan. If the stock market and real-estate were to both inflate by the same amount, your investment in a house gets you 5x the return that your down payment investment makes. In the mean time, all the money you pay in rent goes down the drain, whereas all the money you pay into the house above the down payment comes back to you when you sell the house. From my point of view, a house seems like a far better investment, when you factor in the rent you lose. And historically home ownership has been the single most important wealth-building tool for the average US citizen.
It is legitimately concerning that the median house price is so high, and the trend is continuing upwards. Some of the fuss is concern over the future potential of a crashing economy, and yes that certainly will give us bigger things to worry about.
If this was the case, then there would be more and more renters, and less and less tenants, so rent would increase, and make homeowning a better financial decision. There's a stable equilibrium there, even taking into account the various taxes involved.
In one case you can sell your property and get your money back, so you can decide to do whatever you want with it (like index fund if you so chose). And in the other it's your landlord who's either paying their mortgage with your money, or placing it in said index fund...
Of course reality is nuanced - a friend of mine for example is building out essentially his own apartment in his garage and having his sister pay rent for his house.
I'm still not sure how best to add a "compare buying to renting" feature for the calculator, so any ideas are most welcome!
1. There are a ridiculous amount of abandoned properties, when I walk the streets of major cities, sometimes more than half of the buildings even in expensive areas are boarded-up.
2. Meanwhile I am afraid of being homeless soon, I lost my job recently, and the unemployment benefit I can receive is literally half of my rent. Thing is, there is no "worse but cheaper" place to move to. I already live in a "0" apartment, with the "0" referring to the number of rooms. The apartment is literally just an empty square with kitchen sink and bathroom stuff. I don't even have my workstation anymore because literally there is no physical place for it inside the apartment.
People are like: "Build more homes". Yet the amount of abandoned properties (by the way, this also include abandoned farmland! Government is upset that there are tons of that, and the result is land with zero management, with wildfires, poachers, drug traffickers...) is greater than the number of families needing.
- join a group of squatters (hopefully you already know someone) until you get your bearings. The less ideological ones often squat old industrial properties, or long-abandoned houses (its rough in winter, but in Portugal you should be fine). You might meet some Urbex guys, they're nice and always fine with finding squatters.
- Live in a "big enough" car. You absolutely need to rest on a completely flat surface. I knew someone who got the back seats down and put a wooden plank on it. If you're less than 1.80 and don't move on your sleep, you have a lot of choice (the diagonal is nice), else it might be a bit more expensive.
A very short-term solution is squatting with a close friend, but you shouldn't abuse it too much, it strains relationships.
Of those single family homes there is one that was owner-occupied for a year when we moved in. Since, it's been locked up and has had no renters. The couple that own it own several properties across my city, which I came to know as I got to know one of the owners while they lived here. It perplexes me, and the rest of our neighborhood, how someone can float a mortgage, much less an investment mortgage, without a renter. My owner-occupied mortgage costs me somewhere around $2600/m, I can't fathom paying two with one at a higher interest rate. Apparently this situation is common around my city.
On the other hand, and a bit non-sequitur, is two homes will likely become dense housing. They're foreclosures of properties that were inhabited by meth addicts. The whole property from the building to the soil will need to be removed for various reasons. At auction the properties were purchased for the average sale price of a home of that size that had no pre-existing issues. It won't be the kind of housing people need though, if I'm a betting man; my city has plenty of SROs (single room occupancy) but they're at the wrong price point. They're now called "lofts" and "studios" with a price tag to match. What will be lost is two 50+ year old homes, and likely the ability of our street to tolerate the traffic it was designed for as another issue is the city not investing in road-building and maintenance on our street.
I also see a lot of empty properties for years on end in the middle of town.
If there are places owned that aren't in use then the political solution seems pretty easy: tax property ownership massively when unused. Make unannounced visits to properties to see if the owners claim of having a property that's lived in is true.
Portugal has started offering financial incentives for restoring properties, but I'm surprised this is a factor in Major cities, which ones do you see this? Is it also an issue in Lisbon?
Affordable though? Apparently not. I mean if you have a lot for development are you going to build a $200K home or a $600K one on that lot?
We need laws against corporate ownership of residential housing, simple as.
Why not apply the following: - every house not used for primary living place is highly taxed (removing all speculative ownership) - charge foreign investors heavily (australia will do this soon) - tax reduction for renting places for lower than median per square meter price - incentivising affordable homes
Just trying to understand why this wouldn’t work?
Other places, with surprisingly little success, can do and actually do it, but it magically doesn't solve underlying issues, so results don't move needle as much as expected.
And yet, supply is so constrained that house prices continue to rise. Either cities need to stop growing, or build a lot more housing.
I always rented within walking/biking distance to my work. Try that with a house.
But let's just call them what they are: Trailer parks. I just don't see how trailer parks are going to solve the problem. You may have cheap land but if you put 500 trailers on a plot you're still going to need sewage hookup, power and water for 500 homes.
https://en.wikipedia.org/wiki/Missing_middle_housing
Efficient and healthy land use for housing was solved in the 1900s - we don't need tiny homes.
Agreed land is totally unique and should be handled very differently from other forms of wealth.
I think this probably has decreased house prices to some extent, but people are really insanely reluctant to sell a house for less than they bought it for so lots will wait for years before accepting the change.
It's probably good times to be buying an ex-rental to live in and getting better as mortgage rates fall.
The exact impact is a little hard to work out, because, at least in Paris, it's also coincided with apartment owners wanting to hold on to empty apartments to rent them for the Olympics rather than to locals.
0: https://www.connexionfrance.com/practical/timetable-for-new-....
Something about the tax position of letting mortgaged property.
In the UK, if a private landlord receives £1000 in rent, and pays £800 in mortgage interest, they pay tax on the whole £1000, not just on the money they made.
There are reasonable arguments on both sides:
A) Why should a landlord be able to deduct mortgage interest from their income, for tax purposes, when owner-occupiers cannot?
B) Why should a landlord be unable to deduct business expenses from revenue before calculating taxable profit, when all other businesses can?
Nothing about that has changed recently.
The recent reforms did swap out some landlords for homeowners. It didnt undo the war on affordable housing it just prevented landlords from profiting as much from it.
Which is a good thing, even if some media outlets owned by landlords do like to pretend that euthanizing the buy to let landlord is bad renters.
If a mortgage is recourse, and your home price has fallen enough - yeah, you have a pretty big reason not to sell.
Especially if your alternative is to pay more monthly for a worse rental (often the case).
I see it in my parents that they're pretty comfortable staying in the family house as long as possible, I'm happy with this. It is made a lot easier by the fact that prices keep going up so staying in a house that is oversized financially is rewarding.
I'd like to think it'll all come to and end one day as the spiral reverses, but I've been wrong for so long now I'm losing faith.
There is a saying: „The market can stay irrational longer than you can stay solvent.“
Here in Munich, they indeed are... and wherever possible, they and their often beautiful gardens get torn down, and the entire plot gets "densified" by creating as much indoor space as possible. What was one house for one family is now at least 6-8 apartments for DINKs, often built in shoddy quality with corners cut everywhere but priced and sold at record amounts (that still get paid because all the tech and car bros massively distort the wage market).
On one side, it's positive because the lack of housing is absurd.
On the other side, none of the surrounding infrastructure was built with that density in mind. Parking overflows everywhere because you physically (slope angle vs lot size) can't create enough garage spaces, traffic itself is getting more and more dangerous as the small streets have been built as tiny veins but now have to carry 2-3x the traffic load, public transport can't handle it as well, doctors/kindergartens/schools are on the verge of collapse, the grid operator doesn't allow PV or EV installation because all the density increase would first require a complete overhaul of the last mile distribution grid. And on top of that, biodiversity has taken a visible hit as all the trees and bushes getting ripped out and replaced by steel eyesores and yards being replaced by gravel so that the hipsters don't have to bother with mowing a lawn don't support insect life, so the birds vanish as well. No free-roaming cats any more either thanks to traffic.
Seriously, screw urbanization and gentrification. We absolutely need to revitalize rural areas again.
Either intentional or unintentional, this has the effect of increasing demand and with interest rates high supply is constrained.
For specific USA numbers:
There are 18.7 million 65-69 year olds.
There are 21.1 million 60-64 year olds.
There are 22.3 million 55-59 year olds.
Etc... You can't have one demographic retire/die off and everything is cheap again -- because there is always another demographic moving right into their place all the time.
Stop allowing people to buy multiple homes. Stop allowing landlords to "collaborate" on prices.
If you told me 10 years ago how much I paid for it, I'd ask what the name of my butler is.
Sounds nice, but land/home values in the area I'd like to move to has nearly tripled in the same timespan.
I feel bad for renters priced out of the market, but many of us who have "enjoyed" the upside are actually deeply underwater relative to our preferences, to say nothing of the doubling of insurance premiums, and ~25% property tax hikes in the last five years.
Page 7 for AVG sale price: 2019: $485,128 2022: $644,750 AVG build cost: 2019: $296,792 2022: $392,241
My only thought is that it's political, and some voters don't want their houses to lose value.
They may well have a point, that government should only do things that only government can do, and that by declining to be involved they're leaving space for private businesses to operate.
But yea that's how we got here.
At this point any attempt for a government to be more intentional and interventionist would result in severe push back from the right.
Some governments are trying. In British Columbia, the government has changed laws to allow the arms length public transit agency to be able to buy and develop land around its transit stations.
This system of building houses was completely scrapped by neoliberals, letting the "market" take control of supply with the government taking a background stance of mostly zoning out where they'd incentivise building new dwellings.
I can see in a not-so-distant future talks about this kind of program being reignited in politics, the neoliberal approach has absolutely failed us.
Otherwise it doesn't make sense that prices are high for a good (housing) whose primary input (land) is in great supply.
You got one part of it right: building more solves the housing crisis. But if you built outside cities, you're asking new homeowners (read: young people who contribute the most to economic growth) to live increasingly far away from where the economic growth happens.
If you have a high tolerance for crime and other antisocial behavior there is plenty of extremely affordable housing in major US cities with plenty of amenities like walkability and public transportation.
Second is construction cost. A round number for the US is about 150 USD per square foot. So a 2,000 sq. foot house should be in the neighborhood of $300,000. (That does not include land, just the structure). However, in desirable cities this number is higher because labor costs are higher. In sparsely populated cities, that number is (of course) lower. This varies country to country, and in some space constrained cities, vertical is the only direction that you can build. (As one poster noted below, the $150/sq foot is only for single family. Multi-story buildings are significantly more expensive.)
But probably the biggest problem are artificial barriers to construction. The zoning system in the US, for example, prevents the construction of higher density in some areas. For example, a neighborhood can be zoned at 1 per acre. It's illegal to build a duplex, apartment, or to divide the acre into four and build four houses, etc. The zoning is set by a local board elected by homeowners in that locality. Being near high-density housing often lowers the value of existing homes, including making traffic worse and stressing the school system. (Also, to be fair, a sudden, large influx of new people, before the tax base and services catch up, can stress EMS, hospitals, fire, police, public transportation, sewage, water, electrical grid, etc. as well as just schools and roads).
Finally, there are builders, who would rather sell one large unit instead of lots of cheaper units. Building and selling a 1,000,000 USD home is cheaper and easier to manage than 5 200,000 USD homes. If you can only build one house per acre, or the space is constrained by geography, it doesn't make economic sense to build a 200,000 USD house. Even if space isn't constrained, the incentive is to build luxury, high end units as long as you can sell all your inventory.
It's absolutely weird to see land go for $1m for a small lot, then 10 minutes drive there are cows grazing on huge acreage. Then if you do a 10 minute flight in any direction you can see thousands of hectares of empty, good, liveable land.
(This is in Australia)
Housing prices are unaffordable in big cities, while abandoned properties are rotting in the countryside everywhere. It's time we start spreading the economy rather than concentrating the people.
we artificially subsidized sprawl for generations. leading to a periphery of, as you say, rotting/abandoned countryside homes, because the economic activity generated by people living that spread out does not cover the cost of modern standard of living infrastructure over that distance.
https://www.youtube.com/watch?v=gG1T03NuZKM
cities are expensive because they do have the economic network effects of people in proximity, they are simply where the money is, combined with restrictions on building new units.
continuing to pour good money after bad down the sprawl money pit will only make things worse. the only way out is up.
And politicians love every dollar of price increase.
There’s the homeowners and the renters/serfs and nothing in between.
Dead society, nothing to aim for or live for.
Regular people own the overwhelming majority of homes, and they love every dollar of increase.
The finger pointing at corporations or politicians is totally misguided. It's the locals who collectively are invested in their homes and collectively (through the votes they cast) create the disastrous situation we are in.
Even the most bleeding heart liberal is all about "protecting the character of our neighborhood". Just look at San Francisco.
It is probably exceptionally challenging to manage the economic fallout from such a correction, but I believe it has to happen. I would also support draconian measures which would forcibly and retroactively destroy accrued home value to ensure we haven't extracted wealth from the younger generations. I realize this is unprecedented and probably unconstitutional, but that's my emotional response to the problem. It is plain as day: Boomers extracted the wealth out of the country and now they're extracting the wealth out of their kids. It has to be stopped.
It has been extremely effective. Of course you can never determine the actual effect of a policy like this in such a noisy environment, but everyone agrees it has contributed towards increased supply and falling prices, especially in Auckland. In the city I live in townhouses were almost unheard of, and now they're popping up everywhere.
But it's the right idea -- move it up the chain so that it's not a hyper-local issue. IOW, at the state level rather than city/county. This has seen some success in California: https://cayimby.org/legislation/
It’s supply and demand, with other things being small factors. We either need to vastly increase supply across the entire country somehow, or cut down on demand. The latter is a hell of a lot easier than the former. For some reason it’s ok to talk about this in the context of Canada and how their mass immigration has increased home prices, but that applies to almost everywhere. Japan literally has homes they’re trying to give away.
Without demonstrating success at the much more achievable State level, there is no way it will work at the Federal level, even ignoring the obvious Constitutional issue.
- built 254000 homes[0]
- had 745,000 people immigrate (net)[1]
- had 600000 people turn 21[2]
- had 577160 people die[3]
If you gain a load of people, far more than you increased dwellings for, prices will go up and dwelling size will go down. It's not particularly complicated.
[0] https://www.savills.co.uk/research_articles/229130/357082-0
[1] https://www.bbc.co.uk/news/uk-politics-67612106
[2] https://www.ons.gov.uk/peoplepopulationandcommunity/birthsde...
[3] https://www.ons.gov.uk/peoplepopulationandcommunity/birthsde...
My point elsewhere in this thread is a that demand is not entirely a function of demand for homes (what I would call 'natural' demand). Finance and tax incentives play a large part too - encouraging demand for investment properties that are often not used as homes (what I would call 'artificial' demand).
This is not to say that addressing supply through more building is not helpful, just that there are other things to consider that may not require as much effort and can have broader economic benefits (e.g. changes to the tax system to encourage productive rather than unproductive investment, credit guidance, etc).
There were an estimated 28.1 million households in the UK in 2021, an increase of 6.3% over the previous 10 years. [0]
and:
The UK population at mid-year 2021 was estimated to be 67.0 million, an increase of 3.7 million (5.9%) on the population in mid-2011.[1]
So the number of UK households increased by slightly more than the population between 2011 and 2021.
[0] https://www.ons.gov.uk/peoplepopulationandcommunity/birthsde...
[1]https://www.ons.gov.uk/peoplepopulationandcommunity/populati...
I grew up in a 20 square meter per person apartment (with multiple person living there, for a total size of 60 square meters) - and it was definitely not pleasant. But I feel that nowadays people also expect a lot - for example in The Netherlands the reported average of 65 square meter per person https://longreads.cbs.nl/trends19-eng/economy/figures/constr....
Not discussing what it should be ideal, but if (some) people now want 2x or 3x what they wanted 40 years ago for example (without actually needing it due to a larger family), it's no wonder that there are issues (with prices/availability etc.).
I think part of the problem is there aren't 3rd places nearby in the suburbs, because that is the point, so people want more room to have to accommodate their needs.
I was born in, grew up in and currently live in a location that the HN community never even thinks about. Most people in here have no idea of how the regular 99% live and then base their whole world view on expensive capital cities and hold the strangest views of housing.
I bought my current house in the 2010s, my mortgage is still half the price of renting and I could manage to pay for everything by myself even if I were on a minimum wage. The problem isn't anything to do with housing it's to do with your own warped view on the world.
I don't say this to be contrarian or to necessarily make a point. I want you to look up the minimum wage of your country and think about how literally everyone else happily lives without thinking twice about these things. You all live a massively privileged life yet these things concern you more than they should.
Also, remote countryside is cheap in most countries, but unless you can do 100% remote, they are very few jobs there.
You just said that where you live, if you were on minimum wage, you could "manage to" pay for half the price of renting. Think hard about what you just said here. You are saying that someone on minimum wage can't nearly afford to rent. But their problem is their own warped view of the world. The warped view that someone working full time should not be forced into homelessness? How warped!
https://www.semafor.com/article/05/23/2024/is-congress-havin...
There is no solution that doesn't involve building lots more houses.
The reason Home Ownership is desirable is that the pricing of houses go up faster then both inflation and depreciation caused by wear decreases the utility value of a dwelling, and the reason that houses are expensive is that the state actors are invested enough in this cycle to make sure it never really breaks.
In a real functional market there would be no real benefit to house ownership over long term leases. but were dealing with a market thats been deliberately broken by policies promoting home ownership for reasons that's fundamentally religious/dogmatic in nature.
More precisely, there would be no net financial benefit to home ownership over long term leases, so people would use the free market as a tool to naturally sort themselves according to their non-financial preferences: people who valued the non-financial benefits of home ownership over the non-financial benefits of renting would own homes, those whose preferences were the reverse would rent. That would not mean nobody would own the homes they live in.
No.
No.
The reason it's desirable it that I've lived in three flats in three years because subsequent landlords wanted to sell their property. I don't want to buy because it's a good investment, I want to buy so I can actually settle down in an area, and not be constantly moving.
Fixing senior living options will create inventory in the market and give seniors better choices with an active community.
Oftentimes those same Boomers in business own retirement/senior living/nursing homes. And while generalizing, the fuck you, got mine attitude means that nursing staff get paid a pittance, and oftentimes they're abusing the 911 system (multiple homes around here have a "policy" to call 911 for anything worse than requiring a bandaid - they won't let their nursing staff evaluate or treat patients for ... reasons ... - so we (paramedics) get called multiple times a day for little more than first aid, if that. Meanwhile, out front of the nursing home is a big billboard, "Round the clock nursing care!" and they're sending bills to the residents/families that reflect that, while you have CNAs and an LPN or two barely meeting staffing mandates, if they even are, who are unable to do anything).
But taking a more long-term view, in the US the owner-occupied housing rate about 65%, which has not changed a ton in the last 50-60 years (high was 69% in 2005 and low was 63% in 1965). Granted the market has changed a lot, we have much bigger houses, and more two-income families to pay for those more expensive houses.
https://www.advisorperspectives.com/dshort/updates/2024/04/3....
Given that this number doesn't take preferences into account, I think it's pretty reasonable that almost everyone (>80%) making at least the average (median) salary owns their home.
- Increasing density in older cities requires infrastructure upgrades that are much more complex and expensive to retrofit than it was to plan and build the first time when space was abundant.
- Multi-story buildings are more expensive per floor space area than single-story buildings. As cities become denser, the added expense of multi-story buildings is realised.
- Home standards have dramatically increased. We've forgotten how common it used to be for houses to leak during storms, or how hot or cold houses used to be without any insulation or HVAC systems. We've forgotten flash floods caused by inadequate stormwater systems. Where children used to grow up in bunk beds in tiny shared bedrooms, they now are expected to have their own adult-sized room. Where a small kitchen used to suffice, people now expect a huge show kitchen and butlers pantry that is double the size of old smaller kitchens. Or in a country such as China, millions of people have forgotten what living in a cave house was like for their grandparents.
- Complexity of expected amenities and public services have dramatically increased, resulting in people wanting to live inside large cities rather than spread out across small towns. People want to live within an hour of travel to a MRI machine and healthcare specialists. Or instead of shopping at one food store or dining out in one of two restaurants in a small town, people want to be within a few minutes of 20 choices of cuisine in a large city.
- Materials are more expensive because it has been realised that clear-felling old growth forest is not sustainable, nor is digging up the easiest to extract resources, and we're just starting to realise how expensive sustainable resource extraction actually is. As a result of increased quality of housing and infrastructure, materials are enormously more complex and varied.
- Safety standards for construction labour are significantly improved, even if just by worker and public expectation. It's no longer acceptable for labourers to be working in dusty environments or working at heights without scaffolding and harnesses having been planned and setup first.
- Increasingly affluent populations are aging and naturally reducing in size. In such a demographic shift, workers can prefer safer and easier jobs that don't risk life-long back and joint injuries and all the other types of health risks common to the construction industry.
>Multi-story buildings are more expensive per floor space area than single-story buildings. As cities become denser, the added expense of multi-story buildings is realised.
A lot of that is parking. Parking minimum laws basically hollow out intermediate-density development. In order to meet parking requirements, the only legal and economically viable types of buildings are low-density with cheap surface parking, or high-density with expensive underground parking.
I saw a recent "podcast" on Portugal reality from a business side perspective about this, the calculations are simple (numbers inaccurate but up to scale) - Around 2005, you could build "up-to-code" houses for around 1000€/m2 - Now, you build "up-to-code" houses for around 2500€/m2
The purchasing power has not increased 2.5X so housing now it's less affordable.
His overall comment is that now we have "Nordic" (richer) construction standards but we still earn Portuguese (poorer) standards.
I don't think the solution is as simple as just "cutting rates". Low rates lead to incredibly fierce bidding wars that can drive up the price by tens of thousands of dollars. An acquaintance of mine and his wife bid $50,000 over the asking price on a house in the Boston area a few years ago. They were outbid by an additional $60,000 (total of $110,000 over the asking price). Another acquaintance narrowly defeated 30+ other bidders (!) to get his house.
My wife and I bought a house last year during a time when rates were _highest_. Ironically, I believe this was actually a fairly great time to buy. Competition from other buyers was low, and sellers were more willing to negotiate because they didn't know if they would be able to sell anytime soon. And yes, we now have a higher interest rate, but that can be refinanced down the road.
It's a complex situation. I do hope for lower interest rates, but I don't think that alone is going to solve the issue.
I hear people who are already in the top 1-2% in income are told their borrowing power is only A$1M (~U$660K) while houses at all worth raising a family in cost A$3-6M. Banks don't seem to want to lend to them because they could instead lend to yet another property investor that already has a portfolio full of equity and collateral. The houses will sell and the mortgages will close, the banks can afford to be picky.
If you work in tech non-remotely, you're looking at the high end of that because you're competing with everyone else working tech, heavily weighted towards Sydney, and the rest of the country's housing supply is largely irrelevant. The cities certainly aren't designed for car commuting, so the supply of locations is further narrowed to places that are either so close they're walkable or have good public transport.
To my US readers I cannot emphasize enough how much this limits people's options both ways. When you have a non-remote job it limits your housing options, and if you're lucky enough to lock in a house, now it's limited your employment options in return. This isn't great for housing or employment markets. I'd like to think remote work has helped some people, but the most career-focused people I know are sticking to in-person connections, competing with everyone else doing the same.
Meanwhile cashed-up investors can buy up several houses and neither live in them nor rent them out. They're taking supply away from both the buying and renting markets, which is their legal right and a smart move on their part, but totally dysfunctional for the market as a whole. Anyone who does buy a house to rent it out is doing their small part to make buying less affordable but make renting more affordable, making it just that little bit less likely that the next person out there is a buyer of any kind.
Of course there's been doomsaying about a housing bubble pop for decades, especially during the world-famous pandemic lockdowns. Nothing popped and the exponential runaway pricing continues. Surely it's getting untenable enough to pop somehow, if my successful friends can't buy houses then I don't know who's left in the market except the real estate investors themselves.
I honestly don't see how I can un-expat now, and I'm just counting myself lucky to own property in the USA. If I want to keep this sweet deal, my options for moving are more limited than they've ever been, but it looks like a lot of people would gladly sacrifice flexibility to have anywhere near a tenable deal on housing.
Our biggest software employers are banks and real estate companies. Everyone I've worked with in my career has worked for REA or a bank at some point. There's no innovation, just property investing.
As long as every newspaper in the country keeps running stories about some dipshit 20 year old magically buying 6 houses with a paper route, it's impossible for it to ever change.
It's a complete mystery why inflation has run amuck.
The CPI inflation rate is 3.4%, and it's been under 4% for a year.
House price inflation is at almost 6%, and it's been above 4% for more than 10 years. The lowest house price inflation rate during Trump's presidency was 4.4%. Excluding the financial crisis, you have to go back to the mid-90s to find house price inflation under 3%. Pandemic-era fiscal policy and college loan debt cancellation is not helpful as an explanation for the explosion of house prices.
Young families also get discounts if they are poor, and have a much higher earning potential.
I'd personally bet that there is a gentle imbalance appearing between how much energy the average person can lay claim to vs. how much they need to build and service a house and this is a symptom of the energy squeeze. But it might not be and this article isn't doing much to prove or disprove what the actual problems are because we need more information to make useful observations.
But there is investor demand for an investment vehicle that has the tax and asset benefits that homes offer.
The consequence is that the buying power in the market by humans-who-need-a-place-to-live is relatively weak when they compete against financial investment corporate entities.
The problem with most comments in this post is they don't say how they'll get people to build. It requires incentives.
Has anywhere tried LVT?
all housing posts have the following discussions 1. housing shouldn't be an investment
2. 'local democracy' always turns into nimby
3. something about gentrification
4. something about govt incentives/disincentives: don't give tax breaks for homeowners, tax second home ownership ect .
5. something about airbnb
6. some comparisons with europe/denmark
pls let me know if i need to add anything to list
1.hyperconsolidation in lenders
2. Real estate orgs have worked together to eliminate downward price pressures.
3. NIMBYs and generally “home ownership associations “ have created so many barriers to building & reaped the profits in their own home values.
Some good news is that most populations are slowing or declining on the globe, and that ought to be a substantial risk to mass ownership, but that will take 20years to manifest.
What is he getting out of making these videos other than playing the populist game? Has he actually been verified to ever have been "Citi's top trader"?
I’ve noticed roommates are not a thing for many people anymore, particularly among younger folk. Is this a post-Covid thing?
- Properties in world-class cities are in demand globally
- NIMBYism means it's hard to build new housing or increase density
- Resource costs and wages are high in world-class cities
The first one is a demand-side driver, the last two are supply-side drivers. There aren't any palatable solutions to reduce the impact of these drivers, at least not ones that do not negatively impact other sectors of the economy.
My mortgage (not UK) are just fixed in various parts on various semi-short terms (3 months, 1year, 3 years etc). The shortest ones are basically the current interbank rate plus 1%. The 3 year one is the banks expectation of interest over 3 years, plus a small margin and so on. For 10 year or longer the current rates are 4%.
Why are interest rates so much higher for mortgages in the UK, despite often demanding longer fixed terms? Is the risk massively higher? (My loan uses the home as collateral but also future income, meaning if the home becomes worthless I'm still on the line for repaying the lone for as long as it takes, I can't just leave the keys and let the bank eat the risk).
The problem buying a house for me was always getting the deposit together while paying rent. Most people in the UK seem to rely on gifts from parents.
* very few -- there are some very specialised brokers
However, it's common for people to refinance down to a lower rate when they come available, so lots of American homeowners have rates in the 2-3% range.
The game is rigged. But that should be no surprise. People who enter a game of Monopoly after a few rounds have been played know that they will be swimming against a strong current. Our financial systems are unfair and broken.
We're born in a year we didn't choose to parents we didn't pick with talent we didn't earn with intelligence we don't deserve with environmental influences we can't control.
The game is Texas Hold em. Play your cards. Bluff if you must. Press if you can. Go all in when you can leverage.
I recently got to know a gentleman quite like myself. His parents and upbringing are quite the same. His father took risks. Mine did not. He's got a million dollar business that he took over. With respect, I don't think he would be any better than me without his father's risk and resources.
I was briefly jealous. Then I realized I was exactly in his father's position. I'm taking risks and building something for my kids. He's one generation ahead of me.
You can get upset about the game or play it.
I took a risk a week ago. Turned $500 into $11,000 with a little effort. My skills let me analyze stuff quickly. I discovered a pump and dump bot network. It turns out I correctly matched the entry and exit signals to the bots chatter.
If i can validate this next week, I will pay off my house in a few weeks.
So let me explain somethign that is often misconstrued about leftist sentiment, be in socialism or whatever: leftists generally make the distinction between personal property and private property.
Private property is what we have now. We have wealthy landlords buying up houses to drive up prices. We have single homeowners who think their home value is going up so that's good for them so they vote for these policies. A leftist position is that you're entitled to own your personal residence but there's next to no landlording. Housing is a basic human need. The only way to provide it in a sustainable way is with social housing. For example, the majority of housing in Vienna is social housing.
The UK came really close last century to ending landlording [1] (ie councils simply bought houses from landlords who wanted out).
But if you think about it: there's no way your $200k turns into a $600k house without that money coming from somewhere. You're taking it from the next generation.
Capitalism loves this because a) a bunch of capital owners become even wealthier and b) debt-laden workers and workers who will take any jobs they can get (ie it suppresses wages).
In the 1990s, the average house price in London was ~70k pounds. Now it's over 700k.
Pretty much everything bad about modern society can be traced back to private property, be it intellectual property, housing or whatever.
People need to realize that if your house triples in value, you haven't really gained anything. If you sell it, what now? You still have to live somewhere. That means higher rents or buying an equivalently priced home. Or downsizing or moving overseas. This is why housing is unlike other assets.
we, as a society, have decided to prioritize generational wealth from landlording by literally killing people by denying them housing.
[1]: https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-...
The discussion on housing should start with one fact: the supply of housing has been growing faster than the size of the population, decade after decade, for a very long time.
This is why the number of people per home, has been dropping decade after decade. That is a measure of luxury. We can afford homes with fewer people. People can afford to be single and live alone. We can afford not to take in a roommate. Couples can afford to each have their own home. That's not an indication of a housing crisis or being priced out.
Then there is home size, it has been increasing also, decade after decade. We can afford to live in bigger homes. Again, a measure of luxury.
Anecdotes about 'my (grand)parents lived in XYZ home that's way bigger than mine' are just that, anecdotes. The data shows we live in bigger homes with fewer people, in fact we have double the housing that we had a few decades ago. In other words, the average person's lifestyle with respect to housing has greatly, greatly improved compared to previous generations.
What is often also not mentioned is that affordability is not a function of prices only, but of prices x the cost of money (i.e. interest rates). In the 1980s interest rates were as high as 18%, now it's 1/3rd of that at around 6%. That's the true cost of housing. Taking $1000 and paying off $1000 in debt has no impact on your equity, you're as rich as you were before the transaction. Paying interest however is money you'll never see again. That cost was 3x as high a few decades ago. Prices haven't tripled when adjusted for inflation and salaries, not even close. That's why affordability of housing isn't the disaster that many people think it is.
Here is an old source (2016), which you may think is outdated. But it shows a multi-decade trend that cuts across the same price increases we've seen in recent years:
https://www.aei.org/carpe-diem/new-us-homes-today-are-1000-s...
For another source that runs to 2020: https://humanprogress.org/u-s-housing-became-much-more-affor...
I'm not even going into how the function of housing has changed. With today's connectivity (netflix, spotify, internet, food delivery, teams/slack, amazon etc), it has become more than ever: an workplace/office, a cinema, a library, a music studio, a game hall, a restaurant, a shopping mall. Its value has increased.
No, I'm not saying finding housing is super easy for anyone and everyone. I recognise many find challenges. But what is simply not true, is that it is any more difficult than the past. In fact it has never been easier. What appears true however is that our lifestyle expectations keep increasing faster than our lifestyles are improving.
check the timestamps :p
(I thought there was some dupe protection for exact urls in such a close time period?)
Discussion: https://news.ycombinator.com/item?id=40489250
- Cities across the world built thorough sewage systems, preventing the need for private citizens to empty their litter buckets out the window – a large river in Chicago was even reversed!
- Cities across the world built mass transit networks, enabling citizens to move around efficiently without relying solely on private vehicles.
- Cities across the world should build affordable housing networks, as Vienna did. This way, citizens don't have to fall victim to the exploitation of speculators and distortions of the supposedly fair market.
Public affordable housing is a necessary infrastructure, just like sewers and transit, to create livable cities for all residents.
The most major busts by year:
1837 - caused by land speculation, driven by the gold rush
1873 - caused by land speculation, driven by railroad companies and their investors
1929 - caused by a stock market bubble
2008 - caused by widespread mortgage fraud and speculation on the housing market
Most of our friends are still running along the platform, desperately trying to grab on but the train just keeps accelerating.
Our first home price increased by 50% in 4 years when we sold and moved into a bigger home in 2022, and we hardly did anything to it. Just the way the market is. The only reason we were able to afford the new house is because of the rapid gains on our first house and the fact that we had a ~2% interest rate for two years that allowed us to quickly build up a savings nest egg, with a mortgage payment that was far below what our friends paid in rent.
I just feel bad for all my fellow millennials that couldn't catch the train before the market went fucking insane in 2020. Because it really does feel like catching up is impossible if you aren't already in the game.
-Cheap credit with ever-decreasing lending standards (not like 2006 though, not yet) -Population growth (whether immigration or births — does not make a difference, though babies can't buy houses) -"Pent up" demand, people who wanted to move during COVID but did not because of COVID (somehow), who now do want to move
Factors restricting supply
-Building -Zoning -Most of all: nobody wants to leave their 3% rate, and there is about 11T of outstanding mortgage debt, most of which at the 2020-2022 low rates
Factors inflating prices
-(Mostly) obsolete realtors charging 6% in a world with Zillow -Orgy of money-printing
I look forward to an article when housing prices retreat rather than increase.
"Here's a nickel, sonny."
Same with startups, anymore many of them are setup as attractive financial products, not attractive businesses.
Our population is currently increasing by over 1 million people each year and it is 98% immigration.
I think an odd effect of very very high immigration is that everyone who arrives is presumably of working age and needs to be housed outside of a family unit. This puts immense pressure on a housing supply that is already decades behind where it should be and as a result prices are exploding.
Canada as a country has a population of about ~40 million people. The main country we are getting our immigration from is India with a population of nearly 2 billion. There is no possible world in which Canada can construct enough housing for the nearly infinite supply of people that it seems to be importing
A recent study showed it currently takes on average 10 years to go from acquiring a piece of land to building an apartment. This is clearly problematic but there is a physical limitation on how fast housing can be constructed.
Maybe that was not in the public's interest.
On top of the weird collective delusion, most ignore the huge financial/time burden that is owning a home. It is not cheap, and anyone that tells you otherwise is *literally lying*.
There’s the never-ending maintenance that costs thousands per year in both money and time, small problems can cost thousands of dollars to fix, variable property taxes, variable insurance rates, having an asset worth being sued over, shitty neighbors that you can’t easily move away from, bad school districts, etc etc etc.
Is home ownership right for _some_ people? Sure. Is it right for the majority of people? Probably not. Should corporations be allowed to own housing? Hell no.
The man on the street wants less immigration and more housebuilding so that they can start a family.
The political class seem to want to just import a ton of low skilled foreigners because they'll take lower living standards.
It's ass backwards. The solutions are obvious.
The man used to be an upper-ish class dude (p96+), but due to how horribly slow and uneducated governments are at making data-driven decisions, the man is now a working or middle class dude.
As a result, you will see property prices skyrocket in your area while the government takes 50%+ of your 5% pay raise, leaving you only some pocket change richer than before. But the property owners in your area will be richer every year because their great grandad hunted a bunch of whales or some shit, and so called progressive policy makers are clueless about wealth distribution.
The only solution, of course, is to build more houses! Build until prices fall! (And don't bail out people who are now underwater because prices fell.)
To be honest I don’t think capitalism is able to fix this problem, the only solution I see if government takes over and subsidizes housing enough from taxes to make it more affordable for salaried employees (needs to come with strings attached so the free market does not turn a quick buck reselling)
Note US GDP looks great until you realise that it is in dollars whose nominal purchasing power is diminishing. There is no better was of seeing this than in the price of housing.
Here is mine. The Boomers, the generation born 1945 - 1965, benefited from affordable housing, and when it grew up, set about making housing an investment.
'Affordable ' and 'investment' are mutually exclusive. That is why supply is not keeping up with demand, and why there are so many unoccupied houses.
Low interest rates raise house prices. This has to be a 'duh' thing, really, but, governments don't really appear to 'get it', or, play dumb for political reasons. If, after adjusting for inflation and the like, the exact same house costs €500,000 in 1980 but costs €1,000,000 in 2024, BUT, interest rates in 1980 are double what they are in 2024, your mortgage cost to buy that house is __pretty much identical__.
It's oversimplified to say that this means 'real house price has not changed'. It still takes more money to actually buy that house. But, of the money you pay every month for your house, more of it is a weird, not very liquid investment portfolio, and less of it a weird form of rent. It's got all sorts of problems: Not everybody qualifies for a mortgage in the first place, for starters. But _in the end the amount of money you have to burn just to live in a house is identical in this hypothetical scenario_.
One lesson you could learn from it is that everybody is whining and houses are just as affordable as they've always been, but that's not my point, and isn't really true. The point is more: With low interest rates, house prices skyrocket.
This explains _some_ high house prices, but certainly not all.
For example, China's is an utterly different explanation. Due to the way their government is set up, the usual benefits of a free market, namely that the population 'intelligence of the masses' their way to efficient allocation of resources isn't a thing china 'does', in essence. Government decides what happens. And so far, they've decided to build more houses than there will ever be chinese people to live in them. Ever. This is a bit of a problem today and will be far more of a problem tomorrow. But that's it. That's the simple, sufficient, and therefore only required explanation. It has NOTHING to do with how hard to it is to build in China (it is not), nor with population growth (it doesn't, or rather, a sheer and severe drop in house prices looming, that'll be explained by China's population glut). It's just that: They built way too many, and their market system cannot respond in kind to stop that runaway process.
In europe, yes, in large part runaway NIMBYism and being at the forefront of ecological change, putting limits on how much nitrogen/co2 can be 'used up', and building does take quite a bit of that - has put the breaks on building. Especially combined with extremely low unemployment which hurts the building sector. "Too few houses being built" is a factor.
But not the only one. And I think, not even the largest one.
Yet another explanation is lack of efficiency: Fewer people partner up, so, more people live alone. They tend to use space inefficiently: They all want their own kitchen, their own shower, their own living room, their own bed room, their own hallway, and so on. A really cheap and ludicrously efficient solution to _that_ is dorm-style living together. Instead of having a small crappy single-tenant kitchen, why not have a giant luxurious very well stocked kitchen you share with 9 other solo tenants? Yes, there are all sorts of downsides to this (which lout has made a mess of the kitchen?!? - and nobody wants to deal with a cleaning schedule), but in the end it is vastly more efficient, and better for social cohesion.
Society in e.g. europe and the US has not, yet, adapted to it. I hope it will. It'll solve the unaffordability of housing crisis all on its own if society wants to invest in it.
In places like Toronto, huge influx of people where the city doubled in size in a few short years not only putting strain on housing and rentals but everything (hospitals, roads, schools, you name it).
In places like Texas the huge influx of out state people drove up prices where housing in DFW basically doubled in price since 2019. Very much like what Toronto went through. Migration from high tax states to low tax states has now made low tax states high tax states and Texas is becoming very unaffordable quickly.
Don't know what the end game is. In Ontario, Canada what use to cost 200k 10 years ago now is 1 million. What use to cost 1 million is 5 plus million and there is no end to the madness. You have foreigners from Arab countries, China, India paying cash for 2-3 million dollar homes.